Notes to Financial Statements Flashcards
Chapter 11 TOA
It provide narrative description for disaggregation of items presented in the financial statements and information about items that do not qualify for recognition
Notes to financial statement
It is used to report information that does not fit into the body of the statements in order to enhance the understandability of the statements
Notes to financial statement
The presentation of the notes to financial statement in a systematic manner
a. Is voluntary
b. Is mandatory
c. Is mandatory, as far as practicable
d. Depends on the industry
c. Is mandatory, as far as practicable
The cross-reference between each line item, in the financial statements and any related information disclosed in the notes to financial statements
a. Is voluntary
b. Is mandatory
c. Depends on the industry
d. Is either voluntary or mandatory
b. Is mandatory
Disclosure of information about key sources of estimation uncertainty
a. Is voluntary
b. Is mandatory
c. Is either voluntary or mandatory
d. Depends on the industry
b. Is mandatory
Disclosure of information about judgements
a. Is voluntary
b. Is mandatory
c. Is either voluntary or mandatory
d. Depends on the industry
b. Is mandatory
Which best demonstrates the standard of adequate disclosure?
a. The separate income statement
b. The auditor’s report
c. The tax return
d. The notes to financial statements
d. The notes to financial statements
Which is a purpose of the notes to financial statements?
a. To present information about the basis of preparation of financial statements and accounting policies used
b. To disclose the information required by PFRS but not presented elsewhere in the financial statement
c. To provide additional information not presented but necessary for a fair presentation
d. All of these can be considered a purpose of the notes to financial statements
d. All of these can be considered a purpose of the notes to financial statements
Which is the first item in presenting the notes to financial statements?
a. Explicit and unreserved statement of compliance with PFRS
b. Other disclosures, such as contingent liabilities and nonfinancial disclosures
c. Supporting information for items presented on the face of the financial statements
d. Summary of significant accounting policies
a. Explicit and unreserved statement of compliance with PFRS
An entity is required to disclose all of the following nonfinancial information, except
a. A description of the nature of the entity’s operations and the principal activities
b. The name of the parent entity and the ultimate parent
c. Domicile and legal form of the entity, the country of incorporation and address of the registered office
d. Names and addresses of directors and officers
d. Names and addresses of directors and officers
Notes to financial statements
a. Are relatively unimportant facts
b. Document the source of financial statement facts
c. Are an integral part of financial statements
d. Are irrelevant and immaterial facts
c. Are an integral part of financial statements
Notes to financial statements
a. Must be quantifiable
b. Must qualify as an element
c. Amplify items presented in the financial statements
d. All of these are characteristics of notes to financial statements
c. Amplify items presented in the financial statements
What is the purpose of information presented in the notes?
a. To provide disclosures by GAAP
b. To correct improper presentation in the statements
c. To provide recognition of amounts not included in the financial statements
d. To present management response to auditor comments
a. To provide disclosures by GAAP
The notes to financial statements should not be used to
a. Describe significant accounting policies
b. Describe depreciation methods employed
c. Describe the principles peculiar to an industry
d. Correct an improper presentation in the statements
d. Correct an improper presentation in the statements
An entity shall disclose in the summary of significant accounting policies
a. The measurement basis used
b. All measurements based whether used or not
c. The measurement basis used in preparing the financial statements and the accounting policies used
d. All of the measurement bases and the accounting policy choices available to the entity
c. The measurement basis used in preparing the financial statements and the accounting policies used
Which of the following information should be disclosed in the summary of significant accounting policies?
a. Refinancing of debt subsequent to the reporting period
b. Guarantee of indebtedness of others
c. Criteria for investments treated as cash equivalents
d. Adequacy of pension plan assets relative to vested benefits
c. Criteria for investments treated as cash equivalents
The summary of significant accounting policies should disclose
a. Effect of retroactive application of an accounting change
b. Income recognition on long term construction contract
c. Adequacy of pension plan assets
d. Future lease payments
b. Income recognition on long term construction contract
The summary of significant accounting policies should disclose
a. The composition of property, plant and equipment and the depreciation method used
b. The composition of property, plants and equipment only
c. The depreciation method used only
d. Neither the composition of property, plant and equipment nor the depreciation method used
c. The depreciation method used only
Which of the following should be included in the summary of significant accounting policies?
a. Property, plant and equipment recorded at cost with the depreciation computed principally by straight line method
b. A business component was sold during the current year
c. Breakdown of sales attributable to business components
d. Future ordinary share dividends
a. Property, plant and equipment recorded at cost with the depreciation computed principally by straight line method
Which is not a required disclosure of accounting policies?
a. The measurement basis used
b. Key management personnel involved in drafting the summary of significant accounting policies
c. Disclosures required by Standards
d. The nature of operations and the policies applied
b. Key management personnel involved in drafting the summary of significant accounting policies
The disclosure of accounting policies is important to financial statement users in determining
a. Net income for the year
b. Whether accounting policies are consistently applied from year to year
c. The measurement of obsolete inventory
d. Whether the working capital position is adequate
b. Whether accounting policies are consistently applied from year to year
Significant accounting policies may not be
a. Selected on the basis of judgement
b. Selected from existing acceptable alternatives
c. Unusual or innovative in application
d. Omitted from financial statements disclosure
d. Omitted from financial statements disclosure
Which is incorrect regarding notes to financial statements?
a. IFRS requires specific note disclosures
b. IFRS requires a maturity analysis for receivables
c. IFRS requires that all notes should be clear, simple to understand and nontechnical in nature
d. All of the choices are correct regarding notes
c. IFRS requires that all notes should be clear, simple to understand and nontechnical in nature
The standard of adequate disclosure is best described by
a. All information related to operating objectives must be disclosed in the financial statements
b. Information about each account balance appearing in the financial statements is included in the notes
c. Enough information should be disclosed in order that a prospective investor can make a wise decision
d. Disclosure of any financial facts significant enough to influence the judgement of a primary user
d. Disclosure of any financial facts significant enough to influence the judgement of a primary user
Application of the full disclosure principle
a. Is theoretically desirable but not practical
b. Is violated when important financial information is buried in the notes to financial statements
c. Is demonstrated by the use of supplementary information presenting the effects of changing prices
d. Requires that the financial statements should be consistent and comparable
c. Is demonstrated by the use of supplementary information presenting the effects of changing prices
An inventory accounting policy that should be disclosed in a summary of significant accounting policies is
a. Composition of inventory into raw materials, goods in process and finished goods
b. Major backlog of inventory orders
c. Method use for pricing inventory
d. All of these should be disclosed
c. Method use for pricing inventory
Which is a method of disclosing relevant information?
a. Supporting schedule
b. Parenthetical explanation
c. Cross reference
d. All of those are methods of diclosure
d. All of those are methods of diclosure
