WorksheetsIFRS quiz
Total questions: 36
Worksheet time: 9hrs 0mins
What is the authoritative statutes of the Framework?
It has the highest level of authority. In case of a conflict between Framework and a Standard or Interpretation, the Framework overrides the Standard of Interpretation.
If there is a Standard or interpretation that specifically applies to a transaction, it overrides the Framework. In the absence of a Standard or an Interpretation that specifically applies, the Framework should be followed
If there is a Standard or interpretation that specifically applies to a transaction, it overrides the framework. In the absence of a Standard or an Interpretation that specifically applies to a transaction, management should consider the applicability of the Framework in developing and applying an accounting policy that results in information that is relevant and reliable
The Framework applies only when IASB developes new or revised Standards. An entity is never required to consider the Framework
What is the objective of financial statements according to the Framework?
To provide information about the financial position, performance, and changes in financial position of an entity that is useful to a wide range of users in making economic decisions
To prepare and present a balance sheet, an income statement, a cash flow statement, and a statement of changes in equity
To prepare and present comparable, relevant, reliable, and understandable information to investors and creditors
To prepare financial statements in accordance will applicable Standards and Interpretations
Which of the following are underlying assumptions of financial statements?
Relevance and reliability
Financial capital maintenance and physical capital maintenance
Accrual basis and going concern
Prudence and conservatism
What are qualitative characteristics of financial statements according to the Framework?
Qualitative characteristics are the attributes that make the information provided in financial statements useful to users
Qualitative characteristics are broad classes of financial effects of transactions and other events
Qualitative charcteristics are nonquantitative aspects of an entity's position and performance and changes in finacial position
Qualitative characteristics measure the extent to which an entity has complied with all relevant Standards and Interpretations
Which of the following is not a qualitative characteristics of financial statements according to the Framework
Materiality
Understandability
Comparability
Relevance
When should an item that meets the definition of an element to be recognized, according to the Framework?
When it is probable that any future economic benefit associated with the item will flow to or from the entity
When the element has a cost or value that can be measured with reliability
When the entity obtains control of the rights or obligations associated with the item
When it is probable that any future economic benefit associated with the item will flow to or from the entity and the item has a cost or value that can be measured with reliability
XYZ Inc. changes its method of valuation of inventories from weighted average method to fist in first out (FIFO) method. XYZ Inc. should account for this change as
A change in estimate and account for it spectively
A change in accounting policy and account for it prospectively
A change in accounting policy and account for it retrospectively
Account for it as a correction of an error and account for it retrospectively
Change in accounting policy does not include
Change in useful life from 10 years to 7 years
Change of method of valuation of inventory from FIFO to weighted average
Change of method of valuation of inventory from weighted average to FIFO
Change from the practice (convention) of paying as Christmas bonus one month's salary to staff before the end of the year to the new practice of paying one half month's salary only
When a public shareholding company changes an accounting policy voluntarily, it has to
Inform shareholders prior to taking the decision
Account for it retrospectively
Treat the effect of the change as an extraordinary item
Treat it prospectively and adjust the effect of the change in the current period and future periods
When it is difficult to distinguish between a change of estimate and a change in accounting policy, then an entity should
Treat the entire change as a change in estimate with appropriate disclosure
Apportion, on a reasonable basis, the relative amounts of change in estimate and the change in accounting policy and treat each one accordingly
Treat the entire change as a change in accounting policy
Since this change is a mixture of two types of changes it is best if it is ignored in the year of the change; the entity should then wait for the following year to see how the change develops and then treat it accordingly
When an independent valuation expert advice an entity that the salvage value of its plant and machinery has drastically changed, thus the change is material, the entity should
Retrospectively change the depreciation charge based on the revised salvage value
Change the deprecation charge and treat it as a correction of an error
Change the annual depreciation for the current year and future years
Ignore the effect of the change on annual depreciation because changes in salvage values would normally affect the future only since these are expected to be recovered in future
An entity purchases a building and the seller accepts payment partly in equity shares and partly in debentures of the entity. This transaction should be treated in the cash flow statement as follows:
The purchase of the building should be investing cash outflow and the issuance of shares and the debentures financing cash outflow
The purchase of the building should be investing cash outflow and the issuance of the debentures financing cash outflows while the issuance of shares investing cash outflow
This does not belong in a cash flow statement and should be disclosed only in the footnotes to the financial statement
Ignore the transaction totally since it is a noncash transactions. No mention is required in either the cash flow statement or anywhere else in the financial statements
An entity (other than a financial institutions) receives dividends from its investments in shares. How should it disclose the dividends received in the cash flow statement prepared under IAS7?
Operating Cash inflow
Either as operating cash inflow or as investing cash inflow
Either as operating cash inflow or as financing cash inflow
An an adjustment in the operating activities section of the cash flow because it is included in the net income for the year and as a cash inflow in the financing activities section of the cash flow statement
How should gain on sale of an office building owned by the entity be presented in a cash flow statement?
As an inflow in the investing activities section of the cash flow because it pertains to a long term asset
As an inflow in the financing activities section of the cash flow statement because the building was constructed with long term loan from a bank that needs to be repaid from the sale proceeds
An an adjustment to the net income in the operating activities section of the cash flow statement prepared under the indirect method
Added to the sale proceeds and presented in the investing activities section of the cash flow statement
How should an unrealized gain on foreign currency translation be presented in a cash flow statement?
As an inflow in the financing activities section of the cash flow statement because it arises from a foreign currency translation
It should be ignored for the purposes of the cash flow statement as it is an unrealized gain
It should be ignored for the purposes of the cash flow statement as it is an unrealized gain but it should be disclosed in the footnotes to the financial statement by way of abundant precaution
As an adjustment to the net income in the operating activates section of the statement of cash flows
How should repayment of a long term loan comprising repayment of the principle amount and interest due to date on the loan be treated in a cash flow statement
The repayment of the principle portion of the loan is a cash flow belonging in the investing activities section the interest payment belongs either in the operating activities section or the financing activities section
The repayment oof the principle portion of the loan is a cash flow belonging in the investing activities section the interest payment belongs either in the operating activities section or the investing section
The repayment of the principle portion of the loan is a cash flow belonging in the investing activities section the interest payment belongs in the operating activities section (became IAS 7 does not permit any alternatives in case of interest payment)
The repayment of the principle portion of the loan is a cash flow belonging in the investing activities section the interest payment should be netted against interest received on bank deposits and the net amount of interest should be discloses in the operating activities section
Healthy Inc brought a private jet for the use of its top ranking officials. The cost of the private jet is $15 million and can be deprecated either using a composite useful life or useful lives of its major components. It is expected to be used over a period of 7 years. The engine of the jet has a useful life of 5 years. The private jet's tires are replaced every 2 years. The private jet will be depreciated using the straight line method over
7 years composite useful life
5 years useful life of the engine, 2 years useful life of the tires, and 7 years useful life applied to the balance cost of the jet
2 years useful life based on conservatism (the lowest useful life of all the parts of the jet)
5 years useful life based on a simple average of the useful lives of all major componets of the jet
An entity imported machinery to install in its new factory premises before year end. However, due to circumstances beyond its control, the machinery was delayed by a few moths but reached the factory premises before year end. While this was happening the entity learned from the bank that it was being charged interest on the loan it had taken to fund the freight and interest expense under IAS 16?
Both expenses should be capitalized
Interest may be capitalized but freight should be expensed
Freight charges should be capitalized but interest cannot be capitalized under these circumstances
Both expenses should be expensed
XYZ Inc. owns a fleet of over 100 cars and 20 ships. It operates in a capital intensive industry and thus has significant other property, plant, and equipment that it carries in its books. It decided to revalue its property, plant, and equipment. The company's accountant has suggested the alternatives that follow. Which one of the options should XYZ Inc. select in order to be in line with the provisions of IAS 16?
Revalue only one half of each class of property plant and equipment as that method is leas cumbersome and easy compared to revaluing all assets together
Revalue an entire class of property plant and equipment
Revalue one ship at a time as it easier than revaluing all ships together
Since assets are being revalued regularly there is no need to depreciate
An entity installed a new production facility and incurred a number of expenses at the point of installation. The entity's accountant is arguing that most expenses do not qualify for capitalization. Included in those expenses are initial operating losses. These should be
Deferred and amortized over a reasonable period of time
Expensed and charged to the income statement
Capitalized as part of the cost of the plant as a directly attributable cost
Taken to retained earnings since it is unreasonable to present it as part of the current year's income statement
IAS 16 requires that revaluation surplus resulting from initial investment revaluation of property plant and equipment should be treated in one of the following ways. Which of the four options mirrors the requirements of IAS 16
Credited to retained earnings as this is an unrealized gain
Released to the income statement an amount equal to the difference between the depreciation calculated on historical cost vis a vis revalued amount
Deducted from current assets and added to the property plant and equipment
Debited to the class of property plant and equipment that is being revalued and credited to a reserve captioned revaluation surplus which is presented under equity
Entity A has an ordinary A class nonvoting share, which is entitled to a fixed dividend of 6% per annum. The A class ordinary share will
Be included in the per share calculation after adjustment for the fixed dividend
Be included in the per share calculation for EPS without adjustment for the fixed dividend
Not to be included in the per share calculation for EPS
Be included in the calculation of dividend EPS
Earnings per share is calculated before accounting for which of the following items
Preference dividend for the period
Ordinary dividend
Taxation
Minority interest
Ordinary shares issued as part of a business combination are included in the EPS calculation in the case of the purchase method from
The beginning of the accounting period
The date of acquasition
The end of the accounting period
The midpoint of the accounting year
When an enterprise makes a bonus issue/stock split/stock dividend or a rights issue , then
The previous year's EPS is not adjusted for the issue
The previous year's EPS is adjusted for the issue
Only a note of the effect on the previous year's EPS is made
Only the diluted EPS for the previous year is adjusted
If a stock option is converted on March 31, 20X1, then
The potential ordinary shares (stock option) are included in diluted EPS up to March 31 20X1, and in basic EPS from the date converted to the year end (both weighted accordingly)
The ordinary shares are not included in the diluted EPS calculation but are included in basic EPS
The ordinary shares are not included in the basic EPS but are included in diluted EPS
The effects of the stock option are included only in previous year's EPS calculation
In calculating whether potential ordinary shares are dilutive, the profit figure used as the control number is
Net profit after taxation (including discontinued operations)
Net profit from continuing operations
Net profit before tax (including discontinued operations)
Retained profit for the year after dividends
Potential ordinary shares issued by a subsidiary should be included in the diluted EPS calculation as they could potentially have an impact on the net profit for the period and the number of shares to be included in the calculation
True
False
An enterprise need disclose diluted EPS only if it differs from basic EPS by a material amount
True
False
If a bonus issue occurs between the year end and the date that the finical statements are authorized the
EPS both for the current and the previous year are adjusted
EPS for the current year only is adjusted
No adjustment in the made to EPS
Diluted EPS only is adjusted
If a new issue of shares for cash is made between the year end and the date that the finical statements are authorized then
EPS for both the current and the previous year are adjusted
EPS for the current year only is adjusted
No adjustment is made to EPS
Diluted EPS only is adjusted
The weighted average number of shares outstanding during the period for all period (other than the conversion of potential ordinary shares) shall be adjusted for
Any change in the number of ordinary shares without a change in resources
Any prior year adjustment
Any new issue of shares for cash
Any convertible instruments settled in cash
In the case of a nonmonetary grant, which of the following accounting treatments is prescribed by IAS20?
Record the asset at replacement cost and the grant ate a nominal value
Record the grant at a value estimated by management
Record both the grant and the asset at fair value of the nonmonetary asset
Record only the asset at fair value; do not reorganize the fair value of the grant
In the case of grant related to an asset, which of these accounting treatments (balance sheet presentation) is prescribed by IAS 20
Record the grant at a nominal value in the first year and write it off in the subsequent year
Either set up the grant as deferred income or deduct it in arriving at the carrying amount of the asset
Record the grant at fair value in the first year and take it to income in the subsequent year
Take it to the income statement and disclose it as an extraordinary gain
In the case of grant related to an income, which of these accounting treatments is prescribed by IAS 20?
Credit the grant to general reserve under shareholder's equity
Present the grant in the income statement as other income or as a separate line item or deduct it from the related expense
Credit the grant to retained earnings on the balance sheet
Credit the grant to sales or other revenue from operations in the income statement
Which of these disclosures is not required by IAS 20?
The accounting policy adopted for government grants including methods of presentation adopted in the financial statements
Unfulfilled conditions and other contingencies attaching to government assistance
The names of the government agencies that gave the grants along with the dates of sanction of the grants by these government agencies and the dates when cash was received in case of monetary grants
The nature and extent of government grants recognized in the financial statements an indication of other forms of government assistance from which the entity has directly benefited
