Corporate Reporting Practice Exam
Course Introduction
Corporate Reporting focuses on the preparation, analysis, and interpretation of financial statements for corporate entities, emphasizing compliance with international financial reporting standards (IFRS) and local regulations. The course explores the principles and practices involved in external reporting, disclosure requirements, and the communication of financial performance to stakeholders such as investors, regulators, and the public. Students learn to critically assess annual reports, understand the impact of accounting policies and estimates, and evaluate contemporary reporting issues, including sustainability reporting, integrated reporting, and the use of digital technologies in financial communication.
Recommended Textbook
Understanding Australian Accounting Standards 1st Edition by Janice Loftus
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Page 2
Chapter 1: Accounting Regulation and the Conceptual Framework
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Sample Questions
Q1) The following statements about the AASB are correct, except:
A) The AASB has the authority to issue Australian Accounting Standards.
B) The AASB has power to establish committees, advisory panels, and consultative groups.
C) Members of the AASB are appointed by the FRC.
D) Chair of the AASB is appointed by the FRC.
Answer: D
Q2) Which of the followings are the recognition criteria of elements of financial statements?
\(\begin{array}{ll}
I.\text { Existence of economic benefits}&III.\text { Probable occurrence }\\
II.\text {Reliable measurement }&IV.\text { Control by the entits}\\ \end{array}\)
A) I and II
B) II and III
C) II and IV
D) I and III
Answer: B
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Chapter 2: Application of Accounting Theory
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Sample Questions
Q1) Which of the following processes describe how positive theories are developed?
A) Principles \(\to\) Assumptions \(\to\) Objectives \(\to\) Definitions/Actions
B) Objectives \(\to\) Definitions/Actions \(\to\) Assumptions \(\to\) Principles
C) Definitions/Actions \(\to\) Principles \(\to\) Assumptions \(\to\) Objectives
D) Objectives \(\to\) Assumptions \(\to\) Principles \(\to\) Definitions/Actions
Answer: C
Q2) A market is efficient if:
A) investors are able to earn profits by trading on information.
B) it takes time for market to adjust to new information.
C) share prices fully reflect available information about the shares.
D) available information can be used to earn returns beyond those that compensate for the risk involved.
Answer: C
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4
Chapter 3: Shareholders Equity: Share Capital and Reserves
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Sample Questions
Q1) Gains or losses that arise as a result of translating foreign currency denominated operations into the reporting currency are recognised in income:
A) in the reporting period in which they arise;
B) only when the interest in the foreign operation is sold; C) only if they are material items;
D) only when they are settled in cash.
Answer: B
Q2) If the balance in a forfeited shares account is refundable to the owners of those shares, then the forfeited shares account is classified as a component of: A) income; B) liabilities; C) equity; D) expense.
Answer: B
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Page 5
Chapter 4: Fair Value Measurement
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Sample Questions
Q1) Which of the following is not a valuation technique prescribed by AASB 13?
A) the fair value approach
B) the income approach
C) the cost approach
D) the market approach
Q2) In which circumstance will it be necessary to determine the fair value of an entity's own equity instruments?
A) where the entity is preparing for listing
B) where the entity undertakes a business combination and issues its own equity instruments in exchange for a business
C) where the entity undertakes a share buy-back
D) where there is a change in the shareholding of the entity.
Q3) In measuring an equity instrument at fair value the objective is to estimate an exit price at measurement date from the perspective of:
A) the issuer of the equity instrument
B) the party to whom the instrument will be transferred
C) the party who intends to repurchase the instrument.
D) a market participant who holds the instrument as an asset.
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Chapter 5: Revenue
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Sample Questions
Q1) Deefer Limited sold an item of machinery on 1 July 2013 on the following terms:
Initial payment of $25 000
Annual payments of $25 000 for 5 years (total $125 000).
The buyers incremental rate of interest is 7.5% and the present value of the future annual payments is $101 147.
At 30 June 2014 Deefer would recognise interest revenue of:
A) $7500
B) $7586
C) $9375
D) $17 414
Q2) The introduction of IFRIC 13 Customer Loyalty Programmes had the following impact on revenue recognition policies for entities in the airline industry:
A) no impact
B) reduced the amount of revenue able to be recognised
C) increased the amount of revenue able to be recognised
D) changed the timing of the recognition of revenue
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Page 7
Chapter 6: Provisions, Contingent Liabilities and Contingent Assets
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Sample Questions
Q1) An example of where an entity has a present obligation is:
A) a public announcement made by an entity's management to undertake restructuring.
B) a recommendation from the HR manager to the Board as to the level of bonuses to be paid at year end.
C) a historical pattern of performing a major overhaul of machinery every two years.
D) the declaration of a dividend by directors which is required to be ratified at a meeting of shareholders
Q2) Which of the following is an example of a provision falling within the scope of AASB 137?
A) accruals
B) onerous contracts
C) employee benefits
D) future operating losses
Q3) The uncertainty that exists in relation to provisions is one of
A) timing
B) amount
C) timing and amount
D) timing or amount
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Chapter 7: Income Taxes
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Sample Questions
Q1) Generally, when considering the differences between the accounting treatment and the income tax treatment of a particular item the accounting treatment is based on:
A) cash flows
B) cash flows adjusted for depreciation charges
C) accrual accounting and is subject to the requirements of accounting standards
D) the income tax legislation.
Q2) Which of the following disclosures are optional under AASB 112?
A) the major components of income tax expense
B) the aggregate current tax or deferred tax that arises relating to items that are charged or credited directly to equity
C) the amount of deductible temporary differences and unused tax losses, for which no deferred tax asset is recognised in the statement of financial position
D) a numerical reconciliation between the average effective tax rate and the applicable tax rate, disclosing also the basis of calculating the applicable tax rate.
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Chapter 8: Financial Instruments
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Sample Questions
Q1) When accounting for a cash flow hedge, AASB 139 Financial Instruments: Recognition and Measurement, requires that hedge ineffectiveness is:
A) recorded in profit or loss;
B) separately recorded in equity;
C) recorded separately as a financial liability;
D) capitalised as a deferred asset.
Q2) Which of the following is excluded from the scope of AASB 139?
A) a lease renewal option within a lease agreement.
B) a contract for contingent consideration receivable in a business combination covered by AASB 3
C) an investment in a controlled entity accounted for at cost in the investor's separate consolidated financial statements.
D) Loan commitments that cannot be settled in cash or another financial instrument.
Q3) All of the following would be regarded as financial instruments except:
A) bank overdraft;
B) notes payable;
C) cash;
D) equipment.
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10
Chapter 9: Share-Based Payments
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Q1) Which of the following statements in relation to modifications to the terms and conditions on which equity instruments were granted as part of an employee share scheme is correct?
A) a reduction in the exercise price of options will reduce the fair value of the share options
B) a reduction in a performance hurdle relating to profitability targets will reduce the fair value of the options
C) a shortening of the vesting period will increase the fair value of the share options.
D) an increase in the number of equity instruments granted is not an example of a modification
Q2) What is the fair value of the equity alternative?
A) $240 000
B) $250 000
C) $288 000
D) $300 000
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11
Chapter 10: Translation of the Financial Statements of Foreign Entities
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Sample Questions
Q1) Post acquisition date retained earnings that are denominated in a foreign currency are:
A) translated into the functional currency using the rate current at the latest end of reporting period;
B) translated into the functional currency using the average rate since acquisition date;
C) translated into the functional currency using the rates at the end of each year since acquisition date;
D) balances carried forward from translation of previous statement of comprehensive income and do not need to be translated.
Q2) Monetary items are best described as:
A) plant and equipment;
B) units of currency held and assets and liabilities to be received or paid in fixed numbers of currency units;
C) all intangible items including goodwill;
D) all items that are contingent in nature.
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12
Chapter 11: Employee Benefits
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Sample Questions
Q1) AASB 119 adopts which method to determining long service leave obligations?
A) units of production method
B) the actuarial method
C) the bi-nominal method
D) projected unit credit method
Q2) Which of the following obligations do NOT arise from past services provided by an employee?
A) short-term compensated absences
B) termination benefits
C) other long-term employee benefits
D) post-employment benefits
Q3) Employee benefits can be allocated to assets:
A) only if it relates to the cost of an internally generated intangible
B) where the entity is certain the future economic benefits will flow to it
C) in accordance with the requirements of other accounting standards
D) where they meet the definition of an asset under the Conceptual Framework
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13
Chapter 12: Inventories
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Sample Questions
Q1) 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 taken through the opening balance of retained earnings;
C) prospectively and the current period adjustment recognised directly in equity;
D) retrospectively and the adjustment recognised as an extraordinary gain or loss.
Q2) 'Net realisable value' of inventory is defined as the net amount that an enterprise expects to realise from the sale of the inventory:
A) in the ordinary course of operations less estimated costs of completion and costs necessary to make the sale;
B) plus the estimated costs of completion plus the estimated costs necessary to make the sale;
C) in a forced sale;
D) plus the estimated costs of completion.
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Chapter 13: Property, Plant and Equipment
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Sample Questions
Q1) After an item of Property, plant and equipment has been initially recognised at cost it may be measured using the following measurement method:
A) liquidation value
B) accrual
C) revaluation
D) realisable value.
Q2) Depreciation is a process that is designed to:
A) reduce the carrying amount of an asset to reflect the diminishing fair value of the asset;
B) spread the cost of an asset across a period no greater than 5 years;
C) reflect the change in value of an asset as a result of obsolescence;
D) allocate the cost of an asset across its useful life to an entity.
Q3) Property, plant and equipment includes items that are:
A) intangible
B) held for resale
C) expected to be used up during the current period
D) held for rental to others.
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15
Chapter 14: Leases
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Sample Questions
Q1) The period over which the asset should be depreciated by the lessee is:
A) 3 years
B) 6 years
C) the rate as determined by the Commissioner of Taxation D) cannot be determined from the information provided
Q2) On 30 June 2013, Mala Ltd leased a vehicle to Tango Ltd. Mala Ltd had purchased the vehicle on that day for its fair value of $89 721. The lease agreement cost Mala Ltd $1457 to have drawn up and requires Tango to reimburse Mala for annual insurance costs of $1050. The amount recorded as a lease receivable by Mala Ltd at the inception of the lease is:
A) $88 264
B) $89 721
C) $90 771
D) $91 178
Q3) On inception date, the present value of the minimum lease payments is:
A) $60 359
B) $64 170
C) $64 584
D) $69 000
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Page 16
Chapter 15: Understanding Australian Accounting Standards
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Sample Questions
Q1) According to the definition provided in AASB 138 Intangibles, activities undertaken in the 'research' phase of the generation of an asset may include:
A) the application of knowledge to a design for the production of new materials
B) original and planned investigation with the prospect of gaining new scientific knowledge
C) the use of research findings to create a substantially improved product
D) using knowledge to materially improve a manufacturing device.
Q2) Under the revaluation method of measuring an intangible, the asset is carried at fair value and subject to charges for:
A) amortisation and impairment
B) inflation in value
C) interest expense
D) increment in value
Q3) The characteristic that distinguishes the goodwill from other intangible assets is:
A) identifiability
B) its nature as a monetary asset
C) that is has a physical embodiment
D) it can be separated from the entity and sold individually.
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Chapter 16: Impairment of Assets
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Sample Questions
Q1) Where an asset is measured using the cost model, any impairment loss is:
A) accumulated in a separate 'accumulated impairment losses' account
B) set off against the balance of revenue
C) taken directly to equity
D) added to the balance of the accumulated depreciation account.
Q2) Which of the following is required to be disclosed for each class of assets?
I the amount of impairment losses recognised in profit or loss during the period II the amount of reversals of impairment losses recognised in profit or loss during the period
III the amount of impairment losses on revalued assets recognised directly in equity during the period; and
IV the amount of reversals of impairment losses on revalued assets recognised directly in other comprehensive income during the period.
A) III and IV only
B) I, II, III and IV
C) I, II and III only
D) I and II only
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18
Chapter 17: Accounting for Mineral Resources
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Sample Questions
Q1) Accounting policies for exploration and evaluation costs should be determined:
A) in accordance with AASB 6
B) in accordance with AASB 108
C) in accordance with AASB 106
D) in accordance with AASB 8
Q2) Subsequent to initial recognition E&E assets are required to be measured:
A) under the cost model
B) under the revaluation model
C) either under the cost model or revaluation model
D) at the lower of the cost and fair value
Q3) In the context of AASB 6, E&E stands for:
A) evaluation and extraction
B) exploration and evaluation
C) extraction and exploration
D) exploration and expenditure
Q4) Which costs are within the scope of AASB 6?
A) Pre-exploration and evaluation phase expenditure
B) Exploration and evaluation phase expenditure
C) Development phase expenditure
D) All of the above
19
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Chapter 18: Agriculture
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Q1) Which of the following is NOT a reason as to why the IASC felt that agriculture was an industry that needed its own industry specific standard?
A) the specific exclusion of assets related to agricultural activity from other standards
B) agriculture was considered to be an emerging industry at that time
C) accounting guidelines for agricultural activity previously developed by national standard setters had been piecemeal
D) the nature of agricultural activity had created uncertainty or conflicts when applying traditional accounting models
Q2) Agricultural produce is defined in AASB 141 as:
A) a living animal or plant
B) a living product capable of biological transformation
C) the harvested product of the entity's biological assets
D) the detachment of produce from a biological asset or cessation of a biological asset's life processes
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Chapter 19: Financial Statement Presentation
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Q1) The issuing of bonus shares in lieu of a cash dividend would be separately disclosed in an entity's
A) Statement of Financial Position
B) Statement of Comprehensive Income
C) Statement of Changes in Equity
D) Statement of Cash Flows
Q2) Which of the following is NOT an example of an adjusting event under AASB 110?
A) the settlement after reporting date but prior to the date that the financial statements are authorised for issue of a court case which had commenced prior to reporting date.
B) the sale of inventories after reporting date but prior to the date that the financial statements are authorised for issue for an amount below cost.
C) uninsured damage to a material item of machinery after reporting date but prior to the date that the financial statements are authorised for issue for an amount below cost.
D) receipt of advice after reporting date but prior to the date that the financial statements are authorised for issue that a material debtor has been placed in liquidation.
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Chapter 20: Statement of Cash Flows
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Sample Questions
Q1) The following cash flow activities are regarded as investing cash flows:
A) income taxes paid
B) interest paid
C) acquisition of subsidiary net of cash acquired
D) proceeds from issue of debentures.
Q2) Warner Limited had the following cash flows during a reporting period:
Acquisition of subsidiary, net of cash flows $250 000
Dividends paid $65 000
Repayment of borrowings $90 000
Interest paid on borrowings $57 000
Proceeds from sale of plant $215 000
What is the amount of the cash flows in relation to financing activities of Warner Limited for the reporting period?
A) Net cash inflow $155 000
B) Net cash outflow $155 000
C) Net cash inflow $212 000
D) Net cash outflow $212 000
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Chapter 21: Earnings Per Share
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Q1) Mary Ltd determined its profit attributable to ordinary shareholders for the reporting period ended 30 June 2014 as $720 000. The number of ordinary shares on issue up to 31 October 2013 was 50 000. Mary Ltd announced a two-for-one bonus issue of shares effective for each ordinary share outstanding at 31 October 2013.
Basic earnings per share at 30 June 2014 is:
A) $4.80
B) $6.17
C) $7.20
D) $9.60
Q2) Earnings per share disclosed by reporting entities have limitations because of the: I different accounting methods that can be used in the determination of profit II different amounts of profit depending on the size of the entity
III ability of an entity to change the number of shares used in the denominator IV different numbers of shareholders depending on the size of the entity
A) I and IV
B) II and III
C) II and IV
D) I and III
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Chapter 22: Operating Segments
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Q1) AASB 8 Operating Segments is primarily a:
A) disclosure standard;
B) measurement standard;
C) definition standard;
D) conceptual standard.
Q2) CODM refers to:
A) Chief Of Divisional Management;
B) Chief Operating Decision Maker;
C) Company Operational Documentation Manual;
D) Company Official Director Meeting.
Q3) Additional segments must be identified as reportable segments until at least:
A) 75% of total entity revenue is included in reportable segments;
B) 75% of total entity assets are included in reportable segments;
C) 75% of total entity liabilities are included in reportable segments;
D) 75% of total entity equity is included in reportable segments.
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Chapter 23: Operating Segments
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Q1) The power to participate in the financial and operating policy decisions of an entity is known as:
A) control;
B) significant influence;
C) share ownership;
D) joint control.
Q2) An entity in which an investor has significant influence is known as:
A) a joint venture;
B) a related party;
C) a subsidiary;
D) an associate.
Q3) Galaxy Limited is a listed company operating in retail industry with three business units: Milky Way, Andromeda, and Whirlpool. Which of the followings is likely to be the key management personnel of Galaxy Limited?
A) The general manager of Milky Way;
B) The managing director's personal assistant;
C) The company's auditor;
D) The company's IT manager.
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25
Chapter 24: Business Combinations
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Q1) Fredericks Limited acquired the identifiable assets and liabilities of Nicole Limited for $134 000. The items acquired, stated at fair value, are: Plant $72 000 Inventory $40 000 Accounts receivable $18 000 Patents $10 000 Accounts payable $16 000. The difference on acquisition is:
A) Gain on bargain purchase $10 000
B) Gain on bargain purchase $16 000
C) Goodwill of $10 000
D) Goodwill of $124 000.
Q2) Net employee benefit liabilities acquired in a business combination are measured by using the:
A) present value method
B) estimated total of future cash outflows, undiscounted
C) face value of the liabilities
D) cash method.
Q3) Goodwill arising in a business combination is classified as:
A) an item in equity
B) a liability
C) an expense associated with the acquisition
D) an asset
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Page 26
Chapter 25: Consolidation: Principles and Accounting Requirements
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Q1) Which of the following events can cause a change in the pre-acquisition elimination entry
Subsequent to acquisition date?
A) Transfers from post-acquisition retained earnings
B) Dividends paid from pre-acquisition reserves
C) Transfers from pre-acquisition retained earnings
D) Impairment of goodwill
Q2) The key characteristic that determines which entities financial statements should be combined into a set of consolidated financial statements is:
A) the existence of transactions between the entities
B) control
C) substance over form
D) access to the financial statements of each entity that is to be combined.
Q3) For entities wanting to use the cost model of accounting, the revaluation of a subsidiary's assets would be undertaken in the:
A) subsidiary's records
B) parent entity's records
C) consolidation worksheet
D) notes to the consolidated financial statements.
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Chapter 26: Consolidation: Intragroup Transactions
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Q1) JoJo Ltd provided an advance of $500 000 to its subsidiary BoBo Ltd. Interest of $50 000 was charged during the year ended 30 June 20X8. On consolidation, the following adjustment is needed at 30 June 20X8 in relation to the interest charged:
A) no adjustment needed
B) \(\begin{array}{lrrr}
\text { DR } & & \text { Interest revenue } & \$ 50,000 \\ & \mathrm{CR} & \text { Interest expense } & \$ 50,000 \end{array}\)
C) \(\text { DR } \quad \text { Interest expense } \quad \$ 50,000\)
\(\text { CR } \quad \text { Interest revenue } \quad \$ 50,000\)
D)\(\text { DR } \quad \text { Retained earnings } \quad \$ 50,000\)
\(\text { CR } \quad \text { Cash } \quad \$ 50,000\)
Q2) The test indicating that an intragroup business transaction has been realised is: A) the involvement of an external party in the transaction. B) the generation of profit from the transaction.
C) whether or not an operating profit or loss occurred as a result of the transaction. D) the presence of only entities within the group as parties to the transaction.
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Page 28
Chapter 27: Consolidation: Non Controlling Interest
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Q1) A non-controlling interest in the net assets of a subsidiary consists of the amount of those non-controlling interests at the date of the business combination:
A) less 100% of any post-acquisition dividends paid
B) less the parent's share of any post-acquisition dividends paid or declared
C) plus a share of the changes in equity since the business combination
D) less the non-controlling proportionate share of changes since the combination.
Q2) A non-controlling 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
B) I and II only
C) II, III and IV only
D) III only.
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Chapter 29: Joint Arrangements
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Q1) A joint operation holds Equipment with a carrying amount of $1 200 000. The two joint operators participating in this arrangement share control equally. They also depreciate Equipment using the straight-line method. The Equipment has a useful life of 5 years. At reporting date each joint operator must recognise the following entry, in relation to depreciation, in its records:
A) DR Depreciation $240 000;
B) DR Depreciation $120 000;
C) DR Investment in joint operation $240 000;
D) DR Assets in joint operation $120 000.
Q2) Which of the following statements is not true in relation to joint control?
A) each party must have an equal interest for joint control to exist
B) joint control exists only where there is contractually agreed sharing of control
C) entities over which a party has joint control are accounted for in accordance with AASB 11 Joint Arrangements
D) joint control requires the unanimous consent of the parties sharing control
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Chapter 30: Associates and Joint Ventures
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Q1) The adjustment required to the investment in associate account at 30 June 20X4 in relation to the above assets is:
A) $875
B) $1250
C) $3500
D) $5000
Q2) Which of the following statements is correct?
A) All joint arrangements are accounted for under AASB 128.
B) Joint arrangements classified as joint ventures are accounted for under AASB 11.
C) Joint arrangements classified as joint ventures are accounted for under AASB 128.
D) Joint arrangements classified as joint operations are accounted for under AASB 128.
Q3) For the purposes of equity accounting, significant influence is regarded as the power of an investor to:
A) control the financial and operating policies of an associate;
B) participate in the financial and operating policy decisions of an investee;
C) participate in the day-to-day management of a joint venture interest; D) dominate the financing decisions of an entity.
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