Quiz 4 Flashcards
Which of the following criteria is NOT required for the results of a component of an entity to be classified as discontinued operation?
a. The entity shall not have any significant continuing involvement in the operations of the component after disposal.
b. The component is available for immediate sale.
c. The operations and cash flows of the component shall be eliminated from the operations of the entity as a result of the disposal.
d. Management must have entered into a sale agreement.
ANS: d. Management must have entered into a sale agreement.
Which disposal could qualify as discontinued operation?
a. Disposal of a component that is similar in nature to other components but has operations and cash flows distinguishable from the rest of the entity.
b. Disposal of a component due to major change in business strategy.
c. Disposal of a small component within the current business strategy.
d. Disposal of a component with distinguishable operations and cash flows from the rest of the entity.
d. Disposal of a component with distinguishable operations and cash flows from the rest of the entity.
An entity shall classify a noncurrent asset or disposal group as held for sale when:
a. The carrying amount of the asset or disposal group will be recovered through a sale transaction.
b. The carrying amount will be recovered through continuing use.
c. The noncurrent asset or disposal group is to be abandoned.
d. The noncurrent asset or disposal group is idle or retired from active use.
ANS: a. The carrying amount of the asset or disposal group will be recovered through a sale transaction.
Non-adjusting events include all, EXCEPT:
a. Accounting error from a major transaction during the year but detected after the accounting period.
b. A major business combination after reporting period.
c. Announcing a plan to discontinue an operation.
d. Expropriation of a major asset after reporting period.
a. Accounting error from a major transaction during the year but detected after the accounting period.
Which is a requirement for a component of an entity to be classified as a discontinued operation?
a. The activities must cease permanently prior to the financial statements being authorized for issue.
b. The component must be a reportable segment.
c. The assets must have been classified as held for sale in the previous financial statements.
d. The component must have been a cash-generating unit while being held for use.
d. The component must have been a cash-generating unit while being held for use.
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 the 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 are expected to approximate sixty percent of earnings.
ANS: a. Property, plant, and equipment recorded at cost with the depreciation computed principally by the straight-line method.
What is the presentation of the results from discontinued operations in the income statement?
a. The amounts from discontinued operations shall be broken down over each category of revenue and expense.
b. Discontinued operations shall be shown as a movement on retained earnings.
c. The entity shall disclose a single amount on the face of the income statement below the income from continuing operations.
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.
ANS: c. The entity shall disclose a single amount on the face of the income statement below the income from continuing operations.
An entity acquired a subsidiary exclusively with a view to selling it. The subsidiary met the criteria to be classified as held for sale. At the end of the reporting period, the subsidiary has not yet been sold, and six months have passed since the acquisition. How will the subsidiary be measured in the statement of financial position at the date of the first financial statements after acquisition?
a. At fair value
b. At the lower of cost and fair value less cost of disposal (carrying amount)
c. In accordance with applicable IFRS
d. None of the above
ANS: b. At the lower of cost and fair value less cost of disposal (carrying amount).
An entity classified a noncurrent asset accounted for under the cost model as held for sale at the current year-end. Because no offers were received at an acceptable price, the entity decided at the end of the next year not to sell the asset but to continue to use it. The asset shall be measured at the end of the next year at what amount?
a. The lower of carrying amount and recoverable amount
b. The higher of carrying amount and recoverable amount
c. The lower of the carrying amount on the basis that the asset had never been classified as held for sale and the recoverable amount
d. The higher of the carrying amount on the basis that the asset had never been classified as held for sale and the recoverable amount
c. The lower of the carrying amount on the basis that the asset had never been classified as held for sale and the recoverable amount
Which of the following is NOT a change in accounting policy?
a. Change from cost model to fair value model in measuring investment property
b. Initial adoption of PFRS 16
c. Change from FIFO to weighted average method
d. Change in inventory valuation due to obsolescence
ANS: d. Change in inventory valuation due to obsolescence
A change in accounting policy is accounted for:
a. Prospectively
b. Retrospectively, unless the limitations were satisfied
c. Retrospectively at all times
d. In the current and future periods
ANS: b. Retrospectively, unless the limitations were satisfied.
Events after the reporting period that provide evidence of conditions that exist at the end of the reporting period are:
a. Adjusting events
b. Non-adjusting events
c. Prior period errors
d. Events after the balance sheet date
ANS: a. Adjusting events.
Which of the following is NOT a change in accounting policy?
a. Initial adoption of PFRS 16
b. Change from FIFO to weighted average method
c. Change in salvage value
d. Change from cost model to fair value model in measuring investment property
ANS: c. Change in salvage value.
A change in accounting estimate should be accounted for:
a. In the period of change and future periods if the change affects both
b. By restating amounts in financial statements of prior periods
c. By reporting proforma amounts for prior periods
d. As a prior period adjustment to beginning retained earnings
ANS: a. In the period of change and future periods if the change affects both.
The 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.
