International Accounting Exam Preparation Guide
Course Introduction
International Accounting explores the principles, standards, and practices of accounting in a global context. The course examines the influence of cultural, economic, legal, and political environments on accounting systems worldwide, and compares international accounting standards such as International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP). Students will analyze issues related to international financial reporting, foreign currency transactions, translation of financial statements, international taxation, and the harmonization of accounting standards. Emphasis is placed on understanding how multinational companies prepare and present consolidated financial statements and the implications for global business decision-making.
Recommended Textbook
Australian Financial Accounting 7th Edition by Craig Deegan
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Page 2
Chapter 1: An Overview of the Australian External Reporting Environment
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Q1) Some of the perceived barriers to the harmonisation process (for the harmonisation of accounting standards globally)include:
A) different business environments.
B) different legal systems.
C) different cultures.
D) all of the given answers.
Answer: D
Q2) The publication of a standard,exposure draft or final SIC interpretation requires approval by:
A) the chairman of the IASB
B) a simple majority of the IASB's 14 members
C) nine of the IASB's 14 members
D) 12 of the IASB's 14 members
Answer: C
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Chapter 2: The Conceptual Framework of Accounting and Its Relevance to Financial Reporting
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Q1) The key characteristics of an asset as defined in the Framework include:
A) There must be future economic benefits.
B) The reporting entity must control the future economic benefits.
C) The asset results from past transactions.
D) all of the given answers.
Answer: D
Q2) Which of the following statements most accurately reflects the qualitative characteristics of financial information in the IASB Conceptual Framework?
A) These attributes or qualities determine whether an entity is considered to be a reporting entity.
B) These are attributes or qualities that financial information should possess if it is to be useful for such decision making.
C) These attributes or qualities satisfy the definition of elements in the financial reports.
D) All of the given answers are correct.
Answer: B
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Chapter 3: Theories of Accounting
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Q1) In a market where individuals are perfectly informed:
A) It could be assumed managers would ultimately bear costs associated with bonding and monitoring.
B) There are no monitoring costs as managers will not risk acting in their own self-interests.
C) Managers will receive a higher salary as principals will assume that managers will act opportunistically.
D) Principals will bear the costs of bonding and monitoring so that they can remain informed.
Answer: A
Q2) A new accounting standard requires the provision of liabilities for share-based payments that has implications in the firm's debt-to-equity ratio.Which of the following accounting policy choices will reduce the probability of the firm violating debt covenants in a debt agreement?
A) Expense all research and development costs.
B) Shift from FIFO to weighted average inventory method.
C) Shift from straight-line to accelerated method of depreciation.
D) Shift from cost to revaluation method in accounting for land and buildings.
Answer: D
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Page 5
Chapter 4: An Overview of Accounting for Assets
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Q1) Which of the following assets are recognised at fair value?
A) biological assets
B) revalued property, plant equipment
C) assets under a finance lease
D) biological assets and revalued property, plant equipment
Q2) If the expected value in use of an asset is more than its market value,then it is expected that the entity will retain the asset.
A)True
B)False
Q3) Which of the following are considered to be an asset?
A) deposit on a futures contract
B) asset under finance lease
C) deferred acquisition costs
D) All of the given answers are considered assets.
Q4) An asset is classified as current when:
A) it is expected to be realised or intended for sale or consumption in the entity's normal operating cycle.
B) the item is held form trading.
C) it is cash or cash equivalent.
D) All of the given answers are correct.
6
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Chapter 5: Depreciation of Property, plant and Equipment
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Q1) Assets must be depreciated from the time they are acquired.
A)True
B)False
Q2) Profit on the sale of an asset is calculated:
A) by subtracting the disposal proceeds from the current carrying amount of the asset.
B) after assessing the fair value of the asset and subtracting the proceeds on the sale.
C) once depreciation has been applied to the date of sale.
D) by subtracting the updated carrying amount from the net proceeds on disposal.
Q3) AASB 116 allows capitalisation of items of plant and property because these are considered prepayments.
A)True
B)False
Q4) When sale proceeds are deferred the discount rate to be used is the rate at which the vendor could invest the amount under similar circumstances and conditions.
A)True
B)False
Q5) Discuss how the useful life of a depreciable asset is determined.
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Chapter 6: Revaluations and Impairment Testing of
Non-Current Assets
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Q1) What is the rationale for revaluing the entire class of assets when an item of property,plant and equipment is revalued?
Q2) Explain why discounting future cash flows will have direct implications for the calculated value of the recoverable amount.
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.
Q4) Entities that elect to report plant and equipment at cost less accumulated depreciation are required to disclose a valuation of plant and equipment every 3 years in a note to the accounts.
A)True B)False
Q5) An entity that elects the revaluation model to measure a class of asset is permitted to revert back to the cost model provided that this will provide more relevant and reliable information.
A)True B)False
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Chapter 7: Inventory
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Q1) The definition of inventories includes assets in the form of materials or supplies to be consumed in the production process or in rendering of services.
A)True
B)False
Q2) Which of the following statements is correct in relation to the costing of inventories?
A) Direct costing treats fixed production costs as an expense of the period and is not permitted as a method for valuing inventories under AASB 102.
B) Absorption costing treats fixed production costs as a product cost, allocating them to the goods produced, and is not permitted as a method for valuing inventories under AASB 102.
C) Absorption costing treats fixed production costs as an expense of the period and is the required method for valuing inventories under AASB 102.
D) Direct costing treats fixed production costs as a product cost, allocating them to the goods produced, and is not permitted as a method of valuing inventory under AASB 102.
Q3) Identify and discuss the items included as inventory cost.
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Chapter 8: Accounting for Intangibles
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Q1) Examples of elements of a business that commonly make up goodwill are:
A) patents and licences.
B) trademarks and brand names.
C) research and development.
D) established reputation and loyal customers.
Q2) Prior to the introduction of AASB 138 companies had found ways to circumvent the requirements of the revised (1996)version of AASB 1013.These methods included:
A) using the inverted sum-of-digits amortisation technique.
B) calculating goodwill as the difference between the carrying value of the net assets of the acquired company and the consideration paid.
C) requiring the purchased company to make excessive provisions for restructuring costs to be undertaken after the company is purchased.
D) attributing the excess of the cost of acquisition over the fair value of the net identifiable assets of the company acquired to brands, licences and other identifiable intangible assets.
Q3) Discuss the concerns held by Australia corporate executives on the amortisation of intangibles prior to Australia's 2005 adoption of IFRS.
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Chapter 9: Accounting for Heritage Assets and Biological Assets
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Q1) When valuing assets,the travel-cost method (TCM)uses the costs incurred by individuals travelling to a particular location plus:
A) the opportunity cost of leisure alternatives forgone.
B) opportunity costs of wages forgone.
C) average costs of all trips made by the traveller.
D) none of the given answers.
Q2) Biological assets have a natural capacity to grow and/or procreate that directly affects the value of the asset.
A)True
B)False
Q3) 'Wine' is classified as a processed product of the agricultural produce 'grapes' and is still within the scope of AASB 141 Agriculture.
A)True
B)False
Q4) Discuss the rationale for having a separate standard on accounting for agricultural activities.
Q5) What is the appropriate accounting treatment for agricultural produce at initial recognition and subsequent measurement dates?
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Chapter 10: An Overview of Accounting for Liabilities
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Q1) What is the treatment of contingent liabilities in the financial statements?
A) Contingent liabilities are to be recognised as a separate category in the statement of financial position, with a clear note disclosure of the factors that constitute the contingent event for each material contingent liability.
B) Contingent liabilities are required to be disclosed in the notes to the financial statement when the amount of the obligation cannot be measured with sufficient reliability.
C) Material contingent liabilities only are required to be recognised in the financial statements under AASB 137.
D) Contingent liabilities are to be disclosed in the notes to the accounts in categories that reflect their nature and possible timing.
Q2) Explain in what situations,and why,some provisions should be measured at present values.
Q3) A necessary condition for a provision to be recognised is that there is a legal obligation to make a future sacrifice of economic benefits
A)True
B)False
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Chapter 11: Accounting for Leases
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Q1) Lease rentals representing a recovery of material executory costs are to be treated by the lessor as:
A) expenses of the financial years in which the related costs incurred.
B) expenses at inception when the related costs incurred.
C) revenue of the financial years in which the related costs incurred.
D) revenue at inception when the related costs incurred.
Q2) If the lease arrangement contains a bargain purchase option,it is reasonable to assume that the risks and rewards of ownership are transferred to the lessee.
A)True
B)False
Q3) Operating leases are capitalised for inclusion in the statement of financial position.
A)True
B)False
Q4) If a lease transfers ownership of the property to the lessee,or contains a bargain purchase option,then this is consistent with the lease being an operating lease.
A)True
B)False
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Chapter 12: Accounting for Employee Benefits
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Q1) Explain how salaries and wages may be included in the cost of an asset,rather than be treated as a period expense.
Q2) Defined benefit plans are fairly simplistic and AASB 119 devotes only a small section to them.
A)True
B)False
Q3) Post-employment benefits include:
A) cash payments.
B) pensions payable through a superannuation fund.
C) insurance costs.
D) all of the given answers.
Q4) In a long-service leave liability,a conditional period is the period during which an employee gains legal entitlement to pro rata payment.
A)True
B)False
Q5) Long-service leave must be accrued and recorded as a liability from the first day of employment.
A)True
B)False
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Chapter 13: Share Capital and Reserves
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Q1) The AASB Framework defines equity as the remedial interest in the assets of the entity after the deduction of its liabilities.
A)True
B)False
Q2) The Corporations Law was amended in 1998 in relation to the par value of shares.That amendment has the effect of:
A) making the use of par values optional for companies.
B) requiring companies not to issue shares with a par value.
C) requiring the calculation of the share premium or discounts to be based on an average of the market price for the share over the current reporting period.
D) making the use of par values optional for companies and requiring the calculation of the share premium or discounts to be based on an average of the market price for the share over the current reporting period.
Q3) Where new investors are offered the opportunity to buy new shares this will have the effect of diluting the existing shareholders' interest in the company.
A)True B)False
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Chapter 14: Accounting for Financial Instruments
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Q1) A put option on a company's shares entitles the holder to buy that company's shares at a future time for a specified price.
A)True
B)False
Q2) 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
Q3) What is a foreign currency swap and discuss why organisations enter into swap arrangements with other parties?
Q4) Discuss the economic effect of issuing a compound instrument.
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Page 16
Chapter 15: Revenue Recognition Issues
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Q1) IASB (2011)requires revenues to be measured in terms of historical cost to improve reliability.
A)True
B)False
Q2) Gains must be reported net of related expenses.
A)True
B)False
Q3) Which of the following is not a step in recognising revenue according to IASB (2011)?
A) Identify the contract with a customer.
B) Determine the transaction price.
C) Recognise revenue before title of the assets transfers to the customer.
D) Identify the separate performance obligations in a contract.
Q4) In most cases dividend revenue should not be recognised until the dividend proposed has been ratified by the shareholders at the annual general meeting.
A)True
B)False
Q5) Discuss how the use of call and put options affect revenue recognition for sales of merchandise with associated conditions.
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Chapter 16: The Statement of Comprehensive Income and Statement of Changes in Equity
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Q1) Profit is:
A) an ideal measure of the 'well-offness' of a firm because income and expenses are clearly defined.
B) only a measure of financial performance and therefore not useful in decision-making.
C) directly affected by the accounting policy choices implemented by management.
D) comparable across all firms as it is simply calculated by subtracting expense from revenues.
Q2) An implication of the fact that traditional financial accounting is based on a model that emphasises property rights is that:
A) fair values become of critical importance.
B) such rights are recognised as intangible assets.
C) many social costs are ignored.
D) these financial reports are always prepared on a 'true and fair' basis.
Q3) An entity shall recognise all items of income and expense in a period in profit or loss unless an Australian Accounting Standard requires or permits otherwise.
A)True
B)False
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Page 18
Chapter 17: Accounting for Share-Based Payments
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Q1) AASB 2 requires the remeasurement of equity-settled transactions at fair value at reporting date.
A)True
B)False
Q2) Which of the following share-based payment transactions are considered cash-settled transactions within the scope of AASB 2?
A) Company A grants 5000 options each to its directors in return for services to be received over two years.
B) Company B purchases machinery in exchange for shares.
C) Company C incurs a liability based on the price of the entity's share options to pay for the services of its sales executives.
D) Company A grants 5000 options each to its directors in return for services to be received over two years; Company B purchases machinery in exchange for shares.
Q3) Discuss the three main headings required to be disclosed by AASB 2 with respect to share-based payments.
Q4) Are there parties that would benefit from the accounting requirements of AASB 2? Discuss.
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Chapter 18: Accounting for Income Taxes
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Q1) AASB 112 uses what term to describe the method for accounting for taxes that it mandates?
A) net balances method
B) financial position method
C) asset and liability method
D) balance sheet method
Q2) A deductible temporary difference is one that will result in:
A) a decrease in income tax recoverable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
B) an increase in income tax payable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
C) a decrease in income tax recoverable in future reporting periods when the carrying amount of the asset or liability is recovered or settled, and an increase in income tax payable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
D) a decrease in income tax payable in future reporting periods when the carrying amount of the asset or liability is recovered or settled.
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Chapter 19: The Statement of Cash Flows
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Q1) In accordance with AASB 107 Statement of Cash Flows,cash receipts from sales of property,plant and equipment are classified as cash flows from operating activities.
A)True
B)False
Q2) Explain how the form and content of the statement of cash flow could change as a result of a joint project by the IASB and the US Financial Accounting Standards Board (FASB)investigating the presentation of financial statements.
Q3) The statement of cash flows may assist in determining the ability of an entity to:
A) generate cash flows.
B) obtain internal finance.
C) meet its financial commitments to customers.
D) generate cash flows and meet its financial commitments to customers.
Q4) A statement of cash flows is a forecast of net cash flows from operating,investing and financing activities.
A)True
B)False
Q5) Discuss the potential limitations of the statement of cash flows.
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Chapter 20: Accounting for the Extractive Industries
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Q1) Mirza and Zimmer (1999)found that only a small number of companies were undertaking upward asset revaluations.The reasons for their reluctance to undertake this practice included:
A) a desire to remain 'small' in keeping with the political-cost hypothesis.
B) Any revaluations made are not permitted to be recognised as income by the relevant accounting standard.
C) In an attempt not to overstate assets management preferred not to revalue items that are subject to a great deal of uncertainty.
D) all of the given answers.
Q2) While AASB 6 prefers the area-of-interest method among other alternatives to account for pre-production costs,is there scope for managers to manipulate their accounting policy to adopt an alternative method? Discuss.
Q3) Discuss the financial reporting issues associated with minerals,oil and gas reserves and resources that have been identified for consideration by the International Accounting Standards Board.
Q4) Discuss the recognition of revenue for the extractive industries.
Q5) Discuss how an entity accounts for restoration costs and the measurement used.
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Chapter 21: Accounting for General Insurance Contracts
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Q1) You are an accountant for Chance Insurance Ltd and are asked to assess the adequacy of unearned premium liability.You are able to access the following information:
I.present value of expected future cash flows relating to future claims based on current insurance contracts
II.unearned premium liability (before liability adequacy test)
III.risk margin
IV.related deferred acquisition cost
V.related intangible assets
Which of the following combinations best fits the liability adequacy test as prescribed in AASB 1023?
A) (I+III) - II
B) (I+III) - (II - IV - V)
C) (I-III) - II
D) (I+III) - (II+IV+V)
Q2) Outstanding claims should be recognised as liabilities,as should any insurance premiums received in advance but not yet earned.
A)True
B)False
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Chapter 22: Accounting for Superannuation Plans
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Q1) Contrast the measurement rules that apply to assets of superannuation funds from assets held for backing general insurance liabilities.What effects would these have on the qualitative characteristics of financial reports.
Q2) Discuss why the Australian Accounting Standards Board decided not to adopt IAS 26 Accounting and Reporting by Retirement Benefit Plans.
Q3) According to AAS 25,the revenue of a superannuation fund should include the changes in net market value of all plan assets over the period.
A)True
B)False
Q4) AAS 25 requires the disclosure of at least a summary of the most recent actuarial report for defined contribution plans.
A)True
B)False
Q5) A defined benefit plan is also known as an accumulation fund.
A)True B)False
Q6) Discuss the options available for defined benefit superannuation plans.
Q7) Discuss the disclosure requirements for defined benefit plans.
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Chapter 23: Events Occurring After the End of the Reporting Period
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Q1) Dividends declared after reporting date but before the authorisation for issue of the financial report do not meet the criteria of the present obligation because the identity of the shareholders is unknown until the date of payment.
A)True
B)False
Q2) Wattle Ltd is in the process of completing its financial reports for the period ended 30 June 2014 when its accountant completes the collection of information about the realisable value of inventory as at reporting date.A number of items are reflected at a cost greater than net realisable value with a material effect on the accounts.What treatment does AASB 110 require for this event?
A) It should be disclosed in the Directors' Declaration.
B) The effect on the accounts should be disclosed in the notes to the financial statements.
C) No disclosure is required.
D) The financial statements should be adjusted to reflect the impact of the event.
Q3) Explain the period covered by AASB 110 Events After the Reporting Period and discuss how the period covered is determined.
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Chapter 24: Segment Reporting
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Q1) Identification of operating segments in AASB 8 Operating Segments adopts a 'rules-based' approach,while its predecessor AASB 114 Segment Reporting adopts a 'principles-based' approach.
A)True
B)False
Q2) Research has shown that companies only provide segment information when it is required by accounting regulation.
A)True
B)False
Q3) Managers may choose to provide segment data voluntarily because:
A) They want to highlight the companies in the group that are doing well.
B) Managers generally do not believe that consolidated accounts are meaningful.
C) The segment information will demonstrate more accurately where they have done well and where they have done badly.
D) It demonstrates a greater level of accountability that may attract investment funds.
Q4) Discuss the advantages and disadvantages to the users and preparers of financial reports of disclosing segment data.
Q5) Discuss the reasons for the release of IFRS 8.
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Chapter 25: Related Party Disclosures
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Q1) Related parties are not considered to be interdependent.
A)True
B)False
Q2) The annual remuneration report of the entity is to be put to a non-binding vote of the shareholders.
A)True
B)False
Q3) If there had been a related-party transaction during the period,the disclosures required by AASB 124 director-related entities include:
A) annual income in aggregate amount and the number in $10 000 bands.
B) retirement benefits.
C) aggregate number of shares, units, options and other equity instruments acquired and disposed of, by issuing entity and class of share, unit, option or equity instrument.
D) their names.
Q4) In order for two parties to be related they must be under the common control or influence of a third party.
A)True
B)False
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Chapter 26: Earnings Per Share
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Q1) Rose Ltd has a net income after tax of $3 400 000 for the year ended 30 June 2015.At the beginning of the period Rose Ltd has 1 800 000 fully paid-up ordinary shares on issue.On 1 October 2014 Rose had issued a further 200 000 fully paid-up ordinary shares at an issue price of $5.00.On 1 May 2015 Rose Ltd made a one-for-four bonus issue of ordinary shares out of retained earnings.The last sale price of an ordinary share before the bonus issue was $5.50.The basic earnings per share for the period ended 30 June 2014 was $2.00 per share.What is the earnings per share figure for the period ended 30 June 2015 and the comparative earnings per share for the previous year to be reported in the 2015 financial reports according to AASB 133?
A) current period (2015) $1.67; previous period (2014) $2.00 B) current period (2015) $1.34; previous period (2014) $2.50 C) current period (2015) $1.83; previous period (2014) $1.50 D) current period (2015) $1.40; previous period (2014) $1.60
Q2) Discuss what is referred to in AASB 133 Earnings per Share as antidilutive security and illustrate a potential ordinary share that is considered to be antidilutive.
Q3) Describe how the calculation of a basic EPS will be affected by a bonus issue that is in accordance with AASB 133 Earnings per Share.
Q4) Describe the AASB 133 EPS disclosure requirements.
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Chapter 27: Accounting for Group Structures
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Q1) Control is defined in AASB 10 as the 'capacity to manage the policies of another entity'.
A)True
B)False
Q2) The partition effect in relation to a group of companies arose when:
A) It was not permitted under The Corporations Law to consolidate an entity that was not a company. This resulted not only in the non-company entity not being consolidated, but also all the entities (company or otherwise) that it controlled not being consolidated.
B) The non-controlling shareholders in a number of companies controlled by a parent entity organised themselves to block the transfer of funds within a group.
C) Companies in a group coordinated to transfer assets in such a way as to protect part of the group from being taxed, thus reducing the total tax owing for the group as a whole.
D) Dividends were declared and paid in such a way as to manage cash reserves within a group.
Q3) Discuss the reason for recognising non-controlling interests as part of equity,rather than as a liability.
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Chapter 28: Further Consolidation Issues I: Accounting for
Intragroup Transactions
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Q1) Lilo Ltd sells inventory items to its subsidiary Stitch Ltd.If during the financial year 2013,the unrealised profits in ending inventory in Stitch Ltd exceeds that of its unrealised profits in beginning inventory,which of the following statements is correct with respect to Lilo Ltd's consolidated financial statements after considering these transactions only?
A) Consolidated profit will decrease.
B) Consolidated deferred tax liability will increase.
C) Consolidated ending inventory will decrease.
D) Consolidated sales will be unaffected.
Q2) Only dividends paid externally should be shown in the consolidated financial statements.
A)True
B)False
Q3) Discuss the reasoning behind the elimination all dividends receivable/payable between entities within the group during the consolidation process.
Q4) Explain,with examples,the difference between dividend payments out of pre-acquisition profits and dividend payments out of post-acquisition profits,and the manner in which they are accounted for in consolidation accounting.
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Chapter 29: Further Consolidation Issues II: Accounting for
Non-Controlling Interests
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Q1) Which of the following statements is incorrect with regards to non-controlling interests in subsidiaries?
A) The requirement to eliminate the effects of intragroup transactions does not hold when there are non-controlling interests.
B) The non-controlling interest's share in the dividends paid or proposed by the subsidiary is not eliminated on consolidation.
C) The non-controlling interest's share of the profits of the subsidiary is calculated after adjustments to eliminate income and expenses of the subsidiary that are realised from the economic entity's perspective.
D) Management fees paid in an intragroup transaction are considered realised when determining non-controlling interests in a subsidiary.
Q2) Non-controlling interests are shown as equity,that is,as contributors of equity capital to the economic entity.
A)True
B)False
Q3) Discuss the three elements considered when calculating non-controlling interests.
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Chapter 30: Further Consolidation Issues IV: Accounting for
Changes in the Degree of Ownership of a Subsidiary
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Q1) The following consolidation adjusting journal entries appeared at the end of a period in which the parent sold all of its shareholding in a subsidiary.It received $1 200 000 for the shares. \[\begin{array} { | l | l | r | r | }
\hline \mathrm { Dr } & \text { Profit on sale of investment } & 500000 & \\
\hline \mathrm { Dr } & \text { Loss on sales of subsidiary } & 250000 & \\
\hline \mathrm { Cr } & \text { Profit after tax } & & 179000 \\
\hline \mathrm { Cr } & \text { Retained earnings } & & 271000 \\
\hline \mathrm { Cr } & \text { Revaluation reserve } & & 300000 \\
\hline
\end{array}\] The amount of the share of post-acquisition profits and movements in equity balances,contributed to the group by the subsidiary,and attributable to the parent,is:
A) ($250 000)
B) $350 000
C) $750 000
D) $1 200 000
Q2) Explain how the gain or loss is calculated for: (a)the parent's investment; (b)the economic entity; when the parent sells some of its shares in a subsidiary.
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Chapter 31: Accounting for Equity Investments,including
Investments in Associates and Joint Arrangements
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Q1) Discuss the accounting treatment for a joint venture as prescribed in AASB 128 Investments in Associates and Joint Ventures.
Q2) Which of the following are categories that are commonly used to classify investments?
A) equity investments and property investments
B) electronic investments and bonds
C) international investments and cash investments
D) electronic investments and bonds and international investments and cash investments
Q3) If a joint venture is deemed to be a reporting entity according to terms contained in the AASB Conceptual Framework,then general purpose financial reports that comply with the relevant accounting standards may need to be prepared.
A)True
B)False
Q4) As prescribed in AASB 11 Joint Arrangements,where a separate entity is formed the joint arrangement is always referred to as a joint operation.
A)True
B)False
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Chapter 32: Accounting for Foreign Currency Transactions
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Q1) Which of the following statements is correct with respect to AASB 121 The Effects of Changes in Foreign Exchange Rates?
A) Foreign currency transactions are 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.
B) At each end of the reporting period, foreign currency monetary items shall be translated using the closing rate.
C) At each end of the reporting period non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction.
D) At each end of the reporting period, non-monetary items that are measured at fair value in a foreign currency shall be translated using closing rate.
Q2) Describe,with examples,the two tests of hedge effectiveness.
Q3) How does the accounting treatment for qualifying monetary items differ from other foreign currency monetary items as prescribed under AASB 121 The Effects of Changes in Foreign Exchange Rates?
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Chapter 33: Translating the Financial Statements of Foreign Operations
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Q1) When a parent entity has an overseas subsidiary the first task before consolidation is to:
A) translate the financial statements from the functional currency to the presentation currency.
B) translate the financial statements from the presentation currency to the functional currency.
C) determine the functional currency of the overseas subsidiary.
D) determine the functional currency of the parent entity.
Q2) AASB 121 requires foreign currency transactions to be recorded on initial recognition in the functional currency,by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the reporting date. A)True B)False
Q3) The foreign exchange exposure of the parent entity in relation to its foreign operation relates to the net cash flows of the investment in the operation. A)True B)False
Q4) Distinguish monetary items from non-monetary items.Provide two examples of each.
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Chapter 34: Accounting for Corporate Social Responsibility
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Q1) The Global Reporting Initiative has suggested alternative views of the application of the materiality concept in social and environmental accounting,including:
A) Materiality thresholds (e.g. 10 per cent) should be lowered in relation to social and environmental costs because of the difficulty in measuring them.
B) Liabilities for social and environmental costs should not be discounted before they are evaluated for materiality and therefore inclusion in the accounts.
C) Contingent liabilities related to environmental and social issues should be disclosed regardless of whether they are considered 'material' or not according to traditional financial accounting approaches to materiality measurement.
D) Materiality measures should reflect the nature and circumstances as well as the scale or magnitude of the item or event.
Q2) Companies are required to disclose information about payments to directors and executives and the average wage level for their major classes of employees by function within the organisation.
A)True
B)False
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