Chapter 3

Question 1

These are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs. These are referred to as “financial statements”

Answer 1

General Purpose Financial Statement

Question 2

These are standards and interpretations issued by the International Accounting Standards Board

Answer 2

International Financial Reporting Standards

Question 3

It is a term used when the entity cannot apply a requirement after making every reasonable effort to do so

Answer 3

Impracticable

Question 4

This is a type of information that if omitted, misstated or obscured, could reasonably be expected to influence decisions that the primary users of general purpose financial statements make

Answer 4

Material information

Question 5

This contain information in additional to that presented in the statement of financial position, statement of profit or loss and other comprehensive income and statement of cash flows

Answer 5

Notes

Question 6

It provides a narrative description or disaggregation of items presented in the financial statements and information about items that do not qualify for recognition in those statements

Answer 6

Notes

Question 7

It comprises items of income and expense (including reclassification adjustments) that are not recognize in profit or loss as required or permitted by other IFRSS

Answer 7

Other comprehensive income

Question 8

These holders of instruments classified as equity

Answer 8

Owners

Question 9

Is the total of income less expenses, excluding the components of other comprehensive income

Answer 9

Profit or loss

Question 10

These are amounts reclassified to profit or loss in the current period that were recognized in other comprehensive income in the current or previous periods

Answer 10

Reclassified adjustments

Question 11

Is the change in equity during a period resulting from transactions and other events, other than those changes resulting from, transactions with owners in their capacity as owners

Answer 11

Total comprehensive income

Question 12

What is the purpose of financial statements

Answer 12

The objective of financial statements is to provide to information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions

Question 13

What are the information found in the financial statement about an entity

Answer 13

The entity’s assets, liabilities, equity, income and expenses (including gains and losses), contributing by and distributions to owners and cash flows

Question 14

Enumerate the complete set of financial statement

Answer 14

Statement of financial position, statement of profit or loss and other comprehensive income
Statement of changes in equity
Statement of cash flows
Notes
Additional: comparative information I’m respect of the preceding period and a third statement of financial information when an entity applies a change in accounting policy

Question 15

What are the general features of financial statement

Answer 15

It must be presented fairly and explicit unreserved statement of IFRS compliance
It is prepared under going concern assumption
Prepared under accrual basis of accounting (except cash flow)
It shall present material class of similar items and present separately items of dissimilar in nature of function unless they are immaterial
Offsetting in not allowed unless required or permitted by an IFRS
At least annual presentation of complete set of financial statement
A minimum of two statements (financial position, profit or loss and other comprehensive income, cash flow, statement of equity) for comparative purposes and
Consistent presentation and classification of items in the financial statements from one period to the next

Question 16

What are the information to be displayed prominently in the financial statements as required by IAS 1 to clearly identify each FS and the notes

Answer 16

The name of the reporting entity or other means of identification, and any changes in that information from the end of the preceding reporting period
Whether the FS are of an individual entity or a group of entities
The date of the end of the reporting period or the period covered
The presentation currency
The level of rounding used

Question 17

What are the basis of an assessment for an entity to judge whether an item in financial position shall be presented separately

Answer 17

The nature and liquidity of assets
The function of asset within the entity and the amounts, nature and timing of liabilities

Question 18

When shall an entity classify assets as current

Answer 18

It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
It holds the asset primarily for the purpose of trading;
It expects to realize the asset within twelve months after the reporting period and
The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period

Question 19

It is the time between the acquisition of assets for processing and their realization in cash or cash equivalent

Answer 19

Operating cycle

Question 20

When shall an entity classify liabilities as current

Answer 20

It expects to settle the liability in its normal operating cycle
It holds the liability primarily for the purpose of trading
The liability is due to he settled within twelve months after the reporting period and
It does not have the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period

Question 21

What are the two forms of expense classification in profit or loss

Answer 21

Nature of expense method and function of expense method

Question 22

What are the information to be presented in the notes

Answer 22

The basis of preparation of the financial statements and the specific accounting policies used;
Information required by IFRSS but is not presented elsewhere in the FS and
Relevant information for better understanding but is not presented elsewhere in the FS

Question 23

It provides an overview of the financial condition of an entity

Answer 23

Statement of Financial Position or Balance Sheet

Question 24

It provides information about the entity’s financial performance and management stewardship on a given period

Answer 24

Statement of comprehensive income

Question 25

It provides all transactions affecting the equity component of the entity. It sevres as a link between the income statement and the statement of financial position

Answer 25

Statement of changes in equity

Question 26

It is a financial statement that provide a summary of inflow and outflow of cash to and from an entity

Answer 26

Statement of cashflows

Question 27

The only statement that is not prepared under accrual basis of accounting

Answer 27

Statement of cashflow

Question 28

What are items to be presented in other comprehensive income

Answer 28

Gain or loss from translating financial statements of a foreign operation
Unrealized gain or lose in derivative contracts designed as cash flow hedge
Unrealized gain or loss on debt investment measured at FV through OCI
Unrealized gain or loss on equity investment measured at FV through OCI
Change in revaluation surplus
Remeasurement of a defined benefit plan
Gain or loss attributable to credit risk of a financial liability designated at FV through profit or loss

Question 29

How should statement of comprehensive income presented

Answer 29

Single statement approach or two statement approach

Question 30

The frequency of presentation of complete financial statement

Answer 30

At least annually

Question 31

Cash payments to and on behalf of employees is classified as what activity in the statement of cash flow

Answer 31

Operating activity

Question 32

Cash proceeds from issuing shares or other equity instruments is classified as what activity in the statement of cash flow

Answer 32

Financing activity