International Financial Reporting Standards
Textbook Exam Questions
Course Introduction
This course provides a comprehensive introduction to International Financial Reporting Standards (IFRS), covering the conceptual framework, structure, and application of IFRS in financial statement preparation and analysis. Students will explore the adoption process of IFRS worldwide, compare IFRS to other major accounting standards such as U.S. GAAP, and examine key standards related to recognition, measurement, presentation, and disclosure of assets, liabilities, revenues, and expenses. Through real-world case studies and practical exercises, participants will develop a solid understanding of how IFRS enhances transparency and comparability in global financial reporting.
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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) A recent noteworthy development in relation to Australian Stock Exchange (ASX)-required disclosures is the establishment of the ASX Corporate Governance Council,and the issue of Principles of Good Corporate Governance and Best Practice Recommendations.In relation to these principles:
A) All companies governed by the Corporations Act 2001 must abide by these principles and recommendations.
B) The Australian Accounting Standards Board (AASB) has incorporated the principles and recommendations into the Accounting Framework.
C) All ASX-listed companies are compelled by law to comply in entirety with these principles and recommendations.
D) All ASX-listed companies are compelled to change their corporate governance systems to ensure total compliance with these principles and recommendations.
E) All ASX-listed companies must follow these principles and recommendations, and where they have not, they must identify the fact that they have not and give reasons for not following them.
Answer: E
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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 costs versus benefits constraint being exercised in the disclosure of financial information?
A)Inventory is valued at lower of cost or market.
B)Property,plant and equipment are appraised and revalued every three years.
C)Biological assets are stated at fair value unless the fair value cannot be measured reliably.
D)Research and development costs are expensed as incurred.
E)None of the given answers.
Answer: C
Q2) Which of the following Statement of Accounting Concepts are still operational in Australia?
A)Statement of Accounting Concepts 1 to 4
B)Statement of Accounting Concepts 1 to 3
C)Statement of Accounting Concepts 1 and 2
D)Statement of Accounting Concepts 3 and 4
E)Statement of Accounting Concepts 2 and 3
Answer: A
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Chapter 3: Theories of Financial Accounting
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Q1) PAT outlines the best (or most positive)way of preparing accounting reports:
A)True
B)False
Answer: False
Q2) From an efficiency perspective of PAT,what approach should be adopted when managers are approaching retirement?
A) Increase the percentage of their remuneration that is paid out as bonuses based on accounting profit in order to keep them motivated to work hard.
B) Use a market-based bonus scheme.
C) Make them redundant as early as possible.
D) Link an additional element of the manager's superannuation package to profits.
E) None of the given Answers.
Answer: B
Q3) Normative theories are referred to as prescriptive theories:
A)True
B)False
Answer: True
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Chapter 4: An Overview of Accounting for Assets
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Q1) The decision to expense or capitalise an item is important because.
A) It may have direct implications for the value of the organisation and wealth of managers.
B) It may impact on contractual arrangements that are based on accounting numbers related to profits and/or assets.
C) It may give managers scope to maximise personal wealth, in line with Positive Accounting Theories.
D) The decision should only be based on providing an unbiased report of the company.
E) All of the given answers.
Q2) A material prior period error in year ending 2009 was subsequently discovered in 2010.To comply with AASB 108 "Accounting policies,changes in accounting estimates and errors" an entity should.
A) re-issue the 2009 financial statements with the error corrected.
B) make a retrospective adjustment in 2009.
C) make a retrospective adjustment in 2010.
D) make a prospective adjustment in 2009.
E) make a prospective adjustment in 2010.
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Chapter 5: Depreciation of Property, plant and Equipment
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Q1) Crows Ltd purchased a photocopier on 1 July 2007 for $30,000.It was estimated that it would have a useful life of 3 years and produce 5,000,000 copies over its life.The asset's residual value is estimated at $3,000.Other similar assets are depreciated on a reducing balance method is at 40% rate.Which of the following statement is correct for year ending 30 June 2008?
A) If the straight-line method is used, depreciation expense is $10 000.
B) If the reducing balance method is used, depreciation expense is $10 800.
C) If the sum of digits method is used, depreciation expense is $13, 500.
D) If the reducing balance method is used, depreciation expense is $10 800 and If the sum of digits method is used, depreciation expense is $13, 500.
E) None of the given answers.
Q2) The expenditure to modify an asset so that its service potential is improved should be expensed.
A)True
B)False
Q3) A non-current asset that is subjected to depreciation is no longer subjected to impairment testing.
A)True
B)False
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Chapter 6: Revaluation and Impairment Testing of
Non-Current Assets
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Q1) Under AASB 116 when an asset is revalued and the net method is used,accumulated depreciation:
A) must be written back to profit.
B) must be closed off to equity account.
C) should be eliminated against the gross carrying amount of the asset before revaluation.
D) should be increased by the same proportion as the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals the revalued amount.
E) None of the given answers.
Q2) Recoverable amount is the amount expected to be recovered through the ongoing use and subsequent disposal of an asset:
A)True
B)False
Q3) If an asset is subject to depreciation or amortization there is no longer a need to test the asset for impairment.
A)True
B)False
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Chapter 7: Inventory
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Q1) The measurement of inventories is no different for not-for-profit entities.
A)True
B)False
Q2) Use of the LIFO method has been deemed unacceptable under AASB 102 because?
A) It presents too many options to report preparers and may confuse them.
B) This method allows profits to be manipulated by purchasing items at year's end even though they have not been sold.
C) It can result in higher cost of goods sold figures and therefore lower taxes.
D) This method did reflect the actual physical flow of inventories.
E) All of the given answers.
Q3) The first-in,first-out (FIFO)method assumes that items remaining in inventory at the end of the period are those most recently purchased or produced.
A)True
B)False
Q4) FIFO method is an income decreasing inventory cost flow method in periods of rising prices.
A)True
B)False
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Chapter 8: Accounting for Intangibles
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Q1) Intangible assets without a limited useful life cannot be recorded under AASB 138 as they cannot be amortised.
A)True
B)False
Q2) Which of the following statements in regard to goodwill is/are correct in accordance with AASB 136 "Impairment of Assets"?
A) Goodwill may be amortised when it has a finite life.
B) Goodwill is subjected to impairment testing every three years.
C) Upward revaluation of goodwill is permitted as long as it is a reversal of prior years' impairment losses.
D) All of the given answers.
E) None of the given answers.
Q3) According to AASB 138 on intangible assets,if an entity buys another entity separate values can be assigned to purchased goodwill and to a brand name:
A)True
B)False
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Chapter 9: Accounting for Heritage Assets and Biological Assets
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Q1) The requirements of AAS 29 are out of line with one of the views outlined in the International Accord on the Value of Natural Science Collections:
A)True
B)False
Q2) AASB 141 covers agricultural activities such as deep sea fishing.
A)True
B)False
Q3) Providing financial information about heritage assets:
A) Is important as it will benefit all users.
B) Is a requirement of AAS 29 which appears to be based on the assumption that only financial information is relevant to report users.
C) Will result in wasted resources if demand for such information is limited.
D) Should be done only if the cost of providing the information exceeds the benefits.
E) None of the given answers.
Q4) AASB 141 requires that biological asset be recognised at cost until the asset is sold.
A)True
B)False
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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 balance sheet, with 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 accounts only when they are individually material and categories are required to be disclosed only when the category is material.
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.
E) None of the given answers.
Q2) Provisions are established to allow for future sacrifices such as repairs and maintenance of machinery and may be recognised as liabilities:
A)True
B)False
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Chapter 11: Accounting for Lease
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Q1) Where a sale and leaseback arrangement involves the benefits and risks of ownership being maintained by the lessee.
A) The lease back is classified as a finance lease.
B) The owner has effectively refinanced the asset.
C) Any profit on the sale should be deferred in the balance sheet and amortised.
D) The owner has managed to obtain funds from the sale but also maintained control of the asset.
E) None of the given answers.
Q2) The rental payments made during the term of a finance lease.
A) Are reductions of the lease liability that should be debited to the liability account.
B) Are an expense that should be recognised in the annual income statements.
C) Need to be divided into an interest component and an expense component. The expense effectively shows the amortisation of the lease asset.
D) Should be considered as a payment of principal (reduction in the lease liability) and interest (an annual expense).
E) None of the given answers.
Q3) 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) A right of set-off is a debtor's legal right,by contract or otherwise,to settle or otherwise eliminate all or a portion of an amount due to a creditor by applying against that amount an amount due from the creditor.
A)True
B)False
Q2) AASB 132 only allows assets and liabilities to be offset against one another if a legally recognised right to set-off exists for these items:
A)True
B)False
Q3) AASB 132 allows for all types of assets and liabilities to be offset as long as the entity intends to settle on a net basis:
A)True
B)False
Q4) Insubstance debt defeasance refers to an arrangement where assets are placed in trust,meaning that the creditor has now been paid in full: A)True
B)False
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Chapter 13: Accounting for Employee Benefits
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Q1) A non-contributory superannuation fund means:
A) No contributions are made to the fund by either the employer or employee.
B) Only the employer makes contributions to the fund.
C) Only the employee makes contributions to the fund.
D) It is a solely Government-funded scheme.
E) The fund is not taxed.
Q2) Sick leave may be classified as:
A) Cumulative vesting.
B) Non-cumulative non-vesting.
C) Cumulative non-vesting.
D) Non-cumulative vesting.
E) All of the given answers.
Q3) In a long service leave liability,conditional period is period during which an employee gains legal entitlement to pro rata payment.
A)True
B)False
Q4) Defined benefit plans are fairly simplistic and AASB 119 devotes only a small section to them:
A)True
B)False
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Chapter 14: Share Capital and Reserves
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Q1) If an entity performs a share split on a partly paid share,the split must be done in such a way as to divide the uncalled portion equally among the shares issued.
A)True
B)False
Q2) The statement of changes in equity:
A) Presents, either on the face of the statement or in the notes, the amounts of transactions with equity holders as equity holders.
B) Is identical to the statement of recognised income and expense.
C) Is the same as that required under the former AASB 1018.
D) Provides a reconciliation between the expenses outstanding at the start of the period and those outstanding at the end of the period.
E) None of the given answers.
Q3) Equity's claim against the assets of the entity:
A) Take priority as owners.
B) Is ranked before employee entitlements.
C) Is equal to the value of cash reserves held in equity.
D) Ranks after liabilities in terms of priority.
E) None of the given answers.
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Chapter 15: Accounting for Financial Instruments
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Q1) In a convertible note,AASB 139 "Financial Instruments: Recognition and Measurement" requires the holder of such financial instrument to present the liability component and the equity component separately on the statement of financial position.
A)True
B)False
Q2) For a financial instrument to be classified as an equity instrument,the instrument must include:
A. No contractual obligations whatsoever.
B. A certification of public approval from ASIC.
C. A contractual obligation to exchange financial assets or financial liabilities with another entity under conditions that are unfavourable to the issuer.
D. A contractual obligation for the issuer to deliver a variable number of shares of its own equity if settled with such an issue.
E. No contractual obligation for the issuer to deliver a variable number of shares of its own equity if settled with such an issue.
A)True
B)False
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Chapter 16: Revenue Recognition Issues
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Q1) Which of the following statements is incorrect with respect to revenue recognition of construction contracts?
A) The percentage-of-completion method is to be applied for fixed price contracts if the recognition criteria are satisfied.
B) AASB 111 requires individual construction contracts to be accounted for separately and the requirements of the standard to be applied separately to each contract.
C) The percentage-of-completion method should be used, provided certain conditions are met that enable the outcome of the contract to be reliably estimated.
D) Percentage-of-completion method requires contract revenue to be matched with progress billings, resulting in the reporting of revenue, expenses and profit which can be attributed to the amount billed to customers.
E) E: All of the given answers.
Q2) Unearned revenues are assets treated as liabilities,as these are received by a business for services to be performed at a future date.
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) Extraordinary items will be included in the income statement:
A) When they are material and need to be disclosed separately.
B) When an item of revenue or expense is attributable to an event outside the ordinary course of business.
C) When an expense or a revenue is of a non-recurring nature.
D) When an item of revenue or expense is attributable to an event outside the ordinary course of business and when an expense or a revenue is of a non-recurring nature.
E) None of the given answers.
Q2) All adjustments to equity other than those related to transactions with owners in their capacity as owners are disclosed in the Statement of Comprehensive Income (AASB 101):
A)True
B)False
Q3) All expenses from operating activities must be classified according to either their nature or function:
A)True
B)False
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Chapter 18: Accounting for Share-Based Payments
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Q1) AASB 2 requires all share-based payment transactions to be measured at grant date:
A)True
B)False
Q2) If the fair value of the equity instruments granted in a share-based payment transaction cannot be estimated,the entity shall measure the fair value of the goods received.
A)True
B)False
Q3) On 30 June 2012,based on probability estimates how many employees are expected to be employed by Windermere Ltd when the share vests?
A) 78
B) 82
C) 88
D) 90
E) None of the given answers
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Chapter 19: Accounting for Income Taxes
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Q1) Which of the following statements is correct with respect to AASB 112 "Income Taxes" when a non-current asset is revalued?
A) On revaluation date, the revaluation reserve is increased by the product of the temporary difference and the tax rate.
B) On revaluation date, the revaluation reserve is decreased by the product of the temporary difference and the tax rate.
C) On revaluation date, a deferred tax liability is created equal to the amount of the temporary difference.
D) On revaluation date, a deferred tax asset is created equal to the amount of the temporary difference.
E) None of the given answers
Q2) Deferred tax assets may arise from amounts of income taxes recoverable in future periods that arise from carry forward of unused tax losses.
A)True B)False
Q3) Non-deductible expenses results to a deferred tax asset. A)True B)False
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Chapter 20: Cash-Flow Statements
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Q1) Sharma (1996)argues that cash flows from operating activities divided by current debt should replace the current ratio as a measure of liquidity:
A)True
B)False
Q2) The cash-flow statement is argued by researchers to be a more reliable statement than accrual statements:
A)True
B)False
Q3) What is net cash used in financing activities for the year ended 30 June 2009?
A) ($1,017,000)
B) ($1,032,000)
C) ($1,125,000)
D) ($1,218,000)
E) None of the given answers
Q4) To calculate the cash flow associated with an accrued expense,any increase in the associated liability should be added to the expense:
A)True
B)False
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Chapter 21: Accounting for the Extractive Industries
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Q1) The costs-written-off method is to:
A) Write off all exploration and evaluation costs and not reinstate them if economically recoverable reserves are subsequently discovered.
B) Write off all evaluation and development costs unless it is considered likely that economically recoverable reserves will be identified within the next financial period.
C) Write off all exploration and evaluation costs but reinstate them if economically recoverable reserves are subsequently discovered.
D) Write off all deferred exploration and development costs as soon as it is determined that the reserves in the area of interest are not economically recoverable.
E) None of the given answers.
Q2) AASB 6 effectively permits entities to choose between the full-cost method and the area-of-interest method.
A)True
B)False
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Chapter 22: Accounting for General Insurance Contracts
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Q1) 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.
Q2) Danger Ltd writes insurance policies to cover the risk of theft in Central Brisbane.The policy premiums are expected to be received evenly over the year as they have evenly distributed due dates.Danger Ltd is aware that the risk of theft is 20 times higher in March and 15 times higher in July than in the other months of the year.The appropriate discount rate for Danger Ltd is 15 per cent.If the total amount of insurance premiums to be received is $1,000,000,what is the pattern of revenue recognition in accordance with AASB 1023 (round amounts to the nearest dollar)?
A) $72,467 per month.
B) $200,000 in March, $150,000 in July, $54,167 in each other month.
C) $83,333 per month.
D) $444,444 in March, $333,333 in July and $22,222 in each other month.
E) None of the given answers.
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Chapter 23: Accounting for Superannuation Plans
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Q1) A contributory superannuation plan is one in which:
A) The employer contributes periodic payments to the trust fund.
B) The employees contribute periodic payments to the trust fund.
C) The government contributes a percentage of the employees' contribution.
D) The benefits accumulate at a compound rate.
E) None of the given answers.
Q2) AAS 25 permits use of cost or revalued basis in measuring assets of a defined contribution plan and a defined benefit plan.
A)True
B)False
Q3) AAS 25 requires a defined contribution plan to disclose which of the following items on the face of the operating statement or by way of note?
A) Investment revenue and its individual components, including changes in net market values for each class of investment;
B) Amounts contributed by employers;
C) Amounts contributed by members;
D) Changes in market value of each class of investment;
E) None of the given answers.
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Chapter 24: Events Occurring After Balance Sheet Date
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Q1) AASB 110 specifies that adjusting events should be considered against two criteria to determine their treatment.The two criteria are:
A) (a) provides an indication that conditions may have existed at balance sheet date; or (b) reveals additional solid evidence of a condition that existed at balance sheet date.
B) (a) provides additional evidence of conditions that existed at the date the audit report was signed; or (b) reveals for the first time a condition that existed at date of completion.
C) (a) provides an indication that conditions may have existed at date of completion; or (b) reveals additional solid evidence of a condition that existed at date of completion.
D) (a) provides additional evidence of conditions that existed at reporting date; or (b) reveals for the first time a condition that existed at reporting date.
E) None of the given answers.
Q2) In general a subsequent event is one that occurs,or the occurrence of which becomes known,after the reporting date:
A)True
B)False
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Chapter 25: Segment Reporting
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Q1) 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
Q2) Where the entity's primary format for reporting segments is geographical then disclosures in addition to those required when the primary format is business segments are required.These disclosures depend on:
A) Whether the segments are business segments or geographical segments.
B) The relative size of the assets invested in geographical segments.
C) The accounting policies applied to calculating the revenues, expenses, assets and liabilities of the segments.
D) Whether the segments are based on the location of assets or location of customers.
E) None of the given answers.
Q3) IAS 8 was issued as part of the ongoing process to converge IAS standards with US Accounting Standards:
A)True
B)False
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Chapter 26: Related-Party Disclosures
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Q1) The definition of related parties relies on three key terms.These are:
A) Directors, control and significant influence.
B) Input, effect and common control.
C) Authorised trustee corporations, material influence, control.
D) Common control, directors, material influence.
E) None of the given answers.
Q2) 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.
E) All of the given answers.
Q3) In AASB 124 "Related Party Disclosures",two entities having a director in common are assumed related parties.
A)True
B)False
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Chapter 27: Earnings Per Share
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Q1) Craven Ltd has 10,000,000 ordinary shares on issue at the beginning of the year,1 July 2003.These shares were issued at $0.50 each and have a current market value of $3.00.On 1 November 2003,Craven Ltd bought back 1,000,000 ordinary shares originally issued at $0.50 for $1.90 each.On 1 February 2004,1,500,000 shares were issued fully paid up at the current market value of these shares.Also during the period,500,000 partly paid-up ordinary shares were issued.They were issued on 1 April 2004 at an issue price of $2.90.These shares were partly paid to $1.80.The partly paid shares are permitted proportionate rights to vote and receive dividends based on the relationship between the amount paid up and the issue price. Craven Ltd has 3,000,000,$1.00 preference shares that provide cumulative dividends at a rate of 8 per cent.
For the year ended 30 June 2004,the net income after tax was $20,000,000.
What are the basic earnings per share for Craven Ltd for the year ended 30 June 2007?
A) $1.99
B) $2.00
C) $1.96
D) $1.53
E) None of the given answers.
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Chapter 28: Accounting for Group Structures
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Q1) Control is defined in AASB 3 as the 'capacity to manage the policies of another entity':
A)True
B)False
Q2) Where separate entities in a group do not apply the same accounting methods,AASB 127 "Consolidated and Separate Financial Statements" prescribes adjustments to be made on consolidation to remove the impacts of different accounting policies.
A)True
B)False
Q3) The consolidation process does not involve any adjustments to the financial statements of the individual entities making up the group:
A)True
B)False
Q4) AASB 127 "Consolidated and Separate Financial Statements" permits the reporting periods of entities in the group to be dissimilar as long as adjustments are made on consolidation to remove the impacts of different reporting periods.
A)True
B)False
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Chapter 29: Further Consolidation Issues I: Accounting for
Intragroup Transact
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Q1) AASB 127 "Consolidated and Separate Financial Statements" prescribes that intragroup balances,transactions,income and expenses be eliminated in full on consolidation.This requirement is consistent with the parent entity concept of consolidation.
A)True
B)False
Q2) Intragroup transactions that are to be eliminated in the consolidated accounts include:
A) Inter-entity loans.
B) Inter-entity sales of non-current assets.
C) The payment of management fees to a member of the group.
D) The transfer of tax losses between entities in the group without consideration being paid.
E) All of the given answers.
Q3) Intragroup profits are eliminated in consolidation to exclude intragroup transactions in the parent entity's financial statements.
A)True
B)False
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Chapter 30: Further Consolidation Issues II: Accounting for Minority Interests
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Q1) When a subsidiary company that has a minority interest (MI)declares a dividend,the treatment in the consolidated balance sheet of dividends not paid is:
A) The minority interest portion of the dividend owing should be eliminated along with the parent entity's share, leaving a zero balance in dividends payable.
B) The MI's portion should be deducted from the minority interest's share in equity. There should be no dividend amounts remaining in the consolidated balance sheet, but the amount owed to the MI should be disclosed separately.
C) The amount owing to MI as a dividend payable should be included in the consolidated balance sheet as a current liability.
D) The amount of dividends payable to both the parent entity and the MI will be reflected in the consolidated balance sheet.
E) None of the given answers.
Q2) 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) In calculating indirect minority interests,intragroup transactions need not be eliminated.
A)True B)False
Q2) The non-controlling interest in post-acquisition movement in reserves and post-acquisition profits is based on the combined sum of both direct non-controlling interest and indirect non-controlling interest.
A)True B)False
Q3) It is possible for aggregated direct and indirect minority interests in an entity to be a greater percentage of ownership than the parent's aggregated direct and indirect ownership interests:
A)True B)False
Q4) Non-sequential acquisition is when a parent acquires its interest in the intermediate subsidiary after the intermediate subsidiary acquires its interest in the other subsidiary. A)True B)False
Page 33
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Chapter 32: Further Consolidation Issues Iv: Accounting for
Changes in the Deg
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Q1) Which of the following statements is in accordance with AASB 127 "Consolidated Financial Statements" with respect to multiple acquisitions?
A) Each individual investment in the subsidiary is accounted for separately and separate consolidation worksheet entries are made to eliminate each investment on consolidation.
B) Once control of the subsidiary is established, consolidation worksheet entries will eliminate the parent entity's respective share of the subsidiary's net identifiable assets as at each of the respective investment dates (at fair value).
C) The aggregate costs of the investments would be eliminated against the parent's share of capital and reserves at the date when control is ultimately established and only one amount of goodwill (or bargain gain on purchase) is calculated.
D) Because eliminations of each investment are made at the various investment dates, there is a need to calculate a separate amount of goodwill (bargain gain on purchase) for each investment date.
E) All of the given answers.
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34
Chapter 33: Accounting for Equity Investments
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Q1) Investor Ltd owns 30% of Investee Ltd.During the year,Investee Ltd had reported a net profit of $100000 and paid no dividends for the year.Which of the following statements best describes the impact of the investment in Investee Ltd to Investor Ltd's financial ratios?
A) Current ratio will improve;
B) Quick asset ratio will deteriorate;
C) Sales turnover will improve;
D) Inventory turnover will deteriorate;
E) Earnings per share will improve.
Q2) Under the equity method of accounting,the amount recorded in the consolidated accounts as the investment in an associate is:
A) A market valuation.
B) A cost measure.
C) A present value calculation.
D) An independent valuation.
E) None of the given answers.
Q3) Investments are commonly classified into seven different categories:
A)True
B)False
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Chapter 33: Accounting for Equity Investments
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Q1) AASB 131 describes a jointly controlled entity as being differentiated from other types of entities (particularly associates)on the basis that:
A) The function of a joint venture is different to all other types of entities because it does not have a focus on generating a profit.
B) The contractual arrangement between the venturers establishes joint control over the economic activity of the entity.
C) The function of a jointly controlled entity is to achieve a tax simplification for the venturers so that accumulated joint venture losses may more easily be carried forward to offset future profits of the venturers.
D) The contractual arrangement between the venturers establishes joint and several liability for the liabilities of the jointly controlled entity.
E) None of the given answers.
Q2) AASB 131 provides the choice between equity accounting and proportional consolidation,when accounting for jointly controlled entities:
A)True
B)False
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Chapter 35: Accounting for Foreign Currency Transactions
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Q1) Hedges cannot be designated and/or documented on a retrospective basis:
A)True
B)False
Q2) An entity's may change its functional currency when there is a change in the underlying transactions,events and conditions.
A)True
B)False
Q3) Apart from some limited exceptions,AASB 121 requires that exchange differences on monetary items shall be:
A) Deferred and recognised when the associated asset or liability is realised or settled.
B) Treated as a reserve or provision against the associated monetary item.
C) Not recognised in the accounts until the monetary asset is received or monetary liability settled.
D) Recognised as income or an expense in the reporting period in which the exchange rates change.
E) None of the given answers.
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Chapter 36: Translation of the Accounts of Foreign Operations
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Q1) As prescribed in AASB 121,in translating the accounts of a foreign operation from functional to presentation currency,the exchange rate to use for inventory is the average rate during the period the inventory was purchased.
A)True
B)False
Q2) Under the translation method required by AASB 121,the approach to translating a foreign operation's accounts includes:
A) Non-monetary items included in the balance sheet are translated at the rate current at reporting date.
B) Equity at the date of investment is translated at the rate for the when the investment was acquired.
C) Revenue and expense items are translated at the exchange rates current at the applicable transaction dates.
D) Monetary items included in the balance sheet are translated at the exchange rate current at the reporting date.
E) All of the given answers.
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Chapter 37: Accounting for Corporate Social Responsibility
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Q1) Freeman and Reid provide a broad definition of 'stakeholders' as follows: 'any identifiable group or individual who can affect the achievement of an organisation's objectives,or is affected by the achievement of an organisation's objectives':
A)True
B)False
Q2) Research in corporate environmental disclosures show that entities typically disclose positive environmental information.This would be consistent with:
A) Legitimacy Theory.
B) Positive Accounting Theory.
C) Stakeholder Theory.
D) All of the given answers.
E) Legitimacy Theory and Positive Accounting Theory.
Q3) Entities wishing to provide social and environmental reports are able to use the conceptual framework for guidance in reporting social costs:
A)True
B)False
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