WorksheetsFR-IAS 2,13,41,8,16, 20, 40,23 & Framework (2024)
Total questions: 48
Worksheet time: 2hrs 5mins
Which of the following is stated as an underlying assumption according to the IFRS Conceptual Framework for Financial Reporting?
Neutrality
Accruals
Relevance
Going concern
Identify, by clicking on the relevant box in the table below, whether each of the following statements regarding financial information is true or false.
(1) Faithful representation means that the legal form of a transaction must be reflected in financial statements, regardless of the economic substance
(2) Only items that can be depicted by a monetary amount can be recognised in the statement of financial position or statement of financial performance
(3) It may sometimes be necessary to exclude information that is relevant and reliable from financial statements because it is too difficult for some users to understand
(4) Information is material if it exceeds a quantitative threshold; any transaction that does not exceed that threshold does not need to be disclosed
(1) True
(2) False
(3) True
(4) False
(1) True
(2) False
(3) False
(4) False
(1) False
(2) True
(3) False
(4) False
(1) True
(2) False
(3) True
(4) True
The IFRS Conceptual Framework for Financial Reporting identifies qualitative characteristics of financial statements.
Which TWO of the following characteristics are fundamental qualitative characteristics according to the IFRS Conceptual Framework for Financial Reporting?
Relevance
Understandability
Faithful representation
Comparability
Which TWO of the following are required to meet the comparability characteristic of useful financial information?
Entities are required to disclose their accounting policies
Corresponding information is required to be provided in financial statements
Entities must use the same accounting policies from period to period
All assets within a class should be depreciated at the same rate
Under what conditions can borrowing costs be capitalised?
The borrowing costs are incurred for purchases of inventory items
The borrowing costs are directly attributable to the acquisition, construction, or production of a qualifying asset
The borrowing costs are directly attributable to the acquisition, construction, or production of routinely manufactured assets
The borrowing costs are incurred for purchases of property, plant and equipment
For which THREE of the following categories of funds used to construct a factory, that is a qualifying asset, can borrowing costs be capitalised?
Funds borrowed specifically to construct the factory
Funds borrowed in advance of expenditure on the factory
An overdraft used to help finance working capital
General borrowed funds used to finance the building of the factory
Funds borrowed that have been applied to the construction of a new office
QI is incurring expenditure on project 275 which meets the definition of a qualifying asset, in accordance with IAS 23 Borrowing Costs. The company has the following debt components:
(1) 6% $100,000 debt used specifically to finance project 274
(2) 7% $500,000 preference share capital
(3)10% $80,000 short-term loan
(4) 4% $200,000 convertible debt
What capitalisation rate would QI apply to expenditure incurred on project 275 (to one decimal place)?
6.4%
6.5%
6.3%
6.6%
Which of the following is investment property according to IAS 40 Investment Property?
An investment in land and or buildings other than leased property
A property owned and occupied by an entity for its own purposes
A property which is held to earn rentals or for capital appreciation
An investment in land and or buildings whether let to third parties or occupied by an entity within a group
In accordance with IAS 40 Investment Property, which TWO of the following are classified as investment property?
Property held for long-term capital appreciation
Owner-occupied property
Land held for an undetermined future use
Property occupied by employees
Which of the following is an investment property under IAS 40 Investment Property?
A building that is vacant but held to be rented to third parties
Property under construction on behalf of third parties
Property that is available for sale in the ordinary course of business
Owner-occupied property
Under IAS 40 Investment Property, which of the following transfers could result in a change from a cost model to a fair value model?
(1) A transfer from investment property to owner-occupied property
(2) A transfer from inventories to property available for rental
(3) A transfer from investment property to inventories, when the property is intended for sale
1 only
2 only
1 and 2 only
1, 2 and 3
Cutie acquired a building for $800,000 on 1 January 20W7. It was being depreciated at 2% per year.
On 31 December 20X6 the building was revalued to $1m. At this date the building had a remaining useful life of 40 years.
Match the figures that correctly show the effects of the revaluation.
(1) Depreciation charge for year ending 31 December 20X7.
(2) Revaluation surplus as at 31 December 20X6.
(1) $25,000
(2) $360,000
(1) $25,000
(2) $350,000
(1) $26,000
(2) $360,000
(1) $25,000
(2) $360,100
The following information relates to the disposal of two machines by Halwell:
What was the total accumulated depreciation on both machines sold?
$80,000
$100,000
$120,000
$140,000
Upton makes up its financial statements to 31 December each year. On 1 January 20X0 it bought a machine with a useful life of 10 years for $200,000 and started to depreciate it at 15% per annum on the reducing balance basis. On 31 December 20X3 the accumulated depreciation was $95,600 and the carrying amount $104,400. During 20X4 the company changed the basis of depreciation to straight line.
Which of the following summarises the correct accounting treatments in the financial statements of Upton for the year ended 31 December 20X4?
Depreciation expense ($10,440); No prior period adjustment
Depreciation expense ($17,400); No prior period adjustment
Depreciation expense ($17,400); Prior period adjustment $15,600
Depreciation expense ($20,000); Extraordinary item $15,600
In accordance with IAS® 16 Property, Plant and Equipment, which of the following is true?
If an entity decides to use the revaluation model, then all of its non-current assets must be revalued
An entity must transfer excess depreciation from the revaluation surplus to retained earnings on an annual basis in respect of any property which it revalues
If an entity decides to revalue property annually, then this property will not need to be depreciated
There is no requirement for an entity to revalue property on an annual basis
An entity has decided to adopt the revaluation model for the first time from 31 December 20X6.
At that date, details relating to two properties were as follows:
What is the total gain to be recorded in the revaluation surplus at 31 December 20X6?
$0
$225,000
$375,000
$600,000
How does the Conceptual Framework define an asset?
A resource owned by an entity as a result of past events and from which future economic benefits are expected to flow to the entity
A resource over which an entity has legal rights as a result of past events and from which economic benefits are expected to flow to the entity
A resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity
A resource to which an entity has a future commitment as a result of past events and from which future economic benefits are expected to flow from the entity
The Conceptual Framework identifies four enhancing qualitative characteristics of financial information. For which of these characteristics is disclosure of accounting policies particularly important?
Verifiability
Timeliness
Comparability
Understandability
Which of the following is NOT a purpose of the IASB’s Conceptual Framework?
To assist the IASB in the preparation and review of IFRS
To assist auditors in forming an opinion on whether financial statements comply with IFRS
To assist in determining the treatment of items not covered by an existing IFRS
To be authoritative where a specific IFRS conflicts with the Conceptual Framework
Recognition is the process of including within the financial statements items which meet the definition of an element according to the IASB’s Conceptual Framework for Financial Reporting.
Which of the following items should be recognised as an asset in the statement of financial position of a company?
A skilled and efficient workforce which has been very expensive to train. Some of these staff are still in the employment of the company.
A highly lucrative contract signed during the year which is due to commence shortly after the year end
A government grant relating to the purchase of an item of plant several years ago, which has a remaining life of four years
A receivable from a customer which has been sold (factored) to a finance company. The finance company has full recourse to the company for any losses.
Comparability is identified as an enhancing qualitative characteristic in the IASB’s Conceptual Framework for Financial Reporting.
Which of the following does NOT improve comparability?
Restating the financial statements of previous years when there has been a change of accounting policy
Prohibiting changes of accounting policy unless required by an IFRS or to give more relevant and reliable information
Disclosing discontinued operations in financial statements
Applying an entity's current accounting policy to a transaction which an entity has not engaged in before
The accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events.
A Sold an asset to a finance company and leased it back for the remainder of its useful life. The accountant has decided that this should be treated as a secured loan.
B The company’s statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss
C Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.
Which concept or qualitative characteristic has influenced the decision in (A) above
Faithful representation
Verifiability
Accruals
Comparability
The accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events.
A Sold an asset to a finance company and leased it back for the remainder of its useful life. The accountant has decided that this should be treated as a secured loan.
B The company’s statement of profit or loss prepared using historical costs showed a loss from operating its shops, but the company is aware that the increase in the value of its properties during the period far outweighed the operating loss
C Inventory has up to this year been valued using FIFO but the accountant is considering changing to the weighted average method for the year to 31 March 20X6.
In applying the principle of comparability, how should the change of inventory valuation basis be accounted for?
The change should just be disclosed.
The financial statements for 31 March 20X6 should show both methods
The notes should show what the profit would have been if the change had not taken place.
The financial statements for the prior period as shown at 31 March 20X6 should be restated using the weighted average basis.
The process for developing an International Financial Reporting Standard involves a number of stages. Following receipt and review of comments on a Discussion Paper, what will be the next step undertaken by the IASB?
Publication of an Exposure Draft
Establishment of an Advisory Committee
Consultation with the Advisory Committee
Issue of a final IFRS
Which one of the following would NOT be an advantage of adopting IFRS?
It would be easier for investors to compare the financial statements of companies with those of foreign competitors.
Cross-border listing would be facilitated.
Accountants and auditors would have more defence in case of litigation.
Multinational companies could more easily transfer accounting staff across national borders.
In accordance with the Conceptual Framework which of the following is/are true in relation to the enhancing characteristic of comparability?
(1) Permitting alternative accounting treatments for the same economic phenomenon enhances comparability
(2) Comparability requires uniformity
Both 1 and 2
Neither 1 nor 2
1 only
2 only
At what amount should total inventory be stated in the statement of financial position?
Rs.95,900
Rs.95,100
Rs.103,100
Rs.105,100
In which of the following situations is the net realisable value of an item of inventory likely to be lower than its cost?
The production cost of the item has been falling.
The selling price of the item has been rising
The item is becoming obsolete.
Demand for the item is increasing
At what amount is a biological asset measured on initial recognition in accordance with IAS 41 Agriculture?
Production cost
Fair value
Cost less estimated costs to sell
Fair value less estimated costs to sell
Which of the following is NOT the outcome of a biological transformation according to IAS 41?
Growth
Harvest
Procreation
Degeneration
How is a gain or loss arising on a biological asset recognised in accordance with IAS 41?
Included in profit or loss for the year
Adjusted in retained earnings
Shown under 'other comprehensive income'
Deferred and recognised over the life of the biological asset
At 31 March 20X7 Tentacle Ltd had 12,000 units of product W32 in inventory, included at cost of $6 per unit. During April and May 20X7 units of W32 were being sold at a price of $5.40 each, with sales staff receiving a 15% commission on the sales price of the product. At what amount should inventory of product W32 be recognised in the financial statements of Tentacle Ltd as at 31 March 20X7?
Rs.5508
Rs.50000
Rs.55000
Rs.55080
In which of the following situations is the net realisable value of an item of inventory likely to be lower than cost?
The production cost of the item has been falling.
The selling price of the item has been rising.
The item is becoming obsolete.
Demand for the item is increasing.
Which of the following statements about IAS 2 Inventories are correct?
1 Production overheads should be included in cost on the basis of a company’s actual level of activity in the period.
2 In arriving at the net realisable value of inventories, settlement discounts must be deducted from the expected selling price.
3 In arriving at the cost of inventories, FIFO, LIFO and weighted average cost formulas are acceptable.
4 It is permitted to value finished goods inventories at materials plus labour cost only, without adding production overheads.
1 only
1 & 2
3 & 4
None of them
In preparing financial statements for the year ended 31 March 20X6, the inventory count was carried out on 4 April 20X6. The value of inventory counted was $36 million. Between 31 March and 4 April goods with a cost of $2.7 million were received into inventory and sales of $7.8 million were made at a mark-up on cost of 30%.
At what amount should inventory be stated in the statement of financial position as at 31 March 20X6?
36.0 million
39.3 million
6.0 million
None of them
Which of the following would correctly describe the net realisable value of a two year old asset?
The original cost of the asset less two years’ depreciation.
The amount that could be obtained from selling the asset, less any costs of disposal.
The cost of an equivalent new asset less two years’ depreciation.
The present value of the future cash flows obtainable from continuing to use the asset.
Which of the following statements regarding IFRS 13 Fair Value Measurement is not true?
Level 1 inputs are likely to be used without adjustment.
Level 3 inputs are based on the best information available to market participants and are therefore regarded as providing the most reliable evidence of fair value.
Level 2 inputs may include quoted prices for similar (but not identical) assets and liabilities in active markets.
Level 1 inputs comprise quoted prices in active markets for identical assets and liabilities at the reporting date.
Which of the following would be a change in accounting policy in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors?
Adjusting the financial statements of a subsidiary prior to consolidation as its accounting policies differ from those of its parent.
A change to reporting depreciation charges as cost of sales rather than as administrative expenses.
Depreciation method changed to reducing balance method rather than straight line.
Reducing the value of inventory from cost to net realisable value due to a valid adjusting event after the reporting period.
To which of the following items does IAS 41 Agriculture apply?
(i) A change in fair value of a herd of animals relating to the unit price of the animals.
(ii) Logs held in a wood yard.
(iii) Farm land which is used for growing vegetables.
(iv) The cost of developing a new type of crop seed which is resistant to tropical diseases.
All four
(i) only
(i) and (ii) only
(ii) and (ii) only
IAS 2 Inventories specifies expenses that should be included in year-end inventory values. Which THREE of the expenses below are allowable by IAS 2 as expenses that should be included in the cost of finished goods inventories?
A Marketing and selling overhead
B Variable production overhead
C General management overhead
D Factory management overhead allocated to production E Cost of delivering raw materials to the factory
F Abnormal increase in overhead charges caused by unusually low production levels due to the exceptionally hot weather.
A, B, D
B, D, E
B, C, D
A, B, E
Tunshill has an item of plant with an estimated five-year life. The plant is wearing well and at 1 October 20X8 the production manager believed that the plant was likely to last 5 more years.
Tunshill wishes to change its method of inventory valuation from first-in/first-out (FIFO) to average cost (AVCO). The value of Tunshill’s inventory at 30 September 20X9 (on the FIFO basis) is $20 million. However, on the AVCO basis it would be valued at $18 million.
Tunshill’s inventory at 30 September 20X8 was $15 million, but on the AVCO basis it would have been reported as $13.4 million. Tunshill also has two items of inventory that require review. Item A cost $50 per unit. Tunshill has struggled to sell the item and has 2,000 units still in inventory. Tunshill has agreed a contract with a distributor to sell the items for $55 each, but will charge commission of 20%.
Item B relates to a one-off purchase of rare metal for a profitable contract costing $80,000. No work has yet been done, but after further costs of $20,000 it will be converted into a product and sold for an agreed price of $150,000. Since buying the metal, the cost price has fallen to $50,000.
Which circumstances are outlined in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors as acceptable reasons to change accounting policy?
To provide greater comparison with competitors
If tax law in a country changes
If required by an International Financial Reporting Standard
None of these
Schrute owns a herd of cattle, which produce milk. Schrute then turns this into cheese.
On 1 April 20X5, Shrute purchased a flock of sheep for $100,000, which included transaction costs of $5,000. At 31 March 20X6, the flock was valued at $120,000. Every time animals are sold there is a 5% commission fee payable to the national farming agency.
Shrute uses the historical cost model and charges all depreciation as an operating expense.
In addition to this, Schrute uses a number of items of specialised farm machinery. This machinery cost Schrute $200,000 on 1 April 20X2 and has a 10-year useful life. At 31 March 20X6, there is only one supplier who still sells this machinery and the current price of new machinery is $300,000.
Which of the following items held by Schrute will be accounted for under the provisions of IAS 41 Agriculture? (i) Herd of cattle
(ii) Milk
(iii) Cheese
(i) only
(ii) and (iii) only
(i) and (ii) only
All three items
Sakho owned a 1 year old herd of cattle on 1 January. At this date, the fair value less costs to sell were $70,000. At 31 December, the fair value of a 1 year old herd of cattle is $75,000, and the fair value of a 2 year old herd of cattle is $80,000. If Sakho sold the cattle, commission of 5% would be payable.
What is the correct accounting treatment for the cattle at 31 December according to IAS 41 Agriculture?
Revalue to $71,250 taking gain of $1,250 to the revaluation surplus
Revalue to $76,000, taking gain of $6,000 to the statement of profit or loss
Revalue to $76,000, taking gain of $6,000 to the revaluation surplus
Revalue to $71,250, taking gain of $1,250 to the statement of profit or loss
How is a gain or loss arising on a biological asset recognised in accordance with IAS 41?
Included in profit or loss for the year
Adjusted in retained earnings
Shown under 'other comprehensive income'
Deferred and recognised over the life of the biological asset
Identify whether the following statements about IAS 2 Inventories are correct or incorrect ?
(1) Production overheads should be included in cost on the basis of a company's actual level of activity in the period.
(2) In arriving at the net realisable value of inventories, settlement discounts must be deducted from the expected selling price.
(3) In arriving at the cost of inventories, FIFO, LIFO and weighted average cost formulas are acceptable.
(4) It is permitted to value finished goods inventories at materials plus labour cost only, without adding production overheads.
Incorrect, Incorrect, Incorrect, Correct
Incorrect, Correct, Incorrect, Incorrect
Incorrect, Incorrect, Incorrect, Incorrect
Incorrect, Incorrect, Correct, Incorrect
Y purchased some plant on 1 January 20X0 for $38,000. The payment for the plant was correctly
entered in the cash book but was entered on the debit side of the plant repairs account.
Y charges depreciation on the straight line basis at 20% per year, with a proportionate charge in the
years of acquisition and disposal, and assuming no scrap value at the end of the life of the asset.
How will Y’s profit for the year ended 31 March 20X0 be affected by the error?
Understated by $30,400
Understated by $36,100
Understated by $38,000
Overstated by $1,900
Please refer material for this question
At 31 December 20X3 Q, a limited liability company, owned a building that had cost $800,000 on
1 January 20W4.
It was being depreciated at 2% per year.
On 31 December 20X3 a revaluation to $1,000,000 was recognised. At this date the building had a
remaining useful life of 40 years.
What is the balance on the revaluation surplus at 31 December 20X3 and the depreciation charge in the
statement of profit or loss for the year ended 31 December 20X4?
Depreciation charge for Revaluation surplus
year ended 31 December 20X4 as at 31 December 20X3
(statement of profit or loss) (statement of financial position)
Depreciation charge for year ended 31 December 20X4 (statement of profit or loss) 25,000 Revaluation surplus as at 31 December 20X3 (statement of financial position) 200,000
Depreciation charge for year ended 31 December 20X4 (statement of profit or loss) 25,000 Revaluation surplus as at 31 December 20X3 (statement of financial position) 360,000
Depreciation charge for year ended 31 December 20X4 (statement of profit or loss) 20,000 Revaluation surplus as at 31 December 20X3 (statement of financial position) 200,000
Depreciation charge for year ended 31 December 20X4 (statement of profit or loss) 20,000 Revaluation surplus as at 31 December 20X3 (statement of financial position) 360,000
Which of the following costs would be classified as capital expenditure for a restaurant business?
A replacement for a broken window
Repainting the restaurant
An illuminated sign advertising the business name
Cleaning of the kitchen floors
