1. Which ifrs is relevant to preparation of consolidated financial statements?

1.Which IFRS is relevant to preparation of consolidated financial statements?
• IFRS 16 Lease
• None of them
• IAS 2 Inventories
√ IFRS 3 Business Combinations
• IAS 10 Events after reporting period

2.Which IFRS is relevant to preparation of consolidated financial statements?

• None of them
√ IFRS 10 Consolidated Financial Statements
• IAS 41 Agriculture
• IAS 37 Provision, Contingent Liabilities and Contingent Assets
• IAS 38 Intangible Assets

3.Which IFRS is relevant to preparation of consolidated financial statements?

√ IAS 28 Investments in Associates and Joint Ventures
• IAS 16 Property, Plant and Equipment
• IAS 40 Investment Property
• None of them
• IAS 38 Intangible Assets

4. … is an entity that controls one or more entities. Fill in the blanks.

• Shareholder
• Subsidiary
√ Parent
• Associate
• None of them

5. … is an entity that is controlled by another entity. Fill in the blanks.

• Parent
• Associate
• None of them
• Investor
√ Subsidiary

6.Which of the following definitions is not included within the definition of control per IFRS 10 Consolidated Financial Statements?

• Having the ability to use its power over the investee to affect the amount of the investor’s returns
• Having exposure, or rights, to variable returns from its investment with the investee
√ Having the majority of shares in the investee
• Having power over the investee
• None of them

7.Which of the following situations are unlikely to represent control over an investee

• Owning 40% of the shares but having majority of voting rights within the investee
• Having currently exercisable options which would take the shareholding in the investee to 55%
• Owning 55% and being able to elect 4 of the 7 directors
• None of them
√ Owning 35% of the ordinary shares and 80% of the preference shares of the investee

8.Peter acquires 80% of the share capital of Paul on 1 August 20X6 and is preparing its group financial statements for the year ended 31 December 20X6. Which of the followings is correct?

√ 100% of Paul’s revenue and expenses for the period ended 1 August 20X6 to 31 December 20X6
• 80% of Paul’s revenue and expenses for the period 1 August 20X6 to 31 December 20X6
• 100% of Paul’s revenue and expenses for the year ended 31 December 20X6
• 80% of Paul’s revenue and expenses for the year ended 31 December 20X6
• None of them

9.Which of the following is not a condition which must be met for the parent to be exempt from producing consolidated financial statements?

• The ultimate parent produces consolidated financial statements that comply with IFRS Standards and are publicly available
• The parent’s debt or equity instruments are not traded in a public market
• The parent itself is a wholly owned subsidiary or a partially owned subsidiary whose owners do not object to the parent not producing consolidated financial statements
√ The activities of the subsidiary are significantly different to the rest of the group and to consolidate them would prejudice the overall group position
• None of them

10.Which of the following statements regarding consolidated financial statements is correct?

• For consolidation, all companies within the group must have the same year end.
√ For consolidation, it may be acceptable to use financial statements of the subsidiary where the year‐end differs from the parent by 2 months.
• The profit made on all intra‐group sales in the year must be removed from the consolidated financial statements.
• All companies within a group must have the same accounting policy in their individual financial statements.
• None of them

11."‘An associate is an entity over which the investor has significant influence’ (IAS28, para 3). Which of the followings indicate the presence of significant influence?

1. The investor owns 330,000 of the 1,500,000 equity voting shares of the investee
2. The investor has representation on the board of directors of the investee
3. The investor is able to insist that all of the sales of the investee are made to a subsidiary of the investor
4. The investor controls the votes of a majority of the board members
• 4 only
• 3 only
• 3 and 4
√ 1 and 2
• None of them"

12."Consolidated financial statements are presented on the basis that the companies within the group are treated as if they are a single economic entity. Which of the followings are requirements of preparing consolidated financial statements?

1. All subsidiaries must adopt the accounting policies of the parent in their individual financial statements
2. Subsidiaries with activities which are substantially different to the activities of other members of the group should not be consolidated
3. All assets and liabilities of subsidiaries should be included at fair value
4. Unrealised profits within the group must be eliminated from the consolidated financial statements
• 1 only
• 2 only
√ 3 and 4
• 1 and 2
• None of them"

13.Which of the following is the criterion for treatment of an investment as an associate?

• Exposure to variable returns from involvement with the investee
• Ability to exercise control
• Ownership of a majority of the equity shares
• None of them
√ Existence of significant influence

14.When a bargain purchase arises, IFRS 3 Business Combinations requires that the amounts involved in computing the bargain purchase should first be reassessed. When the amount of the bargain purchase has been confirmed, how should it be accounted for?

• Capitalised and presented under non-current assets
√ Credited to profit or loss
• Charged as an expense in profit or loss
• Shown as a deduction from non-current assets
• None of them

15.Petre Co owns 100% of the share capital of the following companies. The directors are unsure of whether the investments should be consolidated. In which of the following circumstances would the investment NOT be consolidated?

√ Gamma Co is located in a country where a military coup has taken place and Petre Co has lost control of the investment for the foreseeable future
• Delta Co is located in a country where local accounting standards are compulsory and these are not compatible with IFRS used by the rest of the group
• Beta Co is a bank and its activity is so different from the engineering activities of the rest of the group that it would be meaningless to consolidate it
• Petre Co has decided to sell its investment in Alpha Co as it is loss-making; the directors believe its exclusion from consolidation would assist users in predicting the group's future profits
• None of them

16."An investor company assesses control to determine whether or not it is the parent of an investee company. According to IFRS 10 Consolidated Financial Statements, which three of the following are required to determine whether an investor has control of an investee?

1. The ability to use its power over the investee to affect the amount of the investor's returns
2. Exposure to, or rights to, variable returns from its involvement with the investee
3. Acquisition of 50% or more of the share capital
4. Power over the investee
• 2, 3 and 4
√ 1, 2 and 4
• 1, 3 and 4
• 1, 2 and 3
• None of them"

17.Which of the following statements regarding consolidated financial statements is correct?

• For consolidation, all companies within the group must have the same year-end
• All companies within a group must have the same accounting policy in their individual financial statements
• Only 100% subsidiaries need to be consolidated
√ For consolidation, it may be acceptable to use financial statements of the subsidiary if the year-end differs from the parent by 2 months
• None of them

18.The … focuses on the existence of the group as an economic unit rather than looking at it only through the eyes of the dominant shareholder group. It concentrates on the resources controlled by the entity. Fill in the blanks.

• Materiality concept
• Going concern concept
• Accrual concept
• None of them
√ Single economic unit concept

19.The single economic unit concept …

• … is an entity that controls one or more entities.
• … is an entity that is controlled by another entity.
√ … focuses on the existence of the group as an economic unit rather than looking at it only through the eyes of the dominant shareholder group. It concentrates on the resources controlled by the entity. Fill in the blanks.
• All of the above
• None of them

20.Parent …

• … focuses on the existence of the group as an economic unit rather than looking at it only through the eyes of the dominant shareholder group. It concentrates on the resources controlled by the entity. Fill in the blanks.
√ … is an entity that controls one or more entities.
• … is an entity that is controlled by another entity.
• All of the above
• None of them

21.Subsidiary …

√ … is an entity that is controlled by another entity.
• … is an entity that controls one or more entities.
• … focuses on the existence of the group as an economic unit rather than looking at it only through the eyes of the dominant shareholder group. It concentrates on the resources controlled by the entity. Fill in the blanks.
• All of the above
• None of them

22.What does "the single economic unit concept" mean?

• The company is going concern for the next 6 months
• Parent should remove dividends from individual statements
• Dividend from subsidiary should be included in the consolidated financial statements
√ Intra-group transactions will need to be removed
• None of them

23.If an entity does not expect to recover the carrying amount of an asset, the entity has incurred:

• a depreciation expense
• an amortisation cost
• a loss on disposal
√ an impairment loss
• All of them

24.The impairment test must be applied to tangible assets:

• at each balance date
• every three years
√ only if there is an indication that the asset may be impaired
• at each reporting date including interim reporting dates such as half-year
• All of them

25.The impairment test must be applied to the following intangible assets every year:

• assets that have a definite useful life
√ assets with indefinite useful lives
• internally generated goodwill
• assets that have been used for more than five years
• All of them

26."Raebow Limited expected the following future cash flows from the use of Property:

End of Year 1 $400;
End of Year 2 $500;
End of Year 3 $600.
The discount rate was determined as 10%. The Value in use of this asset is:
• $1100
• $1177
• $1210
• $1245"
√ $1,228

27."When assessing the value in use of Equipment the following estimates of cash flows and risk rates were made.

In one year: $1,000 at 4%;
in 2 years $1,000 at 4.5%,
and in 3 years $1,000 at 5%.
The expected present value of the asset is:
• $2300
• $2591
√ $2,742
• $2886
• $3000"

28.When an asset is measured at fair value the appropriate journal entry to record an impairment loss will include the following entry:

√ DR Accumulated depreciation
• DR Asset
• DR Revaluation increment
• DR Depreciation expense
• DR Liability

29.Zhang Limited recognised an impairment loss on a Plant asset on the 30th June. The recoverable amount after the loss is $900 and the asset has an estimated useful life of 5 years. Accumulated depreciation was $200 at that date and the straight line depreciation method is used. The asset cost $1,500. The future annual depreciation amount is:

• $140
• $260
• $300
√ $180.00
• $400

30.Routinely comparing the carrying amount of goodwill with the recoverable amount of a cash-generating unit's assets on annual basis is known as:

• forensic accounting
• management accounting
√ impairment testing
• auditing
• None of them

31.The impairment test for goodwill must be conducted:

• annually, at balance date
√ annually, at the same time every year
• once every three years at balance date
• only if it is reasonable to expect that goodwill has been impaired
• None of them

32.Carrying amount is the amount at which an asset is recognised __________.

• After deducting any accumulated depreciation (amortisation)
• After deducting accumulated impairment losses, if any
• Before deducting accumulated impairment losses, if any
• A and C
√ A and B

33.Which of the following terms does this statement define: “the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount”?

• Depreciation
√ Impairment loss
• Fair value
• Value in use
• None of them

34.Which of the following statements do agree with IAS 36?

• An entity shall assess at the end of each reporting period the recoverable amount of its assets
• An entity shall test its assets on impairment at the end of each reporting period
√ An entity shall assess at the end of each reporting period whether there is any indication that its assets may be impaired
• All of the above
• None of them

35.The existence of which of the following in the entity’s internal reporting does indicate that an asset may be impaired?

• Cash flows for acquiring the asset, or subsequent cash needs for operating or maintaining it, that are significantly lower than those originally budgeted
• Actual net cash flows or operating profit or loss flowing from the asset that are significantly worse than those budgeted
• A significant decline in budgeted net cash flows or operating profit, or a significant increase in budgeted loss, flowing from the asset
√ B and C
• A and B

36.All of the following are true with regard to impairment testing of long-lived assets except:

• If impairment indicators are present, the company must conduct an impairment test.
√ The impairment test compares the asset’s carrying value with the lower of its fair valueless cost to sell and its value-in-use.
• If the recoverable amount is lower than the carrying value, an impairment loss will bereported on the period’s income statement.
• If either the fair value less cost to sell or the value-in-use is higher than the carryingamount, no impairment loss will be recorded.
• None of them

37.All of the following are true of the recoverable amount used in the impairment test of along-lived asset except:

√ An asset’s recoverable amount is the lower of its value-in-use and its fair value less cost to sell
• An asset’s recoverable amount is the higher of its fair value less cost to sell and itsvalue-in-use.
• The recoverable amount is calculated as the asset’s value in use less costs to sell.
• If an asset’s recoverable amount is higher than the carrying amount, no impairmentloss will be reported on the period’s income statement.
• None of them
38.If an entity has cash-generating units of different size, each containing goodwill, it is necessary that each unit must be tested for goodwill:
• annually at balance date;
• at the same time;
• only if it is reasonable to expect that goodwill has been impaired.
√ and the smaller unit must be tested before the larger unit;
• None of them

39.If the recoverable value of an individual asset cannot be estimated, the impairment test is instead applied to:

• the share price of the entity
√ the cash-generating unit to which the asset belongs;
• the cash reserves of the entity
• the fair value of all other assets of the entity.
• None of them

40.An entity owns a car that was involved in an accident at the year end. It is barely usable, so the value in use is estimated at $1000. However, the car is a classic and there is a demand for the parts. This results in a fair value less costs to sell of $3000. The opening carrying amount was $8000 and the car was estimated to have a life of eight years from the start of the year. Identify the recoverable amount of the car.

• 4000
• 1000
• 2000
√ 3000
• None of them

41.An entity owns a property which was revalued to $500000 on 31 March 20X3 with a revaluation gain of $200000 being recognised as other comprehensive income and recorded in the revaluation surplus. At 31 March 20X5 the property had a carrying amount of $460000 but the recoverable amount of the property was estimated at only $200000. What is the amount of impairment?

√ 260000
• 300000
• 26000
• 200000
• 40000

42.Which of the following could be an indication that an asset may be impaired according to IAS36?

• Decrease in market interest rates
• Increase in market values for the asset
• All of them
• None of them
√ Damage caused to the asset

43."ABC Co has a CGU that suffers a large drop in income due to reduced demand for its products. An impairment review was carried out and the recoverable amount of the CGU was determined at $100m. The assets of the CGU had the following carrying amounts immediately prior to the impairment.

Goodwill - $25m,
Intangibles - $60m,
PPE - $30m,
Inventory - $15m,
Trade receivables - $10m.
The inventory and receivables are considered to be included at their recoverable amounts. What is the carrying amount of the intangibles once the impairment loss has been allocated?
• $45000000
• $55000000
√ $50,000,000
• $60000000
• $58000000"

44.Which of the following terms does this statement define: “the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount”?

• Fair value
• Depreciation
• Value in use
√ Impairment loss
• None of them

45.Which of the following statements do agree with IAS 36?

√ An entity shall assess at the end of each reporting period whether there is any indication that its assets may be impaired
• An entity shall assess at the end of each reporting period the recoverable amount of its assets
• An entity shall test its assets on impairment at the end of each reporting period
• All of the above
• None of them

46."IAS 36 Impairment of Assets contains a number of examples of internal and external events which may indicate the impairment of an asset.In accordance with IAS 36,which of the following would definitely NOT be an indicator of the potential impairment of an asset (or group of assets) ?

• Adverse changes in the economic performance of one or more assets
• A significant change in the technological environment in which an asset is employed making its software
• effectively obsolete
• An unexpected fall in the market value of one or more assets
√ The carrying amount of an entity’s net assets being below the entity’s market capitalisation
• All of them"

47.In accordance with IAS 36 Impairment of Assets, which of the following explains the impairment of an asset and how to calculate its recoverable amount?

• An asset is impaired when the recoverable amount exceeds its carrying amount and the recoverable amount is the lower of its fair value less costs of disposal and its value in use
√ An asset is impaired when the carrying amount exceeds its recoverable amount and the recoverable amount is the higher of its fair value less costs of disposal and its value in use
• An asset is impaired when the recoverable amount exceeds its carrying amount and the recoverable amount is the higher of its fair value less costs of disposal and its value in use
• An asset is impaired when the carrying amount exceeds its recoverable amount and the recoverable amount is the lower of its fair value less costs of disposal and its value in use
• None of them

48.Which of the following is NOT an indicator of impairment?

• An increase in interest rates which increases the discount rate an entity uses
• The carrying amount of an entity’s net assets is higher than the entity’s number of shares in issue multiplied by its share price
• Advances in the technological environment in which an asset is employed have an adverse impact on its future use
√ The estimated net realisable value of inventory has been reduced due to fire damage although this value is greater than its carrying amount
• All of them

49.Where will impairment losses be recorded in respect of assets held under the cost model?

• In other comprehensive income
• If temporary, only included as a disclosure note
√ In the profit or loss
• In a loss reserve
• None of them

50.Which of the following assets is not covered by the impairment rules of IAS 36?

• All of them
• Leased assets
• Intangible assets
• Property, plan and equipment
√ Long-term loans issued

51. A vehicle was involved in an accident exactly halfway through the year. The vehicle cost $10000 and had a remaining life of 10 years at the start of the year. Following the accident, the expected present value of cash flows associated with the vehicle was $3400 and the fair value less costs to sell was $6500. What is the recoverable amount of the vehicle following the accident?

√ 6500
• 7000
• 3400
• 10000
• 5000

52."In accordance with IAS 36 Impairment of Assets which of the following statements are true?

1)An impairment review must be carried out annually on all intangible assets.
2)If the fair value less costs to sell of an asset exceed the carrying amount there is no need to calculate a value in use.
3)Impairment is charged to the statement of profit or loss unless it reverses a gain that has been recognised in equity in which case it is offset against the revaluation surplus.
• All three
• 1 and 2 only.
√ 2 & 3 only
• 1 and 3 only.
• None of them

53.IAS 36 requires an entity to perform a quantified impairment test annually for some types of assets, irrespective of whether there is an indication of impairment. Which of the followings is not one of these assets :

• goodwill acquired in a business combination
√ assets that have been used for more than ten years
• all of them
• an intangible asset with an indefinite useful life
• an intangible asset not yet available for use

54.Which statement best describes impairment loss?

• The removal of an asset from the statement of financial position
• None of them
√ The amount by which carrying amount of an asset exceeds the recoverable amount.
• The systematic allocation of cost of an asset less residual value over the useful life
• The amount by which the recoverable amount of an asset exceeds the carrying amount

55.Which one of the followings is internal indicator of an impairment reversal?

• All of them
• Decreases in interest rates
• Increases in the asset's market value
• Favourable changes in the technological, market, economic or legal environment
√ Favourable changes in the use of the asset

56.ZZZ Co owns a machine that has a carrying amount of $85,000 at the year end of 31 March 2021. Its market value is $78,000 and costs of disposal are estimated at $2,500. ZZZ Co expects it to produce net cash flows of 77,500. What is the impairment loss on the machine to be recognised in the financial statements at 31 March 2021?

• 7000$
√ 7,500$
• 8500$
• 8000$
• 9500$

57.Which of the following is true about reversal of an impairment loss

√ If there is a change in the economic or operating conditions for an asset or CGU that mean a previous impairment loss can now be reversed
• An impairment loss for goodwill should could be reversed in a subsequent period.
• If the asset is valued under historical cost, reversal of the impairment loss should be recognised in other comprehensive income
• If the assets is valued in fair value, reversal of the impairment loss should be recognised immediately in profit or loss
• Depreciation of assets should be calculated based on the value of asset before reversal of an impairment loss

58.First of all, the impairment loss is allocated to __________ to reduce the carrying amount of the assets of the unit.

• To the administrative assets
• To the production facilities
• To the other assets of the unit
√ To any goodwill allocated to the CGU
• To internally generated intangible assets of the CGU

59.Which of the followings is not an external indicator of impairment?

• Asset's value declined more than expected due to the passage of time or normal use
√ Obsolescence or physical damage
• Carrying amount of net assets exceeds market capitalisation
• Increased market interest rates
• Adverse changes in technological, market, economic or legal environment

60. IAS 36 applies assets to one of the followings below:

• Deferred tax assets
• Inventories
√ Intangible assets
• Assets arising from employee benefits
• Financial assets included in the scope of IFRS 9

61.How does the Conceptual Framework define an asset?

• A present economic resource, which is a right that has the potential to produce economic benefits, owned by an entity as a result of past events
√ A present economic resource controlled by an entity as a result of past events and from which the economic resource is a right that has the potential to produce economic benefits
• A present economic resource over which an entity has legal rights and from which the economic resource is a right that has the potential to produce economic benefits
• A present economic resource to which an entity has a future commitment as a result of past events and from which the economic resource is a right that has the potential to produce economic benefits
• None of them

62.Which of the following would be classified as a liability?

• Dexter's business manufactures a product under licence. In 12 months' time the licence expires and Dexter will have to pay $50000 for it to be renewed
• Reckless purchased an investment 9 months ago for $120000. The market for these investments has now fallen and Reckless's investment is valued at $90000
√ Carter has estimated the tax charge on its profits for the year just ended as $165,000
• Expansion is planning to invest in new machinery and has been quoted a price of $570000
• None of them

63.Which of the following would correctly describe the net realisable value of a two year old asset?

• The original cost of the asset less two years' depreciation
• The cost of an equivalent new asset less two years' depreciation
• The present value of the future cash flows obtainable from continuing to use the asset
√ The amount that could be obtained from selling the asset, less any costs of disposal
• None of them

64.The Conceptual Framework identifies an underlying assumption in preparing financial statements:

• Materiality
√ Going concern
• Substance over form
• Accruals
• None of them

65.Which ONE of the following is NOT an enhancing qualitative characteristic?

• Verifiability
• Timeliness
• Understandability
√ Consistency
• None of them

66.Which TWO of the following are purposes of the IASB's Conceptual Framework?

1.To assist preparers to develop consistent accounting policies when no Standard applies to a particular event
2.To issue rules regarding the accounting treatment of elements in the financial statements
3.To assist in determining the treatment of items not covered by an existing IFRS
4.To be authoritative where a specific IFRS conflicts with the Conceptual Framework
√ 1,3
• 2,3
• 1,4
• 3,4
• None of them

67.Which of the following items should be recognised as an asset in the statement of financial position of a company?

(i) A secret formula for the manufacture of a best-selling sauce. The recipe is kept secure at the company premises and known only by the company directors
(ii) A highly lucrative contract signed during the year which is due to commence shortly after the year end
(iii) Items that are to be sold via a third party agent which the company can no longer control and cannot be returned to the company of they are unsold
(iv) A receivable from a customer which has been sold (factored) to a finance company. The finance company has full recourse to the company for any losses
• (i) and (iii)
• (iii) and (iv)
√ (i) and (iv)
• (ii), (iii) and (iv)
• None of them

68.In accordance with the Conceptual Framework which of the following is/are true in relation to the enhancing characteristic of comparability?

(1) Permitting alternative accounting treatments for the same economic phenomenon enhances comparability
(2) Comparability requires uniformity
• 1 only
• 2 only
√ Neither 1 nor 2
• Both 1 and 2
• None of them

69.The process for developing an International Financial Reporting Standard involves a number of stages. Following receipt and review of comments on a Discussion Paper, what will be the next step undertaken by the IASB?

• Establishment of an Advisory Committee
• Consultation with the Advisory Committee
• Issue of a final IFRS
• None of them
√ Publication of an Exposure Draft

70.Which TWO of the following statements would be an advantage of adopting IFRS?

1. It would be easier for investors to compare the financial statements of companies
with those of foreign competitors
2. Cross-border listing would be facilitated
3. Accountants and auditors would have more defence in case of litigation
4. The accounting standards can be more easily tailored to reflect the industries of the
territory adopting them
• 2,3
• 3,4
• 2,4
• None of them
√ 1,2

71.Which TWO of the following statements regarding systems of regulation of accounting are true?

1.A principles-based system will require more detailed regulations than a rules-based system
2.A rules-based system will tend to give rise to a larger number of accounting standards than a principles-based system
3.A principles-based system seeks to cover every eventuality
4.A principles-based system requires the exercise of more judgement in application than a rules-based system
• 2,3
• 3,4
• 1,2
√ 2,4
• None of them

72.The process for developing an International Financial Reporting Standard involves a number of stages. During the early stages of a project, the IASB will undertake consultation on the key issues. Which of the following is correct regarding the early stages of the process:

• In the early stages of the project, the IASB will issue a Discussion Paper to obtain views from the public
• In the early stages of the project, the IASB will issue a Discussion Paper then consult with the Advisory Committee
• In the early stages of the project, the IASB will issue an Exposure Draft to obtain views from the public
• None of them
√ In the early stages of the project, the IASB will consult with the Advisory Committee and IFRS Advisory Council to seek out the key issues

73.Which of the following is NOT an advantage of historical cost accounting?

• It provides fewer opportunities for creative accounting than systems of current value accounting
√ It avoids the overstatement of profit which can arise during periods of inflation
• Amounts in the statement of financial position can be matched to amounts in the statement of cash flows
• Amounts of transactions are reliable and can be verified
• None of them

74.Which of the following is NOT a likely consequence of overstatement of profits?

• Higher tax bills
• Higher wage demands from employees
• Overstated EPS
√ Reduced dividends to shareholders
• None of them

75.Drexler acquired an item of plant on 1 October 20X2 at a cost of $500,000. It has a useful life of five years (straight-line depreciation) and an estimated residual value of 10% of its historical cost or current cost as appropriate. As at 30 September 20X4, the manufacturer of the plant still makes the same item of plant and its current price is $600,000. What is the correct carrying amount to be shown in the statement of financial position of Drexler as at 30 September 20X4 under historical cost and current cost?

√ Historical cost:320,000 , Current cost:384,000
• Historical cost:320000 , Current cost:600000
• Historical cost:300000 , Current cost:600000
• Historical cost:300000 , Current cost:384000
• None of them

76.The 'physical capital maintenance' concept states that profit is the increase in the physical productive capacity of the business over the period.This concept is applied in:

• Historical cost accounting
• Current value accounting
√ Current cost accounting
• Current purchasing power accounting
• None of them

77.Which of the following statements is an advantage of using the Value in Use method of accounting?

• Amounts used are objective and free from bias
√ It assists a user to assess the future prospects of the business
• It is an easily understood system of valuation
• Amounts are reliable and can be verified to invoices and documents
• None of them

78.Under current value accounting, what is the definition of Value in Use measurement method?

• Costs incurred at the time of acquisition
• Open market value of the asset
• Open market value of the asset, less the present value of the future cash outflows
√ Present value of future cash flows, less costs of disposal
• None of them

79.Who issues International Financial Reporting Standards?

• The government
• The stock exchange
• The IFRS Advisory Committee
√ The International Accounting Standards Board
• None of them

80.Which groups of people are most likely to be interested in the financial statements of a sole trader?

1 Shareholders of the company
2 The business's bank manager
3 The tax authorities
4 Financial analysts
• 1 and 2 only
√ 2 and 3 only
• 2, 3 and 4 only
• 1, 2 and 3 only
• None of them

81.Which of the following are advantages of trading as a limited liability company?

1 Operating as a limited liability company makes raising finance easier because additional shares can be issued to raise additional cash.
2 Operating as a limited liability company is more risky than operating as a sole trader because the
shareholders of a business are liable for all the debts of the business whereas the sole trader is
only liable for the debts up to the amount he has invested.
√ 1 only
• 2 only
• Both 1 and 2
• Neither 1 or 2
• None of them

82.Which of the following best describes corporate governance?

√ Corporate governance is the system by which companies and other entities are directed and controlled.
• Corporate governance is the system of rules and regulations surrounding financial reporting.
• Corporate governance is carried out by the finance department in preparing the financial statements.
• Corporate governance is the system by which an entity monitors its impact on the natural environment.
• None of them

83.Identify which of the following statements are true or false.

1 The directors of a company are ultimately responsible for the preparation of financial statements,
even if the majority of the work on them is performed by the finance department.
2 If financial statements are audited, then the responsibility for those financial statements instead
falls on the auditors instead of the directors.
3 There are generally no laws surrounding the duties of directors in managing the affairs of a
company.
√ 1 only
• 2 only
• 2 and 3 only
• 1 and 3 only
• None of them

84.Which ONE of the following statements correctly describes the contents of the Statement of Financial Position?

• A list of ledger balances shown in debit and credit columns
√ A list of all the assets owned and all the liabilities owed by a business
• A record of income generated and expenditure incurred over a given period
• A record of the amount of cash generated and used by a company in a given period
• None of them

85.Which ONE of the following statements correctly describes the contents of the Statement of Profit or Loss?

• A record of the amount of cash generated and used by a company in a given period
√ A record of income generated and expenditure incurred over a given period
• A list of all the assets owned and all the liabilities owed by a business
• A list of ledger balances shown in debit and credit columns
• None of them

86.Which of the following are TRUE of partnerships?

1 The partners' individual exposure to debt is limited.
2 Financial statements for the partnership by law must be produced and made public.
3 A partnership is not a separate legal entity from the partners themselves.
• 1 and 3 only
√ 3 only
• 2 only
• 1 and 2 only
• None of them

87.Which of the following statements is/are true?

1 Directors of companies have a duty of care to show reasonable competence in their management
of the affairs of a company.
2 Directors of companies must act honestly in what they consider to be the best interest of the
company.
3 A Director's main aim should be to create wealth for the shareholders of the company.
√ 1, 2 and 3
• 1 and 3 only
• 2 only
• 1 and 2 only
• None of them

88.What is the role of the IASB?

• Oversee the standard setting and regulatory process
• Review defective accounts
• Control the accountancy profession
√ Formulate international financial reporting standards
• None of them

89.Which ONE of the following is NOT an objective of the IFRS Foundation?

• Bring about the convergence of national accounting standards and IFRSs
• Promote the use and rigorous application of International Financial Reporting Standards (IFRSs)
• Through the IASB, develop a single set of globally accepted International Financial Reporting Standards (IFRSs)
√ Ensure International Financial Reporting Standards (IFRSs) focus primarily on the needs of global, multi-national organisations
• None of them

90.Which ONE of the following statements correctly describes how International Financial Reporting

Standards (IFRSs) should be used?
• To ensure high ethical standards are maintained by financial reporting professionals
• internationally
• To facilitate the enforcement of a single set of global financial reporting standards
• To prevent national bodies from developing their own financial reporting standards
• None of them
√ To provide examples of best financial reporting practice for national bodies who develop their own requirements

91.Which accounting concept should be considered if the owner of a business takes goods from inventory for their own personal use?

√ The business entity concept
• The going concern concept
• The accruals concept
• The materiality concept
• None of them

92.Sales revenue should be recognised when goods and services have been supplied; costs are incurred when goods and services have been received. Which accounting concept governs the above?

• The duality concept
√ The accruals concept
• The materiality concept
• The business entity concept
• None of them

93.Which accounting concept states that omitting or misstating this information could influence users of the financial statements?

• The going concern concept
• The accruals concept
√ The materiality concept
• The consistency concept
• None of them

94.Which of the following accounting concepts means that similar items should receive a similar accounting treatment?

• Matching
• Accruals
• Conformity
√ Consistency
• None of them

95.Which ONE of the following statements describes faithful representation, a qualitative characteristic of faithful representation?

√ Financial information should be complete, neutral and free from error.
• The presentation and classification of items in the financial statements should stay the same from one period to the next.
• Having information available to decision-makers in time to be capable of influencing their decisions.
• Revenue earned must be matched against the expenditure incurred in earning it.
• None of them

96.The IASB's Conceptual Framework for Financial Reporting gives six qualitative characteristics of financial information. What are these six characteristics?

• Accuracy, Faithful representation, Comparability, Verifiability, Timeliness and Understandability
• Relevance, Faithful representation, Consistency, Verifiability, Timeliness and Understandability
• Relevance, Comparability, Consistency, Verifiability, Timeliness and Understandability
√ Relevance, Faithful representation, Comparability, Verifiability, Timeliness and Understandability
• None of them

97.Which one of the following is NOT a qualitative characteristic of financial information according to the Conceptual Framework for Financial Reporting?Conceptual Framework for Financial Reporting?

• Timeliness
• Relevance
• Faithful representation
• None of them
√ Accruals

98.According to the IASB Conceptual Framework which of the following is NOT an objective of financial statements?

• Enabling users to assess the performance of management to aid decision making
• Providing information regarding the performance of a business
√ Providing reliable investment advice
• Providing information regarding the financial position of a business
• None of them

99.Which of the following statements about prudence is correct?

• A prudent decision will mean lower expenditure
√ Prudence does not allow for overstatement of liabilities
• When prudence is applied, income is not recognised until the cash has been received
• Prudence requires assets to be carried at their lowest possible valuation
• None of them

100.Which of the following statements best defines a statement of financial position?

√ It is a summary of assets, liabilities and equity at a specified date
• It is a summary of cash receipts and payments made during an accounting period
• It is a summary of income and expenditure for an accounting period
• It is a summary of assets and expenses at a specified date
• None of them