IFRS Certificate Mock Exam 2

Which of the following statements is correct?

Operating segments cannot be aggregated for disclosure purposes

Correct Incorrect Correct answer

IFRS 8 Operating Segments must be applied by all companies reporting under IFRS

Correct Incorrect Correct answer

Operating segments are identified based on information provided to the Chief Operating Decision Maker of an entity

Correct Incorrect Correct answer

Operating segments that do not meet the 10% test are never considered to be reportable segments.

Correct Incorrect Correct answer

An entity is preparing its financial statements for the year ended 31 December 20X1. At 31 December 20X0 it reported a deferred tax liability of $120. The carrying amount of its tangible non current assets is $1,800 at 31 December 20X1 and their tax base is $1,200. The rate of tax is 30%.What is the deferred tax charge or credit included in profit or loss for the year ended 31 December 20X1?

Charge of $60

Correct Incorrect Correct answer

Credit of $60

Correct Incorrect Correct answer

Charge of $180

Correct Incorrect Correct answer

Credit of $180

Correct Incorrect Correct answer

Which of the following statements regarding IFRS, UK GAAP and US GAAP is not true?

There are no major differences between IAS 16 and UK GAAP guidance on property, plant and equipment

Correct Incorrect Correct answer

Both IFRS Standards and US GAAP prohibit the presentation of items as extraordinary

Correct Incorrect Correct answer

There are no major differences between IFRS 15 and US GAAP guidance on revenue from contracts with customers.

Correct Incorrect Correct answer

IAS 23 requires the capitalisation of eligible borrowing costs; UK GAAP allows but does not require capitalization

Correct Incorrect Correct answer

An entity acquires an item of equipment that is not of a specialised nature by way of a lease. In accordance with IFRS 16 Leases a right of use asset is recognised. There is no certainty that the entity (as the lessee) will obtain ownership of the equipment by the end of the lease term. Depreciation of the equipment should be spread over:

The term of the lease

Correct Incorrect Correct answer

The useful life of the equipment

Correct Incorrect Correct answer

The shorter of the term of the lease or the useful life of the equipment

Correct Incorrect Correct answer

Which one of the following statements regarding IFRS 16 leases is true?

A lessor recognises a receivable in respect of a lease for an asset that is so specialised that only the lessee could use it without major modification

Correct Incorrect Correct answer

Lessors apply the same accounting treatment to all leases without exception

Correct Incorrect Correct answer

A lessor deducts initial direct costs incurred in arranging an operating lease from the carrying amount of the leased asset

Correct Incorrect Correct answer

In a sale and leaseback transaction if a transfer is a sale, proceeds are recognised as a financial liability

Correct Incorrect Correct answer

On 15 December 20X0, the directors of Restless Co formally minuted their decision to dispose of the entity’s 60% controlled subsidiary Loser Co. No public announcement has been made nor have the shares been formally put on sale. The disposal is expected to be completed in the second quarter of 20X1.

How should Restless Co account for Loser Co in the financial statements for the year ended 31 December 20X0, in accordance with IFRS 10 Consolidated financial statements?

Loser Co will be excluded from consolidation because control is expected to be temporary

Correct Incorrect Correct answer

Loser Co will continue to be consolidated within the group financial statements

Correct Incorrect Correct answer

The expected gain or loss on disposal will be included in the statement of profit or loss and the estimated net proceeds will be included at net realisable value within current assets

Correct Incorrect Correct answer

Loser Co will not be consolidated and instead be measured at the equity value on 15 December 20X0.

Correct Incorrect Correct answer

IFRS Standards require certain transactions to be recognised in other comprehensive income.

Which of the following transactions IS NOT recognised in other comprehensive income?

Deferred tax insofar as it relates to a transaction which is recognised in other comprehensive income

Correct Incorrect Correct answer

Foreign exchange differences arising on a monetary item that is in substance, part of a net investment in a foreign entity

Correct Incorrect Correct answer

Revaluation surpluses recognised when adopting the revaluation model for the subsequent measurement of non-current assets

Correct Incorrect Correct answer

The impairment losses when writing down a non current asset which was not previously revalued

Correct Incorrect Correct answer

Torpedo Co took out a bank loan on 1 April 20X0 for $10,000. It is due to be paid back in equal monthly instalments of $250, starting on 1 May 20X0. How should Torpedo Co include the loan in its statement of financial position at 30 June 20X0?

A non-current liability of $9,500

Correct Incorrect Correct answer

A current liability of $3,000 and a non-current liability of $7,000

Correct Incorrect Correct answer

A non-current liability of $10,000

Correct Incorrect Correct answer

A current liability of $3,000 and a non-current liability of $6,500

Correct Incorrect Correct answer

A cash generating unit (CGU) comprises property with a carrying amount of $400,000, plant with a carrying amount of $100,000 and goodwill with a carrying amount of $50,000. The property has a fair value less costs to sell of $380,000, and a value in use of $350,000. The CGU has a fair value less costs to sell of $440,000 and a value in use of $460,000. Which of the following statements is true?

The maximum impairment loss allocated to the property is $20,000

Correct Incorrect Correct answer

The total impairment loss in the CGU is $110,000

Correct Incorrect Correct answer

The impairment loss is pro-rated between all assets within the scope of IAS 36

Correct Incorrect Correct answer

The impairment loss allocated to plant is $8,000

Correct Incorrect Correct answer

The following material events occurred after the reporting date but before the financial statements were authorised for issue. According to IAS 10 Events after the Reporting Period, which of these would be classed as an adjusting event?

The disposal of a subsidiary

Correct Incorrect Correct answer

Change of foreign exchange rates

Correct Incorrect Correct answer

Destruction of inventory in a warehouse fire but not affecting the going concern status

Correct Incorrect Correct answer

Bankruptcy of a customer with a balance outstanding at the year end

Correct Incorrect Correct answer

Which of the following concepts may be the reason why a company chooses not to capitalise small items of equipment held for continuing use in the business, rather than capitalising them?

Completeness and materiality

Correct Incorrect Correct answer

Faithful representation and understandability

Correct Incorrect Correct answer

Accruals and relevance

Correct Incorrect Correct answer

Materiality and comparability

Correct Incorrect Correct answer

Jelly Bean Co purchased an item of plant on 1 January 20X1 for $500,000. Its estimated useful life was 10 years and it was expected to have nil residual value. On 31 December 20X2, the plant was revalued upwards to $750,000 with no change to the estimated useful life. On 1 January 20X4 the plant was sold for $800,000. What was the gain/loss on disposal to be recorded in the statement of profit or loss for the year ended 31 December 20X4?

$300,000 profit

Correct Incorrect Correct answer

$50,000 loss

Correct Incorrect Correct answer

$143,750 profit

Correct Incorrect Correct answer

$450,000 profit

Correct Incorrect Correct answer

A farm acquires lumber trees for $250,000 on 1 March 20X7, which represents their fair value. The fair value of the trees at the reporting date 31 December 20X7 is $280,000. The trees will be grown for 5 years and then felled and sold. Costs to sell are 5% of fair value. Which of the following statements is true?

The trees are initially measured at $250,000

Correct Incorrect Correct answer

The trees are measured at $208,333 at 31 December 20X7

Correct Incorrect Correct answer

The trees are measured at $280,000 at 31 December 20X7

Correct Incorrect Correct answer

The trees are measured at $266,000 at 31 December 20X7

Correct Incorrect Correct answer

The correct treatment of a dividend on ordinary shares, declared after the reporting date, but before the financial statements are authorised for issue, is:

Do not recognise as a liability and do not disclose

Correct Incorrect Correct answer

Do not recognise as a liability but disclose in the notes

Correct Incorrect Correct answer

Recognise as a liability and deduct from net profit in the statement of profit or loss

Correct Incorrect Correct answer

Recognise as a liability and deduct from accumulated profit in the statement of changes in equity

Correct Incorrect Correct answer

IAS 1 Presentation of Financial Statements envisages that an entity’s financial statements should be presented at least every 12 months. Which of the following statements is correct according to IAS 1?

A reporting period can exceed 12 months but the reason must be disclosed

Correct Incorrect Correct answer

A reporting period can be less than 12 months; no disclosure of reason is required

Correct Incorrect Correct answer

A reporting period can be more or less than 12 months but the reason must be disclosed

Correct Incorrect Correct answer

A reporting period can exceed 12 months but not 18 months; no disclosure of reason is required

Correct Incorrect Correct answer

A Co acquires a 60% equity shareholding in B Co. The purchase consideration is $130,000. The fair value of B Co’s net assets at the date of acquisition is $160,000 and their book value is $110,000. The goodwill arising on the acquisition, measured in accordance with IFRS 3 using the purchased goodwill method (ie where the NCI is measured at its share of the acquiree’s identifiable net assets) is:

$30,000 negative goodwill

Correct Incorrect Correct answer

$20,000 positive goodwill

Correct Incorrect Correct answer

$34,000 positive goodwill

Correct Incorrect Correct answer

$64,000 positive goodwill

Correct Incorrect Correct answer

X Co has issued 1000 ordinary shares to the shareholders of Y Co in order to acquire the whole of the share capital of Y Co. Which of the following is applicable to this transaction:

IFRS 2 Share-Based Payment

Correct Incorrect Correct answer

IFRS 3 Business Combinations

Correct Incorrect Correct answer

IFRS 9 Financial Instruments

Correct Incorrect Correct answer

IAS 28 Investments in Associates and Joint Ventures

Correct Incorrect Correct answer

Bush Co leases a train over a 3-year term commencing on 1 June 20X5. The discounted present value of the future lease payments is $64,427. The interest rate implicit in the lease is 8% and lease payments of $25,000 are required annually in arrears. What is the carrying amount of the lease liability at 31 May X7?

$18,988

Correct Incorrect Correct answer

$42,581

Correct Incorrect Correct answer

$44,581

Correct Incorrect Correct answer

$23,148

Correct Incorrect Correct answer

Festival Co values its inventory using the average cost method. At the beginning of January it held 110 units of inventory which cost $5 each. The following inventory movements took place during January:

3 January Sold 95 units for $6 each

12 January Purchased 100 units for $5.50 each

15 January Purchased 50 units for $5.75 each

20 January Sold 80 units for $6 each

At what amount should inventory be included in Festival Co’s statement of financial position at 31 January?

$442.42

Correct Incorrect Correct answer

$453.90

Correct Incorrect Correct answer

$480.00

Correct Incorrect Correct answer

$470.08

Correct Incorrect Correct answer

According to IAS 12 Income Taxes, where the tax base of an asset exceeds its carrying amount in the statement of financial position, what term describes the difference?

A taxable temporary difference

Correct Incorrect Correct answer

A deferred tax asset

Correct Incorrect Correct answer

A deductible temporary difference

Correct Incorrect Correct answer

A deferred tax liability

Correct Incorrect Correct answer

Which statement is correct regarding the 2018 Conceptual Framework?

Current value measurements include fair value and value in use

Correct Incorrect Correct answer

An asset is recognised if it is probable that economic benefits will flow to an entity

Correct Incorrect Correct answer

Part of an entity cannot be a reporting entity

Correct Incorrect Correct answer

All income and expenses must be measured in profit or loss without exception

Correct Incorrect Correct answer

Which of the following are classed as financial instruments according to International Financial Reporting Standards?

Trade receivables
Loans
Cash
Forward contracts

1, 2, 3 and 4

Correct Incorrect Correct answer

4 only

Correct Incorrect Correct answer

1, 2 and 3 only

Correct Incorrect Correct answer

2 and 4 only

Correct Incorrect Correct answer

Which of the following statements are true regarding foreign exchange rates?

All amounts in foreign currency financial statements are translated to presentation currency using the closing rate.
A foreign currency monetary asset is translated at the reporting date using the closing rate.
Gains on the translation of foreign currency financial statements to presentation currency are recognised in other comprehensive income.
A foreign currency non-monetary asset is never retranslated using closing rate.

1 and 2

Correct Incorrect Correct answer

2 and 3

Correct Incorrect Correct answer

3 and 4

Correct Incorrect Correct answer

1 and 3

Correct Incorrect Correct answer

Which of the following statements about the IFRS for SMEs Standard are correct?

Companies may only use the Standard if they meet prescribed size limits
The IFRS for SMEs Standard cannot be applied by insurance companies
The IFRS for SMEs Standard may be adopted by jurisdictions that have not adopted full IFRS Standards

1 and 2

Correct Incorrect Correct answer

2 and 3

Correct Incorrect Correct answer

1 and 3

Correct Incorrect Correct answer

All of them

Correct Incorrect Correct answer

IAS 19 provides guidance on accounting for employee benefits, including defined benefit pensions. Which statements are correct?

The current service cost in a year is recognised in other comprehensive income.
Remeasurements include the difference between the actual and expected return on plan assets.
Recognition of a pension surplus is restricted by the asset ceiling.
Past service costs are spread over an employee’s remaining expected working life.

1 and 2

Correct Incorrect Correct answer

1 and 3

Correct Incorrect Correct answer

2 and 3

Correct Incorrect Correct answer

2 and 4

Correct Incorrect Correct answer

Quiz Summary

Information

Results

Results

Categories

1. Question

Which of the following statements is correct?

2. Question

3. Question

Which of the following statements regarding IFRS, UK GAAP and US GAAP is not true?

4. Question

5. Question

Which one of the following statements regarding IFRS 16 leases is true?

6. Question

How should Restless Co account for Loser Co in the financial statements for the year ended 31 December 20X0, in accordance with IFRS 10 Consolidated financial statements?

7. Question

IFRS Standards require certain transactions to be recognised in other comprehensive income.

Which of the following transactions IS NOT recognised in other comprehensive income?

8. Question

Torpedo Co took out a bank loan on 1 April 20X0 for $10,000. It is due to be paid back in equal monthly instalments of $250, starting on 1 May 20X0. How should Torpedo Co include the loan in its statement of financial position at 30 June 20X0?

9. Question

10. Question

The following material events occurred after the reporting date but before the financial statements were authorised for issue. According to IAS 10 Events after the Reporting Period, which of these would be classed as an adjusting event?

11. Question

Which of the following concepts may be the reason why a company chooses not to capitalise small items of equipment held for continuing use in the business, rather than capitalising them?

12. Question

13. Question

14. Question

The correct treatment of a dividend on ordinary shares, declared after the reporting date, but before the financial statements are authorised for issue, is:

15. Question

IAS 1 Presentation of Financial Statements envisages that an entity’s financial statements should be presented at least every 12 months. Which of the following statements is correct according to IAS 1?

16. Question

17. Question

X Co has issued 1000 ordinary shares to the shareholders of Y Co in order to acquire the whole of the share capital of Y Co. Which of the following is applicable to this transaction:

18. Question

19. Question

Festival Co values its inventory using the average cost method. At the beginning of January it held 110 units of inventory which cost $5 each. The following inventory movements took place during January:

3 January Sold 95 units for $6 each

12 January Purchased 100 units for $5.50 each

15 January Purchased 50 units for $5.75 each

20 January Sold 80 units for $6 each

At what amount should inventory be included in Festival Co’s statement of financial position at 31 January?

20. Question

According to IAS 12 Income Taxes, where the tax base of an asset exceeds its carrying amount in the statement of financial position, what term describes the difference?

21. Question

Which statement is correct regarding the 2018 Conceptual Framework?

22. Question

Which of the following are classed as financial instruments according to International Financial Reporting Standards?

Trade receivables

Loans

Cash

Forward contracts

23. Question

Which of the following statements are true regarding foreign exchange rates?

All amounts in foreign currency financial statements are translated to presentation currency using the closing rate.

A foreign currency monetary asset is translated at the reporting date using the closing rate.

Gains on the translation of foreign currency financial statements to presentation currency are recognised in other comprehensive income.

A foreign currency non-monetary asset is never retranslated using closing rate.

24. Question

Which of the following statements about the IFRS for SMEs Standard are correct?

Companies may only use the Standard if they meet prescribed size limits

The IFRS for SMEs Standard cannot be applied by insurance companies

The IFRS for SMEs Standard may be adopted by jurisdictions that have not adopted full IFRS Standards

25. Question

IAS 19 provides guidance on accounting for employee benefits, including defined benefit pensions. Which statements are correct?

The current service cost in a year is recognised in other comprehensive income.

Remeasurements include the difference between the actual and expected return on plan assets.

Recognition of a pension surplus is restricted by the asset ceiling.

Past service costs are spread over an employee’s remaining expected working life.