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RFJPIA-R12
Annual Regional Convention 2008 QUIZ BEE PA1 & TOA

EASY ROUND 1. Which ONE of the following statements best describes the term 'liability'? A An excess of equity over current assets B Resources to meet financial commitments as they fall due C The residual interest in the assets of the entity after deducting all its liabilities D A present obligation of the entity arising from past events
Question 1 - D The correct answer is "A present obligation of the entity arising from past events", as defined in para 49(b) of the Framework. 2.

Are the following statements true or false, according to IAS1 Presentation offinancial statements? (1) Dividends paid should be recognised in the statement of comprehensive income. (2) A loss on disposal of assets should be recognised in the statement of changes in equity. Statement (1) Statement (2) A False False B False True C True False D True True
Question 3 - A A loss on disposal of assets is recognised in the statement of comprehensive income because IAS16 Property, plant and equipment does not permit otherwise (IAS1 para 88). Dividends paid are recognised in the statement of changes in equity (IAS1 para 106).

The Oakes Company has a loan due for repayment in six months' time, but Oakes has the option to refinance for repayment two years later. Oakes plans to refinance this loan. In which section of its statement of financial position should this loan be presented, according to IAS1 Presentation of financial statements? (select one answer) A Current liabilities B Current assets C Non-current liabilities D Non-current assets
3. Question 12 - C Because Oakes both has the right to roll over the loan beyond 12 months for the end of the reporting period and intends to roll it over, it should be presented as a non-current liability per para 73 of IAS1.

4.

Which TWO of the following should be taken into account when determining the cost of inventories per IAS2 Inventories? A Storage costs of part-finished goods B Trade discounts C Recoverable purchase taxes D Administrative costs
Question 1 - A & B The correct answers are trade discounts (deduct these from purchase costs) and storage costs for part-finished (but not finished) goods. See IAS2 paras 11 and 16.

5.

Which ONE of the following statements best describes the carrying amount of an asset? A The cost (or an amount substituted for cost) of the asset less its residual value B The amount at which the asset is recognized in the statement of financial position after deducting any accumulated depreciation and accumulated impairment losses C The higher of the asset's net selling price and its value in use D The fair value of the asset at the date of a revaluation less any subsequent accumulated impairment losses
Question 3 - B The correct answer is "The amount in the statement of financial position after accumulated depreciation and impairment losses". IAS16 para 6 defines the carrying amount.

6.

Which ONE of the following statements best describes the term 'depreciation'? A The systematic allocation of an asset's cost less residual value over its useful life B The removal of an asset from an entity's statement of financial position C The amount by which the recoverable amount of an asset exceeds its carrying amount D The amount by which the carrying amount of an asset exceeds its recoverable amount
Question 5 - A "The systematic allocation of an asset's cost" is the correct answer. See IAS16 para 6 for definitions.

The Mirror Company classified a non-current asset accounted for under the cost model as held for sale on 31 December 20X6. Because no offers were received at an acceptable price, Mirror decided on 1 July 20X7 not to sell the asset, but to continue to use it. In accordance with IFRS5 Noncurrent assets held for sale and discontinued operations, the asset should be measured on 1 July 20X7 at (select one answer) A the lower of its carrying amount and its recoverable amount B the higher of its carrying amount and its recoverable amount
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C the lower of its carrying amount on the basis that it had never been classified as held for sale and its recoverable amount D the higher of its carrying amount on the basis that it had never been classified as held for sale and its recoverable amount
Question 2 - C IFRS5 para 27 in effect requires an entity ceasing to classify an asset as held for sale to remeasure it as if it had never been held for sale, subject to an impairment test (the recoverable amount test) at that date.

A brand name that was acquired separately should initially be recognized , according to IAS38 Intangible assets, at (select one answer) A recoverable amount B either cost or fair value at the choice of the acquirer C fair value D cost
8. Question 5 - D IAS38 para 24 states that an intangible asset should be recognised initially at cost. 9. The Naylor Company has determined that it needs to recognise an

impairment loss on each of two non-current assets; plant and land. The relevant amounts are as follows: Plant Land Original cost CU700,000 CU1,400,000 Previous revaluations Nil CU450,000 Existing carrying amount CU700,000 CU1,850,000 Impairment loss to be recognised in year CU200,000 CU300,000 According to IAS36 Impairment of assets, how should each of the impairment losses be recognised? Plant Land A In profit or loss In profit or loss B In profit or loss In other comprehensive income C In other comprehensive income In profit or loss D In other comprehensive income In other comprehensive income
Question 9 - B IAS36 paras 60-61 state that impairment losses on assets that have not been revalued are recognised in profit or loss. Impairment losses on revalued assets are treated as a revaluation decrease. 10. The Snowfinch Company is closing one of its operating divisions, and the

conditions for making restructuring provisions in IAS37 Provisions, contingent liabilities and contingent assets have been met. The closure will happen in the first quarter of the next financial year. At the current year end, the company has announced the formal plan publicly and is calculating the restructuring provision. Which ONE of the following costs should be included in the restructuring provision? A Retraining staff continuing to be employed B Relocation costs relating to staff moving to other divisions

C Contractually required costs of retraining staff being made redundant from the division being closed D Future operating losses of the division being closed up to the date of closure
Question 5 - C IAS37 paras 80-82 require provisions to be made for costs necessarily incurred by the restructuring, but not those relating to the future conduct of the business.