2017 Jan

Question 1

1. Describe the fundamental qualitative characteristics of financial information according to the Conceptual Framework.

a) Relevance and faithful representation
b) Matching and prudence
c) Comparability and conservatism
d) Substance over form

Answer 1

A)

Question 2

2. Why is the going concern assumption important to the practice of accounting?
   a) It is important because all measures of performance and financial position implicitly assume that the entity is going to continue.
   b) It is important because the valuation model simplicity assume that the entity is going to continue.
   c) It is important because all measures of market values assume that the enti ty is going to continue.
   d) It is important because valuing the future dividends from the entity implicitly assume that the entity is going to continue in eternity.

Answer 2

A)

Question 3

3. Costs can either be presented as by nature or by function. Which of the following is wrong ?
   a) Expense by function – marketing expense
   b) Expense by nature – employee costs
   c) Expense by function – depreciation
   d) Expense by nature – interest costs

Answer 3

c) Expense by function – depreciation

Question 4

4. What are the key elements indefining ‘fairvalue’?
   a) It is the current exit price, which is to sell an asset (or pay to transfer a liability), in an orderly transaction, between market participants, at the measurement date.
   b) It is the entry price, which is to buy an asset (or pay to transfer a liability), in an orderly transaction, between market participants, at the measurement date.
   c) It is the transactions price, which is to transact an asset (or exchange a liability), in an orderly transaction, between market participants, at the measurement date.
   d) It is the exchange price, which is to exchange an asset into cash (or transfer a liability), in an orderly transaction, between market participants, at the measurement date. .

Answer 4

A)

Question 5

5. How is a financial lease presented in the balance sheet and the income statement for a lessee?
   a) No recognition in the balance sheet. The future lese payments are disclosed in the footnote, for year 1, year 2-5 (as a sum) and after year 5 and onwards (as a sum). The lease expense is recognized as an operating cost in the income statement.
   b) The present value of future lease payments is recognized as an asset and a liability. The lease expense is recognized as an operating cost in the income statement.
   c) The nominal value of future lease payments is recognized as an asset and a liability. The lease expense is recognized as an operating cost in the income statement.
   d) The present value of future lease payments is recognized as an asset and a liability. The asset is depreciated in line with the economic useful life. The interest cost on the liability is presented as a financial cost in the income statement.

Answer 5

D)

Question 6

6. If a sale and leaseback transaction results in a gain for the previous owner (now lessee), how should this be treated in a finance lease for the lessee?
   a) The gain should immediately be recognized in the income statement.
   b) The gain should be deferred and amortized over the lease term.
   c) The gain should be deferred to the end of the leasing period and recognized in the income statement when the leasing contract expires.
   d) The gain should be included in Other Comprehensive Income and recycled to net earnings when the lease contract expires.

Answer 6

B)

Question 7

7. Which of the following are NOT key characteristics of an intangible asset?

a) Contractual right
b) Identifiable
c) Non-monetary
d) No physical substance

Answer 7

a) Contractual right

Question 8

8. Which of the following is NOT a purpose of the pre-acquisition entries in the preparation of consolidated financial statements.
   a) prevent double counting of the assets of the economic entity
   b) prevent double counting of the equity of the economic entity
   c) recognise any gain on bargain purchase
   d) recognize goodwill

Answer 8

D)

Question 9

9. What is an impairment test?
   a) It is a test to determine if an entity’s assets are overstated, that is, whether the carrying amount of the assets is greater than their recoverable amount.
   b) It is a test to determine If an entity’s assets are understated, that is, whether the carrying amount of the assets is lower than their recoverable amount.
   c) It is a test to determine the amount of consolidated goodwill, that is, whether the acquisition price is higher than the carrying amount of the net assets.
   d) It is a test to determine the amortization of goodwill, that is, whether the carrying amount of the goodwill is greater than the recoverable amount.

Answer 9

A)

Question 10

10. Which of the following is an indicator of impairment?

a) significant changes in the legal
the environment in which the entity operates

b) significant increases in market value
c) decreases in market interest rates
d) the carrying amount of the entities assets is below its market capitalisation

Answer 10

a) significant changes in the legal

the environment in which the entity operates

Question 11

11. What is meant by recoverable amount?
    a) It is the higher of an entity’s discounted cash flow value and fair value, less costs of disposal.
    b) It is the lower of an entity’s discounted cash flow value and fair value, less costs of disposal.
    c) It is the higher of an asset’s value in use and fair value, less costs of disposal.
    d) It is the higher of fair value and historical costs, less cost of disposal.

Answer 11

C)

Question 12

12. What is a cash-generating unit?
    a) Group segments that generates cash inflows largely independent of the cash flows from other group segments.
    b) Subsidiaries that generates cash inflows largely independent of the cash flows from other subsidiaries.
    c) The smallest identifiable group of assets that generates cash inflows largely independent of the cash flows from other assets.
    d) A group of assets that generates identifiable cash inflows largely independent of the cash flow from other assets.

Answer 12

C)

Question 13

13. Which of the following is an example of a financial instrument?

a) A Provision for restructuring
b) A contract to by copper
c) A futures contract to buy US-dollars
d) A pension liability

Answer 13

C)

Question 14

14. Which of the following is NOT an example of a financial asset/liability?
    a) Advances received on a construction project
    b) A contract that will be settled in the company’s own equity
    c) Cash
    d) Shares

Answer 14

A)

Question 15

15. Which of the following is NOT an example of market risks?
    a) Value changes coming from fluctuations in the Swedish krona (SEK)
    b) Value changes on a futures contract in US-dollar (USD), as part of a hedge transaction of exports in USD.
    c) The change in the value of the company’s bond, due to a downgrade in creditworthiness from Standards & Poor.
    d) The change in the value of the company’s bond, due to changes in the value of government bonds with the same maturity.

Answer 15

C)

Question 16

16. What is the differences between the categories: 1) Fair value through profit and loss; 2) Held to
    collect cash; 3) Fair value through OCI?

a) Category 1 and 3 requires quoted market prices, but category 2 does not.
b) Category 1 is applicable to a trading portfolio, but 2 and 3 are not.
c) The income effect from category 1 is recognized in profit/loss, but the income effect from category 2 and 3 are recognized in other comprehensive income.
d) On category 1 and 3 a gain or a loss from selling the instrument will be recognized in the income statement, but not in category 2.

Answer 16

B)

Question 17

17. What is the differences between the measurement of the following categories: 1) Fair value through profit and loss; 2) Held to collect cash; 3) Fair value through OCI; 4) Loans and receivables? Select one:
    a) Category 1 is measured at fair value, the others to amortized costs
    b) Category 1 and 3 are measured at fair value, the others to amortized costs
    c) Category 2 and 4 are measured at fair value, the others to amortized costs
    d) Category 1, 2 and 3 are measured at fair value, category 4 at amortized costs

Answer 17

B)

Question 18

20. How does an entity choose between depreciation methods, for example, straight -line versus diminishing-balance models?
    a) The depreciation method shall reflect the pattern in which the asset’s future economic benefits are expected to be consumed by the entity.
    b) The depreciation method shall reflect the pattern in which the asset’s future fair value are expected to develop in the entity.
    c) The depreciation method used shall reflect the future residual value of the asset in the entity.
    d) The depreciation method shall reflect the pattern of future revenues relating to the asset’s in the entity.

Answer 18

A)

Question 19

1. Which of the following steps is NOT a part of the standard-setting process of the IASB?
   a) Developing and publishing a discussion paper (DP)
   b) Developing and publishing the exposure draft (ED)
   c) Setting a final draft (FD) with the FASB
   d) Consultation and evaluation after an IFRS has been issued.

Answer 19

C)

Question 20

3. Which are the required classifications of cash flows under IAS 7.
   a) Operating, investing and financing
   b) Cash flow from the income statement, cash flow to/from the assets and cash flow to/from liabilities

c) Cash flow from customers, cash flow to suppliers and employees, cash flow to/from
investing.

d) Cash flow from the income statement, change in working capital, investments

Answer 20

a) Operating, investing and financing

Question 21

4. Which of the following statements is correct regarding the fair value hierarchy?
   a) The fair value hierarchy is a hierarchy of inputs into the fair value measurement. The inputs are classified as quoted or not quoted.
   b) The fair value hierarchy is a hierarchy of inputs into the fair value measurement. The inputs are classified as liquid or non-liquid.
   c) The fair value hierarchy is a hierarchy of inputs into the fair value measurement. The inputs are classified as traded or non-traded.
   d) The fair value hierarchy is a hierarchy of inputs into the fair value measurement. The inputs are classified as observable or unobservable.

Answer 21

D)

Question 22

5. How is present value related to the concept of a provision?
   a) IAS 37 always require provisions to be discounted to present value

b) IAS 37 requires provisions to be discounted to present value where the time-frame of the
obligation is more than 12 months.

c) IAS 37 requires provisions to be discounted to present value where the effect of discounting is material.
d) IAS 37 do not requires provisions to be discounted to present value

Answer 22

C)

Question 23

6. What is contingent liability?
   a) An uncertain obligation whose existence will be confirmed by the occurrence of one or more uncertain past events.
   b) A certain obligation that arises from past events and whose existence will be confirmed by the occurrence of one or more certain future events.
   c) A possible obligation that arises from past events and whose existence will be confirmed by the occurrence of one or more uncertain future events.
   d) An unforeseen event that may or may not happen.

Answer 23

C)

Question 24

8. Relating to intangible assets, which of the following factors are not included in the term ‘identifiability’?

a) Separable
b) Contractual rights
c) Goodwill
d) Legal rights

Answer 24

B)

Question 25

9. Which of the following are NOT reasons to prepare the consolidated financial statements?

a) Supply of comparable information
b) Accountability for management
c) Creditor protection
d) Reporting risk and benefits

Answer 25

B)

Question 26

10. What is the purpose of the business combination valuation entries?
    a) The purpose of these entries is to make consolidation adjustments so that in the consolidated balance sheet the identifiable assets, liabilities and contingent liabilities of the subsidiary are reported at fair value.
    b) The purpose of these entries is to make consolidation adjustments so that in the consolidated balance sheet the identifiable assets, liabilities and contingent liabilities of the subsidiary are reported at historical costs.
    c) The purpose of these entries is to make consolidation adjustments so that in the consolidated balance sheet the identifiable assets, liabilities and contingent liabilities of the subsidiary are reported at the entry value.
    d) The purpose of these entries is to make consolidation adjustments so that in the consolidated balance sheet the identifiable assets, liabilities and contingent liabilities of the subsidiary are reported at current costs.

Answer 26

A)

Question 27

11. Which of the following is NOT an indicator of impairment?
    a) significant changes in the legal environment in which the entity operates
    b) significant increase in market value
    c) increases in market interest rates
    d) the carrying amount of the entity’s assets exceeds the entity’s market capitalisation

Answer 27

B)

Question 28

15. Which of the following is an example of an equity instrument?
    a) Preference shares that will be redeemed at the option of the holder.

b) Preference shares that can be converted into shares at the option of the holder, or
redeemed.

c) A convertible bond with a fixed interest rate that can be exchanged into shares at the option of the holder, or be settled in cash.
d) A convertible bond with a variable interest rate that can be exchanged into common shares at the option of the issuer, the company.

Answer 28

B)

Question 29

16. Which of the following items is NOT a hedge instrument?
    a) A loan in foreign currency, to hedge currency risks in a foreign subsidiary
    b) A liquidity reserve in foreign currency, to hedge currency risks on import in that currency
    c) Forward contracts on foreign currencies
    d) Interest rate swaps

Answer 29

B)

Question 30

20. An acquisition can include contingent considerations, for example an additional pay-out to the seller of the company. Which of the following is NOT correct.
    .
    a) A contingent consideration must be included in the purchase price allocation.

b) A change in the contingent consideration after the purchase price allocation is finalized, must be included in the income statement.
c) A change in the contingent consideration after the purchase price allocation is finalized, must be adjusted against goodwill.
d) The effect from the contingent consideration may include the acquiring company’s valuation of future products introduced on the market.

Answer 30

D)

Question 31

12. Which of the following is NOT one of the eight overall considerations to be applied in the presentation of financial statements.
    a) Fair presentation
    b) Going concern
    c) Consistency of presentation
    d) Objective reporting

Answer 31

d) Objective reporting

Question 32

19. Which are the key-steps in the acquisitions method according to IFRS3?
    a) Identify an acquirer. Determine the acquisition date. Recognise and measure goodwill or a gain from bargain purchase (negative goodwill). Recognise any contingent consideration (additional pay-outs).
    b) Identify an acquirer. Determine the share price in the acquired company at the acquisition date. Recognise and measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired company. Recognise and measure goodwill or a gain from bargain purchase (negative goodwill)
    c) Identify an acquirer. Determine the acquisition date (can be several). Recognise and measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquired company. Recognise and measure goodwill or a gain from bargain purchase (negative goodwill)
    d) Identify an acquirer. Recognise and measure the intangible assets acquired (for example customer lists), the liabilities assumed and any non-controlling interest in the acquired company. Recognise and measure goodwill or a gain from bargain purchase (negative goodwill).

Answer 32

C)