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ADVANCED PRE-WEEK MATERIALS

THEORY OF ACCOUNTS For Cebu CPAR Use only.


MULTIPLE CHOICE
1. The name that is now used for standards issued by the International Accounting Standards

Board is:
a. International Accounting Standards (IAS);
b. International Generally Accepted Accounting Principles (IGAAP);
c. International Financial Accounting Interpretations (IFAI)
d. International Financial Reporting Standards (IFRS).
ANS: D
2. The responsibilities of the International Financial Reporting Interpretations Committee

include:
I.
II.
III.
IV.
V.
a.
b.
c.
d.

Report to the IASB and obtain its approval for final interpretations.
Interpret the application of IFRS.
Provide timely guidance on financial reporting issues not addressed in IFRS or IAS.
Publish draft interpretations for public comment.
Consider comments made on interpretations before finalising an interpretation.
I, II, III, IV and V;
I, II and III only;
II, III, and IV only;
III, IV and V only.

ANS: A
3. A document that contains disclosures including financial statements, that is issued to potential

investors, by companies seeking capital, is known as a:


a. securities statement;
b. company constitution;

c.
d.

trust deed;
prospectus.

ANS: D
4. Under IFRS 2 Share-based Payment, the method that must be used to measure employee stock

options and other payments given to employees in the form of equity securities, is:
a.
b.

initial cost;
fair value;

c. discounted cash flows;


d. selling price.

ANS: B
5. A company is regarded as a first-time adopter of International Financial Reporting Standards

if, for the first time, it makes an explicit and unreserved statement that:
a. its general purpose financial statements comply with IFRS;
b. it has prepared its financial statements using national GAAP;
c. it has selected accounting policies that are based on IFRS in force prior to 31
d.

December 2005;
it will prospectively adjust its comparative financial statements by applying IFRS
in force at 1 January 2006.

ANS: A
6. International Financial Reporting Standards are applicable to the following entities:
a. not-for-profit entities;
b. government activities

c. government business enterprises


d. public sector non-profit organisations
ANS: C
7. The standards of the International Auditing and Assurance Standards Board include

international standards on:


I. Quality control.
II. Auditing.
III.Review Engagements.
IV.Assurance Engagements.
a.
b.

I, II and III only;


I, III and IV only;

c. II, II, III and IV.


d. II, II and IV only;

ANS: C
8. Information about the sources and uses of an enterprises cash and cash equivalents is

provided in the:
a. income statement;
b. cash flow statement;

c. statement of changes in equity;


d. balance sheet.

ANS: B
9. The IASB Framework outlines two underlying assumptions of financial statements. These

are:
Assumption 1
a. Accrual basis of accounting
b. Cash basis of accounting
c. Historical cost accounting
d. Fair value basis of measurement

Assumption 2
Going concern assumption;
Insolvency assumption;
Limited life concept;
Perpetual life concept.

ANS: A
10. If financial information that is presented in a balance sheet or income statement is misstated,

and it influences the economic decisions of users, that information is described as:
a.
b.

reliable;
prudent;

c. material
d. faithful.

ANS: C
11. The IASB Framework identifies four principal qualitative characteristics that make the

information in financial statements useful to investors, creditors and others. These


characteristics are:
I. Comparability.
II. Relevance.
III.Subjectivity.
IV.Confidentiality.
V. Understandability.
VI.Reliability.
a. I, II, III and IV
b. I, II, V, and IV.

c. II, IV, V and IV


d. I, III, IV and VI;

ANS: B
12. In respect to information included in financial statements, the accounting concept of

prudence ensures that:

a. the financial statements report what they purport to report


b. a degree of caution in the exercise of judgments about estimates is made:
c. an appropriate balance is achieved between the relevance and the reliability of
d.

information that has been included;


information is provided to users within the time period in which it is most likely to
bear on their decisions.

ANS: B
13. An item cannot be recognised in the balance sheet or the income statement unless it meets the

two criteria of:


Criterion 1
a. Materiality
b. Completeness
c. Neutrality
d. Probable economic benefits

Criterion 2
Relevance to the users;
Measurement reliability;
Representational faithfulness;
Measurement reliability.

ANS: D
14. The following statement: decreases in economic benefits during the accounting period in the

form of outflows or depletions of assets, or the incurrence of liabilities that result in decreases
in equity other than those relating to distributions to equity participants provides a definition
of:
a. expenses
b. assets;

c. liabilities
d. income.

ANS: A
15. The following definition increases in economic benefits during the accounting period in the

form of inflows or enhancements of assets or decreases of liabilities that result in increases in


equity, other than those relating to contributions from equity participants is a formal
statement of the meaning of:
a. assets
b. income;

c. liabilities;
d. expense.

ANS: B
16. When measuring the revenue from dividends, IAS 18 Revenue, allows the recognition of

dividend revenue only when:


a. the revenue has been realised
b. the cash is received
c. when the right to receive payment is established;
d. the dividend amount is determined and the dividend has been declared.
ANS: C
17. So long as it is probable that the economic benefits will flow to the enterprise and the amount

of revenue can be measured reliably, revenue from royalties should be recognised on:
a. an accruals basis
b. the net present value of cash flows

c. the cash basis of accounting


d. a percentage of completion basis.

method;
ANS: A
18. According to IAS 18 Revenue, the revenue from interest should be recognised using the

following measurement basis:


a. the accrual basis
b. a time proportionate basis that takes

c. the cash basis;


d. the historical cost basis

into account, the effective yield;


ANS: B
19. The measurement basis net realisable value is best described as:
a.
b.

unamortised historical cost;


time adjusted cash flow.

c. unadjusted initial cost;


d. an assets selling price or a liabilitys

settlement amount;
ANS: D
20. When a public share issue is made, the offer comes from:
a. the company issuing the shares;
b. the applicant.
c. the broker handing the share issue for the company;
d. the Australian Securities and Investments Commission once it has reviewed the

prospectus documentation;
ANS: B
21. The bonus issue of shares has the following impact on the equity of a company;
a. total equity increases;
b. total equity decreases;
c. only the amount of issued share capital changes.
d. one equity account increases and another equity account decreases by an equal

amount;
ANS: D
22. A company issued share option is an instrument that gives the holder the right but not the

obligation to:
a. receive a certain dividend declared by the company by a specified date;
b. receive a bonus issue of shares in a proportion as notified by the company
c. sell a certain number of shares in the company by a specified date at a stated price;
d. buy a certain number of shares in the company by a specified date at a stated price;
ANS: D
23. Dividends declared after the balance sheet date but before the financial statements are

authorised for issue:


a. meet the criteria for recognition as a liability;
b. do not meet the IAS 37 criteria of a present obligation.
c. are recognised in the balance sheet as they meet the definition of equity;
d. atisfy the criteria for recognition as an expense
ANS: B
24. IAS 10 Events after the Balance Sheet Date, states that if a dividend is declared after the

balance sheet date but before the financial statements are authorised for issue, the dividend is:
.
a.
b.
c.
d.

recognised as a liability at the balance sheet date;


not recognised as a liability at the balance sheet date
recorded as a direct reduction of equity at the balance sheet date;
recorded as a reduction against the asset cash at balance sheet date

ANS: B
25. The balance in the retained earnings account is affected by the transfer to that account of:

I. Issued share capital;


II. Dividends paid or provided for.
III.Transfers to or from Other reserve accounts.
IV.Changes in accounting policies and errors.
V. Interest paid to debenture holders.
a. I, II and III only;
b. II, III and IV only;

c. I, II, III and IV only;


d. II, III and V only.

ANS: B
26. Under IAS 16 Property, Plant and Equipment, an entity may choose to measure assets using

the revaluation model. If this model is chosen, revaluation increments are recognised:
a. in profit or loss of the period in which the revaluation is undertaken
b. as a deferred credit in the balance sheet
c. directly in equity;
d. as an increase in the balance of the relevant accumulated depreciation account
ANS: C
27. In relation to an asset revaluation surplus, an entity:
a.
b.
c.
d.

is not able to use this surplus for the payment of future dividends;
is able to use this surplus for the payment of future dividends
is not able to transfer this surplus to any other reserve account;
can transfer the surplus to the income statement when the asset is disposed of

ANS: B
28. According to IAS 39 Financial Instruments: Recognition and Measurement, gains and losses

on available-for-sale financial assets are recognised:


a. directly in equity until the financial asset is derecognised
b. in profit or loss of the period
c. as part of interest revenue or interest expense of the period
d. as deferred liabilities or assets until derecognised.
ANS: A
29. IAS 1 Presentation of Financial Statements, requires the following items to appear on the face

of the statement of changes in equity:


I. The net amount of cash from the issue of any securities during the period.
II. The cumulative effect of changes in accounting policy and the correction of
errors.
III. Each item of income or expenses that is required to be recognised directly in
equity.
IV.Profit or loss for the period.
a. I, II, III and IV
b. II, III and IV only;

c. I, III and IV only;


d. II and IV only.

ANS: B
30. The components of equity generally recognised by companies in a balance sheet are:

I. Provisions.
II. Debentures
III.Share capital.
IV.Other reserves.
V. Retained earnings.

a. I, II and III only;


b. III, IV and V only.

c. I, III, IV and V only


d. II, III and V only;

ANS: B
31. According to IAS 37 Provisions, Contingent Liabilities and Contingent Asset, when providing

for the future a future event such as the clean-up of a contaminated site, gains and other cash
inflows that are expected to arise on the sale of asset related to the clean-up, must be treated as
follows:
a. set-off against the provision for the clean-up
b. recognised as a deferred asset
c. recognised directly in equity in the period in which the cash inflows arose;
d. measured separately of the provision
ANS: D
32. The following is statement made in IAS 37 Provisions, Contingent Liabilities and Contingent

Assets:
a contract in which the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it.
This statement provides a definition of:
a.
b.

an onerous contract;
a present obligation.

c. a future operating loss


d. a deferred liability;

ANS: A
33. McCann Limited announced its plans for a major restructuring of its operations. Under IAS

37 Provisions, Contingent Liabilities and Contingent Assets, the entity is able to:
a.
b.

capitalise all direct and indirect restructuring costs;


provide for restructuring costs that are associated with the ongoing activities of
the entity.
c. set up a provision for the best estimate of all restructuring costs;
d. provide only for restructuring costs that are directly and necessarily caused by the
restructuring;
ANS: A
34. Purcell Limited is a manufacturer of swimming pools and provides its customers with

warranties at the time of sale. The warranty applies for three years from the date of sale. Past
experience shows that there will be some claims under the warranties. The appropriate
treatment of this items under IAS 37 Provisions, Contingent Liabilities and Contingent
Assets, is to:
a. note disclosure is required, but do not recognise in the financial statements;
b. recognise the best estimate of costs as a provision;
c. charge the costs directly to profit or loss in the period in which the economic
d.

outflows occur;
transfer the expected amount of the warranty from retained earnings to a special
reserve account in equity.

ANS: B
35. A railway company is required, under law, to overhaul its rail-tracks every three years as a

safety measure. The appropriate treatment of this event for the purposes of preparing
financial statements is:

a. recognise as a provision for future maintenance costs;


b. estimate the future maintenance costs and charge as depreciation over the next
c.
d.

three years;
disclose in the notes as a contingent liability, but do not recognise;
estimate the future cash outflows and discount to determine the amount to be
recognised as a deferred liability.

ANS: B
36. At balance sheet date, Raschella Limited was awaiting the final details of a court case for

damages awarded in its favour. The amount and possible receipt of damages is unknown and
will not be decided until the court sits again in several months time. How is this event dealt
with in the preparation of the financial statements?
a.

recognise as a deferred asset in the balance sheet and re-classify as a non-current


asset when the court decision is known.
b. disclose in the notes to the financial statements as it is possible that the entity will
receive the damages and the court decision is out of its control;
c. do not recognise or disclose in the financial statements as the possibility of
receiving damages is remote;
d. recognise as an asset in the financial statements as the receipt of damages is
probable;
ANS: B
37. In respect to a contingent liability, IAS 37 Provisions, Contingent Liabilities and Contingent

Assets, requires disclosure of


a.

an indication of the uncertainties about the amount or timing of expected


outflows.

b.
the carrying amount at the beginning and end of the period;
c. any increase in the contingent liability during the period;
d.
an estimate of its financial effect;
ANS: A
38. Under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the appropriate

accounting treatment for future operating losses is to:


a. not recognise such items in the financial statements;
b. measure on the basis of estimated future cash flows.
c. determine the cost and charge it directly against retained earnings;
d. determine a reasonable estimate of the cost and provide for the future liability;
ANS: A
39. According to IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the appropriate

treatment for a contingent asset in the financial statements of en entity is:


a. do not recognise in the financial statements, and do not disclose in the notes
b. recognition in the financial statements, but no further disclosure in the notes;
c. recognition in the financial statements, and note disclosure
d. disclosure of information in the notes, but do not recognise in the financial

statements;
ANS: D
40. Which of the following items is classified as a financial asset?
a. ordinary shares of the issuer;
b. loans payable (owed by the borrower)

c. accounts receivable;
d. inventory

ANS: C
41. All of the following would be regarded as financial instruments except:
a.
b.

bank overdraft;
cash;

c.
d.

equipment.
notes payable;

ANS: C
42. According to IAS 32 Financial Instruments: Disclosure and Presentation, which of the

following items would be regarded as a financial liability?


a.
b.
c.
d.

the right of a depositor to obtain cash from a financial institution with which it
has deposited cash.
a contractual right to exchange under potentially favourable conditions, an option
to purchase shares below the market price;
ordinary shares held in another entity;
a contract that is a non-derivative for which the entity is obliged to deliver a
variable number of its own equity instruments;

ANS: D
43. All of the following are regarded as financial instruments:

I.
II.
III.
IV.
V.

Deposits held by a financial institution;


Ordinary shares;
Raw materials inventories;
Property, plant and equipment.
Accounts receivable and accounts payable.

a. I, IV and V only.
b. I, II and V only

c. II, III and IV only;


d. I, II, IV and V only;

ANS: B
44. The following events provide objective evidence that a financial asset has been impaired:

I. A default in interest payments.


II. The borrower enters into bankruptcy.
III.Significant financial difficulty of the issuer.
IV.The downgrade of an entitys credit rating.
a. I, II and III only;
b. I, III and IV only;

c.
d.

II, III and IV only;


II and IV only.

ANS: A
45. IAS 39 Financial Instruments: Recognition and Measurement, requires that Held-to-

maturity investment be initially measured at:


a. fair value;
b. discounted future net cash flows.

c.
d.

discounted future cash outflows;


fair value plus transaction costs;

ANS: D
46. Under IAS 12 Incomes Taxes, deferred tax assets and liabilities are measured at the tax rates

that:
a.
b.
c.
d.

applied at the beginning of the reporting period;


are expected to apply when the asset or liability is settled.
at the rates that prevail at the reporting date;
at the end of the reporting period;

ANS: B
47. In jurisdictions where the impairment of goodwill is not tax deductible, IAS 12 Income Taxes:
a. does not permit the application of deferred tax accounting to goodwill;
b. allows the recognition of a deferred tax item in relation to goodwill;
c. requires that any deferred tax items in relation to goodwill be recognised directly
d.

in equity;
requires that any deferred tax items for goodwill be capitalised in the carrying
amount of goodwill.

ANS: A
48. When a deferred tax asset is subsequently recognised by an acquirer, the following adjustment

is made:
a.
b.
c.
d.

increase the carrying amount of goodwill;


increase the carrying amount of the assets acquired.
reduce the carrying amount of the assets acquired;
reduce the carrying amount of goodwill;

ANS: D
49. Deferred tax assets must be recognised for deductible temporary differences and for tax

losses, but only to the extent that:


a. it is likely that future deductible expenses will be incurred;
b. there is a chance that future deductible items will be incurred.
c. it is possible that future taxable profits will be available;
d. it is probable that future taxable profits will be available;
ANS: A
50. The tax expense related to profit or loss of the period is required to be presented:
a. on the face of the balance sheet;
b. in the cash flow statement;

c. on the face of the income statement;


d. in the statement of changes in equity

ANS: C
51. Unless a company has a legal right of set-off, IAS 12 Income Taxes, requires disclosure of all

of the following information for deferred tax balance sheet items:


I.
II.
III.
IV.
a.
b.

The amount of deferred tax assets recognised.


The amount of the deferred tax liabilities recognised.
The net amount of the deferred tax assets and liabilities recognised.
The amount of the deferred tax asset relating to tax losses.
I, II and IV only;
III and IV only;

c.
d.

IV only.
I, II and III only;

ANS: A
52. Where a business transaction requires a direct adjustment to an equity account, the tax effect

is adjusted against:
a. income;
b. equity;

c. cash.
d. tax expense;

ANS: B
53. The weighted average inventory costing method is particularly suitable to inventory where:

a. homogeneous products are mixed together.


b. goods have distinct use-by dates and the goods produced first must be sold earliest;
c. the entity carries stocks of raw materials, work-in-progress and finished goods;
d. dissimilar products are stored in separate locations;
ANS: A
54. When an inventory costing formula is changed, the change is required to be applied:

.
a. prospectively and the adjustment taken through the current profit or loss;
b. retrospectively and the adjustment recognised as an extraordinary gain or loss
c. prospectively and the current period adjustment recognised directly in equity;
d. retrospectively and the adjustment taken through the opening balance of

accumulated profits;
ANS: D
55. The measurement rule for inventories, mandated by IAS 2 Inventories, is:
a. lower of fair value and selling price;
b. higher of completion costs and replacement costs.
c. higher of initial cost and realisable value;
d. lower of cost and net realisable value;
ANS: D
56. Net realisable value of inventory is defined as the net amount that an enterprise expects to

realise from the sale of the inventory:


a. plus the estimated costs of completion
b. plus the estimated costs of completion plus the estimated costs necessary to make

the sale;
c. in a forced sale;
d. in the ordinary course of operations less estimated costs of completion and costs
necessary to make the sale;
ANS: D
57. Net realisable value of inventories may fall below cost for a number of reasons including:

I.
II.
III.
IV.

Product obsolescence.
Physical deterioration of inventories.
An increase in the expected replacement costs of the inventory,
An increase in the estimated costs of completion.

a. I, II and IV only;
b. II, III and IV only

c. I, III and IV only;


d. I and II only.

ANS: A
58. When determining the net realisable value of inventory, estimates must be made of the

following:
I.
II.
III.
IV.
a.
b.

Estimated costs of completion.


Expected replacement cost.
Expected selling price.
Estimated selling price.
I, II, III and IV;
II and IV only;

c.
d.

I, II and III only;


I, III and IV only.

ANS: D

10

59. IAS 2 Inventories requires that when inventories are written down to net realisable value, they

are written-down:
a.

on a class-by-class basis;

c. according to geographical segment

on an item-by-item basis;

d. on the basis of industry segment;

within the entity.


b.

ANS: B
60. If the selling price of inventory that has been written down to net realisable value in a prior

period, subsequently recovers, the:


a.
b.
c.
d.

previous amount of the write-down can be reversed;


value adjustment can be recognised immediately in equity;
carrying amount of the inventory cannot be adjusted;
adjustment must be recognised in a provision for future inventory write-downs
account.

ANS: A
61. Where the net realisable value of inventory falls below cost, IAS 2 Inventories, requires that:
a. the difference be added to the carrying amount of the inventory.
b. no adjustment be made, but the difference between net realisable value and cost be

disclosed in the notes to the financial statements;


c. the inventory continue to be carried in the balance sheet at cost;
d. the inventory be written down to net realisable value;
ANS: D
62. When an entity allocates depreciation to the separate parts of an asset and each part is

accounted for separately, the entity is using which of the following approaches to
depreciation?
a. periodic depreciation;
b. replacement cost depreciation;

c. segment depreciation
d. components depreciation

ANS: D
63. When a balance is carried in an asset revaluation surplus account in relation to an asset that

has been derecognised, it is acceptable under IAS 16 Property, Plant and Equipment, to:
a.
b.

transfer the balance to a provision account for future asset revaluations.


recognise the balance in profit or loss of the period in which the asset was
derecognised;
c. transfer the balance to retained earnings;
d. transfer the balance to share capital account;
ANS: C
64. If a reporting entity chooses to switch from the cost model to the revaluation model for

property, plant and equipment, the periodic depreciation charge will:


a.
b.

increase;
not be affected;

c.
d.

no longer be required.
decrease;

ANS: A
65. In relation to the amortisation of intangible assets, if an intangible asset has a finite useful life:
a. it must be amortised over a period not exceeding 40 years;
b. it must be amortised over that life.
c. it must be amortised across a period not exceeding 5 years;

11

d. it is not subject to an annual amortisation charge;


ANS: B
66. In relation to the amortisation of intangible assets, the general rule in IAS 38 Intangibles, is

that unless demonstrated otherwise:


a. the residual value is presumed to be zero
b. all intangible assets have a residual value at least equal to the amount of

maintenance costs incurred;


c. the residual need no be reviewed at the end of each annual reporting period;
d. the residual value does not enter into the determination of the amortisation charge;
ANS: A
67. In relation to amortisation of intangible assets, IAS 38 Intangibles, requires that intangible

assets with indefinite useful lives:


a. should not be amortised in a period in which maintenance of the asset occurs.
b. are not subject to an amortisation charge;
c. must be amortised across a period of no more than 20 years;
d. are amortised by the straight-line method across their useful lives;
ANS: B
68. IAS 38 Intangibles, requires that the following items in relation to intangibles, each be

disclosed separately:
a. all amounts of intangibles acquired during the period.
b. any impairment losses reversed in profit or loss during the period;
c. the closing balance of each intangible;
d. the opening balance of each intangible;
ANS: B
69. When an intangible asset is acquired by an exchange of assets, which of the following

measures will need to be considered in the determination of that cost? The:


a.
b.

c. replacement cost of the asset received


fair value of the asset given up;
carrying amount of the asset received; d. initial cost of the asset given up;

ANS: A
70. Internally generated goodwill is prohibited from recognition in the financial statements of an

entity. The reason for this treatment is that:


a. goodwill is not identifiable;
b. it is not comparable to any other intangible assets;
c. it is not prudent to recognise intangible assets.
d. goodwill is not measurable;
ANS: A
71. According to the definition provided in IAS 38 Intangibles, activities undertaken in the

research phase of the generation of an asset may include:


a.

original and planned investigation with the prospect of gaining new scientific
knowledge;
b. using knowledge to materially improve a manufacturing device
c. the use of research findings to create a substantially improved product;
d. the application of knowledge to a design for the production of new materials;

12

ANS: A
72. According to IAS 38 Intangibles, in order to be able to capitalise development outlays an

entity must be able to demonstrate the following:


I.

Technical feasibility and intention of completing the asset so it will be


available for use or sale.
II. Its ability to reliably measure the expenditure on the development of the asset.
III.Ability to use or sell the asset.
IV.How the asset will generate probable future economic benefits.
a.
b.

I, II and IV only;
I, II, III and IV;

c. II, and IV only;


d. II, III and IV only.

ANS: B
73. When an internally generated asset meets the recognition criteria, the appropriate treatment

for costs previously expensed is:


a. no adjustment as these amounts may not be reinstated;
b. capitalise into the cost of the asset and adjust the opening balance of retained
c.
d.

earnings.
include in the cost of the development of the asset;
reinstatement;

ANS: A
74. Paragraph 63 of IAS 38 Intangibles, prohibits the recognition of the following internally

generated identifiable intangibles:


Brands
Mastheads
Publishing titles
Customer lists
a.
b.

I;
IV.

I
No
No
No
No
c.
d.

II
No
Yes
No
Yes

III
No
Yes
Yes
No

IV
Yes
Yes
Yes
Yes

III;
II;

ANS: A
75. When determining the fair values to be used in accounting for a business combination, IFRS 3

Business Combinations, allows an acquirer how much time from the acquisition date in this
process?
a.
b.

1 month;
12 months;

c. 3 months;
d. 2 years.

ANS: B
76. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, is not applicable to

the following assets:


a.
b.

property;
land and buildings;

c. plant and equipment.


d. financial assets that are already carried

at fair value;
ANS: D
77. The key characteristic for the classification of an asset as held for sale is that the carrying

amount of the asset must:


a.

principally be recovered through a sale transaction;


13

b.
c.
d.

be lower than initial cost of the asset;


be higher than its net realisable value.
principally be recovered through continuing use;

ANS: A
78. The following criteria are used to determine whether an asset should be categorised as held

for sale:
I.
II.
III.
IV.
V.
VI.
a.
b.

The asset should be available for immediate sale.


The asset should be available for sale at a future date yet to be determined.
The sale of the asset should be highly probable.
The sale of the asset is a possibility.
There should be an active program to locate a buyer.
There need not be an active marketing program for the asset.
I and III only;
II, IV and VI only;

c.
d.

I, III and V only;


IV and VI only.

ANS: C
79. Where assets are removed from the classification of held for sale, IFRS 5 Non-current

Assets Held for Sale and Discontinued Operations, requires disclosure of the effects of the
decision on the results of operations for the period, in the:
a. notes.
b. cash flow statement;

c.
d.

statement of changes in equity;


income statement;

ANS: A
80. In relation to assets that have been sold during the reporting period, IFRS 5 Non-current

Assets Held for Sale and Discontinued Operations, requires disclosure of the following items:
I.
II.
III.
IV.
a.
b.

A description of the non-current asset or disposal group.


The gain or loss recognised in profit or loss.
A description of the facts or circumstances of the sale.
The segment in which the non-current asset is reported.
I, II, III and IV;
II, and IV only;

c.
d.

I, II and IV only.
I, III and IV only;

ANS: A
81. Under IAS 36 Impairment of Assets, the following assets are subject to impairment testing:

I
Yes
Yes
No
No

Inventory
Assets arising from construction contracts
Assets arising from employee benefits
Property, plant and equipment
a.
b.

I;
III;

c.
d.

II
Yes
Yes
Yes
Yes

III
No
No
No
Yes

IV
No
No
Yes
No

II;
IV.

ANS: A
82. Where assets are removed from the classification of held for sale, IFRS 5 Non-current

Assets Held for Sale and Discontinued Operations, requires disclosure of the effects of the
decision on the results of operations for the period, in the:
a. notes.

c.

statement of changes in equity;

14

b. cash flow statement;

d.

income statement;

ANS: A
83. When assessing the recoverable of assets that have previously been subject to an impairment

loss, all of the following indicators assist in providing external evidence that an impairment
loss has reversed:
a.

internal reporting sources indicate that the economic performance of the asset will
not be as good as expected.
b. market interest rates have decreased during the period
c. significant changes with an adverse effect on the entity have taken place;
d. the assets market value has decreased significantly during the period
ANS: B
84. When an impairment loss in relation to a cash-generating unit is reversed, it is allocated on a

pro rate basis to the assets of the unit, except for:


a.
b.

land;
equipment.

c.
d.

plant;
goodwill;

ANS: D
85. During 20X4 Sacco Limited, estimated that the carrying amount of goodwill was impaired

and wrote it down by $50 000. In a subsequent year, the company reassessed goodwill was
decided that the old acquired goodwill still existed. The appropriate accounting treatment in
the subsequent period is:
a.
b.
c.
d.

increase goodwill by an adjustment to retained earnings.


ignore the reversal as it is prohibited by IAS 36 Impairment of Assets;
reverse the previous goodwill impairment loss;
recognise the revalued amount of goodwill by an adjustment against the asset
revaluation surplus account;

ANS: B
86. According to IAS 17 Leases, because lease payments are made over the lease term, the

payments must be divided into the following components:

a.
b.

I
Yes
Yes
Yes
No

Reduction of the lease liability


Interest expense incurred
Reimbursement of lessor costs
Receipt of lease incentives

II
Yes
No
Yes
No

III
No
Yes
Yes
Yes

IV
Yes
No
No
Yes

c. II;
d. IV.

I;
III;

ANS: A
87. In relation to finance leases, the following information must be disclosed separately in the

financial statements of lessors:


I. Unearned finance income.
II. Contingent rents recognised as income in the period.
III.The unguaranteed residual values accruing to the benefit of the lessee.
IV. The accumulated allowance for uncollectible minimum lease payments
receivable.
a. I, II and IV only
b. II, III and IV only;

c. I, III and IV only


d. II and IV only

15

ANS: A
88. When substantially all of the risks and rewards incident to ownership remain with the lessor,

the arrangement is treated as:


a. an operating lease;
b. a sale and leaseback;

c. a finance lease;
d. a non-lease, rental arrangement.

ANS: A
89. Under IAS 17 Leases, lessors are required to account for lease receipts from operating leases

as:
a. revenue, on a reducing balance basis over the lease term;
b. income, on inception date of the lease;
c. income, on a straight-line basis over the lease term;
d. revenue, at the end of the lease term.
ANS: C
90. In respect to non-cancellable operating leases, lessees are required under IAS 17 Leases, to

disclose the total of future minimum lease payments for each of the following periods:
a. not later than one year.
b. not later than 3 months;
c. later then 6 months and not later than 9 months;
d.
later than 3 months and not later then 6 months;
ANS: A
91. With respect to operating leases, lessors are required under IAS 17 Leases, to make the

following disclosures:
I.
Total contingent rents recognised as income in the period.
II.
Future minimum lease payments under individual, cancellable operating leases,
separately.
III.
A general description of the lessees leasing arrangements.
IV.
Future minimum lease payments under non-cancellable operating leases in aggregate.
a. I, II and III only;
b. II and III only;

c. I, III and IV only


d. I, II and IV only.

ANS: C
92. A lessee when accounting for a lease incentive received under an operating lease treats is as

a:n
a. increase in rental income over the lease term;
b. increase in rental expense over the lease term;
c. reduction in rental expense over the lease term;
d. reduction in rental income over the lease term;
ANS: C
93. A lease transaction that involves the sale of an asset that is then leased back to the seller for all

or part of its remaining economic life is known as:


a. a sale and leaseback
b. an operating lease

c. a novated lease;
d. a leveraged lease

ANS: A

16

94. If a sale and leaseback transaction results in a finance lease, IAS 17 Leases, provides the

following accounting treatment for any excess of sales proceeds over the carrying amount:
a. recognise directly in retained earnings of the seller-lessee
b. immediately recognise as income by the seller-lessee;
c. defer and amortise over the lease term;
d. include in the capitalised amount of the leased asset.
ANS: C
95. If an item of income is not material, then the manner of presenting that information, or

whether or not it is disclosed:


a.
b.
c.
d.

will have an impact on the economic decisions of users;


should not affect the economic decisions of users
should not be included in the determination of profit or loss for the period
will be included directly in retained earnings

ANS: B
96. The level of rounding used in the financial statements refers to:
a. the presentation of a concise financial report rather than a full financial report.
b. the shortening of the notes by removing comparative numbers;
c. the abbreviation of words used
d. the truncation of the amounts presented;
ANS: D
97. IAS 1 Presentation of Financial Statements, requires that an entity must disclose the

following information in its financial statements:

A description of the entitys operations


The legal form of the entity
The name of the entitys ultimate parent
The address of the registered office

a. I;
b. III;

I
No
No
No
No

II
Yes
Yes
Yes
Yes

III
No
Yes
No
Yes

IV
Yes
Yes
No
Yes

c. II;
d. IV.

ANS: C
98. An accounting policy:
a.
b.
c.
d.

comprises the principles applied in preparing the financial statements;


is a judgment applied in deciding whether to recognise a transaction;
is the application of judgment in deciding on the measurement of an item;
is the judgement used in deciding on whether to disclose a particular item.

ANS: A
99. Where a material error occurs in the recording process, an adjustment:
a. must be made to the prior period comparative balances;
b. may be recognised directly in retained earnings;
c. may be deferred and recognised in a later accounting period;
d. is not necessary, but the item must be fully explained in the notes to the financial

statements.
ANS: A
100. The balance sheet of a reporting entity presents a structured summary of the:

17

a. revenue and expenses arising during the reporting period;


b. assets, liabilities and equity at reporting date;
c. profits and losses not reported in income of the period;
d. receipts and payments of cash during the period.
ANS: B
101. The profit or loss of a period and the other gains and losses recognised directly in equity are

presented in the:
a.
b.

balance sheet;
cash flow statement;

c.
d.

income statement;
statement of changes in equity.

ANS: D
102. The profit or loss attributable to a minority interest is required, under IAS 1 Presentation of

Financial Statements, to be presented on the face of the:


a. cash flow statement;
b. income statement;

c. balance sheet;
d. statement of changes in equity.

ANS: B
103.

The following is no longer an allowable line item for presentation on the face of an income
statement:
a.
b.

extraordinary items;
tax expense.

c. finance costs;
d. pre-tax loss attributable to

discontinuing operations;
ANS: A
104. Which of the following classifications has been eliminated for the purposes of presenting

information on an income statement?


a. revenue;
b. cost of sales;

c. abnormal items;
d. other income.

ANS: C
105. If the classification of expenses by function method is used for the presentation of an income

statement, additional information on the following items must be disclosed:


a. revenue;
c. gains on disposal of assets;
b. depreciation and amortisation expense. d. gains on revaluation of assets;
ANS: B
106. In relation to Retained earnings, IAS 1 Presentation of Financial Statements, mandates the

following disclosures:
I.
II.
III.
IV.

Any changes during the reporting period.


The related tax adjustments in respect to any changes during the period.
The beginning balance.
The balance at reporting date.

a. I, II, III and IV;


b. I, III and IV only;

c. II, III and IV only;


d. III and IV only.

ANS: B

18

107. Exchange difference relating to the translation of foreign operations into the currency of the

reporting entity, are disclosed in the:


a. income statement;
b. cash flow statement;

c.
d.

statement of changes in equity.


balance sheet;

ANS: C
108. IAS 1 Presentation of Financial Statements requires disclosure in the balance sheet of the

following items:
a.
b.
c.
d.

a statement of compliance with IFRS


the measurement basis used for the revaluation of assets
information about the key assumptions used in the depreciation of assets
the carrying amount of property, plant and equipment;

ANS: D
109. The summary of accounting policies is normally presented:
a. before all of the financial statements in a financial report;
b. as the first note, after all the financial statements;
c. as the last note in a set of financial statements
d. within the auditors report.
ANS: B
110. IAS 1 Presentation of Financial Statements, requires the following note disclosures in relation

to dividends of an entity. The:


a. amount of any cumulative preference dividends not recognised;
b. names of the recipients of the dividends;
c. addresses of all shareholders who are entitled to receive the dividends
d. a schedule of cumulative dividends paid in prior periods.
ANS: A
111. The following cash flow activities are regarded as investing cash flows:
a.
b.

income taxes paid;


proceeds from issue of debentures.

c. interest paid;
d. acquisition of subsidiary net of cash

acquired;
ANS: D
112. When presenting the proceeds from the acquisition and disposal of subsidiaries, IAS 7 Cash

Flow Statements, requires that the aggregate cash flows:


a.
b.
c.
d.

should be presented as operating activities;


should be included amongst financing activities;
should be presented separately
may be set off for presentation purposes.

ANS: C
113. In respect to both acquisitions and disposals of investments in subsidiaries, IAS 7 Cash Flow

Statements, requires that an entity should disclose, in aggregate, the following:


I. The total purchase or disposal consideration.
II. The portion of the consideration discharged by cash or cash equivalents.
III. The amount of cash and cash equivalents in the subsidiary acquired or
disposed of.
IV.The amount of the non-cash assets and liabilities acquired or disposed of.
19

a. I, II, III and IV;


b. I, II and IV only;

c. I, II, and III only;


d. II and III only.

ANS: A
114. Which of the following items would be presented in a cash flow statement?
a. payment of dividends through a share investment scheme;
b. proceeds from the issue of debentures;
c. refinancing of long-term debt.
d. acquisition of an investment in a subsidiary for consideration consisting of an

exchange of non-current assets and liabilities;


ANS: A
115. The following item would not appear in a cash flow statement:
a. receipts of cash from customers;
b. conversion of preference shares to

c. payment of creditors;
d. proceeds on disposal of non-current

ordinary shares;

assets.

ANS: B
116. IAS 7 Cash Flow Statements, requires that investing and financing transactions that do not

require the use of cash or cash equivalents should be:


a. excluded from a cash flow statement;
b. included in a cash flow statement before operating, investing and financing

activities;
c. presented in the cash flow statement after operating activities and before investing
and financing activities;
d. presented in a cash flow statement after the operating, investing and financing
activities have been presented.
ANS: A
117. In a consolidated group of entities, control over the subsidiaries in the group:
a.
b.

may not be shared control


can be less than 100% control;

c.
d.

can be shared with other parties;


can be less than 50% control.

ANS: A
118. The IASB Framework identifies seven user groups that are considered to be important in

determining the existence of a reporting entity. These users groups include all of the
following except:
a. investors;
b. lenders;

c. preparers;
d. suppliers and other trade creditors.

ANS: C
119. All parent entities are required to present consolidation statements unless the following

conditions apply to them:


I. The parent is a wholly owned subsidiary.
II. The parent is a partly owned subsidiary and its owners do not object to the
non-presentation of consolidated financial statements.
III.The parents debt or equity securities are traded in a public market.
IV. The parent is not in the process of applying to issue any securities in a public
market.

20

a.
b.

I and II only;
I, II and IV only;

c. I, II and III only;


d. I, II, III and IV.

ANS: B
120. As required by IAS 27 Consolidated and Separate Financial Statements, where there are

transactions between members of the group, the effects of these transactions are:
a. adjusted partially in direct proportion to the level of control held by the parent;
b. adjusted in full on consolidation;
c. not adjusted in the consolidation process.
d. adjusted in proportion to the equity held by the minority interests in the subsidiary;
ANS: B
121. Under the parent entity concept of consolidation, the minority interest in the subsidiary is:
a. reported in the asset section of a balance sheet
b. reported in the equity section of a balance sheet
c. reported in the notes to the financial statements and not in the balance sheet;
d. reported in the liability section of a balance sheet.
ANS: D
122. The focus of the parent entity concept of consolidation is on the:
a. minority interests in subsidiaries within the group as the primary users;
b. equity holders of all entities within the group;
c. parents equity holders as the prime user group;
d. subsidiarys equity holders as the prime user group.
ANS: C
123. The consolidation concept that results in a group consisting of the assets and liabilities of the

parent and the parents proportional share of the assets and liabilities of the subsidiary, is
known as the:
a.
b.

proprietary concept;
entity concept;

c. comprehensive concept;
d. concise concept;

ANS: A
124. The concept of consolidation that requires pro rata consolidation of subsidiaries is known as

the:
a.
b.

entity concept;
parent concept;

c.
d.

proprietary concept;
subsidiary concept.

ANS: C
125. If an investor entity owns more than half of the voting or potential voting power of an investee

and does not account for the investment as a subsidiary, IAS 27 Consolidated and Separate
Financial Statements, requires that the following disclosure be made:
a. the reasons why the ownership of the investee does not constitute control;
b. the nature of the relationship between the investor and investee;
c. the nature of any restriction on the ability of the investor to transfer funds to the
d.

investee;
the amount of any repayments of borrowings between the investor and investee
during the period.

ANS: A

21

126. If a parent entity chooses not to prepare consolidated financial statements, IAS 27

Consolidated and Separate Financial Statements, requires the following disclosures in the
separate financial statements of the parent:
I. The name, country of residence and voting power of the directors of the parent.
II. That the exemption from consolidation has been used.
III. A list of significant investments including the proportion of ownership.
IV.A description of the method used to account for the investments.
a.
b.

I, II and IV only;
II and III only;

c.
d.

II, III and IV only;


IV only.

ANS: C
127. According to IAS 27 Consolidated and Separate Financial Statements, parent entities are

required to disclose:
I.
II.
III.
IV.
a.
b.

The fact that the statements are separate financial statements


A list of significant investments in subsidiaries.
If the subsidiary is not wholly owned, the names of all other members.
The country of incorporation of subsidiaries.
I, II and IV only;
I and IV only;

c.
d.

II, III and IV only;


I, II, III and IV.

ANS: A
128. In relation to pre-acquisition of a subsidiary entity, which of the following events can cause a

change in the pre-acquisition entry subsequent to acquisition date?


I. Transfers from post-acquisition retained earnings.
II. Dividends paid from pre-acquisition reserves.
III.Transfers from pre-acquisition retained earnings.
IV.Impairment of goodwill.
a.
b.

I, II, III and IV;


II, III and IV only.

c.
d.

I, III and IV only;


II and III only;

ANS: B
129. When a dividend is paid by a wholly owned subsidiary out of pre-acquisition equity, the

parent entity recognises:


a. a reduction in the investment in the subsidiary;
b. an increase in dividend income;
c. a decrease in share capital;
d. a decrease in dividend revenue.
ANS: A
130. When a parent recognises a pre-acquisition dividend that is declared by a wholly owned

subsidiary it makes the following entry in its accounting records:


a.

DR Dividend receivable
CR
Dividend income;
b. DR Dividend receivable
CR Shares in subsidiary;

c.

DR Dividend income
CR Dividend receivable;
DR Shares in subsidiary
CR Dividend income.

d.

ANS: B
131. For entities wanting to use the cost model of accounting, the revaluation of a subsidiarys

assets would be undertaken in the:

22

a. subsidiarys records;
b. consolidation worksheet;

c. parent entitys records;


d. notes to the consolidated financial

statements.
ANS: B
132. In a business combination the revaluation of non-current assets in the records of the

subsidiary, means that the subsidiary has effectively adopted the:


a.
b.

parent-entity model of consolidation;


cost model of accounting;

c.
d.

proprietary model of accounting;


revaluation model of accounting.

ANS: D
133. A reverse acquisition occurs where a:
a. subsidiary entity is controlled by a legal parent entity;
b. subsidiary entity has control over a legal parent entity;
c. parent entity controls a subsidiary through an ownership interest in another

subsidiary
d. parent entity has indirect control over the subsidiary.
ANS: B
134. Janus Limited, a subsidiary entity, sold a non-current asset at a profit to it parent entity. The

adjustment necessary on consolidation to reflect the tax effect of this transaction, is:
a.
b.

increase deferred tax assets;


increase retained earnings;

c.
d.

decrease deferred tax liabilities;


decrease retained earnings.

ANS: A
135. If a dividend is paid out of profit that are earned after the acquisition date, it is known as:
a.
b.

a final dividend;
a post acquisition dividend;

c.
d.

a temporary dividend;
a pre acquisition dividend.

ANS: B
136. A consolidation adjustment to deal with the management fees charged by a parent entity to a

subsidiary entity has the following tax effect:


a.
b.

increases deferred tax liabilities;


decreases deferred tax assets;

c.
d.

increases deferred tax assets;


no tax effect.

ANS: D
137. Ownership interests in a subsidiary entity that do not belong to the parent entity are known as:
a.
b.

unowned interests;
proprietary interests;

c.
d.

minority interests;
pro rata ownership rights.

ANS: C
138. A minority interest in a group of entities, contributes which of the following to the group?
a.
b.

debt funds;
revenue;

c.
d.

assets;
equity.

ANS: D
139. In a consolidated balance sheet, the minority interest is shown:

23

a. separately within the non-current liabilities;


b. separately within the equity section;
c. separately within the non-current investments;
d. as part of the total current liabilities of the group
ANS: B
140. The IAS Framework, identifies the minority interest in a group as an element of:
a.
b.

equity;
assets;

c.
d.

liabilities;
revenue.

ANS: A
141. When preparing a consolidated income statement, IAS 1 Presentation of Financial

Statements, requires that any minority interest in:


a.
b.

revenue is shown separately;


expenses is shown separately;

c.
d.

profit or loss is shown separately;


in income tax expense is shown
separately.

ANS: C
142. When preparing a consolidated statement of changes in equity, IAS 27 Consolidated and

Separate Financial Statements, requires that any minority interest in equity of subsidiaries is:
a. shown as a one-line item;
b. shown as a share of total ending equity of the subsidiary only;
c. disclosed in the balance sheet, and not in the statement of changes in equity;
d. shown on a line-by-line basis.
ANS: D
143. When a revaluation of a subsidiaries assets, up to fair value, is undertaken on a consolidation

worksheet, the tax effect that must also be adjusted on the worksheet is:
a. increase deferred tax liability;
c. decrease deferred tax liability;
b. increase deferred tax asset;
d. decrease deferred tax asset.
ANS: A
144. An excess will arise in an acquisition if:
a.

the parent entity pays less than fair value for the identifiable asset, liabilities and
contingent liabilities acquired;
b. the parent entity pays more than fair value for the identifiable assets, liabilities and
contingent liabilities of the business acquired;
c. the subsidiary sells its identifiable assets, liabilities and contingent liabilities for
more than fair value;
d. the subsidiary sells its identifiable assets, liabilities and contingent liabilities at a
price that is higher than fair value.
ANS: A
145. Under the entity concept of consolidation, a minority interest is entitled to a share of which of

the following items?


I. Equity of the group entity at acquisition date.
II. Current period profit or loss of the subsidiary entity.
III. Changes in equity of the subsidiary since acquisition date and the beginning
of the financial period.
IV.Equity of the subsidiary at acquisition date.
a.

I, II and III;

c.

I and II only;

24

b.

II, III and IV only;

d.

III only.

ANS: B
146. In a situation where a parent acquires shares in a subsidiary, and the subsidiary later acquires a

controlling interest in another entity, the ownership structure is:


a.
b.

sequential;
ordered;

c.
d.

non-sequential;
random.

ANS: A
147. Omega Limited acquired a controlling interest in shares in Diamond Limited. At the time of

this acquisition Diamond Limited already held shares in Oscar Limited. This form of
acquisition of an indirect acquisition by Omega Limited in Oscar Limited is known as:
a.
b.

an indirect acquisition;
a cross-holding;

c. a reciprocal shareholding
d. a non-sequential acquisition.

ANS: D
148. The indirect minority interest, in a group that has a multiple subsidiary structure, is entitled to

a proportionate share of:


a.
a proportionate share of post-acquisition equity only;
b.
a proportionate share of pre-acquisition equity only;
c.
no share of post acquisition equity;
d.
no share of either pre acquisition or post acquisition equity.
ANS: A
149. When calculating the direct minority interest share of equity, consolidation adjustments are

needed to:
a. remove unrealised profits or losses from intragroup transactions;
b. recognise profits made on intragroup services;
c. eliminate intragroup advances
d. partially eliminate profits on intragroup services.
ANS: A
150. Mutual shareholdings exist when:
a. a parent owns shares in a subsidiary;
b. a subsidiary owns shares in a parent only;
c. a parent owns shares in a subsidiary and in a joint venture;
d. a parent and a subsidiary own shares in each other.
ANS: D
151. The accounting method applied to investments in associates, known as the equity method, is

also known as the:


a. entity method of consolidation;
b. multiple line consolidation method;

c.
d.

proprietary method of consolidation;


one-line consolidation method.

ANS: D
152. For the purposes of equity accounting for an investment in an associate, it is presumed that the

investor has significant influence over the other entity where the investor holds:
a. between 1% and 5% of the voting power of the investee;
b. between 5% and 10% of the voting power of the investee.
c. 20% or more of the voting power of the investee;
d. 50% or more of the voting power of the investee;
ANS: C
153. Organisation to which IAS 28 Investments in Associates, applies include:

25

a.
b.

unincorporated entities;
mutual funds;

c.
d.

venture capital organisations;


unit trusts.

ANS: A
154. Where non-current assets are held for resale are required to be measured using:
a.

the equity method;

c.

b.

fair value.

d.

the lower of cost or market


value;
the lower of carrying amounts
and fair values less costs to sell;

ANS: D
155. When goodwill is acquired by an investor in an associate, the amortisation of goodwill is:.
a.
b.
c.
d.

spread evenly across the useful life of the investment;


included in the determination of the investors share of the associates profit or
loss;
not permitted;
included in the revaluation of the investment

ANS: C
156. Adjustments made for the purpose of calculating the incremental adjustment to the share of

profit of an associate are:


a. recognised in the books of the investor;
b. recognised in the books of the investee;
c. notional adjustments and not included in the books of the investee;
d. relate to realised transactions and so are recognised directly by the investee
ANS: C
157. When disclosing information about investments in associates, IAS 28 Investments in

Associates, requires separate disclosure of which of the following?


I. Shares in associates, in the balance sheet.
II. Share of profit or loss of associates, in the income statement.
III.Share of any discontinuing operations, in the Statement of changes in equity.
IV. Shares of changes recognised directly in the associates equity, in the
Statement of changes in equity.
a.
b.

I, II, III and IV;


II, II and IV only;

c.
d.

I, II and IV only;
I, II and III only.

ANS: A
158. The particular relationship between parties that signifies the existence of a joint venture is:
a.
b.
c.
d.

significant influence by one party over the other party;


control over the operating policies of one party by another party;
shared influence by two parties over the activities of another party;
joint control by the parties over the activities of an operation.

ANS: D
159. A relationship that is characterised by the existence of a capacity to share control over an

economic entity is known as:


a. a parent-subsidiary relationship;
b. an investor-associate relationship;

c.
d.

a joint venture;
a sole proprietorship.
26

ANS: C
160. IAS 31 Interests in Joint Ventures, provides that joint control exists where:
a. no single venturer is in a position to control the activity unilaterally;
b. the decisions in areas essential to the goals of the joint venture do not require the
c.
d.

consent of the venturers;


no one party may be appointed as the manager of the joint venture;
one party alone has power to control the strategic operating decisions of the joint
venture.

ANS: A
161. In relation to the supply of a service to a joint venture by one of the venturers, which of the

following statements is correct?


a. a venturer can recognise 100% of the earned through the supply of services to the
joint venture;
b. a venturer is entitled to recognise a profit from the supply of services to itself;
c. a venturer cannot earn a profit on supplying services to itself;
d. a venturer is not able to recognise the service revenue or service cost for the
services supplied to the joint venture.
ANS: C
162. Under IAS 14 Segment Reporting, where a segment is not primarily of a financial nature,

segment revenue will include:


a. interest income;
b. gain on sale of investments;

c. dividend income;
d. an entitys share of profit of associates

ANS: D
163. Under IAS 14 Segment Reporting, segment expense include:.
a. a joint venturers share of the expenses of a jointly controlled entity that is

accounted for by a proportionate consolidation


b. income tax expense;
c. interest, unless the segments operations are primarily of a financial nature
d. general administrative expenses that relate to the entity as a whole
ANS: A
164. Under IAS 14 Segment Reporting, segment result is described as:
a. total segment income;
c. segment revenue less segment

expense;
b. segment profit after any adjustments

for minority interests;

d. segment profit after any adjustments

for income tax.

ANS: C
165. According to IAS 14 Segment Reporting, segment assets do not include:
a. income tax assets;
b. a joint venturers share of the operating assets of a jointly controlled entity that is

accounted for by proportionate consolidation;


c. investments accounted for under the equity method where the profit or loss from

such investments is included in segment revenue;


d. operating assets employed by a segment in its operating activities that can be

allocated
to the segment on a reasonable basis.
ANS: A
166. According to IAS 14 Segment Reporting, segment liabilities exclude:

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a.

liabilities that result from the operating activities of a segment that are directly
attributable to a segment;
b. interest bearing liabilities if the segment result excludes interest expense
c. income tax liabilities;
d. a joint venturers share of the liabilities of a jointly controlled entity that is
accounted for by proportionate consolidation.
ANS: C
167. Under IAS 14 Segment Reporting, a segment is reportable if a majority of its sales are to

external customers and its:


a. revenue from external customers is 10% or more of total revenue;
b. result is 5% or more of the combined result of all segments;
c. liabilities are 5% or more of total liabilities;
d. assets are 5% or more of total assets.
ANS: A
168. According to IAS 14 Segment Reporting, if an entity has two segments and the primary

segment is a geographic segment, then the secondary segment will be:


a. a business segment
b. a financial segment.

c. an economic segment;
d. a organisational segment;

ANS: A
169. Under IAS 14 Segment Reporting, separate segments of an entity must be identified as

reportable segments until at least:


a.
b.
c.
d.

100% of total entity result is included;


75% of total entity revenue is included;
80% of total entity liabilities are included;
70% of total entity assets are included.

ANS: A
170. When an entitys primary segment format is geographical segments, in relation the segment

result, it is required to make the following disclosures:


a.
b.
c.
d.

segment result by location of assets;


segment result by location of business segment;
segment result by location of customers;
segment result after tax.

ANS: A
171. If an entitys primary segment format is geographical segments by location of customers,

under IAS 14 Segment Reporting, it is required to make the following disclosures:


a. depreciation and amortisation by location of assets;
b. depreciation and amortisation by location of liabilities;
c. depreciation and amortisation by business segment;
d. depreciation and amortisation expense, by location of customers.
ANS: D
-end-

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