Professional Documents
Culture Documents
Board is:
a. International Accounting Standards (IAS);
b. International Generally Accepted Accounting Principles (IGAAP);
c. International Financial Accounting Interpretations (IFAI)
d. International Financial Reporting Standards (IFRS).
ANS: D
2. The responsibilities of the International Financial Reporting Interpretations Committee
include:
I.
II.
III.
IV.
V.
a.
b.
c.
d.
Report to the IASB and obtain its approval for final interpretations.
Interpret the application of IFRS.
Provide timely guidance on financial reporting issues not addressed in IFRS or IAS.
Publish draft interpretations for public comment.
Consider comments made on interpretations before finalising an interpretation.
I, II, III, IV and V;
I, II and III only;
II, III, and IV only;
III, IV and V only.
ANS: A
3. A document that contains disclosures including financial statements, that is issued to potential
c.
d.
trust deed;
prospectus.
ANS: D
4. Under IFRS 2 Share-based Payment, the method that must be used to measure employee stock
options and other payments given to employees in the form of equity securities, is:
a.
b.
initial cost;
fair value;
ANS: B
5. A company is regarded as a first-time adopter of International Financial Reporting Standards
if, for the first time, it makes an explicit and unreserved statement that:
a. its general purpose financial statements comply with IFRS;
b. it has prepared its financial statements using national GAAP;
c. it has selected accounting policies that are based on IFRS in force prior to 31
d.
December 2005;
it will prospectively adjust its comparative financial statements by applying IFRS
in force at 1 January 2006.
ANS: A
6. International Financial Reporting Standards are applicable to the following entities:
a. not-for-profit entities;
b. government activities
ANS: C
8. Information about the sources and uses of an enterprises cash and cash equivalents is
provided in the:
a. income statement;
b. cash flow statement;
ANS: B
9. The IASB Framework outlines two underlying assumptions of financial statements. These
are:
Assumption 1
a. Accrual basis of accounting
b. Cash basis of accounting
c. Historical cost accounting
d. Fair value basis of measurement
Assumption 2
Going concern assumption;
Insolvency assumption;
Limited life concept;
Perpetual life concept.
ANS: A
10. If financial information that is presented in a balance sheet or income statement is misstated,
and it influences the economic decisions of users, that information is described as:
a.
b.
reliable;
prudent;
c. material
d. faithful.
ANS: C
11. The IASB Framework identifies four principal qualitative characteristics that make the
ANS: B
12. In respect to information included in financial statements, the accounting concept of
ANS: B
13. An item cannot be recognised in the balance sheet or the income statement unless it meets the
Criterion 2
Relevance to the users;
Measurement reliability;
Representational faithfulness;
Measurement reliability.
ANS: D
14. The following statement: decreases in economic benefits during the accounting period in the
form of outflows or depletions of assets, or the incurrence of liabilities that result in decreases
in equity other than those relating to distributions to equity participants provides a definition
of:
a. expenses
b. assets;
c. liabilities
d. income.
ANS: A
15. The following definition increases in economic benefits during the accounting period in the
c. liabilities;
d. expense.
ANS: B
16. When measuring the revenue from dividends, IAS 18 Revenue, allows the recognition of
of revenue can be measured reliably, revenue from royalties should be recognised on:
a. an accruals basis
b. the net present value of cash flows
method;
ANS: A
18. According to IAS 18 Revenue, the revenue from interest should be recognised using the
settlement amount;
ANS: D
20. When a public share issue is made, the offer comes from:
a. the company issuing the shares;
b. the applicant.
c. the broker handing the share issue for the company;
d. the Australian Securities and Investments Commission once it has reviewed the
prospectus documentation;
ANS: B
21. The bonus issue of shares has the following impact on the equity of a company;
a. total equity increases;
b. total equity decreases;
c. only the amount of issued share capital changes.
d. one equity account increases and another equity account decreases by an equal
amount;
ANS: D
22. A company issued share option is an instrument that gives the holder the right but not the
obligation to:
a. receive a certain dividend declared by the company by a specified date;
b. receive a bonus issue of shares in a proportion as notified by the company
c. sell a certain number of shares in the company by a specified date at a stated price;
d. buy a certain number of shares in the company by a specified date at a stated price;
ANS: D
23. Dividends declared after the balance sheet date but before the financial statements are
balance sheet date but before the financial statements are authorised for issue, the dividend is:
.
a.
b.
c.
d.
ANS: B
25. The balance in the retained earnings account is affected by the transfer to that account of:
ANS: B
26. Under IAS 16 Property, Plant and Equipment, an entity may choose to measure assets using
the revaluation model. If this model is chosen, revaluation increments are recognised:
a. in profit or loss of the period in which the revaluation is undertaken
b. as a deferred credit in the balance sheet
c. directly in equity;
d. as an increase in the balance of the relevant accumulated depreciation account
ANS: C
27. In relation to an asset revaluation surplus, an entity:
a.
b.
c.
d.
is not able to use this surplus for the payment of future dividends;
is able to use this surplus for the payment of future dividends
is not able to transfer this surplus to any other reserve account;
can transfer the surplus to the income statement when the asset is disposed of
ANS: B
28. According to IAS 39 Financial Instruments: Recognition and Measurement, gains and losses
ANS: B
30. The components of equity generally recognised by companies in a balance sheet are:
I. Provisions.
II. Debentures
III.Share capital.
IV.Other reserves.
V. Retained earnings.
ANS: B
31. According to IAS 37 Provisions, Contingent Liabilities and Contingent Asset, when providing
for the future a future event such as the clean-up of a contaminated site, gains and other cash
inflows that are expected to arise on the sale of asset related to the clean-up, must be treated as
follows:
a. set-off against the provision for the clean-up
b. recognised as a deferred asset
c. recognised directly in equity in the period in which the cash inflows arose;
d. measured separately of the provision
ANS: D
32. The following is statement made in IAS 37 Provisions, Contingent Liabilities and Contingent
Assets:
a contract in which the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it.
This statement provides a definition of:
a.
b.
an onerous contract;
a present obligation.
ANS: A
33. McCann Limited announced its plans for a major restructuring of its operations. Under IAS
37 Provisions, Contingent Liabilities and Contingent Assets, the entity is able to:
a.
b.
warranties at the time of sale. The warranty applies for three years from the date of sale. Past
experience shows that there will be some claims under the warranties. The appropriate
treatment of this items under IAS 37 Provisions, Contingent Liabilities and Contingent
Assets, is to:
a. note disclosure is required, but do not recognise in the financial statements;
b. recognise the best estimate of costs as a provision;
c. charge the costs directly to profit or loss in the period in which the economic
d.
outflows occur;
transfer the expected amount of the warranty from retained earnings to a special
reserve account in equity.
ANS: B
35. A railway company is required, under law, to overhaul its rail-tracks every three years as a
safety measure. The appropriate treatment of this event for the purposes of preparing
financial statements is:
three years;
disclose in the notes as a contingent liability, but do not recognise;
estimate the future cash outflows and discount to determine the amount to be
recognised as a deferred liability.
ANS: B
36. At balance sheet date, Raschella Limited was awaiting the final details of a court case for
damages awarded in its favour. The amount and possible receipt of damages is unknown and
will not be decided until the court sits again in several months time. How is this event dealt
with in the preparation of the financial statements?
a.
b.
the carrying amount at the beginning and end of the period;
c. any increase in the contingent liability during the period;
d.
an estimate of its financial effect;
ANS: A
38. Under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the appropriate
statements;
ANS: D
40. Which of the following items is classified as a financial asset?
a. ordinary shares of the issuer;
b. loans payable (owed by the borrower)
c. accounts receivable;
d. inventory
ANS: C
41. All of the following would be regarded as financial instruments except:
a.
b.
bank overdraft;
cash;
c.
d.
equipment.
notes payable;
ANS: C
42. According to IAS 32 Financial Instruments: Disclosure and Presentation, which of the
the right of a depositor to obtain cash from a financial institution with which it
has deposited cash.
a contractual right to exchange under potentially favourable conditions, an option
to purchase shares below the market price;
ordinary shares held in another entity;
a contract that is a non-derivative for which the entity is obliged to deliver a
variable number of its own equity instruments;
ANS: D
43. All of the following are regarded as financial instruments:
I.
II.
III.
IV.
V.
a. I, IV and V only.
b. I, II and V only
ANS: B
44. The following events provide objective evidence that a financial asset has been impaired:
c.
d.
ANS: A
45. IAS 39 Financial Instruments: Recognition and Measurement, requires that Held-to-
c.
d.
ANS: D
46. Under IAS 12 Incomes Taxes, deferred tax assets and liabilities are measured at the tax rates
that:
a.
b.
c.
d.
ANS: B
47. In jurisdictions where the impairment of goodwill is not tax deductible, IAS 12 Income Taxes:
a. does not permit the application of deferred tax accounting to goodwill;
b. allows the recognition of a deferred tax item in relation to goodwill;
c. requires that any deferred tax items in relation to goodwill be recognised directly
d.
in equity;
requires that any deferred tax items for goodwill be capitalised in the carrying
amount of goodwill.
ANS: A
48. When a deferred tax asset is subsequently recognised by an acquirer, the following adjustment
is made:
a.
b.
c.
d.
ANS: D
49. Deferred tax assets must be recognised for deductible temporary differences and for tax
ANS: C
51. Unless a company has a legal right of set-off, IAS 12 Income Taxes, requires disclosure of all
c.
d.
IV only.
I, II and III only;
ANS: A
52. Where a business transaction requires a direct adjustment to an equity account, the tax effect
is adjusted against:
a. income;
b. equity;
c. cash.
d. tax expense;
ANS: B
53. The weighted average inventory costing method is particularly suitable to inventory where:
.
a. prospectively and the adjustment taken through the current profit or loss;
b. retrospectively and the adjustment recognised as an extraordinary gain or loss
c. prospectively and the current period adjustment recognised directly in equity;
d. retrospectively and the adjustment taken through the opening balance of
accumulated profits;
ANS: D
55. The measurement rule for inventories, mandated by IAS 2 Inventories, is:
a. lower of fair value and selling price;
b. higher of completion costs and replacement costs.
c. higher of initial cost and realisable value;
d. lower of cost and net realisable value;
ANS: D
56. Net realisable value of inventory is defined as the net amount that an enterprise expects to
the sale;
c. in a forced sale;
d. in the ordinary course of operations less estimated costs of completion and costs
necessary to make the sale;
ANS: D
57. Net realisable value of inventories may fall below cost for a number of reasons including:
I.
II.
III.
IV.
Product obsolescence.
Physical deterioration of inventories.
An increase in the expected replacement costs of the inventory,
An increase in the estimated costs of completion.
a. I, II and IV only;
b. II, III and IV only
ANS: A
58. When determining the net realisable value of inventory, estimates must be made of the
following:
I.
II.
III.
IV.
a.
b.
c.
d.
ANS: D
10
59. IAS 2 Inventories requires that when inventories are written down to net realisable value, they
are written-down:
a.
on a class-by-class basis;
on an item-by-item basis;
ANS: B
60. If the selling price of inventory that has been written down to net realisable value in a prior
ANS: A
61. Where the net realisable value of inventory falls below cost, IAS 2 Inventories, requires that:
a. the difference be added to the carrying amount of the inventory.
b. no adjustment be made, but the difference between net realisable value and cost be
accounted for separately, the entity is using which of the following approaches to
depreciation?
a. periodic depreciation;
b. replacement cost depreciation;
c. segment depreciation
d. components depreciation
ANS: D
63. When a balance is carried in an asset revaluation surplus account in relation to an asset that
has been derecognised, it is acceptable under IAS 16 Property, Plant and Equipment, to:
a.
b.
increase;
not be affected;
c.
d.
no longer be required.
decrease;
ANS: A
65. In relation to the amortisation of intangible assets, if an intangible asset has a finite useful life:
a. it must be amortised over a period not exceeding 40 years;
b. it must be amortised over that life.
c. it must be amortised across a period not exceeding 5 years;
11
disclosed separately:
a. all amounts of intangibles acquired during the period.
b. any impairment losses reversed in profit or loss during the period;
c. the closing balance of each intangible;
d. the opening balance of each intangible;
ANS: B
69. When an intangible asset is acquired by an exchange of assets, which of the following
ANS: A
70. Internally generated goodwill is prohibited from recognition in the financial statements of an
original and planned investigation with the prospect of gaining new scientific
knowledge;
b. using knowledge to materially improve a manufacturing device
c. the use of research findings to create a substantially improved product;
d. the application of knowledge to a design for the production of new materials;
12
ANS: A
72. According to IAS 38 Intangibles, in order to be able to capitalise development outlays an
I, II and IV only;
I, II, III and IV;
ANS: B
73. When an internally generated asset meets the recognition criteria, the appropriate treatment
earnings.
include in the cost of the development of the asset;
reinstatement;
ANS: A
74. Paragraph 63 of IAS 38 Intangibles, prohibits the recognition of the following internally
I;
IV.
I
No
No
No
No
c.
d.
II
No
Yes
No
Yes
III
No
Yes
Yes
No
IV
Yes
Yes
Yes
Yes
III;
II;
ANS: A
75. When determining the fair values to be used in accounting for a business combination, IFRS 3
Business Combinations, allows an acquirer how much time from the acquisition date in this
process?
a.
b.
1 month;
12 months;
c. 3 months;
d. 2 years.
ANS: B
76. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, is not applicable to
property;
land and buildings;
at fair value;
ANS: D
77. The key characteristic for the classification of an asset as held for sale is that the carrying
b.
c.
d.
ANS: A
78. The following criteria are used to determine whether an asset should be categorised as held
for sale:
I.
II.
III.
IV.
V.
VI.
a.
b.
c.
d.
ANS: C
79. Where assets are removed from the classification of held for sale, IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations, requires disclosure of the effects of the
decision on the results of operations for the period, in the:
a. notes.
b. cash flow statement;
c.
d.
ANS: A
80. In relation to assets that have been sold during the reporting period, IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations, requires disclosure of the following items:
I.
II.
III.
IV.
a.
b.
c.
d.
I, II and IV only.
I, III and IV only;
ANS: A
81. Under IAS 36 Impairment of Assets, the following assets are subject to impairment testing:
I
Yes
Yes
No
No
Inventory
Assets arising from construction contracts
Assets arising from employee benefits
Property, plant and equipment
a.
b.
I;
III;
c.
d.
II
Yes
Yes
Yes
Yes
III
No
No
No
Yes
IV
No
No
Yes
No
II;
IV.
ANS: A
82. Where assets are removed from the classification of held for sale, IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations, requires disclosure of the effects of the
decision on the results of operations for the period, in the:
a. notes.
c.
14
d.
income statement;
ANS: A
83. When assessing the recoverable of assets that have previously been subject to an impairment
loss, all of the following indicators assist in providing external evidence that an impairment
loss has reversed:
a.
internal reporting sources indicate that the economic performance of the asset will
not be as good as expected.
b. market interest rates have decreased during the period
c. significant changes with an adverse effect on the entity have taken place;
d. the assets market value has decreased significantly during the period
ANS: B
84. When an impairment loss in relation to a cash-generating unit is reversed, it is allocated on a
land;
equipment.
c.
d.
plant;
goodwill;
ANS: D
85. During 20X4 Sacco Limited, estimated that the carrying amount of goodwill was impaired
and wrote it down by $50 000. In a subsequent year, the company reassessed goodwill was
decided that the old acquired goodwill still existed. The appropriate accounting treatment in
the subsequent period is:
a.
b.
c.
d.
ANS: B
86. According to IAS 17 Leases, because lease payments are made over the lease term, the
a.
b.
I
Yes
Yes
Yes
No
II
Yes
No
Yes
No
III
No
Yes
Yes
Yes
IV
Yes
No
No
Yes
c. II;
d. IV.
I;
III;
ANS: A
87. In relation to finance leases, the following information must be disclosed separately in the
15
ANS: A
88. When substantially all of the risks and rewards incident to ownership remain with the lessor,
c. a finance lease;
d. a non-lease, rental arrangement.
ANS: A
89. Under IAS 17 Leases, lessors are required to account for lease receipts from operating leases
as:
a. revenue, on a reducing balance basis over the lease term;
b. income, on inception date of the lease;
c. income, on a straight-line basis over the lease term;
d. revenue, at the end of the lease term.
ANS: C
90. In respect to non-cancellable operating leases, lessees are required under IAS 17 Leases, to
disclose the total of future minimum lease payments for each of the following periods:
a. not later than one year.
b. not later than 3 months;
c. later then 6 months and not later than 9 months;
d.
later than 3 months and not later then 6 months;
ANS: A
91. With respect to operating leases, lessors are required under IAS 17 Leases, to make the
following disclosures:
I.
Total contingent rents recognised as income in the period.
II.
Future minimum lease payments under individual, cancellable operating leases,
separately.
III.
A general description of the lessees leasing arrangements.
IV.
Future minimum lease payments under non-cancellable operating leases in aggregate.
a. I, II and III only;
b. II and III only;
ANS: C
92. A lessee when accounting for a lease incentive received under an operating lease treats is as
a:n
a. increase in rental income over the lease term;
b. increase in rental expense over the lease term;
c. reduction in rental expense over the lease term;
d. reduction in rental income over the lease term;
ANS: C
93. A lease transaction that involves the sale of an asset that is then leased back to the seller for all
c. a novated lease;
d. a leveraged lease
ANS: A
16
94. If a sale and leaseback transaction results in a finance lease, IAS 17 Leases, provides the
following accounting treatment for any excess of sales proceeds over the carrying amount:
a. recognise directly in retained earnings of the seller-lessee
b. immediately recognise as income by the seller-lessee;
c. defer and amortise over the lease term;
d. include in the capitalised amount of the leased asset.
ANS: C
95. If an item of income is not material, then the manner of presenting that information, or
ANS: B
96. The level of rounding used in the financial statements refers to:
a. the presentation of a concise financial report rather than a full financial report.
b. the shortening of the notes by removing comparative numbers;
c. the abbreviation of words used
d. the truncation of the amounts presented;
ANS: D
97. IAS 1 Presentation of Financial Statements, requires that an entity must disclose the
a. I;
b. III;
I
No
No
No
No
II
Yes
Yes
Yes
Yes
III
No
Yes
No
Yes
IV
Yes
Yes
No
Yes
c. II;
d. IV.
ANS: C
98. An accounting policy:
a.
b.
c.
d.
ANS: A
99. Where a material error occurs in the recording process, an adjustment:
a. must be made to the prior period comparative balances;
b. may be recognised directly in retained earnings;
c. may be deferred and recognised in a later accounting period;
d. is not necessary, but the item must be fully explained in the notes to the financial
statements.
ANS: A
100. The balance sheet of a reporting entity presents a structured summary of the:
17
presented in the:
a.
b.
balance sheet;
cash flow statement;
c.
d.
income statement;
statement of changes in equity.
ANS: D
102. The profit or loss attributable to a minority interest is required, under IAS 1 Presentation of
c. balance sheet;
d. statement of changes in equity.
ANS: B
103.
The following is no longer an allowable line item for presentation on the face of an income
statement:
a.
b.
extraordinary items;
tax expense.
c. finance costs;
d. pre-tax loss attributable to
discontinuing operations;
ANS: A
104. Which of the following classifications has been eliminated for the purposes of presenting
c. abnormal items;
d. other income.
ANS: C
105. If the classification of expenses by function method is used for the presentation of an income
following disclosures:
I.
II.
III.
IV.
ANS: B
18
107. Exchange difference relating to the translation of foreign operations into the currency of the
c.
d.
ANS: C
108. IAS 1 Presentation of Financial Statements requires disclosure in the balance sheet of the
following items:
a.
b.
c.
d.
ANS: D
109. The summary of accounting policies is normally presented:
a. before all of the financial statements in a financial report;
b. as the first note, after all the financial statements;
c. as the last note in a set of financial statements
d. within the auditors report.
ANS: B
110. IAS 1 Presentation of Financial Statements, requires the following note disclosures in relation
c. interest paid;
d. acquisition of subsidiary net of cash
acquired;
ANS: D
112. When presenting the proceeds from the acquisition and disposal of subsidiaries, IAS 7 Cash
ANS: C
113. In respect to both acquisitions and disposals of investments in subsidiaries, IAS 7 Cash Flow
ANS: A
114. Which of the following items would be presented in a cash flow statement?
a. payment of dividends through a share investment scheme;
b. proceeds from the issue of debentures;
c. refinancing of long-term debt.
d. acquisition of an investment in a subsidiary for consideration consisting of an
c. payment of creditors;
d. proceeds on disposal of non-current
ordinary shares;
assets.
ANS: B
116. IAS 7 Cash Flow Statements, requires that investing and financing transactions that do not
activities;
c. presented in the cash flow statement after operating activities and before investing
and financing activities;
d. presented in a cash flow statement after the operating, investing and financing
activities have been presented.
ANS: A
117. In a consolidated group of entities, control over the subsidiaries in the group:
a.
b.
c.
d.
ANS: A
118. The IASB Framework identifies seven user groups that are considered to be important in
determining the existence of a reporting entity. These users groups include all of the
following except:
a. investors;
b. lenders;
c. preparers;
d. suppliers and other trade creditors.
ANS: C
119. All parent entities are required to present consolidation statements unless the following
20
a.
b.
I and II only;
I, II and IV only;
ANS: B
120. As required by IAS 27 Consolidated and Separate Financial Statements, where there are
transactions between members of the group, the effects of these transactions are:
a. adjusted partially in direct proportion to the level of control held by the parent;
b. adjusted in full on consolidation;
c. not adjusted in the consolidation process.
d. adjusted in proportion to the equity held by the minority interests in the subsidiary;
ANS: B
121. Under the parent entity concept of consolidation, the minority interest in the subsidiary is:
a. reported in the asset section of a balance sheet
b. reported in the equity section of a balance sheet
c. reported in the notes to the financial statements and not in the balance sheet;
d. reported in the liability section of a balance sheet.
ANS: D
122. The focus of the parent entity concept of consolidation is on the:
a. minority interests in subsidiaries within the group as the primary users;
b. equity holders of all entities within the group;
c. parents equity holders as the prime user group;
d. subsidiarys equity holders as the prime user group.
ANS: C
123. The consolidation concept that results in a group consisting of the assets and liabilities of the
parent and the parents proportional share of the assets and liabilities of the subsidiary, is
known as the:
a.
b.
proprietary concept;
entity concept;
c. comprehensive concept;
d. concise concept;
ANS: A
124. The concept of consolidation that requires pro rata consolidation of subsidiaries is known as
the:
a.
b.
entity concept;
parent concept;
c.
d.
proprietary concept;
subsidiary concept.
ANS: C
125. If an investor entity owns more than half of the voting or potential voting power of an investee
and does not account for the investment as a subsidiary, IAS 27 Consolidated and Separate
Financial Statements, requires that the following disclosure be made:
a. the reasons why the ownership of the investee does not constitute control;
b. the nature of the relationship between the investor and investee;
c. the nature of any restriction on the ability of the investor to transfer funds to the
d.
investee;
the amount of any repayments of borrowings between the investor and investee
during the period.
ANS: A
21
126. If a parent entity chooses not to prepare consolidated financial statements, IAS 27
Consolidated and Separate Financial Statements, requires the following disclosures in the
separate financial statements of the parent:
I. The name, country of residence and voting power of the directors of the parent.
II. That the exemption from consolidation has been used.
III. A list of significant investments including the proportion of ownership.
IV.A description of the method used to account for the investments.
a.
b.
I, II and IV only;
II and III only;
c.
d.
ANS: C
127. According to IAS 27 Consolidated and Separate Financial Statements, parent entities are
required to disclose:
I.
II.
III.
IV.
a.
b.
c.
d.
ANS: A
128. In relation to pre-acquisition of a subsidiary entity, which of the following events can cause a
c.
d.
ANS: B
129. When a dividend is paid by a wholly owned subsidiary out of pre-acquisition equity, the
DR Dividend receivable
CR
Dividend income;
b. DR Dividend receivable
CR Shares in subsidiary;
c.
DR Dividend income
CR Dividend receivable;
DR Shares in subsidiary
CR Dividend income.
d.
ANS: B
131. For entities wanting to use the cost model of accounting, the revaluation of a subsidiarys
22
a. subsidiarys records;
b. consolidation worksheet;
statements.
ANS: B
132. In a business combination the revaluation of non-current assets in the records of the
c.
d.
ANS: D
133. A reverse acquisition occurs where a:
a. subsidiary entity is controlled by a legal parent entity;
b. subsidiary entity has control over a legal parent entity;
c. parent entity controls a subsidiary through an ownership interest in another
subsidiary
d. parent entity has indirect control over the subsidiary.
ANS: B
134. Janus Limited, a subsidiary entity, sold a non-current asset at a profit to it parent entity. The
adjustment necessary on consolidation to reflect the tax effect of this transaction, is:
a.
b.
c.
d.
ANS: A
135. If a dividend is paid out of profit that are earned after the acquisition date, it is known as:
a.
b.
a final dividend;
a post acquisition dividend;
c.
d.
a temporary dividend;
a pre acquisition dividend.
ANS: B
136. A consolidation adjustment to deal with the management fees charged by a parent entity to a
c.
d.
ANS: D
137. Ownership interests in a subsidiary entity that do not belong to the parent entity are known as:
a.
b.
unowned interests;
proprietary interests;
c.
d.
minority interests;
pro rata ownership rights.
ANS: C
138. A minority interest in a group of entities, contributes which of the following to the group?
a.
b.
debt funds;
revenue;
c.
d.
assets;
equity.
ANS: D
139. In a consolidated balance sheet, the minority interest is shown:
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equity;
assets;
c.
d.
liabilities;
revenue.
ANS: A
141. When preparing a consolidated income statement, IAS 1 Presentation of Financial
c.
d.
ANS: C
142. When preparing a consolidated statement of changes in equity, IAS 27 Consolidated and
Separate Financial Statements, requires that any minority interest in equity of subsidiaries is:
a. shown as a one-line item;
b. shown as a share of total ending equity of the subsidiary only;
c. disclosed in the balance sheet, and not in the statement of changes in equity;
d. shown on a line-by-line basis.
ANS: D
143. When a revaluation of a subsidiaries assets, up to fair value, is undertaken on a consolidation
worksheet, the tax effect that must also be adjusted on the worksheet is:
a. increase deferred tax liability;
c. decrease deferred tax liability;
b. increase deferred tax asset;
d. decrease deferred tax asset.
ANS: A
144. An excess will arise in an acquisition if:
a.
the parent entity pays less than fair value for the identifiable asset, liabilities and
contingent liabilities acquired;
b. the parent entity pays more than fair value for the identifiable assets, liabilities and
contingent liabilities of the business acquired;
c. the subsidiary sells its identifiable assets, liabilities and contingent liabilities for
more than fair value;
d. the subsidiary sells its identifiable assets, liabilities and contingent liabilities at a
price that is higher than fair value.
ANS: A
145. Under the entity concept of consolidation, a minority interest is entitled to a share of which of
I, II and III;
c.
I and II only;
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b.
d.
III only.
ANS: B
146. In a situation where a parent acquires shares in a subsidiary, and the subsidiary later acquires a
sequential;
ordered;
c.
d.
non-sequential;
random.
ANS: A
147. Omega Limited acquired a controlling interest in shares in Diamond Limited. At the time of
this acquisition Diamond Limited already held shares in Oscar Limited. This form of
acquisition of an indirect acquisition by Omega Limited in Oscar Limited is known as:
a.
b.
an indirect acquisition;
a cross-holding;
c. a reciprocal shareholding
d. a non-sequential acquisition.
ANS: D
148. The indirect minority interest, in a group that has a multiple subsidiary structure, is entitled to
needed to:
a. remove unrealised profits or losses from intragroup transactions;
b. recognise profits made on intragroup services;
c. eliminate intragroup advances
d. partially eliminate profits on intragroup services.
ANS: A
150. Mutual shareholdings exist when:
a. a parent owns shares in a subsidiary;
b. a subsidiary owns shares in a parent only;
c. a parent owns shares in a subsidiary and in a joint venture;
d. a parent and a subsidiary own shares in each other.
ANS: D
151. The accounting method applied to investments in associates, known as the equity method, is
c.
d.
ANS: D
152. For the purposes of equity accounting for an investment in an associate, it is presumed that the
investor has significant influence over the other entity where the investor holds:
a. between 1% and 5% of the voting power of the investee;
b. between 5% and 10% of the voting power of the investee.
c. 20% or more of the voting power of the investee;
d. 50% or more of the voting power of the investee;
ANS: C
153. Organisation to which IAS 28 Investments in Associates, applies include:
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a.
b.
unincorporated entities;
mutual funds;
c.
d.
ANS: A
154. Where non-current assets are held for resale are required to be measured using:
a.
c.
b.
fair value.
d.
ANS: D
155. When goodwill is acquired by an investor in an associate, the amortisation of goodwill is:.
a.
b.
c.
d.
ANS: C
156. Adjustments made for the purpose of calculating the incremental adjustment to the share of
c.
d.
I, II and IV only;
I, II and III only.
ANS: A
158. The particular relationship between parties that signifies the existence of a joint venture is:
a.
b.
c.
d.
ANS: D
159. A relationship that is characterised by the existence of a capacity to share control over an
c.
d.
a joint venture;
a sole proprietorship.
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ANS: C
160. IAS 31 Interests in Joint Ventures, provides that joint control exists where:
a. no single venturer is in a position to control the activity unilaterally;
b. the decisions in areas essential to the goals of the joint venture do not require the
c.
d.
ANS: A
161. In relation to the supply of a service to a joint venture by one of the venturers, which of the
c. dividend income;
d. an entitys share of profit of associates
ANS: D
163. Under IAS 14 Segment Reporting, segment expense include:.
a. a joint venturers share of the expenses of a jointly controlled entity that is
expense;
b. segment profit after any adjustments
ANS: C
165. According to IAS 14 Segment Reporting, segment assets do not include:
a. income tax assets;
b. a joint venturers share of the operating assets of a jointly controlled entity that is
allocated
to the segment on a reasonable basis.
ANS: A
166. According to IAS 14 Segment Reporting, segment liabilities exclude:
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a.
liabilities that result from the operating activities of a segment that are directly
attributable to a segment;
b. interest bearing liabilities if the segment result excludes interest expense
c. income tax liabilities;
d. a joint venturers share of the liabilities of a jointly controlled entity that is
accounted for by proportionate consolidation.
ANS: C
167. Under IAS 14 Segment Reporting, a segment is reportable if a majority of its sales are to
c. an economic segment;
d. a organisational segment;
ANS: A
169. Under IAS 14 Segment Reporting, separate segments of an entity must be identified as
ANS: A
170. When an entitys primary segment format is geographical segments, in relation the segment
ANS: A
171. If an entitys primary segment format is geographical segments by location of customers,
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