Corporate Accounting
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Course Introduction
Corporate Accounting delves into the specialized principles and practices associated with accounting for corporate entities. This course covers the preparation and interpretation of financial statements for corporations, including balance sheets, income statements, and statements of cash flows, with particular emphasis on accounting for share capital, reserves, dividends, debentures, and corporate taxation. Topics also include amalgamations, absorptions, internal reconstructions, and liquidation of companies, aligning students with statutory compliance and reporting requirements. Through theoretical learning and practical exercises, students gain core competencies needed to analyze and manage the financial affairs of corporations, equipping them for advanced accounting roles in the corporate sector.
Recommended Textbook
Australian Financial Accounting 6e by Craig Deegan
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Chapter 1: An Overview of the Australian External Reporting Environment
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Q1) What are two key ways management accounting is different from financial accounting?
A) Management accounting provides special-purpose information to people external to the firm and it is highly regulated.
B) Management accounting provides information for the day-to-day running of an organisation and it is governed by the requirements of ASIC.
C) Management accounting is focused on providing formation to shareholders who wish to have input into the management of the organisation and it is regulated by generally accepted accounting principles.
D) Management accounting focuses on providing information for internal users and it is largely unregulated.
E) None of the given answers.
Answer: D
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Chapter 2: The Conceptual Framework of Accounting and Its Relevance to Financ
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Q1) Which of the following accounting policies is an example of a trade-off between relevance and reliability?
A)Research outflows are expensed and development activities expenses are capitalized.
B)Biological assets are stated at fair value unless the fair value cannot be measured reliably.
C)Machinery and equipment are reviewed periodically to assess propriety of useful life estimations used in depreciation.
D)All of the given answers.
E)None of the given answers.
Answer: B
Q2) The Framework suggests that the relevance characteristic outweighs the reliability characteristic if the financial statement is to be rendered useful:
A)True
B)False
Answer: False
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Chapter 3: Theories of Financial Accounting
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Q1) The rational economic person assumption as it is used in PAT is that:
A) All action by all individuals is driven by multiple interests in achieving a wide range of goals.
B) All individual action is driven by self-interest and individuals will act in an opportunistic manner.
C) Individuals are governed by a desire to co-operate in organisations to achieve the rational allocation of economic resources.
D) The rational person is concerned only with economic factors and so does not assess the importance of non-economic impacts on their organisation.
E) None of the given Answers.
Answer: B
Q2) AASB 101 requires the summary of accounting policies adopted by reporting entities to be presented in any section of the notes to the financial report.
A)True
B)False
Answer: False
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Chapter 4: An Overview of Accounting for Assets
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Q1) The sum of the total assets of an entity will typically reflect their cost under current generally accepted accounting practices:
A)True
B)False
Q2) The description of 'probable' in the AASB Framework means that:
A) Assessments of the degree of uncertainty attaching to the flow of economic benefits are made on the basis of evidence.
B) Assets will be recognised if the expected probability of future benefits arising is less than 50 per cent.
C) A high degree of professional judgement may be required in preparing accounting reports.
D) Assessments of the degree of uncertainty and a high degree of professional judgement may be required in preparing accounting reports.
Q3) The AASB Framework allows use of different measurement basis for similar assets as long as this is disclosed in the summary of accounting policies adopted in the notes to the accounts.
A)True
B)False
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Chapter 5: Depreciation of Property, plant and Equipment
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Q1) All Saints Ltd acquired a machine for $50,000 on 1 January.This asset has useful life of 4 years and a residual value of $10,000.The declining balance rate adopted by the entity for similar machines is 40%.What is the depreciation expense for the first year,if the depreciation policy adopted is straight-line,declining-balance or sum-of-digits method,respectively?
A) $10,000; $20,000; $16,000
B) $10,000; $25,000; $20,000
C) $12,500; $20,000; $16,000
D) $12,500; $25,000; $20,000
E) E: None of the given answers.
Q2) Assets should be depreciated from:
A) The date the asset is ordered.
B) The date the asset is delivered to the premises until it is no longer in use.
C) The date the asset is first put into use or held ready for use.
D) The date the asset is paid for until it is disposed of.
E) None of the given answers.
Q3) The profit or loss on the sale of an asset is calculated by deducting the cost of the asset from the sale amount:
A)True
B)False
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Chapter 6: Revaluation and Impairment Testing of
Non-Current Assets
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Q1) Once an entity elects to value a class of assets using fair value it can switch back to cost basis measurement as long as there is justifiable reason:
A)True
B)False
Q2) Research using the Positive Accounting Theory approach investigated public trust deeds and found that in relation to revaluations they:
A) Allowed revaluations but imposed very low debt/asset limits.
B) Specified which assets may be revalued and who may conduct the revaluations.
C) Generally did not permit revaluations.
D) Allowed revaluations but specified the period between revaluations as being no longer than 2 years.
E) None of the given answers.
Q3) Brown,Izan and Loh (1992)found that revaluations are more likely to take place:
A) In small firms with low value assets that wished to borrow more.
B) In industries that are strike prone.
C) In entities that are highly geared.
D) In industries that are strike prone and in entities that are highly geared.
E) None of the given answers.
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Chapter 7: Inventory
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Q1) AASB 102 requires that fixed manufacturing costs be excluded from the cost of inventories,as they cannot be allocated accurately:
A)True
B)False
Q2) Phoenix Ltd sells hard disks of similar make and model and reports an opening inventory on 1 July 2012 of 20 units purchased at $60.Its purchases during are as follows:
September 90 units @ $70
November 110 units @ $75
March 70 units @ $80
Phoenix Ltd sold 260 units during the year.
What is the cost of ending inventory using FIFO and weighted average method,respectively (rounded to the nearest dollar)?
A) $2,100; $2,209
B) $2,100; $2,250
C) $2,400; $2,209
D) $2,400; $2,250
E) E: None of the given answers.
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Chapter 8: Accounting for Intangibles
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Q1) Prior to the introduction of impairment testing companies had attempted to manipulate their accounts through amortisation:
A) Because where managers were rewarded based on profits attained it was in their best interests to reduce expenses while they held that position.
B) Because contractual arrangements such as debt covenants often required asset values to be maximised.
C) Recording higher amortisation expenses allowed profits to be reduced, thus allowing tax payments to be minimised without any cash outflows.
D) Because where managers were rewarded based on profits attained it was in their best interests to reduce expenses while they held that position; and because contractual arrangements such as debt covenants often required asset values to be maximised.
E) All of the given answers.
Q2) There are only rare occasions when an identifiable intangible asset should be amortised.
A)True
B)False
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Chapter 9: Accounting for Heritage Assets and Biological Assets
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Q1) Which of the following items are not within the scope of AASB 141 "Agriculture"?
A) Apple trees in a commercial orchard
B) Dried apples sold in supermarkets
C) Pine trees in a plantation forest
D) Harvested apples
E) All of the given answers
Q2) AAS 29 states that the measurement basis of infrastructure and heritage assets should be:
A) Depreciated historical cost.
B) Written current cost.
C) Depreciated fair value.
D) Recoverable amount.
E) None of the given answers.
Q3) Unlike heritage assets,there has always been very clear guidance on the treatment of biological assets given their importance in Australia.
A)True
B)False
Q4) Biological assets are defined in AASB 141 as 'living animal or plant':
A)True
B)False
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Chapter 10: An Overview of Accounting for Liabilities
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Q1) In disclosing liabilities,a reporting entity:
A) Discloses on the basis of the current/non-current liability dichotomy.
B) Has a choice, based on the notions of relevance and reliability to disclose liabilities either on the basis of the current/non-current liability dichotomy or on the basis of order of liquidity.
C) Has a choice, based on the principle of conservatism to disclose liabilities either on the basis of the current/non-current liability dichotomy or on the basis of order of liquidity.
D) Discloses on the basis of order of liquidity.
E) Discloses on the basis of directions from its auditor.
Q2) The present obligation component of a liability must be based on:
A) A legal obligation only.
B) A construction obligation, meaning there is an obligation to build something.
C) A social obligation.
D) A contractual obligation.
E) None of the given answers.
Q3) Convertible notes may be best described as having characteristics of both liabilities and bonds:
A)True
B)False
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Chapter 11: Accounting for Lease
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Q1) Where there is a lease involving a manufacturer or dealer:
A) There are really two parts to the transaction.
B) There will be a difference between the cost of the asset to the lessor and its fair value at the inception of the lease.
C) The lessor's investment would be accounted for in the same way as a direct-financing lease.
D) There are really two parts to the transaction and there will be a difference between the cost of the asset to the lessor and its fair value at the inception of the lease.
E) All of the given answers.
Q2) Describe 'lease incentives' and how they should be accounting according to AASB 117.
Q3) Minimum lease payments include.
A) Any bargain purchase option amount.
B) Any rentals paid to reimburse the lessor for executory costs.
C) Contingent rentals.
D) Unguaranteed residuals.
E) All of the given answers.
Q4) Describe how a lessee would account for the amortisation of a leased asset.
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Chapter 12: Set-Off and Extinguishment of Debt
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Q1) The former AASB 1014 required that if a trust was established to assume the responsibility for a debt in an insubstance debt defeasance,that trust must:
A) Be under the control of the debtor entity and have enough securities issued by a credit-worthy government to ensure that there is a very low probability that the debtor entity will have any further obligation in relation to the debt.
B) Be a company set up under the relevant state and federal statutes to administer the risk-free assets that are to be used to release the debtor entity from the primary obligation for the debt.
C) Have risk-free assets irrevocably transferred to it, which are of a type suited to the amount and timing so as to meet the servicing requirements of the debt..
D) Be a government-guaranteed financial institution that is required to report annually to the Australian Securities and Investments Commission.
E) None of the given answers.
Q2) The term defeasance means the setting off of one thing against another:
A)True B)False
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Chapter 13: Accounting for Employee Benefits
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Q1) Defined benefit plans are fairly simplistic and AASB 119 devotes only a small section to them:
A)True
B)False
Q2) AASB 119 "Employee Benefits" prescribes that all obligations relating to wages and salaries,annual leave and sick-leave entitlements,regardless of whether they were expected to be settled within 12 months of the reporting date be measured at nominal (undiscounted)amounts.
A)True
B)False
Q3) When employees finish their time with their employer,it is normal practice to pay them for any annual leave earned but not taken: A)True B)False
Q4) Long service leave must be accrued and a liability recorded from the first day of employment:
A)True
B)False
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Chapter 14: Share Capital and Reserves
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Q1) Prior period errors and changes in accounting policy create gains and losses that are accounted for in the period that the errors are discovered,or the change in policy made:
A)True
B)False
Q2) When shares are allotted,or a call made on them,allotment and call accounts are created respectively.What is the nature of these accounts and how are they to be disclosed in the financial statements?
A) The accounts are similar in nature to an account receivable and are to be disclosed in the balance sheet as a current asset.
B) The accounts are similar to a future income benefit and are to be separately disclosed as assets in the balance sheet.
C) The accounts are similar to an account receivable and are disclosed in the balance sheet as a reduction against share capital.
D) The accounts are in the nature of a deferred income and are disclosed as a provision for future cash inflows in the balance sheet.
E) None of the given answers.
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Chapter 15: Accounting for Financial Instruments
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Q1) David Ltd acquired a parcel of 50 000 call options in Goliath Ltd on 1 November 2012.The price of the options was $1.50 each and they may be exercised any time prior to 30 June 2015 at exercise price of $30.On the same date the market price for Goliath Ltd shares is $25.On David Ltd's balance date - 30 June 2013 - the company is still holding the options.The market price of the options at that time was $1.80 each and the share price is $27.
What is the financial effect of the above transactions on David Ltd's statement of comprehensive income for the year ending 30 June 2013?
A. Increase by $15 000
B. Decrease by $15 000
C. Increase by $100 000
D. Decrease by $100 000
E. None of the given answers
A)True
B)False
Q2) A change in classification of a financial instrument may occur as a result of "revised probabilities" of,for example,conversion:
A)True
B)False
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Chapter 16: Revenue Recognition Issues
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Q1) With the 'percentage-of-completion' method of accounting for construction contracts,profit is recognised in proportion to the work performed in each reporting perioD.
A)True
B)False
Q2) Which of the following is not a disclosure requirement of AASB 111?
A) The amount of contract revenue recognised as revenue must be disclosed either on the face of the income statement or in the accompanying notes.
B) Contract costs incurred must be disclosed either on the face of the income statement or in the accompanying notes.
C) A liability being the gross amount due to customers for contract work.
D) The gross amount of work progress must be disclosed in the balance sheet.
E) For contracts in progress, the amount of advances received, must be disclosed either on the face of the income statement or in the accompanying notes.
Q3) Transactions that result in an inflow of economic benefits such as the purchase of assets can be classified as a gain:
A)True
B)False
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Chapter 17: The Statement of Comprehensive Income and
Statement of Changes in E
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Q1) AASB 118 'Revenue' requires a number of disclosures,including information about:
A) Rents, interest, royalties and dividends.
B) Accounting policies adopted for the recognition of revenues.
C) Methods adopted to determine the stage of completion of contracts involving the rendering of services.
D) All of the given answers.
E) None of the given answers.
Q2) The notes to the accounts that relate to income and expense should include:
A) Only commentary on issues covered by AASB 101.
B) A variety of information that incorporates the disclosures required in all standards related to income and expenses.
C) Only information that would have resulted in a different profit or loss figure if it had been included on the face of the statement.
D) Only items that were deemed non-material when selecting items to place on the face of the accounts.
E) None of the given answers.
Q3) Comprehensive income includes dividend payments to shareholders.
A)True
B)False
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Chapter 18: Accounting for Share-Based Payments
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Q1) AASB 2 requires all equity-settled share-based payment transactions be measured at fair value of goods and services received.
A)True
B)False
Q2) What is the Employee benefits expense of Liverpool Ltd related to this share option for the year ended 30 June 2010?
A) $19,500
B) $25,000
C) $58,500
D) $75,000
E) None of the given answers
Q3) In accordance with AASB 2,how much Employee benefits expense related to the share option issue should Wigan Ltd recognise for the year ended 30 June 2011?
A) $22,000
B) $23,333
C) $76,000
D) $97,333
E) $146,000
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Chapter 19: Accounting for Income Taxes
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Q1) According to AASB 112,with one exception,the tax base of a liability is to be determined in the following manner,
Carrying amount - Future deductible amount + Future assessable amount:
A)True
B)False
Q2) Some items are typically not allowable tax deductions but are recognised as an expense for accounting purposes.Which of the following items are of that type?
A) Research and development costs.
B) Warranty costs.
C) Sick leave payments.
D) Goodwill amortisation.
E) None of the given answers.
Q3) The difference between the carrying amount of an asset or liability in the balance sheet and its tax base is a temporary difference:
A)True
B)False
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Chapter 20: Cash-Flow Statements
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Q1) While the statement of cash flows is presently required along with the accrual statements,taking a balanced view,it would be sufficient to meet the accountability needs of general-purpose financial statement users on its own:
A)True
B)False
Q2) AASB 107 requires ledger accounts to be reconstructed in order to calculate cash flows from operating activities:
A)True
B)False
Q3) AASB 107 requires disclosures about non-cash financing and investing activities: A)True
B)False
Q4) A reporting entity is required to prepare a cash flow statement that is in accordance with the requirements of AASB 107 and shall be presented as an integral part of the notes to the accounts.
A)True
B)False
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Chapter 21: Accounting for the Extractive Industries
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Q1) Exploration and evaluation assets are depreciated when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount.
A)True
B)False
Q2) AASB 6 provides guidance to cover costs incurred in the five phases listed in AASB 1022 namely: exploration,evaluation,development,construction and production:
A)True
B)False
Q3) Which of thefollowing expenditures is not an example of expenditures that form part of the initial cost of exploration and evaluation assets?
A) Acquisition of rights to explore;
B) Exploratory drilling;
C) Construction of roads and tunnels to the mine site;
D) Activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource;
E) None of the given answers.
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Chapter 22: Accounting for General Insurance Contracts
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Q1) Which of AASB 1023's requirements has received the main criticism?
A) The prohibition against netting reinsurance receivables against claims liabilities.
B) The requirement to mark investments to market and reflect the changes in the income statement.
C) The requirement to report premium revenues gross.
D) The requirement to discount future claim liabilities at the market-determined, risk-adjusted discount rate for the entity.
E) All of the given answers.
Q2) There have been numerous criticisms of AASB 1023 since it became operative in 1992.The criticisms have mainly come from:
A) Policy holders.
B) Government policy advisers.
C) General insurers.
D) Professional accounting bodies.
E) None of the given answers.
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Chapter 23: Accounting for Superannuation Plans
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Q1) AAS 25 requires a defined benefit plan to append to its financial statements an actuarial report that contains the following information:
A) the effective date of the report;
B) the name and qualifications of the actuary;
C) the relationship of the market value of the net assets to meet accrued benefits of the plan at the date of valuation of the plan's assets;
D) opinion of the actuary as to the financial condition of the plan at valuation date;
E) All of the given answers.
Q2) In AAS 25,vested benefits are the members' rights under the terms of a superannuation plan that are conditional upon continued plan membership or any factor other than resignation from the plan.
A)True
B)False
Q3) When a superannuation fund has inventories recognised as an asset,this should be valued at lower of cost or net realisable value.
A)True
B)False
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Chapter 24: Events Occurring After Balance Sheet Date
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Q1) In general a subsequent event is one that occurs,or the occurrence of which becomes known,after the reporting date:
A)True
B)False
Q2) Dividends declared after the reporting period but before the authorization for issue of the financial report are typically recognized as a liability.
A)True
B)False
Q3) AASB 110 requires the financial statements to be restated to a liquidation basis and for extensive additional disclosures to be made when a change in going-concern status occurs after reporting date:
A)True
B)False
Q4) A non-adjusting event is one that occurs:
A) After the reporting date.
B) After the auditor has signed the audit report.
C) After the completion of the financial reports.
D) After the financial statements have been distributed.
E) None of the given answers.
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Chapter 25: Segment Reporting
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Q1) Management may be concerned that segment reporting will put the entity at competitive disadvantage,so it has been suggested that it can avoid providing accurate segment reports through opportunistic interpretation of the definition of a business segment:
A)True
B)False
Q2) AASB 8 specifies guidelines regarding whether or not a segment is reportable.These guidelines are known as the 10 per cent rules.All three rules are required to be met in order to establish a reportable segment:
A)True
B)False
Q3) AASB 8 specifies that a geographical segment cannot include more than two countries:
A)True
B)False
Q4) AASB 8 bans the disclosure of segments that do not pass the "10 per cent test". A)True
B)False
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Chapter 26: Related-Party Disclosures
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Q1) Which of the following is usually not a related party as referred to in AASB 124 "Related Party Disclosures"?
A) Subsidiary
B) Associate
C) Son-in law of the Chief Executive Officer
D) Trade union official
E) None of the given answers
Q2) Entities included in a wholly owned group as defined by AASB 124 include:
A) Entities that have an equity ownership of 20 per cent or greater in an entity that is a subsidiary of an entity that is wholly owned by a party related to the reporting entity.
B) Wholly owned entities' subsidiaries, where subsidiaries are any entity controlled by a parent entity.
C) Entities that are controlled or have significant influence exercised over them by an entity that is wholly owned by a related party of the reporting entity.
D) Subsidiary companies that are wholly owned by a parent company.
E) None of the given answers.
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Chapter 27: Earnings Per Share
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Q1) Benjy Ltd has 8,000,000 ordinary shares on issue at the beginning of the year,1 July 2005.These shares were issued at $1.00 each and have a current market value at the end of the period of $5.20.On 1 September 2005,Benjy Ltd bought back 1,000,000 ordinary shares originally issued at $1.50 for $4.00 each.On 1 February 2006,2,000,000 shares were issued at the current market value of these shares.On 1 March 2006,900,000 partly paid-up ordinary shares were issued at an issue price of $5.00.These shares were partly paid to $4.00.Shares are not granted proportionate rights to receive dividends.This right attaches only when the shares are fully paid.The shares,however,do provide a proportionate right to vote at annual general meetings.What is the weighted average number of shares calculated in accordance with AASB 133?
A) 8,232,438
B) 8,083,333
C) 7,991,781
D) 8,803,333
E) None of the given answers.
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Chapter 28: Accounting for Group Structures
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Q1) Which consolidation concept mainly underlies the approach adopted in AASB 127?
A) The proprietary concept.
B) The accrual concept.
C) The entity concept.
D) The parent-entity concept.
E) None of the given answers.
Q2) In the situation in which a subsidiary is only controlled temporarily,AASB 127 requires:
A) The investment be recorded at fair market value and any gain or loss on acquisition recognised immediately in the income statement.
B) The subsidiary to be treated as an associate and equity accounting applied.
C) The results of the subsidiary for the period of time that it was controlled should be included in the consolidated accounts.
D) The investment to be reported at cost and dividends be accrued when declared.
E) None of the given answers.
Q3) Control is defined in AASB 3 as the 'capacity to manage the policies of another entity':
A)True
B)False
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Chapter 29: Further Consolidation Issues I: Accounting for
Intragroup Transact
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Q1) What is the amount of unrealised profit that needs to be eliminated at the end of the period,in the following situation,where Morecombe Limited is the parent of Wise Limited? (Ignore the tax effect) Morecombe purchases 500 units of inventory for $20 each.Morecombe sells this entire inventory to Wise at a mark up of 25 per cent.Wise then sells half of the inventory to an external party.Half of the remaining amount (after the external sale)is sold back to Morecombe for $2,500.
A) Cannot determine from the information given.
B) $300.
C) $625.
D) $1 250.
E) $2 500.
Q2) If we simply aggregate the sales of the parent and subsidiary companies,without adjustment,when there have been intragroup sales,total income would be overstateD.
A)True
B)False
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Chapter 30: Further Consolidation Issues II: Accounting for Minority Interests
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Q1) Using full goodwill method,share of goodwill attributable to the non-controlling interests is recognized in the statement of financial position as part of non-controlling interest in equity.
A)True
B)False
Q2) One of the steps in preparing consolidated financial statements is working out the amounts to be attributed to non-controlling interests to determine the amount to be eliminated in the consolidation process.
A)True
B)False
Q3) Under the proprietary concept of consolidation,minority interests are shown as a liability:
A)True
B)False
Q4) Minority interests are 'identified' and eliminated as part of the consolidation process: A)True B)False
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Chapter 31: Further Consolidation Issues III: Accounting for
Indirect Ownershi
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Q1) A Ltd owns 80 per cent of the issued capital of B Ltd,B Ltd owns 70 per cent of the issued capital of C Ltd,and B Ltd owns 50 per cent of the issued capital of D Ltd.The only entity that is not an immediate parent entity is D Ltd.
A)True
B)False
Q2) The order of acquisition of subsidiaries (i.e.,sequential or non-sequential)is of no consequence when it comes to calculating minority interests; they are calculated the same way regardless of the order:
A)True
B)False
Q3) The following diagram represents the ownership of issued share capital of the companies in a group.What is the total outside equity interest in D Ltd?
A) 20 per cent
B) 33.6 per cent
C) 60 per cent
D) 24.8 per cent
E) None of the given answers.
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Chapter 32: Further Consolidation Issues Iv: Accounting for
Changes in the Deg
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Q1) Control over a subsidiary may be lost without a change in absolute or relative ownership levels.An example of this is loss of control to a court administrator as a result of bankruptcy.
A)True
B)False
Q2) The profit or loss on the sale of shares in a controlled entity will be the same in the parent entity's legal books as it is in the consolidated accounts:
A)True
B)False
Q3) Under the step-by-step method,the aggregate costs of the investments would be eliminated against the parent's share of capital and reserves at the date control of the subsidiary has been ultimately established and only one amount of goodwill (or bargain gain on purchase)is calculated.
A)True
B)False
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Chapter 33: Accounting for Equity Investments
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Q1) AASB 128 specifically addresses the accounting for the elimination of intragroup transaction between two different associates of an investor:
A)True
B)False
Q2) An equity investment that is expected to be held for longer than six (6)months after reporting date is considered a non-current asset:
A)True
B)False
Q3) Investor Ltd owns 30% of Investee Ltd.During the year,Investee Ltd had reported a net profit of $500,000 and paid dividends of $50,000.The bookkeeper of Investor Ltd mistakenly used the cost method to account for investments in Investee Ltd.Ignoring tax effect,what is the net effect of this error in the statement of financial position and statement of comprehensive income,respectively?
A) overstate by $150,000; overstate by $150,000;
B) understate by $150,000; understate by $150,000;
C) overstate by $135,000; overstate by $135,000;
D) understate by $135,000; understate by $135,000;
E) None of the given answers.
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Chapter 33: Accounting for Equity Investments
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Q1) A venturer that recognises in its financial statements the assets that it controls,the liabilities it incurs,the expenses that it incurs,and its share of the income that it earns from the sale of goods or services by the joint venture is prescribed by AASB 131 for which type(s)of joint venture(s)?
A) Jointly controlled entities;
B) Jointly controlled assets;
C) Jointly controlled operations
D) Jointly controlled assets and jointly controlled operations.
E) Jointly controlled entities and jointly controlled assets;
Q2) AASB 131,'Interests in joint ventures' specifies how the venturers should account for their interest in a joint venture and how the joint venture's accounts should be prepared.
A)True
B)False
Q3) AASB 131 "Interests in Joint Ventures" prescribes disclosure by venturers of each category of asset and liability contributed to the jointly controlled operations.
A)True
B)False
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Chapter 35: Accounting for Foreign Currency Transactions
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Q1) AASB 121 requires foreign currency transactions to be recorded,on initial recognition in the presentation currency,by applying to the foreign currency amount the spot exchange rate between the presentation currency and the foreign currency at the date of the transaction.
A)True B)False
Q2) Management may exercise its judgement to determine the functional currency that most faithfully represents the economic effects of the underlying transactions,events and conditions.
A)True
B)False
Q3) An entity's may change its functional currency when there is a change in the underlying transactions,events and conditions.
A)True
B)False
Q4) AASB 121 defines an exchange rate as a ratio for the exchange of two currencies at a particular time:
A)True B)False
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Chapter 36: Translation of the Accounts of Foreign Operations
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Q1) In the process of consolidating the translated financial accounts of a foreign operation,the elimination entry to record goodwill will be affected by the translation process in what way?
A) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will vary each year depending on the exchange rates at the end of the period that are used to calculate the foreign exchange gain or loss.
B) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will be the same unless inter-company transactions have to be eliminated, in which case the entry will have to be adjusted for the exchange rate differences on the inter-company transactions.
C) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will be the same each year the elimination entry is made.
D) The elimination of the investment against the pre-acquisition capital and reserves and the calculation of goodwill will be affected by any subsequent transfers between equity items that may arise as a result of bonus issues or transfers between reserves.
E) None of the given answers.
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Chapter 37: Accounting for Corporate Social Responsibility
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Q1) 'State of the Environment' reports are:
A) Reports prepared by corporate entities under the guidelines of the Global Reporting Initiative.
B) Reports prepared by local government bodies in support of applications for funding for social and cultural projects.
C) Reports generated by governments that provide details of the condition of the environment in a designated area and the natural resource stocks in that area.
D) Reports generated by environmental protection authorities that specify areas subject to critical levels of pollution and prioritise areas and species for protection.
E) None of the given answers.
Q2) One way in which traditional financial accounting has been able to deal in an environmentally friendly way with the measurement of effects on the environment is through the recognition of pollution permits and emission rights as assets:
A)True
B)False
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