Core 1

Question 1

What are the two main characteristics that financial statements must have in accordance with IFRS?

Answer 1

1. Relevant
2. Faithful representation

Question 2

What are the four enhancing characteristics that financial statements must have?

Answer 2

1. Comparability (more useful if it can be compared to other businesses)
2. Verifiability (two professionals with access to the same information will report the same information)
3. Timeliness (reports must be delivered to users in time to make relevant business decisions)
4. Understandability

Question 3

What is “Relevance” in the context of financial reporting?

Answer 3

Financial information is capable of making a difference in the decisions made by users.

Question 4

How does materiality come in to play with the characteristic of “Relevance”?

Answer 4

Materiality is specifically tied to financial statements users and their objectives. An item is considered material if omitting it would change the decision of a user.

Question 5

What is “Faithful representation” in the context of financial reporting?

Answer 5

Presenting what actually occurred in the business.

Question 6

What is the “Cost Constraint”?

Answer 6

Making the decision on the quantity and level of detail involved in financial reporting to ensure that sufficient information is provided to users, while also not incurring unnecessary costs to prepare the information.

Question 7

What is the difference between the equity reported on the statement of financial position and the statement of changes in equity.

Answer 7

SFP - Shows only the closing equity balance
Statement of changes in Equity - Shows opening/closing balances, as well as increases/decreases throughout the period.

Question 8

What are the three categories found on a statement of changes in cash flows?

Answer 8

1. Operating Activities
2. Investing Activities
3. Financing Activities

Question 9

List three examples of external users of financial statements

Answer 9

1. Investors
2. Creditors
3. Regulatory Bodies
4. Taxing authorities
5. non-management employees

Question 10

What is the purpose of security exchange commissions?

Answer 10

They are responsible for overseeing the companies within its area with the goal to ensure that the marketplace is fair, with each participant having equitable access to information to make informed decisions.

Question 11

What are the three criteria for recognizing revenue under ASPE 3400?

Answer 11

1. Performance has been achieved
2. Revenue can be measured reliable
3. Collection is reasonable assured

Question 12

What are the two options used to establish performance for provision of services and long-term contracts?

Answer 12

1. percentage of completion method
2. Completed contract method

Question 13

How would you determine when to use the percentage of completion method or the completed contract method?

Answer 13

% of completion - more than one act by the seller. % determined using passage of time, cost completed, or number of acts.

Completed contract - only one act by the seller, OR progress of completion cannot be reliably measured. Revenue recognized on completion only.

Question 14

How do you establish when performance is achieved for the sale of goods?

Answer 14

Seller has transferred the significant risks and rewards of ownership and there is no continuing managerial involvement

Question 15

How does ASPE apply revenue recognition criteria for a contract with multiple deliverables?

Answer 15

1. performance of any remaining deliverables is probably
2. deliverables have value on a stand-alone basis