CFAS FINALS Flashcards
All of the following shall be measured at FVPL, except
a. Financial asset held for trading b. Debt investment irrevocably designated at FVPL
c. Investment in quoted equity instruments
d. Debt investment at amortized cost
D
Depending on the business model for managing financial assets, an entity shall classify financial assets subsequent to initial recognition at
a. Fair value through profit or loss
b. Amortized cost
c. Fair value through other comprehensive income
d. All of these are used in measuring financial assets
D
Exploration and evaluation expenditures are incurred
a. When searching for an area that may warrant detailed exploration even though the entity has not yet obtained the legal rights to explore a specific area.
b. When the legal right to explore a specific area has been obtained but the technical feasibility and commercial viability of extracting a mineral resource are not yet demonstrable.
c. BWhen a specific area is being developed and preparations for commercial extraction are being made.
d. In extracting mineral resource and processing the resource to make it marketable or transportable
B
- Which measurement model applies to exploration and evaluation asset subsequent to initial recognition?
Cost model and Revaluation Model
An operating segment is a component of an entity.
a. That engages in business activities from which it may earn revenue and incur expenses.
b. Whose operating results are regularly reviewed by the entity’s chief operating decision maker.
c. For which discrete information is available
d. All of these characterize an operating segment
D
The term chief operating decision maker
a. Refers to a manager with a specific title.
b. Must be disclosed by title in the financial reporting for segments.
c. Must be described in the disclosures for the financial reporting for segments
d. Refers to a function of allocating resources to the operating segments and assessing their performance
D
The approach used in segment reporting is known as
a. Segment approach
b. Revenue approach
c. Management approach
d. Enterprise approach
C
- Segment revenue includes
a. Sales to unaffiliated customers
b. Sales to unaffiliated customers and intersegment sales
c. Sales to unaffiliated customers and interest revenue
d. Sales to unaffiliated customers and other inco
B
Debt investments that meet the business model and contractual cash flow tests are reported it
Amortized Cost
Debt investment not held for collection of contractual cash flow are reported at
Fair Value
a. For use in the production or supply of goods or services or for administrative purposes
b. For sale in the ordinary course of business
An investment property is not held:
a. To earn rentals
b. For capital appreciation
only land and building can qualify as investment property and held
property (land or building or part of a building or both) held by an owner or by the lessee under a finance lease to earn rentals or for capital appreciation or both
Investment property
PAS 40
Investment Property
Investment Property
PAS 40
When ancillary services are provided by the entity to the occupants of the property and these services are a relatively insignificant component of the arrangement, the property is treated as
investment property
if an entity owns and manages a hotel, services provided to guests are significant to the arrangement as a whole. Therefore, an owner-managed hotel is
owner-occupied property
From the perspective of the individual entity that owns it, the property leased to another subsidiary or its parent is considered an
investment property
from the perspective of the group as a whole and for purposes of consolidated financial statements, the property is treated as
owner-occupied property
the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.
Fair value
Equipment such as lift or air-conditioning is often an integral part of a building and is generally _____ in the fair value of the investment property.
included
If an office is leased on a furnished basis, the fair value of the office generally includes the _____________ because the rental income relates to the furnished office
fair value of the furniture
The fair value of investment property excludes .
prepaid or accrued operating lease income
In exceptional cases, when an entity first acquires an investment property, or when an existing property becomes investment property because there has been a change of use, there may be clear evidence that the fair value of the investment property cannot be determined reliably on a continuing basis.
Under such exceptional cases, PAS 40, paragraph 53, mandates that the entity shall measure such investment property using the ______ until the disposal of the investment property.
Moreover, under such exceptional cases only, the residual value of the investment property shall be assumed to be ____.
Cost Method
Zero
An investment property shall be measured initially at its ___.
________ shall be included in the initial measurement.
cost
Transaction costs
The cost of a purchased investment property comprises the
purchase price and any directly attributable expenditure
includes professional legal services, property transfer taxes and other transaction cost.
Directly attributable expenditure
a. Start up cost
b. Operating loss incurred before occupancy
c. Abnormal amount of wasted material, labor or other resources incurred in constructing or developing the property
Costs excluded from cost of investment property
Costs excluded from cost of investment property
a. Start up cost
b. Operating loss incurred before occupancy
c. Abnormal amount of wasted material, labor or other resources incurred in constructing or developing the property
An entity shall choose either of the following models as the accounting policy and shall apply that policy to all of the investment property:
a. Fair value model
b. Cost model
investment property is carried at
Fair Value
No ________ is recorded for the investment property.
depreciation
If the entity decides to measure the investment property under the fair value model, the changes in fair value from year to year are recognized in
profit or loss
If the entity decides to measure the investment property under the cost model, the asset shall be carried
at cost less accumulated depreciation and any accumulated impairment loss.
In cost model, fluctuations in the fair value of the investment property from year to year are
not recognized
Gain or loss from disposal of investment property shall be determined as the difference between the
net disposal proceeds and the carrying amount of the asset.
Transfers to and from investment property shall made only when there is a
change of use
Commencement of owner occupation- transfer from
investment property to owner-occupied property.
Commencement of development with a view to sale - transfer from
investment property to inventory.
End of owner occupation - transfer from
owner-occupied property to investment property.
Commencement of an operating lease to another entity - transfer from
owner-occupied property to investment property
When the entity uses the cost model, transfers between investment property, owner-occupied property and inventory shall be made at
carrying amount
A transfer from investment property carried at fair value to owner-occupied property or inventory shall be accounted for at ____ which becomes the deemed cost for subsequent accounting.
fair value
If owner-occupied property is transferred to investment property ___________, the difference between the fair value and the carrying amount of the property shall be accounted for as ____ of property, plant and equipment.
that is to be carried at fair value
revaluation
If an inventory is transferred to investment property that is to be carried at fair value, the remeasurement to fair value shall be included in
profit or loss
When an investment property under construction is completed and ____________ the difference between fair value and carrying amount shall be included in profit or loss.
to be carried at fair value,
are living animals and living plants.
Biological assets
is the harvested product of an entity’s biological assets.
Agricultural produce
is the detachment of produce from a biological asset or the cessation of a biological asset’s life processes.
Harvest
Sheep
Biological assets
Dairy cattle
Biological assets
Trees in plantation forest
Biological assets
Felled trees
Agricultural produce
Harvested cane
Agricultural produce
Carcass and Wool
Agricultural produce
Sugar
Product after harvest
Sausage, cured ham
Product after harvest
Yarn, carpet
Product after harvest
is the management by an entity of the biological transformation and harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets.
Agricultural activity
In agricultural activity, control may be evidenced by, for example,
legal ownership of cattle and the branding or otherwise marking of the cattle on acquisition or birth.
A biological asset shall be measured on initial recognition and at the end of each reporting period at
fair value less cost of disposal.
Agricultural produce harvested shall be measured at
fair value less cost of disposal at the point of harvest
Agricultural produce growing on bearer plant is measured at
Agricultural produce growing on bearer plant is measured at fair value less cost of disposal
A gain or loss arising on initial recognition of a biological asset at fair value less cost of disposal and any subsequent changes in fair value less cost of disposal shall be included in
profit and loss
A ____ may arise on initial recognition of a biological asset, for example, when a calf is born.
gain
Agricultural land is _________ a biological asset.
not deemed
The agricultural land may be classified either as ______________ for purposes of measurement.
property, plant and equipment or investment property
Under _____, bearer plants should be accounted for in the same way as ____________ because the operation of bearer plants is similar to that of manufacturing
IFRS
property, plant and equipment
is a living plant used in the production of agricultural produce, expected to bear produce for more than one period and has a remote likelihood of being sold as agricultural produce, except as incidental scrap
bearer plant
are used solely to grow agricultural produce over several periods.
Bearer y
A bearer plant that no longer bears produce is commonly ______ and sold as ___ at the end of the productive life.
cut down
scrap
Trees grown to be harvested and sold as log or lumber are
not bearer plant
The agricultural produce as it grows is measured at the end of each reporting period
prior to harvest at fair value less cost of disposal
The agricultural produce growing on bearer plant is classified as
biological assets
Once harvested, the agricultural produce is measured at
fair value less cost of disposal at the point of harvest.
The fair value less cost of disposal at the point of harvest is the deemed
cost of inventory
The harvested product is recorded as ____ and recognized as from agricultural produce.
inventory
gain
animals related to recreational activities shall be accounted for as
PPE
is an existing liability of uncertain timing or uncertain amount.
Provisions
Actually, a provision may be the equivalent of an estimated liability that is accrued because it is both
probable and measurable
The present obligation may be
legal or constructive
is an obligation arising from a contract, legislation or other operation of law.
legal obligation
exists when the entity has a stated policy that created a valid expectation that it will accept certain responsibilities from an established pattern of practice.
Constructive Obligations
The past event that leads to a present obligation is called an
obligating event
is an event that creates a legal or constructive obligation because the entity has no realistic alternative but to settle the obligation created by the event.
obligating event
An accounting provision cannot be created in anticipation of a
future event
if the event is more likely than not to occur, meaning, the probability that the event will occur is greater than the probability that it will not occur.
probable
means more than 50% likely to occur
Probable
means 50% or less likely to occur
Possible
means 10% or less likely to occur or very slightboccurrence
Remote
When no reliable estimate can be made, no ____ is recognized
liability
The amount recognized as a provision should be the ______ of the expenditure required to settle the present obligation at the end of reporting period.
best estimate
is the amount that an entity would rationally pay to settle the obligation at the end of reporting period.
best estimate
Where there is a continuous range of possible outcomes and each point in that range is as likely as any other, the _________ is the best estimate.
midpoint of the range
Where the provision being measured involves a large population of items, the obligation is estimated by ________ all possible outcomes by their associated possibilities.
weighting
The following items are taken into consideration in recognizing and measuring a provision:
- Risks and uncertainties
- Present value of obligation
- Future events
- Expected disposal of assets
- Reimbursements
- Changes in provision
- Use of provision
- Future operating losses.
- Onerous contract
that inevitably surround events and circumstances shall be taken into account in reaching the best estimate of a provision
risk and uncertainties
describes variability of outcome.
Risk
A ______ may increase the amount at which a liability is measured.
risk adjustment
As ______ dictates, caution is needed in making judgment under conditions of uncertainty so that income and assets are not overstated, or expenses and liabilities are not understated
prudence
Where the effect of the time value of money is material, the amount of provision shall be the _____ of the expenditure expected to settle the obligation
present value
Gains from expected disposal of assets _____ be taken into account in measuring a provision.
shall not
any ______ from disposal are treated separately from the measurement of the provision.
cash inflows
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognized when it is _____ that reimbursement would be received if the entity settles the obligation.
virtually certain
The reimbursement shall be treated as a _____ and ____ against the estimated liability for the provision.
separate asset and not netted
The amount of reimbursement shall not ___ the amount of the provision.
exceed
The provision shall be ____ if it is no longer probable that an outflow of economic benefits would be required to settle the obligation.
reversed
Provisions shall be reviewed at ___________ and adjusted to reflect the current best estimate.
every end of the reporting period
shall be used only for expenditures for which the provision was originally recognized.
Provision
Provision shall not be recognized for future
operating losses
is a contract in which the unavoidable costs of meeting the obligation under the contract exceed the economic benefits expected to be received under it.
Onerous contract
unavoidable costs under a contract represent the
least net cost of exiting from the contract
The ______ between the cost of fulfilling the contract and the compensation or penalty arising from failure to fulfill the contract is the least cost of exiting from the contract.
lower amount
is a possible obligation that arises from past event and whose existence will be confirmed only by the occurrence or nonoccurrence of uncertain future events
Contingent liability
is defined also as a probable obligation that arises from past event but the amount of the obligation cannot be measured reliably.
Contingent liability
a contingent liability is either probable or measurable but
not both
If the obligation is probable and the amount can be measured _____, the obligation is not a contingent liability but shall be recognized as a _____.
reliably
provisin
Treatment of contingent liability.
Possible
disclosure only
Treatment of contingent liability.
Probable but not measurable
disclosure only
Treatment of contingent liability.
Remote
no need for disclosure
Treatment of contingent liability.
Probable and measurable
recognize a loss and an estimated liability
is a possible asset that arises from past event and whose existence will be confirmed only by the occurrence or nonoccurrence of uncertain future events.
Contingent asset
Treatment of contingent asset
Probable
disclosure only
Treatment of contingent asset
Possible
no need for disclosure
Treatment of contingent asset
Remote
no need for disclosure
Biological assets are measured at
a. Fair value less cost of disposal
b. Fair value plus cost of disposal
c. cost
d. Cost less accumulated depreciation
A
should be accounted for in the same way as ppe because the operation of this is similar to that of manufacturing
are used solely to grow agricultural produce over several periods
bearer plants
biological transformation results from asset changes through all of the following, except
a. growth
b. degeneration
c. procreation
d. production of agricultural produce
D
agricultural activity includes all of the following except
a. raising livestock
b. perennial cropping
c. aquaculture
d. ocean fishing
D
the harvested agricultural produce is
a. accounted for as inventory
b. initially recognized at fair value less cost of disposal at the point of harvest
c. recorded as gain from change in fair value of agricultural produce
d. all of these are correct
D
generally speaking, biological assets relating to agricultural activity shall be measured using
a. historical cost
b. historical cost less depreciation less impairment
c. a fair value approach
d. net realizable value
C
which of the following criteria must not be satisfied before a biological asset can be recognized?
a. the entity controls the asset as a result of past event
b. it is probable that future economic benefits relating to the asset will flow to the entity
c. an active market for the asset exists
d. the fair value can be measured reliably
C
an entity had a plantation forest that is likely to be harvested and sold in 30 years. the income shall be accounted for in which of the following?
a. no income shall be reported annually until first harvest
b. income shall be measured annually and reported using a fair value approach
c. the eventual sale proceeds shall be estimated and recognized over the 30-year period
d. the plantation forest shall be measured every 5 years.
b. income shall be measured annually and reported using a fair value approach
when there is a long aging or maturation process after harvest, the accounting shall be dealth with by
a. PAS 41, Agriculture
b. PAS 2, Inventories
c. PAS 16, property, plant and equipment
d. PAS 40, Investment Property
b. PAS 2, Inventories
How should a contingent liability be reported in the financial statements when it is reasonably possible?
a. As a deferred liability
b. As an accrued liability
c. As a disclosure only
d. As an account payable
c. As a disclosure only
A contingent liability
a. Has a most probable value -of zero but may require a payment if a given future event occurs.
b. Definitely exists as a liability but the amount or due date is indeterminate.
c. Is reported of current liability.
d. Is not disclosed in the financial statements.
a. Has a most probable value -of zero but may require a payment if a given future event occurs.
Gain contingency that is remote and measurable
a. Must be disclosed in a note to the financial statements.
b. May be disclosed in a note to the financial statements
c. Must be reported in the body of the financial statements.
d. Should not be reported or disclosed
d. Should not be reported or disclosed
Reporting in the financial statements is required for
a. Loss contingency that is probable and measurable.
b. Gain contingency that is probable and measurable.
c. Loss contingency that is possible and measurable.
d. All loss contingencies.
a. Loss contingency that is probable and measurable.
Financial Instruments - Presentation
PAS 22
Provision, Contingent Liability and Asset
PAS 37
Agriculture
Pas 41
any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial Instrument
is any liability that is a contractual obligation:
financial liability
Deferred revenue and warranty obligations ____________ because the outflow of economic benefits is the delivery of goods and services rather than a contractual obligation to pay cash.
are not financial liabilities
is not a financial liability because it is imposed by law and noncontractual.
Income tax payable
are not financial liabilities because the obligations do not arise from contract.
Constructive obligations
is any contract that evidences a residual interest in the assets of an entity after deducting all of the liabilities.
Equity instrument
as a financial instrument that contains both a liability and an equity element from the perspective of the issuer.
compound financial instrument
If the financial instrument contains both a liability and an equity component, PAS 32 mandates that such components shall be accounted for separately.
The approach in accounting for a compound financial instrument is known as
“split accounting”
The fair value of the liability component is then deducted from the total consideration received from the issuance of the compound financial instrument.
The ______ is allocated to the equity component.
residual amount
This means that the consideration received from the issuance of the compound financial instrument shall be allocated between the liability and equity components.
Split Accounting
A financial instrument is any contract that gives rise to
a. A financial asset
b. A financial liability
c. A financial asset of one entity and a financial liability of another entity
d. A financial asset of one entity and a financial liability or equity instrument of another entity
d. A financial asset of one entity and a financial liability or equity instrument of another entity
Which is not classified as a financial instrument?
a. Convertible bond
b. Foreign currency contract
c. Warranty provision
d. Loan receivable
c. Warranty provision
Which cannot be considered a financial asset?
a. Cash
b. A contractual right to receive cash or another financial asset from another entity.
c. A contractual right to exchange financial instruments with another entity under conditions that are potentially unfavorable.
d. An equity instrument of another entity
c. A contractual right to exchange financial instruments with another entity under conditions that are potentially unfavorable.
Which should be classified as financial asset?
a. Patent
b. Trade accounts receivable.
c. Inventory
d. Land.
b. Trade accounts receivable.
A financial liability
a. Must be classified as noncurrent liability.
b. Is a contractual obligation to deliver cash or another financial asset to another entity.
c. Is a contractual obligation to exchange financial instrument with another entity under conditions that are potentially favorable to the entity.
d. Is a contractual obligation to deliver cash or any asset to another entity.
b. Is a contractual obligation to deliver cash or another financial asset to another entity.
Financial liabilities include all of the following, except
a. Trade accounts payable
b. Notes payable
c. Bonds payable
d. Income tax payable
d. Income tax payable
It is any contract that evidences residual interest in the assets of an entity after deducting all of the liabilities.
a. Equity instrument
b. Debt instrument
c. Loan receivable
d. Financial asset with indeterminable fair value
a. Equity instrument
How should preference shares that are redeemable mandatorily be presented in the statement of financial position?
a. Noncurrent liability
b. Current liability
c. Equity
d. Either current or noncurrent liability depending on redemption date
d. Either current or noncurrent liability depending on redemption date
What is the presentation of preference dividend on mandatorily redeemable preference shares?
a. Deducted from retained earnings
b. Deducted from share premium
c.Interest expense
d. Deducted from share capital
c.Interest expense
when bonds are issued with share warrants, the equity component is equal to
a. zero
b. the excess of the proceeds over the face amount of the bonds.
c. the market value of the share warrants.
d. the excess of the proceeds over the fair value of the bonds without the share warrants
d. the excess of the proceeds over the fair value of the bonds without the share warrants
A bond convertible by the holder into a fixed number of ordinary shares of the issuer is
a. A compound financial instrument
b. A primary financial instrument
c. A derivative financial instrument
d. An equity instrument
a. A compound financial instrument
Convertible bonds
a. Have priority over other indebtedness.
b. Are usually secured by a mortgage.
c. Pay interest only in the event net income is sufficient.
d. May be exchanged for shares of the issuer.
d. May be exchanged for shares of the issuer
Issued convertible bonds are
a. Separated into liability and equity with the liability recorded at fair value and the residual assigned to the equity.
b. Always recorded using fair value
c. Recorded at face amount for the liability
d. Recorded at par value of the shares
a. Separated into liability and equity with the liability recorded at fair value and the residual assigned to the equity.
Convertible bonds
a. Are separated into liability and expense
b. Allow an entity to issue debt financing at lower rate.
c. Are separated into liability and equity components based on fair value.
d. Are not accounted for as compound instrument
b. Allow an entity to issue debt financing at lower rate.
The proceeds from an issue of bonds payable with share warrants should not be allocated between the liability and equity components when
a. The fair value of the warrants is not readily available.
b. The exercise of the warrants within the next reporting period seems remote.
c. The warrants issued are nondetachable.
d. The proceeds should be allocated between liability and equity under all of these circumstances
d. The proceeds should be allocated between liability and equity under all of these circumstances
is the income appearing on the traditional income statement and computed in accordance with accounting standards.
Accounting income
Income Taxes
PAS 12
are items of revenue and expense which are included in either accounting income or taxable income but will never be included in the other.
Permanent differences
permanent differences pertain to
nontaxable revenue and nondeductible expenses
do not give rise to deferred tax asset and liability because they have no future tax consequences.
Permanent Difference
are items of income and expenses which are included in both accounting income and taxable income but at different time periods.
Temporary Difference
give rise either to a deferred tax liability or deferred tax asset.
Temporary Difference
is the income for the period determined in accordance with tax law upon which income taxes are payable or recoverable.
Taxable Income
shall be recognized for all taxable temporary differences.
deferred tax liability
is the temporary difference that will result in future taxable amount in determining taxable income of future periods.
Taxable temporary difference
arises when accounting income is higher than taxable income because of future taxable amount.
deferred tax liability
Expenses and losses are ____ for tax purposes in the current period but deductible for accounting purposes in future periods.
deductible
is an excess of tax deductions over gross income in a year that may be carried forward to reduce taxable income in a future year.
Operating loss carryforward
is the temporary difference that will result in future deductible amount in determining taxable income of future periods.
Deductible temporary difference
when it is probable that taxable income will be available against which the deferred tax asset can be used..
operating loss carryforward
A deferred tax liability or deferred tax asset shall be measured using the tax rate that has been enacted by the __________ and ___ to apply to the future period.
end of the reporting period
expected
is the current tax expense or the amount of income tax actually payable. The income tax payable is classified as current liability.
current tax liability
Under our income tax law, income tax for corporations is payable
every quarter
If the amount of tax already paid for the current period exceeds the amount actually payable for the period, the excess is recognized as a
current tax asset.
is a prepaid income tax and shall be classified as current asset.
current tax asset
In computing the deferred tax asset or liability, which tax, rate is used?
a. Current tax rate
b. Estimated future tax rate
c. Enacted future tax rate
d. Prior tax rate
c. Enacted future tax rate
When temporary difference will result in taxable amount in future years
a. A deferred tax liability is recognized in the current year.
b. A deferred tax asset is recognized in the current year.
c. A deferred tax asset may be recognized in the current year if certain conditions are met.
d. A deferred tax liability may be recognized in the current year if certain conditions are met.
a. A deferred tax liability is recognized in the current year.
It is the amount of income tax payable related to taxable income.
a. Current tax expense
b. Total income tax expense
c. Deferred tax expense
d. Deferred tax benefit
a. Current tax expense
It is the deferred tax consequence attributable to a deductible temporary difference and operating loss carryforward.
a. Deferred tax liability
b. Deferred tax asset
c. Current tax liability
d. Current tax asset
b. Deferred tax asset
It is the sum of the amount of income tax payable and deferred tax liability related to accounting income.
a. Tax expense reported in the income statement
b. Current tax expense
c. Deferred tax expense
d. Deferred tax benefit
a. Tax expense reported in the income statement
Employee Benefits
PAS 19
all forms of consideration given by an entity in exchange for services rendered by employees or for the termination of employment.
Employee Benefits
include directors and other management personnel.
employee
The employee benefits include:
a Short-term employee benefits
b. Postemployment benefits
c. Other long term employee benefits d Termination benefits
short-term benefits are payable
no later than twelve months
are employee benefits which are expected to be settled wholly within twelve months after the end of annual reporting period
Short-term employee benefits
are employee benefits, other than termination benefits and short-term employee benefits, which are payable after completion of employment
Postemployment benefits
Most postemployment benefit plans are __ arrangements between an employer entity and the employees..
formal
are classified as either defined contribution plan or defined benefit plan.
Postemployment benefit plans
is a postemployment benefit plan under which an entity pays fixed contributions into a separate entity known as the fund.
contribution plan
retirement benefit to be received by the employee
The contribution is __ but the benefit is ___. Once the defined contribution is paid, the employer has no more obligation under the plan.
definite
indefinite
the ___ administers, manages and invests the funds.
trustee
at the end of the period shall be recognized as accrued expense.
unpaid contribution
an entity’s obligation is to provide the agreed benefits to employees.
defined benefit plan
may be unfunded, fully funded or partly funded by the contributions of the entity.
Defined benefit plan
the expense recognized is not necessarily the amount of contribution for the period.
defined benefit plan
a. Current service cost
b. Past service cost
c. Any gain or loss on plan settlement
Service Cost
Under a defined benefit plan, the employee benefit expense comprises the following:
Service cost
Net interest
is the increase in the present value of the defined benefit obligation resulting from employee service in the current period.
Current service cost
is the cost to an entity under a defined benefit plan for services rendered by employees in the current year.
current service cost
is the cost under a defined benefit plan for services rendered by employees in prior periods resulting from the introduction of a defined benefit plan or amendment of an existing plan or curtailment of an existing plan.
Past service cost
All ______, whether vested or unvested, shall be recognized as an expense immediately.
past service costs
The information contained in the memorandum records of the benefit plan contains the following:
a Fair value of plan assets (FVPA)
b. Projected benefit obligation (PBO)
is the source of fund set aside in meeting future benefits.
fair value of the plan assets
is the present value of expected future benefits required to be settled.
projected benefit obligation
If the FVPA is ___ than the PBO, the plan is overfunded and the difference is a prepaid benefit cost, a noncurrent asset.
more
If the FVPA is __ than the PBO, the plan is underfunded and the difference is an accrued benefit cost, a noncurrent liability
less
Observe that the “prepaid/accrued benefit cost” account is the
balancing figure.
are employee benefits which are not expected to be settled wholly within twelve months after the end of annual reporting period in which the employees render the related service.
Other long-term employee benefits
are employee benefits provided in
exchange for the termination of an employee’s employment as a result of either a. An entity’s decision to terminate an employee’s employment before the normal retirement date. b. An employee’s decision to accept an offer of benefits in exchange for the termination of employment.
termination benefits
It is the increase in the present value of the defined benefit obligation for employee service in prior periods resulting from a plan amendment or curtailment.
a. Current service cost
b. Net interest
c. Past service cost
d. Employee benefit cost
c. Past service cost
It is the increase in the present value of the defined benefit obligation resulting from employee service in the current period
a. Current service cost
b. Interest expense
c. Past service cost
d. Remeasurement
a. Current service cost
A pension liability is reported when
a. PBO exceeds FVPA
b. Accumulated benefit obligation exceeds
c. Pension expense is greater than funding
d. FVPA exceeds PBO
a. PBO exceeds FVPA
A pension asset is reported when
a. FVPA eceeds accumulated benefit obligation
b. FVPA exceeds PBO
c. PBO exceeds FVPA
d. FVPA exceeds remeasurements
b. FVPA exceeds PBO
Vested benefits
a. Usually require minimum number of years of service
b. Are those that the employee is entitled to receive even if fired.
c. Are not contingent upon additional service under the plan.
d. Are defined by all of these.
D
Postemployment employee benefits include following, except
a. Long-term disability benefits b. Retirement benefits, such as pensions
c. Postemployment life insurance
d. Postemployment medical care
a. Long-term disability benefits
Earnings Per Share
PAS 33
figure is the amount attributable to every ordinary share outstanding during the period.
earnings per share
earnings per share information pertains only to
ordinary share
is an equity instrument that is subordinate to all other classes of equity instruments.
ordinary share
The computation of earnings per share requires two presentations of earnings per share, namely
a. Basic earnings per share
b. Diluted earnings per share
Basic EPS =
Net income ÷ Ordinary shares outstanding
If the preference share is ____, the preference dividend for the current year is deducted from net income only if there is declaration.
noncumulative
The share dividends or share split shall be treated _____ as a change from the date the original shares were Issued.
restrospectively
if the preference share is ____, the preference dividend is added to the net loss to get total loss to the ordinary shareholders.
cumulative
If convertible bonds are outstanding during the entire year it is assumed that the conversion takes place at the
beginning of the year.
_____ are granted to employees enabling them to acquire ordinary shares of the entity at a specified price during a definite period of time.
Share options
have no cash yield but they derive their value from the right to obtain ordinary shares at a specified price that is usually lower than the prevailing market price.
Share option
are dilutive if the exercise price or option price is less than the average market price of the ordinary share
Share option
Share options are included in the EPS computation through the
treasury share method.
is used to simplify the computation of incremental or potential ordinary shares that are assumed to be issued for no consideration as a result of share options.
treasury share method
Earnings per share shall be reported for all of the following except
a. Income from continuing operations
b. Income from discontinued operations
c. Netincome
d. Gross income
d. Gross income
In computing basic loss per share, the annual preference dividend on cumulative preference shares should be
a. Ignored
b. Deducted from the net loss whether declared or not
c. Added to the net loss whether declared or not
d. Added to the net loss only when declared
c. Added to the net loss whether declared or not
In computing basic earnings per share, the full amount of the required preference dividends on cumulative preference shares for the period should be
a. Ignored
b. Deducted from net income only when declared
c. Deducted from net income whether declared or not
d. Added to net income whether declared or not
c. Deducted from net income whether declared or not
In computing basic earnings per share, the amount of preference dividends on noncumulative preference shares should be
a. Deducted from net income whether declared or not
b. Deducted from net income only when declared
c. Added to net income only when declared
d. Ignored
b. Deducted from net income only when declared
Where in the financial statements should basic and diluted EPS be reported?
a. In the accompanying notes
b. In management discussion and analysis
c. In the income statement
d. In the statement of cash flows
C
Earnings per share should be computed on the basis of
a. Preference shares
b. Voting ordinary shares
c. Voting and nonvoting ordinary shares
d. Voting ordinary shares and preference shares
d. Voting ordinary shares and preference shares
Undeclared preference dividends are deducted from net income in the EPS computation for which preference shares?
a. Noncumulative
b. Cumulative
c. Neither cumulative nor noncumulative
d. Both cumulative and noncumulative
b. cumulative
Interim Financial Reporting
PAS 34
means the preparation and presentation of financial statements for a period of less than one year.
Interim financial reporting
Interim financial reports may be presented
monthly, quarterly or semiannually.
___ interim reports are the most common.
Quarterly
publicly traded entities are encouraged to provide interim financial reports at least ____ and such reports are to be made available not later than 60 days after the end of interim period.
semiannually
The Securities and Exchange Commission and Philippine Stock Exchange require entities covered by the reportorial requirements of Revised Securities Act to file quarterly interim financial reports within ____ after the end of each of the first three quarters.
45 days
means that each of the headings and subtotals presented in the entity’s most recent annual financial statements is required but there is no requirement to include greater detail unless this is specifically required.
Condensed
are designed to provide an explanation of significant events and transactions arising since the last annual financial statements.
selected explanatory notes
shall be measured at the lower of cost or net realizable value even for interim purposes.
inventories
Dividend revenue, royalties and other income shall be recognized in the interim period when
realized
dividend revenue is not recognized until declared because even when highly predictable based on past experience, the dividend is not an obligation of the entity until it is
legally declared
are encouraged to provide interim financial reports at least semiannually and such reports are to be made available not later than 60 days after the end of interim period
public traded entities
Interim financial reports shall be published
a. once a year at any time during the year.
b. within a month of the half year-end
c. on a quarterly basis
d. whenever the entity wishes
d. whenever the entity wishes
If an entity does not prepare interim financial reports
a. the year-end financial statements are deemed not to comply with IFRS.
b. the year-end financial statements’ compliance with IFRS is not affected
c. the year-end financial statements shall not be acceptable under local jurisdiction.
d. interim financial reports shall be included in the year-end financial statements
B
There is a presumption that anyone reading interim financial reports shall
a. understand all international financial reporting standards
b. have access to the records of the entity
c. have access to the most recent annual report
d. not make decisions based on the report
C
Which statement in relation to an interim report is true?
a. an interim financial report must consists of a complete set of financial statements
b. an interim financial report must consists of a condensed set of financial statements
c. an interim financial report must consists of a condensed set or complete set of financial statements.
d. all of these statements are true.
C
Which statement is true regarding interim reporting?
a. interim reports are required on a quarterly basis
b. interim reports are not required
c. interim reports require the preparation of only an income statement and a statement of financial position.
d. all of these statement are true.
B
When the business is highly seasonal, what does the standard suggest?
a. additional note about the seasonal nature
b. disclosure of financial information for the latest and comparative 12-month period in addition to the interim report
c. additional disclosure in the accounting policy note
d. no additional disclosure
B
For interim reporting, an inventory loss from a market decline in the second quarter shall be recognized
a. in the fourth quarter
b. proportionately over the last quarters
c. proportionately in each of the four quarters
d. in the second quarter
D
for external reporting, it is appropriate to use estimated gross profit rate to determine the cost of goods sold for
a. interim reporting
b. year-end reporting
c. interim reporting and year-end reporting
d. neither interim reporting nor year-end reporting
A
Advertising costs incurred shall be deferred to provide an appropriate expense in each period for
a. interim reporting
b. year-end reporting
c. interim reporting and year-end reporting
d. neither interim reporting nor year-end reporting
D
Conceptually, interim financial statements can be described as emphasizing
a. timeliness over reliability
b. reliability over relevance
c. relevance over comparability
d. comparability over neutrality
A
Hyperinflation
PAS 29
Hyperinflation is a matter of
judgment
is indicated by characteristics of the economic environment of a country which include but are not limited to the following:
Hyperinflation
provides that the financial statements of an entity that reports in the currency of a hyperinflationary conomy shall be stated in terms of the
measuring unit current at the end of reporting period
is the restatement of conventional or historical financial statements in terms of the current purchasing power of the peso through the use of index number.
Constant peso accounting
also known as purchasing power or price level accounting.
Constant peso accounting
The traditional concept of preparing financial statements based on historical cost is known as
nominal peso accounting
as money held and assets and liabilities to be received or paid in fixed or determinable amount of money.
monetary items
is a right to receive or an obligation to deliver a fixed or determinable amount of money.
essential feature of a monetary item
refer to cash and assets that represent a fixed amount of pesos to be received, or obligations that represent a fixed amount of pesos to be paid.
monetary items
their peso amounts reported in the financial statements differ from the amounts that are ultimately realizable or payable.
nonmonetary
Only _____ items are restated when preparing constant peso financial statements.
nonmonetary
means the goods and services that money can buy
Purchasing power
An increase in the general price index means that the purchasing power of money has
decreased
An increase in the general price index means that the purchasing power of money has decreased. This is popularly known as
inflation
A decrease in the general price index means that the purchasing power of money has
decreased
A decrease in the general price index means that the purchasing power of money has increased. This is popularly known as
deflation
Retained earnings
Monetary or Non?
Nonmonetary
Prepaid interest
Monetary or Non?
Monetary
Consisting of bonds at amortized cost
Monetary or Non?
Monetary
The general purchasing power gain or loss is computed on ___ items.
monetary
Any revaluation surplus recognized previously is
eliminated
First Time Adoption of PFRS
PFRS 1
the index number used for restatement is known as?
such index is designed to show how much the overall level of prices in the economy has changed over time.
general price index
all would indicate that hyperinflation exist, except
a. the general population regards monetary amounts in terms of relatively stable foreign currency
b. the cumulative inflation rate over three years is approaching, or exceeds 100%
c. inflation rates have exceeded interest rates in three successive years.
d. the general population prefers to keep wealth in nonmonetary assets
C
All of the following are monetary items, except
a. Trade payables
b. Trade receivables
c. Administration costs paid in cash
d. Loan repayable at face amount
C
The gain or loss on purchasing power in a hyperinflationary economy shall be included in
a. Profit or loss and separately disclosed
b. Retained earnings
c. Equity
d. Comprehensive income
A
hyperinflation is indicated by all of the following, except
a. the general population prefers to keep wealth in nonmonetary assets.
b. interest rates, wages, and prices are linked to a price index
c. the cumulative inflation rate over three years is approaching or exceeds 100%
d. all of the indicate hyperinflation
D
When computing information on a constant peso basis, which of the following is classified as nonmonetary?
a. Estimated warranty liability
b. Accrued expense
c. Unamortized discount on bonds payable
d. Refundable deposit
A
When computing information on a constant peso basis which of the following is classified as nonmonetary?
a. Allowance for doubtful accounts
b. Accumulated depreciation equipment
c. Unamortized premium on bonds payable
d. Advances to unconsolidated subsidiaries
B
During a period of deflation, an entity would have the greatest gain in general purchasing power by holding
a. Cash
b. Property, plant and equipment
c. Accounts payable
d. Mortgage payable
A
During a period of deflation in which a liability account balance remains constant, which of the following occurs?
a. A purchasing power loss if the item is a nonmonetary liability.
b. A purchasing power gain if the item is a nonmonetary liability.
c. A purchasing power loss if the item is a monetary liability.
d. A purchasing power gain if the item is a monetary liability
C
During a period of inflation in which a liability account balance remains constant, which of the following occurs?
a. A purchasing power loss if the item is a nonmonetary liability.
b. A purchasing power gain if the item is a nonmonetary liability.
c. A purchasing power loss if the item is a monetary liability.
d. A purchasing power gain if the item is a monetary liability.
D
During a period of inflation, an account balance remains constant. With respect to this account, a purchasing power gain is recognized if the account is a
a. Monetary liability
b. Monetary asset
c. Nonmonetary liability
d. Nonmonetary asset
A
is an entity that presents for the first time its financial statements in conformity with Philippine Financial Reporting Standards.
first time adopter
are the first annual statements in which an entity adopts PFRS by an explicit and unreserved statement of compliance with PFRS.
first PFRS financial statements
refers to the beginning of the earliest period for which an entity presents full comparative information under PFRS in its first PFRS financial statements.
date of transition to PFRS
is the statement of financial position prepared by a first time adopter on the date of transition to PFRS.
opening PFRS statement of financial position
is the starting point for accounting in accordance with PFRS.
opening PFRS statement of financial position
Share Based Payment
PFRS 2
is a compensation arrangement established by the entity whereby the entity’s employees shall receive equity shares in exchange for their services or receive cash based on the price of its shares.
share-based compensation plan
Share-based compensation plans are classified into
equity settled and cash settled.
The entity issues equity instruments in consideration for services received, for example, share options.
equity settled
The entity incurs a liability for services received and the liability is based on the entity’s equity instruments, for example, share appreciation rights.
cash settled
The compensation resulting from share options is measured following two methods, namely:
Fair value method
Intrinsic value method
means that the compensation is equal to the intrinsic value of the share options.
intrinsic value method
means that the compensation is equal to the fair value of the share options on the date of grant.
fair value method
is the excess of the market value of the share over the option price.
intrinsic value
If the share options ______, the employee is not required to complete a specified period of service before unconditionally entitled to the share options.
In this case, on grant date, the entity shall recognize the compensation as expense in full immediately.
vest immediately
entitles an employee to receive cash which is equal to the excess of the market value of the entity’s share over a predetermined price for a stated number of shares on settlement or exercise date.
share appreciation right
entitles the employee to a cash payment equal to the increase in the price of a given number of shares over a given period.
share appreciation right
a share appreciation right creates a
liability
Share options are what type of share-based payment transaction?
a. Asset-settled share-based payment transaction
b. Equity-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Liability-settled share-based payment transaction
B
The total compensation expense in a share option plan is measured at
a. Fair value of share options on date of grant
b. Fair value of share options on date of exercise
c. Intrinsic value of share options on date of grant
d. Intrinsic value of share options on date of exercise
A
It is the difference between the fair value of the shares to which the counterparty has the right to subscribe and the price the counterparty is required to pay for those shares.
a. Fair value
b. Intrinsic value
c. Market value
d. Book value
B
The date on which total compensation expense is computed in a share option plan is the
a. Date of grant
b. Date of exercise
c. Date when the market price coincides with the option price
d. Date when the market price exceeds the option price
A
For transactions with employees, the fair value of the share options is measured on
a. Exercise date
b. Grant date
c. End of reporting period
d. Beginning of the year of grant
B
It is a contract that gives the employees the right, but not the obligation, to subscribe to the entity’s shares at a fixed or determinable price for a specified period of time.
a. Share option
b. Share warrant
c. Share appreciation right
d. Share split
A
Compensation expense resulting from a share option plan is generally
a. Recognized in the period of exercise
b. Recognized in the period of the grant
c. Allocated to the periods benefited by the employee’s required service
d. Allocated over the periods of the employee’s service life to retirement
C
A cash settled share-based payment transaction increases which of the following?
a. A current asset
b. A noncurrent asset
c. Equity
d. A liability
D
Non-current asse held for sale
PFRS 5
_____ is classified as held for sale if the carrying amount will be recovered principally through a sale transaction rather than through continuing use.
noncurrent asset
Measurement of asset held for sale
at the lower of carrying amount or fair value less cost of disposal.
noncurrent asset classified as held for sale shall be presented separately as
current asset
is a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction and liabilities directly associated with those assets that will be transferred in the transaction.
disposal group
an entity shall not classify as held for sale a noncurrent asset that is to be
abandoned
is accounted for as a “disposal group classified as held for sale “
discontinued operation
Which criterion does not have to be met in order for an operation to be classified as discontinued?
a. The operation shall represent a separate major line of business or geographical area.
b. The operation is part of a single plan to dispose of a separate major line of business or geographical area.
c. The operation is a subsidiary acquired exclusively with a view to resale.
d. The operation must be sold within three months after the end of reporting period.
D
What is the presentation of the results from discontinued operation in the income statement?
a. The entity shall disclose a single amount on the face of the income statement below the income from continuing operations.
b. The amounts from discontinued operations shall be broken down over each category of revenue and expense.
c. Discontinued operations shall be shown as a movement on retained earnings.
d. Discontinued operations shall be shown as a line item after gross income with the related tax being shown as part of income tax expense
A
Exploration and Evaluation of Mineral Resources
PFRS 6
is defined as the search for mineral resources after the entity has obtained legal right to explore in a specific area as well as the determination of the technical feasibility and commercial viability of extracting the mineral resources.
exploration and evaluation of mineral resources
are expenditures incurred by an entity in connection with the exploration and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource
Exploration and evaluation expenditures
is the cost incurred in an attempt to locate the natural resource that can economically be extracted.
exploration cost
is the cost incurred to extract the natural resource that has been located through successful exploration
Development cost
Exploration and evaluation asset shall be measured initially
at cost
Exploration and evaluation asset is classified either as
tangible asset or an intangible asset.
Two methods of accounting for exploration cost
a. Successful effort method
b. Full cost method
All exploration costs, whether successful or unsuccessful, are capitalized as cost of the successful resource discovery.
Full cost method
The exploration cost directly related to the discovery of commercially producible natural resource is capitalized as cost of the resource property.
The exploration cost related to “dry holes” or unsuccessful discovery is expensed in the period incurred.
Successful effort method
Most large and successful oil entities follow the
successful effort method
is popular among small oil entities.
full cost method
Exploration and evaluation expenditures are incurred
a. When searching for an area that may warrant detailed exploration even though the entity has not yet obtained the legal rights to explore a specific area.
b. When the legal right to explore a specific area has been obtained but the technical feasibility and commercial, viability of extracting a mineral resource are not yet demonstrable.
c. When a specific area is being developed and preparations for commercial extraction are being made.
d. In extracting mineral resource and processing the resource to make it marketable or transportable.
B
When is an entity required to recognize exploration and evaluation expenditure as an asset?
a. When such expenditure is recoverable ifi future periods.
b. When the technical feasibility and commercial viability of extracting the associated mineral resource have been demonstrated.
c. When required by the entity’s accounting policy for recognizing exploration and evaluation asset.
d. Such expenditure is always expensed as incurred.
C
Which of the following expenditures would never qualify as an exploration and evaluation asset?
a. Expenditure for acquisitipn of right to explore.
b. Expenditure for exploratory drilling
c. Expenditures related to the development of mineral resource
d. Expenditures for activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource
C
Which type of expenditure is included in exploration and evaluation of mineral resources?
a. The extraction and processing of mineral resource for transport to market.
b. The commercial review of possible areas for mineral extraction before bidding for the legal right to explore a speciflc area.
c. The expenditure incurred after the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.
d. None of these should be included in exploration and evaluation expenditures.
D
Operating Segments
PFRS 8
is the disclosure of certain financial information about the products and services an entity produces and the geographical areas in which an entity operates
Segment reporting
can generally be thought of as a distinguishable component of an entity that is engaged in business activities which generate revenue and incur expenses.
operating segment
identifies a function and not necessarily a manager with a specific title.
This function is to allocate resources to the segments and assess their performance.
chief operating decision maker
who within the organization is responsible for the allocation of resources and assessing the performance of operating segments.
chief operating decision maker
is defined as a single external customer providing revenue which amounts to 10% or more of an entity’s external revenue.
major customer
Which quantitative threshold is not a requirement in qualifying a reportable segment?
a. The segment revenue, both external and internal, is 10% or more of the combined external and internal revenue of all operating segments.
b. The segment profit or loss is 10% or more of the greater between the combined profit of profitable segments and combined loss of unprofitable segments.
c. The segment assets are 10% or more of the combined assets of all operating segments.
d. The segment assets are 20% or more of the combined assets of all operating segments
D
An operating segment is considered reportable when any of the following conditions is met, except
a. Segment revenue is 10% or more of the combined revenue of all segments.
b. Segment assets are 10% or more of the combined assets of all segments.
c. Segment liabilities are 10% or more of the combined liabilities of all segments.
d. Segment profit or loss is 10% or more of the combined profit of all segments that did not incur a loss.
C
For segment reporting, which tests must be applied to determine if an operating segment is reportable?
a. Revenue test and asset test
b. Revenue test, asset test and profit or loss test
c. Revenue test, asset test and expense test
d. Revenue test, asset test and cash flow test
B
The approach used in segment reporting is known as
a. Segment approach
b. Revenue approach
c. Management approach
d. Enterprise approach
C
Financial Instruments
PFRS 9
INITIAL MEASUREMENT OF FINANCIAL ASSET
Fair value
if the financial asset is held for trading the financial asset is measured at
fair value through profit or loss
if the financial asset is held for trading or if the financial asset is measured at fair value through profit or loss, transaction costs are
expensed outright
after initial recognition,ban entity shall measure a financial asset at:
a. Fair value through profit or loss (FVPL)
b. Fair value through other comprehensive income (FVOCI)
c. Amortized cost
represent an ownership interest in an entity.
equity securities
include ordinary shares, preference shares and rights or options to acquire ownership shares.
Ownership shares
is any security that represents a creditor relationship with an entity. A debt security has a maturity date and a maturity value.
debt security or debt investment
include corporate bonds, treasury bills, commerical papers and other debt instruments with maturity.
Debt securities
Depending on the business model for managing financial assets, an entity shall classify financial assets subsequentbto initial recognition at
a. Fair value through profit or loss
b. Amortized cost
c. Fair value through other comprehensive income
d. All of these are used in measuring financial assets
D
Under IFRS, the presumption is that equity investments are
a. Held for trading
b. Held to profit from price changes c. Held for trading and held to profit from price changes
d. Held as financial assets at fair value through other comprehensive income
C
All of the following shall be measured at FVPL, except
a. Financial asset held for trading b. Debt investment irrevocably designated at FVPL
c.Investment in quoted equity instrument
d.Debt investment at amortized cost
D
Equity investments irrevocably accounted for at fair value through other comprehensive income are
a. Nontrading investments of less than 20%.
b. Trading investments of less than 20%.
c. Investments of between 20% and 50%.
d. Investments of more than 50%.
A
Debt investments held for collection of contractual cash
flows are reported at
a. Net realizable value
b. Fair value
c. Amortized cost
d. The lower of amortized cost and fair value
C
Debt investments not held for collection of contractual cash flows are reported at
a. Amortized cost
b. Fair value
c. The lower of amortized cost and fair value
d. Net realizable value
B
Debt investments reported at amortized cost
a. Managed and evaluated based on a documented risk management strategy
b. Trading debt investments
c. Held for collection debt investments
d. All of these are correct
C
The amount recognized in other comprehensive income is not reclassified to profit or loss under any circumstances.
However, on derecognition, the amount may be transferred to
retained earnings
The financial asset - FVOCI is normally classified as
noncurrent asset.
Fair Value Measurement
PFRS 13
is the price that would be received to sell an asset in an orderly transaction between market participants.
Fair value of an asset
is the price that would be paid transfer a liability in an orderly transaction between market
participants.
Fair value of liability
Fair value is the price in an
orderly transaction
Fair value refers to an “___” or market price under current market conditions at measurement date.
exit price
Fair value is the price agreed upon by
market participants
is a market in which transactions for the asset or liability take place with sufficient regularity and volume to provide pricing information on an ongoing basis.
Active market
is the market with the greatest volume and level of activity for the asset or liability.
principal market
In the absence of a principal market, the entity should consider the
most advantageous market
is the market that maximizes the amount that would be received to sell the asset or minimizes the amount that could be paid to transfer the liability.
most advantageous market
The highest and best use of the asset should possess the following:
a. Physically possible
b. Legally permissable
c. Financially feasible
Market participants
Independent
Knowledgeable
Willing or motivated
is defined as the use of nonfinancial asset by market participants that would maximize the value of asset.
Highest and best use
In determining the fair value of an asset or a liability, an entity may refer to information that is directly observable or readily available.
Valuation Premise
Three valuation techniques can be used to measure fair value:
Market approach
Income approach
Cost approach
uses prices and relevant information for market transactions for identical and comparable asset and liability.
Market approach
Focuses on converting future amounts into discounted cash flows.
Income approach
relies on the current replacement cost to replace the asset with a comparable asset.
Cost approach
Valuation techniques for fair value that include the Black-Scholes formula, a binomial model, or discounted cash flow are examples of which valuation technique?
a. Income approach
b. Market approach
c. Cost approach
d. Exit value approach
A
What is the market approach for measuring fair value?”
a. Present value of future cash flows
b. Prices and other relevant information of transactions
from identical or comparable assets.
c. The price to replace the service capacity of the asset
d. The average of the present value of future cash flows
B
Which of the following would be considered a Level 2 input for fair value measurement?
a. Quoted market price on a stock exchange for an identical asset
b. Quoted market price available from a business broker for a similar asset
c. Historical performance and return on the investment
d. All of these would be considered Level 2 input
B
Revenue from Contracts with Customers
PFRS 15
is income in the ordinary course of business activities.
Revenue
is the new global framework for revenue recognition.
PFRS 15
An entity should recognize revenue in a manner that depicts the _______ of good or service to a customer.
pattern of transfer
is an agreement between two or more parties that creates enforceable rights and obligations in a contract.
contract
is a promise to deliver a good or service in a contract with customer
performance obligation
is the amount of consideration in a contract to which an entity expects to be entitled in exchange for transferring good or service to a customer.
transaction price
Noncash consideration is measured at
FV
is the price that the entity would sell a promised good or service separately to a customer
Stand-alone selling price
Revenue shall be recognized either
At a point in time
over time
is a method of marketing goods in which the entity called the consignor transfers physical possession of certain goods to a dealer or distributor called the consignee that sells the goods on behalf of the consignor.
Consignment
an entity ____ transfers physical possession of certain goods to a dealer or distributor called the ____ that sells the goods on behalf of the consignor.
consignor
consignee
is a contract under which an entity bills a customer for a product but the entity retains possession of the product.
Bill and hold arrangement
revenue shall be recognized when the customer obtains ___ or takes title of the product even though the product remains in an entity’s physical possession.
control
____ is generally designed to reward customers for past purchases and to provide them with incentives to make further purchases
customer loyalty program
If a customer buys goods, the entity grants the customer ____ often described as “points”.
award credits
The consideration allocated to the award credits is initially recognized as
deferred revenue
The revenue recognition in accordance with the core principle is applied following
a. Four-step model
b. Five-step model
c. Three-step model
d. Any model
B
Sales in which the buyer is not yet ready to take delivery but does take title are known as
a. Barter sales
b. Bill and hold sales
c. Layaway sales
d. Sales with buyback
C
Leases
PFRS 16
is defined as a contract or part of a contract that conveys the right to use the underlying asset for a period of time in exchange for consideration.
lease
is the subject of a lease for which the right to use that asset has been provided by the lessor to the lessee.
underlying asset
is the entity that obtains the right to use an underlying asset for a period of time in exchange for consideration.
lessee
is the entity that provides the right to use an underlying asset for a period of time in exchange for consideration.
lessor
a lessee is permitted to to apply the operating lease made in two optional exemptions.
a. Short-term lease
b. Low value lease
Low value asset is a matter of
professional judgment
is defined as a lease with a term of twelve months or less at the commencement date of the lease
short-term lease
is defined as an asset that represents the right of a lessee to use an underlying asset over the lease term in a finance lease.
right of use asset
is payment by the lessor to the lessee associated with a lease or the reimbursement or assumption by the lessor of the cost of the lessee.
Lease incentive
The lease incentive should be deducted from the cost of the right of use asset.
True
is incremental cost of obtaining a lease that would not have been incurred if the lease had not been obtained.
Initial direct cost
The lessee shall measure the lease liability at the
present value of lease payments.
is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset.
operating lease
is a lease that transfers substantially all the risks and rewards incidental to ownership of an underlying asset.
finance lease
Lessor - Finance lease is either
Direct financing lease
Sales type lease
A right of use asset is initially measured at
a. Cost
b. Fair value
c. Current cost
d. Present value of expected cash inflows
A
Under IFRS, a lessee is required to recognize
a. Right of use asset and lease liability b. Right of use asset but not lease liability
c. Lease liability but not right of use asset
d. Neither right of use asset nor lease liability
A
The lessee may apply the operating lease model under what condition?
a. Short-term lease
b. Low value lease
c. Both short-term lease and low value lease
d. Under all circumstances
C
The cost of right of use asset comprises all, except
a. The present value of lease payments
b. Lease payment made to lessor on or before commencement date
c. Initial direct cost incurred by lessee
d. Estimated cost of dismantling the underlying asset for which the lessee has no present obligation
D
The right of use asset is reported as
a. Noncurrent as separate line stem
b. Property, plant and equipment
c. Intangible asset
d. Investment property
A
A lessee with a lease containing a purchase option that is reasonably certain to be exercised should depreciate the right of use asset over
a. Useful life of the asset
b. Lease term
c. Useful life of the asset or the lease term, whichever is shorter
d. Useful life of the asset or the lease term, whichever is longer
A
A lease liability is measured at
a. The absolute amount of lease payments
b. The present value of lease payments
c. The present value of fixed lease payments
d. The fair value of the underlying asset
B
The lease payments include all of the following, except
a. Fixed lease payments
b. Variable lease payments
c. Leasehold improvement
d. Residual value guarantee of the lessee
C
Rent received in advance by the lessor in an operating lease should be recognized as revenue
a. When received
b. At the lease inception
c. At the lease expiration
d. In the period specified by the lease
D
an obligation to dismantle, remove and restore an item of property, plant and equipment as required by law or contract.
Decommissioning Liability
is capitalized as cost of the property and initially recognized at present value.
decommissioning liability
Changes in existing decommissioning, restoration and similar liabilities
IFRIC 1
Members’ shares in cooperative entities and similar instruments
IFRIC 2
Distribution of noncash assets to owners
IFRIC 17
Extinguishing financial liabilities with equity instruments
IFRIC 19
Change in decommissioning liability
a. A decrease in decommissioning liability is ____ the cost of the asset.
deducted
Change in decommissioning liability
b. A increase in decommissioning liability is ___ the cost of the asset.
added
is the issuance of share capital by the debtor to the creditor in full or partial payment of an obligation
equity swap
An entity shall measure a liability to distribute noncash asset as dividend to the owners at
a. Carrying amount of the asset distributed
b. Fair value of the asset distributed c. Either the carrying amount or fair value of the asset
d. Neither the carrying amount nor fair value
B
An entity shall adjust the carrying amount of the dividend payable at the end of each reporting period and at the date of settlement with any changes in the carrying amount of the dividend payable recognized
a. Directly in retained earnings
b. As gain or loss on property dividend
c. As adjustment of share premium
d. As component of other comprehensive income
A
When an entity settles the property dividend payable, it shall recognize the difference between the carrying amount of the asset distributed and the carrying amount of the dividend payable as
a. Gain or loss on distribution of property dividend.
b. Other comprehensive income
c. Equity adjustment
d. Prior period error
A
An entity shall measure a noncurrent asset classified as held for distribution to owners at
a. Carrying amount
b. Fair value less cost to distribute.
c. Lower between carrying amount and fair value lesscost to distribute
d. Fair value
C
An entity shall initially measure equity instrument issued to extinguish a financial liability at
a. Fair value of the equity instrument issued
b. Fair value of the liability extinguished
c. Par value of the equity instruments issued
d. Carrying amount of the liability extinguished
A
If the fair value of the equity instrument issued cannot be reliably measured, the equity instrument issued to extinguish a financial liability shall be measured at
a. Fair value of the liability extinguished
b. Par value of the equity instrument issued
c. Carrying amount of the liability extinguished
d. Book value of the equity instrument issued
A
If both the fair value of the equity instrument issued and the fair value of the financial liability extinguished cannot be measured reliably, the equity instrument issued shall be measured at
a. Carrying amount of the liability extinguished
b. Par value of equity instrument issued
c. Carrying amount of the equity instrument issued
d. Value assigned by the Board of Directors
A
The gain or loss from extinguishment of a financial liability by issuing equity instrument is presented as
a. Other income or other expense b. Separate line item in the income statement
c. Component of other comprehensive income
d. Interest expense
B
It is an obligation to dismantle, remove and restore an item of property, plant and equipment as required by law or contract.
a Decommissioning liability
b. Mining claim
c.Executory obligation
d. Contingent liability.
A
The decommissioning liability is initially recognized at
Present Value
The decommissioning liability is
a. Expensed immediately
b. Directly charged against retained earnings
c. Capitalized as cost of the mining facility
d. A deferred charge
C
Members’ shares in cooperative entities are classified as
a. Equity
b. Liability
c. Partly equity and partly liability
d. Either equity or liability depending on the terms and conditions of the financial instrument
D
Members’ shares in cooperative entities are classified as equity when
a The entity has an unconditional right to refuse redemption of the members’ shares b. The entity has a conditional right to refuse redemption of the members’ shares.
c. The redemption is conditionally prohibited by law
d. The redemption is conditionally prohibited by the
entity’s charter
A
