OPC-TRAINING

IAS1: PRESENTATION OF FINANCIAL STATEMENTS

PRACTICE MULTIPLE CHOICE QUESTIONS

Practice the following multiple-choice questions to test your knowledge of IAS 1

Question One
Which of the following is not a component of a complete set of financial statements?
(a)A set of notes
(b)A management commentary sl 2
(c)A statement of cash flows
(d)A statement of changes in equity
Lequel des éléments suivants ne fait pas partie d'un ensemble complet d'états financiers ?
(a) Un ensemble de notes
(b) Un commentaire de gestion sl 2
(c) Un tableau des flux de trésorerie
(d) Un tableau des variations des capitaux propres
Question Two
The IASB requires all entities which comply with IFRS to produce interim financial
statements. True or False?
(a)True
(b) False sl 7 §2

L'IASB exige que toutes les entités qui se conforment aux normes IFRS produisent des
états financiers intermédiaires. Vrai ou faux ?
(a)Vrai
(b) Faux sl 7 §2Question Three
An entity which complies with IFRS may depart from the requirements of an international
standard:
(a)Never
(b)If compliance costs would be excessive
(c)If compliance would produce misleading information sl 7 par1
(d)Whenever it wishes to do so

Question Four
Items of financial information are material if:
(a)They could not influence the economic decisions made by the users of financial statements
(b)They are insignificant
(c)They could influence the economic decisions made by the users of financial statements sl 11
(d)They are aggregated with other items

Question Five

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The information which must be provided so as to properly identify each component of a set
of financial statements does not include:
(a)The country in which the entity operates Sl 17

(b)The presentation currency used

(c)The level of rounding used
(d)The name of the reporting entity

Question Six
Which of the following would generally not be classified as a current asset?
a) An asset intended for consumption within the entity's normal operating cycle
b) An asset held for long-term use within the entity
c) A cash equivalent
d) An asset held for the purpose of being traded

Question Seven
Standard IAS1 does not prescribe a format for each of the primary financial statements.
True or False?
a) True
b) False sl 21

Question Eight
The main financial performance statement is:
a) The statement of profit or loss and other comprehensive income sl 22
b) The statement of changes in equity
c) The statement of financial position
d) The statement of cash flows

Question Nine
The main purpose of the statement of changes in equity is:
a) To show an entity's total equity at the end of an accounting period
b) To show how each component of an entity's equity has altered during an accounting
period
c) To show an entity's income, expenses and profit for an accounting period
d) To show an entity's assets, liabilities and equity at the end of an accounting period

Question Ten
The notes to the financial statements should provide information:
a) About the entity's accounting policies
b) Which is relevant to an understanding of the financial statements
c) As required by international standards, if not presented elsewhere in the financial
statements
d) All of the above sl 29

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Question Eleven
Certain items of income and expense must be excluded when calculating an entity's profit
or loss. True or False?
a) True
b) False cf.PCNR 132-4 Pge 18
Question Twelve
An entity must present an analysis of expenses by function (e.g. cost of sales, distribution
costs and administrative expenses).True or False?
a) True
b) False sl 3 par 1

OPC-TRAINING
IAS2:INVENTORIES
PRACTICE MULTIPLE CHOICE QUESTIONS
QUESTION ONE
The definition of "inventories" given by international standard IAS2 states that items
qualify as inventories only if they are assets held for sale in the ordinary course of business
or assets in the process of production for such sale. True or False?
a) True sl4
b) False
QUESTION TWO
Which of the following items cannot be included in the cost of inventories?
a) The cost of abnormal wastage of materials and labour sl 9
b) Fixed production overheads
c) Variable production overheads
d) Irrecoverable import duties payable on the acquisition of inventories

QUESTION THREE
Which of the following items should be included in the cost of inventories?
a) Conversion costs sl6 §1
b) The cost of storing finished goods
c) The cost of abnormal wastage of materials and labour
d) Selling costs

QUESTION FOUR
The cost formulas permitted by IAS2 are:
a) FIFO, LIFO and AVCO
b) LIFO and AVCO
c) FIFO and AVCO (cout moyen ponderé) sl 11
d) FIFO and LIFO

QUESTION FIVE
The FIFO cost formula assumes that:

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 a) The inventory items which are sold or consumed are those acquired most recently
b) The inventory items which are sold or consumed are those acquired longest ago
c) Newer inventory items are sold or consumed before older inventory items
d) The inventory items which are sold or consumed are a mixture of those acquired
previously

QUESTION SIX
The net realisable value of inventories is defined by IAS2 as:
a) Selling price less costs of completion and selling costs IAS 2→ 2.0
b) Selling price less costs of completion
c) Selling price
d) Cost price

QUESTION SEVEN
On 31 December 2015, a company has partly-completed inventory with a cost to date of
£26,300. It is expected that further costs of £8,900 will be incurred in order to complete the
inventory. It will then be sold for £47,500. Selling costs will be £2,000 (this is exclude in cost
production cf.sl.9)
The cost and the net realisable value of this inventory at 31 December 2015 are:
a) £35,200 and £47,500
b) £26,300 and £36,600 cf IAS 2 summary point 2.0 dernier paragraphe
c) £35,200 and £45,500
d) £26,300 and £38,600 a signaler dans le groupe

QUESTION EIGHT
IAS2 states that inventories should be measured at:
a) Net realisable value
b) The higher of cost and net realisable value
c) Cost
d) The lower of cost and net realisable value sl5

QUESTION NINE
If production is abnormally low, the amount of fixed overheads allocated to each unit of
production should be calculated by dividing total fixed overheads by the number of units
produced.
a) True
b) False

QUESTION TEN

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At the end of an accounting period, the cost of a company's inventory is £450,000. This
includes damaged items with a cost of £25,000 which are expected to be sold for only
£10,000 (less selling expenses of 5%). All other items of inventory have a net realizable
value which exceeds cost.
The amount at which the company's inventory should be recognized at the end of the
period is:
a) £425,000
b) £435,000
c) £450,000
d) £434,500 = 450000-25000 +10000-(10000*5/100)

QUESTION ELEVEN
A company's inventories should be measured at the lower of total cost and total net
realizable value. True or False?
a) True
b) False

QUESTION TWELVE
A company which makes only one type of product incurs fixed production overheads of
£180,000 for an accounting year. Actual production during the year was 30,000 units.
Normal production is 24,000 units per annum.
The amount of fixed production overheads that should be allocated to each unit of
production is:
a) £30
b) £nil
c) £7.50
d) £6 = (180 000/30 000)
e)

IAS7: STATEMENT OF CASHFLOWS

PRACTICE QUESTIONS
QUESTION ONE
Which of the following is not a characteristic of an entity's cash equivalents, as defined by
international standard IAS7?
a) An investment which is subject to significant risk of changes in value sl6,sl2
b) A highly liquid investment
c) A short-term investment
d) An investment which is readily convertible into known amounts of cash

QUESTION TWO

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Bank overdrafts are generally regarded as a component of an entity's cash and cash
equivalents. True or False?
a) True
b) False? Sl7

QUESTION THREE
Cash inflows and outflows arising from operating activities do not include:
a) Cash payments to employees
b) Cash receipts from the sale of property, plant and equipment sl14
c) Cash receipts from the sale of goods and services
d) Cash payments to suppliers for goods and services

QUESTION FOUR
Which of the following is a cash inflow or outflow arising from investing activities?
a) Royalties received
b) Cash received on the issue of loan stock
c) Cash received from the repayment of loans made to other parties sl 15
d) Cash repaid to lenders

QUESTION FIVE
Which of the following is not a cash inflow or outflow arising from financing activities?
a) Cash proceeds from issuing debentures
b) Cash repayments of amounts borrowed
c) Cash payments to acquire equity of other entities sl 17
d) Cash proceeds of a share issue

QUESTION SIX
If cash flows from operating activities are reported using the direct method, the statement
of cash flows does not show:
a) Depreciation charges sl7 sl de 9pges
b) Cash paid to employees
c) Cash received from customers
d) Cash paid to suppliers

QUESTION SEVEN
A company uses the indirect method for reporting cash flows from operating activities.
During an accounting period, inventories have risen by £5,000, trade receivables have
fallen by £4,000 and trade payables have risen by £3,000. When calculating the net cash
inflow or outflow from operating activities, the required adjustments are as follows:
a) Add £5,000, Subtract £4,000, Add £3,000
b) Subtract £5,000, Add £4,000, Subtract £3,000
c) Subtract £5,000, Add £4,000, Add £3,000

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 d) Add £5,000, Subtract £4,000, Subtract £3,000

QUESTION EIGHT
A company uses the indirect method for reporting cash flows from operating activities.
During an accounting period, plant which had cost £30,000 some years ago was sold for
£3,000. The accumulated depreciation on this plant at the time of disposal was £25,000. The
effects of this transaction on the statement of cash flows are as follows:
a) Operating activities:
Subtract loss on disposal £2,000
Investing activities:
Cash received on disposal of plant £3,000
b) Operating activities:
Add disposal proceeds £3,000
Investing activities:
Subtract loss on disposal of plant £2,000
c) Operating activities:
Add back loss on disposal £2,000
Investing activities:
Cash received on disposal of plant £3,000
d) Operating activities:
Add back loss on disposal £5,000
Investing activities:
Cash received on disposal of plant £3,000

QUESTION NINE
The sale of an investment which ranks as a cash equivalent is treated as a cash inflow from
investing activities. True or False?
a) True
b) False? (mvt entre 2 postes de trésorerie ex .virement interne entre banque et caisse)sl7 par
166 ias 7 full

QUESTION TEN
IAS7 requires that all entities which comply with international standards should present a
statement of cash flows. True or False?
a) True sl6 c’est un element des états financiers ias 7 in french champ d’application par 1
b) False pour groupe

QUESTION ELEVEN
The carrying amount of a company's property, plant and equipment was £740,000 at the
beginning of an accounting year and £835,000 at the end of the year. The depreciation
charge for the year was £100,000.
Plant with a carrying amount of £25,000 was sold during the year for £10,000 and a
property was revalued upwards by £50,000.

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The cash outflow caused by the acquisition of property, plant and equipment during the
year was:
a) £205,000
b) £170,000 = 1°) (835 000+100 000+25000-50000)-740000 ) ou 2°)740 000-100 000
depreciation charge -25000 plant value=615000 +50000 revalued =665 000
835 000 -665 000 = 170 000 (=cash flow)
c) £220,000
d) £155,000

QUESTION TWELVE
The current tax liability shown in a company's statement of financial position at 31
December 2016 is £392,000. The comparative figure at 31 December 2015 was £355,000.
The tax expense shown in the statement of comprehensive income for the year to 31
December 2016 is £410,000. A transfer of £5,000 was made to the deferred tax account
during the year.
The amount of tax paid during the year to 31 December 2016 was:
a) £355,000
b) £368,000 =(355000+410000-392000)=373000-5000 impot diferre =368000 charge au
cours de l’année
c) £342,000
d) £410,000

IAS 8: ACCOUNTING POLICIES ACCOUNTING ESTIMATES AND ERRORS

PRACTICE QUESTIONS
QUESTION ONE
The term "accounting policies" refers to:
a) The accounting principles applied by an entity
b) The accounting concepts and conventions adopted by an entity
c) The measurement bases used by an entity
d) All of the above

QUESTION TWO
If an accounting standard applies specifically to a certain item, an entity's accounting
policy in relation to that item must normally be determined by applying the relevant
standard. True or False?
a) True
b) False

QUESTION THREE
An entity may change one of its accounting policies:
a) Never
b) Whenever it wishes to do so
c) If this would reduce the cost of preparing the financial statements
d) If this would result in the provision of reliable and more relevant information

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QUESTION FOUR
A change in accounting policy which does not result from the initial application of an
international standard must normally be accounted for:
a) Prospectively
b) Prospectively unless it is impracticable to do so
c) Either retrospectively or prospectively
d) Retrospectively

QUESTION FIVE
For all changes in accounting policy, the entity concerned must disclose:
a) The reasons which suggest that the change will provide reliable and more relevant
information
b) The fact that the change has been accounted for in accordance with transitional
provisions specified in the applicable standard
c) The nature of the change
d) The title of the international standard that has caused the change to occur

QUESTION SIX
A change in an accounting estimate should be accounted for:
a) Retrospectively
b) Retrospectively unless it is impracticable to do so
c) Either retrospectively or prospectively
d) Prospectively

QUESTION SEVEN
The use of estimates always undermines the reliability of financial statements. True or
False?
a) True
b) False

QUESTION EIGHT
Prior period errors could be caused by:
a) Mistakes in applying accounting policies
b) Fraud
c) Mathematical errors
d) Any of the above

QUESTION NINE
A material prior period error should be corrected:
a) Prospectively unless it is impracticable to do so
b) Prospectively
c) Retrospectively
d) Either retrospectively or prospectively

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QUESTION TEN
An entity's financial statements provide comparative figures for the previous five
accounting periods. If the entity accounts for an item retrospectively, then:
a) The entity may choose whether or not to restate comparative figures
b) Comparative figures are restated for the prior accounting period but never for the four
previous accounting periods
c) Comparative figures for the previous five accounting periods are not restated in any
circumstances
d) Comparative figures for all of the previous five accounting periods may need to be
restated

QUESTION 11
Which of the following is a change of accounting policy?
a) Changing the depreciation method used in relation to a depreciable non-current asset
b) Revising the residual value of a depreciable non-current asset
c) Correcting an error found in the previous year's financial statements
d) Changing from the cost model to the revaluation model when measuring items of
property, plant and equipment

QUESTION 12
When preparing its financial statements for 2016, a company discovers an error in the 2015
financial statements. The 2015 revenue figure should have been £102m but was erroneously
reported as £100m. This difference is regarded as material. The comparative figure for
revenue shown in the 2016 financial statements should be:
a) £100m (but the error should then be explained in the notes to the financial statements)
b) £100m
c) Either £100m or £102m as the company sees fit
d) £102m→ (non coparative because thre’s mistake)

OPC-TRAINING
IAS10: EVENTS AFTER REPORTING PERIOD
PRACTICE QUESTIONS

QUESTION ONE
International standard IAS10 requires that financial statements should be adjusted to take
account of any events occurring between the end of the reporting period and the date when the
financial statements are authorised for issue. True or False?
a) True
b) False sl3 et 4

QUESTION TWO

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A company is preparing its financial statements for the year to 31 March 2016. Assuming that
each of the following events occurs after 31 March 2016 but before the financial statements are
authorised for issue, which one of them should be classified as a NON-ADJUSTING event?
a) The discovery of a major fraud that had occurred in January 2016
b) The sale of inventories which were held on 31 March 2016
c) The bankruptcy of a customer who owed a substantial amount to the company at 31
March 2016
d) A change in tax rates that is announced in April 2016 and which has a material impact on
the tax liability for the year to 31 March 2016

QUESTION THREE
Although the accounting treatment of inventories is prescribed by IAS2 Inventories, a company
may also need to apply IAS10 Events After the Reporting Period when determining the
inventories figure which should be shown in its financial statements. True or False?
a) True
b) False

QUESTION FOUR
LMO Ltd's (LMO) reporting period ended on 30 June 20X1 and the financial statements were
issued on 15 September 20X1. Which of the following is an adjusting event?
a) The fair value of land was $750 000 at 30 June 20X1. On 31 July this valuation was
reduced to $650 000 due to council re-zoning.
b) The construction of new office premises was in progress at the end of the reporting
period and was completed on 15 August 20X1.
c) On 25 July 20X1, LMO signed a contract to sell its existing office premises for $1 500
000 for which settlement is expected to be on 25 September 20X1.
d) A court case was in progress at the end of the reporting period which was finalised on 13
September 20X1 and damages were awarded against the entity.

QUESTION FIVE
Onus Ltd's (Onus) reporting period ends on 31 December and the financial statements are issued
on 31 March. Which of the following is a non-adjusting event?
a) A major customer owing $200 000 filed for bankruptcy on 24 January.
b) On 15 March, the entity had damages of $25 000 awarded against it after a year-long
court battle with a supplier. Sl 5
c) The auditor attended the stock count and on 29 March requested that the entity adjusts
this value by $13 000 due to a valuation error.
d) Onus' 20% stake in XYZ Ltd was recorded at $550 000 in the financial statements, but
this value had decreased to $450 000 as at 31 March. ( there’s correction→ adjusting)

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 IAS 12: INCOME TAXES
PRACTICE QUESTIONS
QUESTION ONE
Current tax should be measured using tax rates and tax laws that:
a) Have been enacted by the end of the reporting period
b) Have been enacted or substantively enacted by the date that the financial statements are
authorised for issue
c) Have been enacted or substantively enacted by the end of the reporting period
d) Have been enacted by the date that the financial statements are authorised for issue

QUESTION TWO
A company's estimate of its current tax liability for the year to 31 December 2014 differed
from the actual tax liability by £10,000. This resulted in a credit balance of £10,000 being
shown in the company's trial balance as at 31 December 2015.The current tax liability for
the year to 31 December 2015 is estimated to be £340,000.The current tax expense which
should be shown in the statement of comprehensive income for the year to 31 December
2015 is:
a) £330,000 or
b) £10,000
c) £350,000
d) £340,000

QUESTION THREE
Deferred tax should be accounted for in relation to certain differences between taxable
profit and accounting profit. The differences which require an entity to account for
deferred tax are:
a) Temporary differences sl 5-6
b) Permanent differences
c) Both temporary differences and permanent differences
d) Neither temporary differences nor permanent differences

QUESTION FOUR
A company's financial statements for the year to 30 June 2016 show a pre-tax profit of
£500,000. This is after charging depreciation of £100,000. Depreciation for the year for tax

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purposes is £160,000. Assuming that the rate of tax paid by the company is 20%, the
required transfer to or from the company's deferred tax account is:
a) A transfer of £32,000 to the deferred tax account
b) A transfer of £12,000 from the deferred tax account
c) A transfer of £32,000 from the deferred tax account
d) A transfer of £12,000 to the deferred tax account

QUESTION FIVE
A company's financial statements for the year to 31 March 2016 show a pre-tax profit of
£2,700,000. This is after charging depreciation of £320,000.
Depreciation for the year for tax purposes is £150,000. Assuming that the rate of tax paid
by the company is 23%, the required transfer to or from the company's deferred tax
account is:
a) A transfer of £34,500 from the deferred tax account
b) A transfer of £39,100 to the deferred tax account
c) A transfer of £39,100 from the deferred tax account
d) A transfer of £34,500 to the deferred tax account

QUESTION SIX
The tax base of an asset is defined by international standard IAS12 as the amount which is
attributable to that asset for tax purposes. If the tax base of an asset is less than its carrying
amount, this is evidence of:
a) A deductible temporary difference (base taxable est inferieur a sa valeur comptable on a
trop payé ex solde cred sur ccf)
b) A taxable temporary difference
c) A taxable permanent difference
d) A deductible permanent difference

QUESTION SEVEN
An item of property, plant and equipment is shown in a company's statement of financial
position at its written down value of £420,000. For tax purposes, the item's written down
value is £610,000. The residual value of the item at the end of its useful life is expected to be
£nil.Assuming that the company pays tax at 23%, the resulting deferred tax asset or
liability is:
a) Deferred tax liability of £43,700
b) £nil
c) Deferred tax asset of £43,700
d) Deferred tax asset of £190,000

QUESTION EIGHT
Unpaid expenses are shown in a company's statement of financial position as a current
liability of £30,000. These expenses have already been deducted when computing
accounting profit but will not be deducted for tax purposes until they are paid.Assuming
that the company pays tax at 20%, the resulting deferred tax asset or liability is:
a) Deferred tax liability of £6,000
b) Deferred tax asset of £6,000

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 c) £nil
d) Deferred tax asset of £30,000

QUESTION NINE
A deferred tax asset should never be recognised in relation to unused tax losses carried
forward for deduction against future taxable profits. True or False?
a) True
b) False
QUESTION TEN
A deferred tax liability must be recognised for all taxable temporary differences. True or
False?
a) True
b) False sl 18

OPC-TRAINING
IAS 16: PROPERTY PLANT AND EQUIPMENT
PRACTICE QUESTIONS
QUESTION ONE
Which of the following items qualifies as property, plant and equipment?
a) A machine bought for use in more than one accounting period
b) A machine bought for resale to a customer
c) A machine bought for use during a single accounting period
d) Computer software bought for use in more than one accounting period

QUESTION TWO
The "carrying amount" of an item of property, plant and equipment generally refers to:
a) The depreciable amount of the item
b) The cost of the item
c) The replacement cost of the item
d) The amount at which the item is recognised in the financial statements

QUESTION THREE (aor b)

A company pays £40,000 to replace a major component of a factory machine. The faulty
component that is replaced is sold for £2,000. The carrying amount of the machine just
before this replacement occurs is £450,000, of which £10,000 relates to the faulty
component that is being replaced. The revised carrying amount of the machine after the
replacement occurs and the profit or loss on disposal of the faulty component are:
a) Carrying amount £480,000, Loss £10,000
b) Carrying amount £480,000, Loss £8,000 (450 000+40 000)-10 000=480000, perte
=10000-2000=8000
c) Carrying amount £490,000, Loss £8,000
d) Carrying amount £490,000, Profit £2,000

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QUESTION FOUR
Which of the following would not be included in the cost of an item of property, plant and
equipment?
a) Testing costs (a,b,c) are include →IAS in french pge 3 paragraphe
17
b) Site preparation costs
c) Delivery and installation charges
d) Refundable value added tax

QUESTION FIVE
On 31 December 2014, a company acquires land for £500,000. The land is revalued at
£530,000 on 31 December 2015 and £460,000 on 31 December 2016.
The company prepares financial statements to 31 December each year and uses the
revaluation model in relation to land.
The correct accounting treatment of each revaluation in the statement of comprehensive
income is as follows:
a) 2015
Income £30,000 →is not comprehensive in come
2016
Expense £70,000
b) 2015
Other comprehensive income £30,000
2016
Negative other comprehensive income £70,000
c) 2015
Other comprehensive income £30,000
2016
Expense £70,000
d) 2015
Other comprehensive income £30,000
2016
Negative other comprehensive income £30,000
Expense £40,000

QUESTION SIX
Depreciation is defined as the fall in value of an asset during an accounting period. True or
False?
a) True
b) False

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QUESTION SEVEN
On 1 January 2015, a company which prepares financial statements to 31 December each
year buys an item of equipment for £20,000. Useful life is estimated to be six years and
residual value is expected to be approximately £1,500. The company uses the diminishing
balance method of depreciation at a rate of 35% per annum. To the nearest pound, the
depreciation of this item for the year to 31 December 2016 would be:
a) £3,083
b) £4,209
c) £4,550 (20 000-1500)*35/100=7000 reste 20 000-7000 =13000 *35/500=4 550
d) £7,000

QUESTION EIGHT
Borrowing costs that are directly attributable to the acquisition of a qualifying
asset must be capitalised as part of the cost of that asset. True or False?
a) True
b) False

QUESTION NINE
A company has the following general borrowings outstanding throughout the whole of an
accounting year:
6.5% Bank loan of £400,000
8% Bank loan of £800,000
If a qualifying asset costing £50,000 is funded out of these general borrowings, the
capitalisation rate that should be used is:
a) 7.5% → (6,5/100*400 000 )+ (8/100* 800 000) / (800 000+400 000)
b) 8%
c) 7.25%
d) 6.5%

QUESTION TEN
If investment property is measured using the fair value model, a gain arising from a change
in the fair value of an investment property must be:
a) Recognised as other comprehensive income
b) Ignored
c) Recognised in the calculation of profit or loss
d) Credited to a revaluation reserve sl 12

QUESTION ELEVEN
If a company adopts the revaluation method in relation to an item of property, plant and
equipment, it is no longer necessary to charge depreciation in relation to that item. True or
False?
a) True
b) False

QUESTION TWELVE

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On 1 January 2015, a company which prepares financial statements to 31 December
acquires an item of equipment and receives a government grant of 20% of the item's cost.
The item cost £30,000 and has an expected useful life of seven years with a residual value of
approximately £4,000.
The item is depreciated on the diminishing balance basis at a rate of 25% per annum. The
amount of the grant that should be recognised as income in the year to 31 December 2016
is:
a) £1,298
b) £857
c) £6,000
d) £1,500

OPC-TRAINING
IAS 19: EMPLOYEE BENEFITS
PRACTICE QUESTIONS
QUESTION ONE
Short-term employee benefits do not include:
a) Employer's social security contributions
b) Benefits in kind
c) Short-term sick pay
d) Bonuses payable more than 12 months after the end of the period in which the related
employee services are performed

QUESTION TWO
An employer's statement of financial position should show a liability equal to the expected
amount payable in the following 12 months as a result of unused entitlement to non-
accumulating short-term paid absences. True or False?
a) True
b) False

QUESTION THREE
Defined benefit plans are post-retirement benefit plans where:
a) The employer is legally obliged to provide an agreed level of post-employment benefits
b) The employer is legally or constructively obliged to provide an agreed level of post-
employment benefits
c) The risk that benefits will be less than expected falls upon the employees
d) The employer pays an agreed level of contributions into the pension fund each year and is
not obliged to make any further contributions

QUESTION FOUR

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In the case of a defined benefit plan, the employer's statement of financial position should
show:
a) An asset or liability equal to the difference between the present value of the defined
benefit obligation at the end of the reporting period and the fair value of the plan assets at
the end of the reporting period →sl 13-14
b) A liability equal to the undiscounted defined benefit obligation at the end of the reporting
period
c) An asset or liability equal to the difference between the present value of the defined
benefit obligation at the end of the reporting period and the cost of the plan assets at the
end of the reporting period
d) An asset equal to the cost of the plan assets at the end of the reporting period

QUESTION FIVE
In the case of a defined benefit plan, the expense shown in the employer's statement of
comprehensive income should normally include:
a) The interest cost for the period
b) The interest income for the period
c) The present value of the current service cost for the reporting period
d) All of the above

QUESTION SIX
The interest cost in relation to a defined benefit plan arises because the accumulated
benefits which employees had earned at the end of the previous period are now one period
closer to being paid. True or False?
a) True
b) False

QUESTION SEVEN
In the case of a defined benefit plan, actuarial gains may arise because:
a) Benefits paid during the period are less than employee contributions.
b) Benefits paid during the period are less than employer contributions.
c) There are favourable differences between actuarial assumptions made at the end of the
previous period and actual events which have occurred in the current period sl18
d) There are adverse differences between actuarial assumptions made at the end of the
previous period and actual events which have occurred in the current period

QUESTION EIGHT
In the case of a defined benefit scheme, the items which must be shown in other
comprehensive income in the statement of comprehensive income are:
a) Actuarial gains or losses only
b) Interest cost and interest income

Page 18 of 56
 c) Return on plan assets only
d) Actuarial gains or losses and the return on plan assets (less interest income)

QUESTION NINE
Which of the following items is always treated as a long-term employee benefit?
a) A company car provided for an employee's use
b) A bonus payable wholly before 12 months after the end of the period in which the related
employee services are performed
c) Employee wages and salaries
d) A bonus which is not payable wholly before 12 months after the end of the period in
which the related employee services are performed

QUESTION TEN
Redundancy payments to employees should be recognised as an expense in the employer's
statement of comprehensive income as soon as the employer is considering making those
employees redundant. True or False?
a) True
b) False

IAS 20: ACCOUNTING FOR GOVERNMENT GRANTS &DISCLOSURE OF

GOVERNMENT ASSISTANCE
PRACTICE QUESTIONS
QUESTION ONE
Government grants are recognized only when there is reasonable assurance that the entity:
a) Will comply with the conditions attaching to them
b) The grants are received
c) The grants will be received
d) A and b
e) A and c

QUESTION TWO
According to IAS 20 Accounting for Government Grants and Disclosure of Government
Assistance, which of the following is a government grant?
a) Tax benefits sl 7
b) Free technical or marketing advice
c) Public improvements that benefit the entire community
d) Provision of guarantees
e) Noninterest-bearing loan from the government

Page 19 of 56
QUESTION THREE
According to IAS 20 Accounting for Government Grants and Disclosure of Government
Assistance, which of the following is not a government grant?
a) Aid from the government to compensate for casualty losses already incurred.
b) Cash received from the government to be used to acquire land
c) Government procurement policy that is responsible for a portion of the entity’s sales.
d) Aid from the government to defray expenses which are yet to be incurred.

QUESTION FOUR
According to IAS 20 Accounting for Government Grants and Disclosure of Government
Assistance, non-monetary grants are measured at:
a) Fair value
b) Nominal amount
c) Cost
d) A or b

QUESTION FIVE
The repayment of government grants is accounted for:
a) Prospectively
b) Retrospectively
c) A or b
d) Not accounted for

QUESTION SIX
In relation to a benefit included in the term ‘government assistance” are the following
statements true or false according to IAS 20 Government Grants and Government
assistance?
Statement(1) Statement (2)
1. The provision of infrastructure in developing areas is a benefit
2. The imposition of trading constraints on competitors is a benefit
a) False False
b) False True
c)True False
d) True True

QUESTION SIX (b)

On January 20x8 The Ebro Company commenced trading to provide key skills education
facilities in a region identified for technology development. Also, on 1 January 20x8, the
company received two grants from its government for setting up its operations in this location:
Grant (a) – was paid to give financial assistance for start-up costs already incurred.
Grant (b) – was paid to subsidize the costs of purchasing computer software over the five-year

Page 20 of 56
period.

The company is almost certain to keep the facilities operational for the next five years. The
company’s accounting year end is 31 December. Are the following statements concerning
recognition of the income from the two government grants true or false, according to IAS 20
Government Grants and Government assistance?
Statement(1) Statement (2)
1. Income from Grant (a) should be recognized in full on receipt in 20x8.
2. Income from Grant (b) should be recognized in full at the end of 5 years.
a) False False
b) False True
c) True False
d) True True

QUESTION SEVEN
Which of the following statements ate correct according to IAS 20 Government grants and
government assistance?
I. Any adjustment needed when a government grant becomes repayable is accounted for as a
change in accounting estimate
II. In respect of loans from the government at an interest rate of 0%, an imputed interest
charge should be made in profit or loss
III. Where conditions apply to a government grant, it should only be recognized when there is
reasonable assurance that the conditions will be met
IV. A government grant should not be recognized until it is received in cash
a) I, III
b) I, II, III
c) I, III, IV
d) I, II, III, IV

QUESTION EIGHT
Which of these disclosures is not required by IAS 20?
a) The accounting policy adopted for government grants, including methods of
presentation adopted in the financial statements.
b) Unfulfilled conditions and other contingencies attaching to government assistance
c) The names of the government agencies that gave the grants along with the dates of
sanction of the grants by these government agencies and the dates when cash was
received in case of monetary grants sl pge 34
d) The nature and extent of government grants recognized in the financial statements and in
indication of other forms of government assistance from which the entity has directly
benefited.

QUESTION NINE
Which of the following is not specifically excluded from the purview of IAS 20?
a) Government participation in ownership of the entity
b) Government grant covered by IAS 41

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c) Government assistance provided in the form of tax benefits
d) Forgivable loan from the government

QUESTION TEN
Government grants should normally be accounted on accruals basis. Which of the
following grants received would you account rather on a receipts basis?
a) Received to make good past losses to keep the business from closure
b) Received to enhance the literacy and communicational ability of staff
c) Received by a charity to operate one of its identified activities
d) Received in the form of land for a business to re-locate to a deprived area

QUESTION 11
IAS 20 permits the reporting of government grant either on the deferral method or on the
offset method. As accountant of a limited company which of the following reasons will
prompt you to opt for the deferral method rather than the offset method?
a) Under the offset method the asset will not be reported at its real cost
b) Under the offset method the company’s profit will be under-stated.
c) On the offset method the depreciation expense is netted against income from grant
d) Deferral method would identify the liability that needs to be refunded if the terms of the
grant are not complied with.
(i) C & D)
(ii) All Four
(iii) A&C
(iv) B, C & D

QUESTION 12
With regard to government grants and accounting for it which of the following statements
is inaccurate?
a) Government grant should preferably be accounted for on accruals basis
b) Assistance in cash or kind received from government or others is known as government
grant
c) The asset related grant may be reported either on deferral method or offset method
d) When a grant is not in cash the grant should always be accounted for at a nominal value

QUESTION 13
Government assistance includes:
a) Indirect help, such as improving local infrastructure.
b) Direct action to provide economic benefits to qualifying firms.
c) Imposing import tariffs.

QUESTION 14

Page 22 of 56
In the case of the grants related to an asset, which of these accounting treatments is
prescribed by IAS 20 to be presented in the Statement of Financial Position?
a) Record the grant at the fair value in the first year and take it to income statement in the
subsequent year.
b) Either set up the grant as deferred income or deduct it in arriving at the carrying amount of
the asset. Sl 28
c) Take it to the income statement and disclose it as an exceptional item.
d) Record the grant at nominal value in the first year and write it off in the subsequent year.

QUESTION 15
LEX LIMITED acquires a manufacturing plant for BIF 10 million on 1 January 20X16 and
thereby qualified for a cash subsidy (grant) of BIF 2.5 million (received on this date) from the
government. The plant was immediately available for use as management intended and is written
off on a straight-line basis over an estimated useful life of five years. The estimated current
residual value is insignificant. Lex Limited has a 30 June reporting date.
What type of government grant is this?
(a) Asset based (non-monetary)
(b) Asset based (monetary)
(c) Income based
(d) Reduction of a loan

IAS 21: THE EFFECT OF CHANGE IN EXCHANGE RATES

PRACTICE QUESTIONS

QUESTION ONE
An entity's functional currency is defined by international standard IAS21 as the currency
in which the entity's financial statements are presented. True or False?
a) True
b) False sl 3

QUESTION TWO
Factors which might help to determine an entity's functional currency include:
a) The currency that mainly influences sales prices for the entity's goods and services
b) The currency that mainly influences the costs of providing goods and services
c) The currency in which funds from financing activities are generated
d) All of the above sl6

QUESTION THREE

Page 23 of 56
When translating from an entity's functional currency to a presentation currency, any
resulting exchange differences are recognised in other comprehensive income. True or
False?
a) True gpe
b) False →sl 32; ias in French 3.2; ias pdf 39

QUESTION FOUR
Which one of the following statements about the presentation currency of an entity is true
a) Presentation currency is determined by applying strict criteria in IAS 21
b) An entity can freely choose the presentation currency in its financial statements pdf ias
21 38
c) It is the currency of the primary economic environment in which the entity operates

QUESTION FIVE
Which of the following items are classified as monetary items?
a) Trade payable& Deferred taxes sl 12 and 14,ias 21 summary 2.0
b) Available for sale investment
c) Inventory
d) Prepaid rent

QUESTION SIX
For consolidation purposes, the group functional currency is used to translate the financial
statements of foreign operations prior to consolidation.
c) True
d) False ias 21 pdf ,38-39;

QUESTION SEVEN
The definition of foreign operation as per IAS 21 is:
a) This is subsidiary, associate, joint venture or branch whose activities are conducted in a
country or currency different from the functional currency of the reporting entity →sl7
point1
b) This is subsidiary, associate and or branch whose activities are conducted in a country or
currency different from the functional currency of the reporting entity
c) This is a associate, joint venture or branch whose activities are conducted in a country or
currency different from the functional currency of the reporting entity
QUESTION EIGHT
The definition of Monetary item is:
a) Units of currency held, or assets and liabilities to be received or paid (in cash), in a fixed
number of currency units sl 14,ias 21 in French paragraphe 2
b) Units of inventory held, or assets and liabilities to be received or paid (in cash), in a fixed
number of currency units
c) Units of payable held, or assets and liabilities to be received or paid (in cash), in a fixed
number of currency units
Page 24 of 56
QUESTION NINE
The rules in IAS21 for reporting assets and liabilities at the end of a subsequent reporting period
make a distinction between:
a) Monetary items, such as trade payables and trade receivables, and non-monetary items,
such as non-current assets and inventory ias 21 summary 2.0
b) Tangible items, such as trade payables and trade receivables, and non-monetary items,
such as non-current assets and inventory
c) Intangible items, such as trade payables and trade receivables, and non-monetary items,
such as non-current assets and inventory
QUESTION TEN
Accounting treatment for the statement of financial position:
a) Monetary items Re-translate at the closing rate ias in French 23
b) Monetary items Re-translate at the opening rate
c) Monetary items Re-translate at the spot rate
QUESTION 11
Accounting treatment for the statement of financial position:
a) Non-monetary items carried at cost- No re-translation. The transaction is left at original
spot rate
b) Non-monetary items carried at cost- Yes re-translation. The transaction is left at original
spot rate
c) None of the above two ias 21 in French point 39
QUESTION 12
A gain or loss arising on the re-translating of a monetary item should be:
a) Recognised in profit or loss in the period that it arises sl 25, pdf ias
b) Not necessary to recognized
c) Recognised in profit and loss in the next year

QUESTION 13
A UK company (with sterling as its functional currency) has a financial year ending on 31
December.
It buys goods from a supplier in France (with euros as its functional currency) on 17 November
20X6 invoiced in euros $140,000. The French supplier is eventually paid in March 20X7.
Exchange rates over the period were as follows:
17 November 20X6 $1=$0.70
31 December 20X6 $1=$0.75
Average for November $1=$0.72
a) The purchase/inventory and the trade payable should be recorded initially by translating
the transaction at the spot rate of $1=$0.70. This gives a translated value of $98,000 for
recording in the ledger accounts ($140,000 X0.70) →sl 18 paragraphe 1,ias 21 pdf 29 b
b) The purchase/inventory and the trade payable should be recorded initially by translating
the transaction at the spot rate of $1=$0.75. This gives a translated value of $105,000 for
recording in the ledger accounts ($140,000 X0.75)

Page 25 of 56
 c) The purchase/inventory and the trade payable should be recorded initially by translating
the transaction at the spot rate of $1=$0.72. This gives a translated value of $100,000 for
recording in the ledger accounts ($140,000 X0.72)
QUESTION 14
Ringmaster Ltd. (RL) has identified the Euro as its functional currency. RL establishes two
entities, Spectator Ltd. (SL) and Clowns and Co. Inc. (CCI) which are wholly-owned. SL is
incorporated in the United States (US) and CCI is incorporated in the United Kingdom (UK).
The following transactions occurred:
RL loaned £2Million each to SL and CCI and both recognized the advance as an intragroup
payable.
• CCI borrowed an additional £3Million from an unrelated third party. SL guaranteed this third
party loan.
• CCI invested its entire £5 million in the building of a manufacturing facility to serve the
domestic UK market. CCI manufactures clown cars which are sold in the British pound sterling,
and, in the current year, has begun generating revenue which CCI intends to use to repay the
third party loan.
• SL used its £2million loan from RL to invest in marketable securities in international markets.
Its investing strategies are determined by RL. SL does not have any other activities or purposes.
What is SL’s and CCI’s functional currencies?
a) The functional currencies of both SL and CCI are the Euro.
b) SL’s functional currency is the US dollar; CCI’s functional currency is pound sterling.sl 5
c) SL’s functional currency is the Euro; CCI’s functional currency is pound sterling.
d) Management of RL can choose either the Euro or US dollar as the functional currencies
of SL and CCI

QUESTION 15
Fun Inc. (FI), which is located in the Philippines, manufactures toys used as carnival prizes that
are exported to the United States (US). Sales prices are denominated in US dollars because the
US is the primary competitive market for the toys. Sales are settled in US dollars and the related
cash receipts are converted to Philippine pesos, only when necessary, to settle local expenses.
The majority of FI’s borrowings are denominated in US dollars. Management salaries, which
represent a significant portion of labour costs, are denominated in US dollars. All other labour
costs, as well as all material costs, are denominated and settled in Philippine pesos.
What is FI’s functional currency?
a) The Philippine peso is FI’s functional currency.
b) The US dollar is FI’s functional currency.
c) FI’s management is able to choose either the Philippine pesos or US dollar as FI’s
functional currency. Sl6
d) FI’s management is free to choose any currency as FI’s functional currency.
QUESTION 16

Page 26 of 56
Trampoline Inc. (TI) has a 100%-owned foreign subsidiary, Springs Ltd. (SL). It sells 80% the
subsidiary on December 31, 2015. As at December 31, 2015, the credit balance in the translation
reserve within equity, which relates to this subsidiary, was $7M.
How does TI treat the cumulative exchange gain in the December 31, 2015 financial
statements?
a) The entire cumulative exchange gain of $7M in equity is reclassified to profit or loss.
b) The entire cumulative exchange gain of $7M in equity is reclassified to retained earnings.
c) $5.6M of the cumulative exchange gain in equity is reclassified to profit or loss.
d) $5.6M of the cumulative exchange gain in equity is reclassified to retained earnings.
QUESTION 17
Quality Tents Ltd. (QTL) sold tents to Big Top Ltd. (BTL) for $23,000 US dollars on April 2nd,
2015. QTL has determined its functional currency to be the Canadian dollar. On the date of the
sale, the exchange rate was $1USD= $1.26 CAD. On April 2nd, 2015, QTL initially recorded
revenue and a corresponding trade receivable of $28,980. QTL received the full payment
($23,000 USD) for the sale of the tents on June 30, 2015 when the exchange rate was $1USD=
$1.2 CAD.
What is the journal entry to account for the payment received on June 30, 2015?
DR Cash $27,600
a) DR Other comprehensive income - foreign exchange loss $1,380
CR Receivable $28,980

b) DR Cash $28,980
CR Receivable $ 28,980

DR Cash $27,600
c) DR Profit or loss - foreign exchange loss $1,380
CR Receivable $28,980

QUESTION 18
A company prepares financial statements to 31 December each year and has the pound
sterling as its functional currency. On 29 October 2015, the company buys inventory for
$28,380. This amount is still unpaid at 31 December 2015. The inventory is all sold during
the month of December. Exchange rates are £1 = $1.65 on 29 October 2015 and £1 = $1.72
on 31 December 2015. Calculate: (a) the amount in £ at which the purchase and the trade
payable should be recorded on 29 October 2015 (b) the amount in £ at which the trade
payable should be shown in the statement of financial position at 31 December 2015 (c) the
exchange difference which arises.
(a) £17,200 (b) £17,200 (c) £nil
(b) £17,200 (b) £16,500 (c) £700 (favorable) →a)28,380 *1/1,65=17,200;b)28,380*1/1,72=
16,65; c) 17 ,200-16,500 =700 dette fseur au 29/10/2015 est 17200 dette fseur au
31/12/2015 = 16,500 diff de change =700 favorable for the campany
(c) £16,500 (b) £16,500 (c) £nil
(d) £17,200 (b) £16,500 (c) £700 (adverse)

Page 27 of 56
 IAS 24: RELATED PARTY DISCLOSURES
PRACTICE QUESTIONS

QUESTION ONE
The fact that an entity has related parties cannot have any effect on the entity's financial
performance unless there are transactions between the entity and those parties. True or
False?
a) True
b) False sl5

QUESTION TWO
International standard IAS24 requires an entity's financial statements to be restated so
that transactions with related parties are reported at the prices that would have applied if
the transactions had been carried out at arm's length. True or False?
a) True
b) False sl 5 objective , sl 14

QUESTION THREE
A person (P) is necessarily related to a reporting entity (R) if:
a) P owns ordinary shares in R
b) P's grandfather has control over R sl 6
c) P is an employee of R
d) P is the domestic partner of a director of R

QUESTION FOUR
A person (P) is not necessarily related to a reporting entity (R) if:
a) P is a major customer of R sl6
b) P is a director of R
c) P is a director of R's parent company
d) P's father has significant influence over R

QUESTION FIVE
An entity (E) is necessarily related to a reporting entity (R) if:
a) E owns ordinary shares in R
b) E is a major supplier of R
c) E and R are both subsidiaries of the same parent sl7( iii)
d) E is a bank which lends money to R

QUESTION SIX
An entity (E) is not necessarily related to a reporting entity (R) if:
a) E is an associate of R
b) E has significant influence over R
c) E is a subsidiary of a subsidiary of R
d) E and R have a director in common sl10

Page 28 of 56
QUESTION SEVEN
IAS 24 Related Party Disclosures, requires relationships between parents and subsidiaries
be disclosed irrespective of whether there have been transactions between those related
parties.
c) True cf. doc word presentation et diclosure a)I ;sl14
d) False

QUESTION EIGHT
In IAS 24 Related Party Disclosures, two entities having a director in common are assumed
related parties.
a) True
b) False sl 7-8

QUESTION NINE
In order for control to exist as the basis for a related-party disclosure the capacity to
control must have been demonstrated as having been exercised in the past.
a) True
b) False sl 6-8

QUESTION TEN
A major supplier with whom an entity transacts a significant volume of business is
considered a related party in IAS 24 Related Party Disclosures.
a) True
b) False sl10

QUESTION 11
A close family member of someone who is key management personnel is considered to be a
related party.
a) True sl 6
b) False

QUESTION 12
Entities that have a controlling entity in common are considered to be 'other related
parties'.
a) True
b) False (they are not other related parties in ias 24)

QUESTION 13
A frequently applied practice in relation to the disclosure of related party transactions with
comparison to arm’s length transactions of similar nature and type
a) Make general statement that there were some transactions.
b) Not report that there were any transactions
c) State that the transactions is at arm’s length terms and conditions.
d) Specify the number, nature and amount of transactions with comparison to arm’s length
transactions of similar nature and type. Sl 14§2,15

Page 29 of 56
QUESTION 14
What is the primary objective of disclosing related party transactions?
a) To provide information about fraud resulting from transactions with related parties
b) To show the possibility that the financial statements are affected by the existence of related
parties sl5
c) To adhere with substance over form principle of the Conceptual Framework
d) To make the notes to financial statements more understandable

QUESTION 15
Which of the following is not true?
a) Related party relationships are questionable feature of business. Voire Sl 14
b) Related party relationship could affect the net income of an entity.
c) Related parties may enter into transactions that unrelated ones would not.
d) The entity’s financial performance may be affected by a related party relationship even if
there is no transaction between them.

QUESTION 16
Which of the following is least likely a term of a related party transaction?
a) Noninterest-bearing
b) No scheduled repayment term
c) No covenant
d) No extension of grace period

QUESTION 17
Which of the following is not a related party of an entity?
a) Member of the executive committee
b) One of the subsidiaries
c) The major creditor-bank of the entity sl 10
d) The daughter of the chief operating officer

QUESTION 18
Person A is the president of Success Blizzard Corporation. He is a child of Person M and Person
F, along with Person B and Person S. Person A has a wife, Person W, who died years ago.
Person A and Person W has children, Person C1, Person C2 and Person C3. Due to loneliness,
Person A currently has a domestic partner, Person D, and they have a child, Person C4. Person D
has two children in her prior marriage, Person X and Person Y.
Which of the following is a close family member of Person A?
a) Person M
b) Person F
c) Person D sl4
d) Person B

QUESTION 19
Using the information in QUESTION18, which of the following is true?
a) Person C4 is a close family member. Sl4

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b) Person S is a close family member.
c) Person X is not a close family member.
d) Person Y is not a close family member.

QUESTION 20
Using the information in QUESTION 18, who among the following is a related party of
Success Blizzard Corporation?
a) Person M
b) Person D sl6
c) Person S
d) Person B

QUESTION 21
Which of the following is considered as key management personnel compensation?
a) Reimbursement of expenses
b) Shares issued to president in exchange for cash consideration
c) Bonuses to all employees
d) Post-employment benefit sl 12

QUESTION22
Company A is a subsidiary of Company B. Company B is a subsidiary of Company C.
Company C is a subsidiary of Company D. Who is Company B in the point of view of
Company A?
a) Ultimate parent
b) Intermediate parent
c) Immediate parent
d) Entity under common control

QUESTION 23
Company A is a subsidiary of Company B. Company B is a subsidiary of Company C.
Company C is a subsidiary of Company D. Who is Company C in the point of view of
Company A?
a) Ultimate parent
b) Intermediate parent
c) Immediate parent
d) Entity under common control

QUESTION 24
Company A is a subsidiary of Company B. Company B is a subsidiary of Company C.
Company C is a subsidiary of Company D. Who is Company D in the point of view of
Company A?
a) Ultimate parent
b) Intermediate parent

Page 31 of 56
c) Immediate parent
d) Entity under common control

QUESTION 25
Which of the following standards covers related party disclosures?
a) IAS 20
b) IAS 21
c) IAS 23
d) IAS 24

QUESTION 26
This is a term used for persons having authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly, including any director (whether
executive or otherwise) of that entity.
a) Board of directors
b) Executive committee
c) Key management personnel sl3
d) Audit committee

QUESTION 27
Which of the following is not a close member of the family of a person in accordance to IAS 24?
a) Spouse
b) Child
c) Parent sl 4
d) Domestic partner

QUESTION 28
This pertains to an entity that obtains key management personnel services from another
entity.
a) Parent company
b) Key management personnel
c) Management entity sl 13 §1
d) Ultimate parent company

QUESTION 29
Statement I: In considering each possible related party relationship, attention is directed to the
substance of the relationship and not merely the legal form.
Statement II: Two entities that have a director or other member of key management personnel in
common or a member of key management personnel of one entity has significant influence over
the other entity are related parties.
a) True; True

Page 32 of 56
b) True; False
c) False; True
d) False; False

QUESTION 30
Entity Z has control over Entities A, B, and C and has significant influence over Entities D and
E. Entity C has significant influence over Entity F. In the separate financial statements of Entity
Z, which of the following is not a related party?
a) Entity D
b) Entity E
c) Entity F voire sl 7.9
d) None of the foregoing

QUESTION 31
Entity Z has control over Entities A, B, and C and has significant influence over Entities D and
E. Entity C has significant influence over Entity F. In the financial statements of Entity A,
which of the following is not a related party?
a) Entity D
b) Entity E
c) Entity F sl 7,9
d) None of the foregoing

QUESTION 32
Entity Z has control over Entities A, B, and C and has significant influence over Entities D and
E. Entity C has significant influence over Entity F. In the financial statements of Entity D, who
is a related party?
a) Entity E
b) Entity F
c) Entity Z voire sl 7,7
d) None of the foregoing

QUESTION 33
Entity Z has control over Entities A, B, and C and has significant influence over Entities D and
E. Entity C has significant influence over Entity F. In the consolidated financial statements of
Entity Z, who is not a related party?
a) Entity C
b) Entity D
c) Entity E
d) Entity F ( z n’est pas une société mère de F et c’est la societé mere qui fait la consolidation)

OPC-TRAINING
IAS 26: ACCOUNTING AND REPORTING BY RETIREMENT BENEFIT PLANS
PRACTICE QUESTIONS
QUESTION ONE
IAS 26 deals with
a) Employers’ accounting for the cost of retirement benefits.

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b) General-purpose financial statements of financial reports of retirement benefit plans. Sl2
c) Only defined contribution plans and not defined benefit plans.
d) Only defined benefit plans and not defined contribution plans.

QUESTION TWO
In rare circumstances, when a retirement benefit plan has attributes of both defined
contribution and defined benefit plans, according to IAS 26 it is
a) Defined benefit plan.
b) Defined contribution plan.
c) Neither a defined benefit nor a defined contribution plan. IAS 26 in French(plus clair) 2.0; sl 4
point 1
d) For aspects of the hybrid plan that are similar to a defined benefit plan: provisions of IAS 26
applicable to such plans are to be applied; for aspects of the hybrid plan that are similar to a
defined contribution plan, provisions of IAS 26 that apply to such plans are to be applied.

QUESTION THREE
In the case of a defined benefit plan, IAS 26
a) Makes it incumbent upon the plan to obtain an actuarial valuation. Ias 26 in French 3.0,sl 21
b) Does not make it incumbent upon the plan to obtain an actuarial valuation.
c) Allows the plan to estimate the present value of future benefits based on valuations done by
other similar plans.
d) Allows the plan to add a percentage based on consumer price index to the previous year’s
valuation of actuarial valuation.

IAS 27: SEPARATE FINANCIAL STATEMENTS

PRACTICE QUESTIONS
QUESTION ONE
IAS 27 mandates which entities shall produce separate financial statements.
a) True
b) False sl 3 □2

QUESTION TWO
Separate Financial Statements states that in the separate financial statements (i.e. not the
consolidated financial statements) of an investor, an investment in an associate should be:
a) Held at cost or in accordance with IFRS 9 or equity accounted sl4, 8
b) Valued using the equity method of accounting
c) Held at fair value only
d) Held at cost

QUESTION THREE

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Consolidated financial statements are the financial statements of a group in which the
assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries
are presented __________.
a) As those of a single economic entity sl 4
b) In one set of financial statements
c) Separately
d) B and C

QUESTION THREE
Dividends from a subsidiary, a joint venture or an associate are recognised in profit or loss
unless the entity elects to use the __________, in which case the dividend is recognised as a
reduction from the carrying amount of the investment.
a) Present value method
b) Equity method sl9
c) Income method
d) Cost method
QUESTION FOUR
At the date of initial application, an investment entity that previously measured its
investment in a subsidiary at __________ through other comprehensive income shall
continue to measure that investment at__________.
a) Fair value; fair value
b) Cost; fair value sl9, ias 27 on net 11A and 11B (b)
c) Fair value; cost
d) Cost; cost

IAS 28: INVESTMENT IN ASSOCIATES AND JOINT VENTURES

PRACTICE QUESTIONS

QUESTION ONE
An associate is an entity over which the investor has:
a) Control
b) Some influence
c) Significant influence sl4
d) Joint control

QUESTION TWO
Which of the following would normally indicate that an investor has significant influence
over an investee?
a) The investor owns 55% of the investee's ordinary shares
b) The investor owns 21% of the investee's ordinary shares sl 7,□3

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 c) The investor has the right to direct the investee to enter into transactions for the investor's
benefit
d) The investor has the right to appoint or remove members of the investee's key
management personnel.
QUESTION THREE
An investment in an associate is normally accounted for using the equity method. This
method requires that the investment in the associate is:
a) Initially recognised at cost and not adjusted thereafter
b) Initially recognised at cost and then adjusted in each subsequent accounting period to
reflect the investor's share of the associate's profit or loss for the period sl 11
c) Initially recognised at cost and then adjusted to fair value in subsequent accounting
periods
d) Recognised at fair value

QUESTION FOUR à supprimer cf.3

An investment in an associate is normally accounted for using the equity method. This
method requires that the investment in the associate is:
a) Initially recognised at cost and not adjusted thereafter
b) Initially recognised at cost and then adjusted in each subsequent accounting period to
reflect the investor's share of the associate's profit or loss for the period
c) Initially recognised at cost and then adjusted to fair value in subsequent accounting
periods
d) Recognised at fair value

QUESTION FIVE
On 1 May 2015, V Ltd acquired 35% of the ordinary share capital of W Ltd at a cost of
£472,500. It was agreed that this amount was equal to 35% of the fair value of the net
assets of W Ltd on that date. In the year to 30 April 2016, W Ltd made a profit after tax of
£80,000 and paid an ordinary dividend of £32,000. In the financial statements of V Ltd, the
carrying amount of the investment in W Ltd as at 30 April 2016 should be:
a) £500,500
b) £472,500
c) £489,300→ = 472000 + (80000*35/100)- (32000*35/100) cf.sl 11 =488800
d)
e) £520,500 → = 472000 + (80000-32000) cf.sl 11

QUESTION SIX
An investor company has a 22% interest in an associate. During an accounting period, the
investor bought goods from the associate for £70,000. These goods had cost the associate

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£50,000. One-quarter of the goods remained in the investor's inventories at the end of the
period. The unrealised profit is:
a) £20,000
b) £5,000
c) £1,100 perte for investor (70 000-50 000)=20 000 one quarter =20 000/4 = 5000
unrealised profit =5000*22/100 =1 100
d) £4,400

QUESTION SEVEN
Any positive goodwill which is included in the carrying amount of an investment in an
associate is not separately recognised and is not separately tested for impairment. True or
False?
a) True sl 15
b) False

QUESTION EIGHT
If an investor company owns less than 20% of an investee's voting power, the investor
cannot have significant influence over the investee and therefore the investee cannot be the
investor's associate. True or False?
a) True
b) False sl 7and sl 4

QUESTION NINE
The two categories of joint arrangement recognised by international standard IFRS11 are:
a) Joint ventures and joint contracts
b) Joint operations and joint ventures IFRS 11 pdf point6
c) Joint operations and joint enterprises
d) Joint ventures and joint enterprises

QUESTION TEN
An interest in a joint operation must be accounted for by the equity method. True or False?
a) True scope → sl 2,sl 3 □2

b) False

QUESTION 11
With the equity method of accounting, the investor's share of the investee's revenue is
added to the investor's own revenue in the investor's statement of comprehensive income.
True or False?
a) True sl 4 □ 2derniers
b) False

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 OPC-TRAINING
IAS 29: FINANCIAL REPORTING UNDER HYPERINFLATIONARY ECONOMIES
PRACTICE QUESTIONS

QUESTION ONE
One of the perceived weaknesses of historical cost accounting in times of inflation is that:
a) Profits are understated
b) Monetary assets are not shown in the statement of financial position sl 17par3
c) Depreciation charges are overstated
d) Holding gains on inventories are not identified sl 15 dernier paragraphe

QUESTION TWO
If financial statements are drawn up on the historical cost basis, holding gains on
inventories are shown separately in the statement of comprehensive income. True or False?
a) True sl28
b) False

QUESTION THREE
Which of the following is not regarded as an indicator of hyperinflation?
a) The general population prefers to keep its wealth in non-monetary assets
b) Credit sales take place at prices which compensate for the expected loss in purchasing
power during the credit period
c) The cumulative rate of inflation over a five-year period is approaching 100% sl5→ e.
d) Wages are index-linked

QUESTION FOUR
The main steps required in the preparation of a restated statement of financial position (in
accordance with the requirements of IAS29) do not include:cf sl 6
a) The restatement of non-monetary items carried at a valuation
b) Credit sales take place at prices which compensate for the expected loss in purchasing
power during the credit period
c) The restatement of non-monetary items carried at historical cost
d) The restatement of each component of equity

QUESTION FIVE
If an entity prepares restated financial statements in accordance with the requirements of
IAS29, the gain or loss on the entity's net monetary position is shown in other
comprehensive income. True or False?
a) True
b) False sl28

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QUESTION SIX
International standard IAS29 adopts a current purchasing power approach to the
restatement of financial statements. True or False?
a) True
b) False sl 15; sl 10
QUESTION SEVEN
A company's only asset on 1 January is cash of £50,000. All of this cash is immediately
spent on inventories, 60% of which are sold for £42,000 on 31 January. There are no other
transactions during the month of January. The index of general prices rose by 2% during
the month.
Calculate the company's profit for the month:
(a) in nominal capital terms, and
(b) in terms of general purchasing power.
(a) £12,000 (b) £12,000
(b) £12,000 (b) £11,400 (50 000*60/100)=30 000 ; bfce =42000-30000 =12000 ;
30000*102/100= 30600 bfce 2 =42000 -30600 = 11400
(c) £12,000 (b) £11,000
(d) £11,400 (b) £12,000

QUESTION EIGHT
An entity has several subsidiaries that operate in a hyperinflationary economy which uses
the zloty as its local currency. Management wishes to show the financial statements in U.S.
dollars. Many of the operations of the entity are within countries that are not
hyperinflationary, and these subsidiaries use the euro as their functional currency. What
currency should the entity use to present its consolidated financial statements?
a) U.S. dollars.
b) The zloty.sl 10 □1
c) The euro.
d) The entity may use any currence

QUESTION NINE
An entity has a subsidiary that operates in a hyperinflationary economy. The subsidiary’s
financial statements are measured in terms of the local currency, which is the zloty. The
subsidiary’s financial statements have been restated in accordance with IAS 29. The parent
is located in the United States and prepares the consolidated financial statements in U.S.
dollars. Which of the following accounting procedures is correct in terms of the
consolidation of the subsidiary’s financial statements?
a) The subsidiary’s financial statements should be prepared using the zloty and then retranslated
into U.S. dollars.
b) The subsidiary’s financial statements should be prepared using the zloty, then restated
according to IAS 29, and then retranslated into U.S. dollars at closing rates. Sl9 □2,□3,
c) The subsidiary’s financial statements should be remeasured in U.S. dollars, then restated
according to IAS 29 and consolidated.

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d) The subsidiary’s financial statements should be deconsolidated and not included in the
consolidated financial statements.

QUESTION TEN
Property was purchased on December 31, 20X5, for 20 million zlotis. The general price
index in the country was 60.1 on that date. On December 31, 20X7, the general price index
had risen to 240.4.If the entity operates in a hyperinflationary economy, what would be the
carrying amount in the financial statements of the property after restatement?
a) 20 million zlotis
b) 1,200.2 million zlotis
c) 80 million zlotis =20 000 000 *240,4/60,1)=80 000 000
d) 4,808 million zlotis

OPC-TRAINING
IAS 33: EARNINGS PER SHARE
PRACTICE QUESTIONS
QUESTION ONE
All companies which comply with international standards must present EPS figures in the
statement of comprehensive income. True or False?
a) True
b) False sl3

QUESTION TWO
When calculating earnings per share, a bonus issue made during the current accounting
period is treated as if it had been made at the beginning of the earliest period for which
comparative figures are presented. True or False?
a) True sl 14;24
b) False
c)

QUESTION THREE
Diluted EPS can never exceed basic EPS. True or False?
a) True sl 6( bfce diminueou perte augmente) and sl 18 dern par le denominateur augmente
b) False

QUESTION FOUR
In most cases, share options will not have a dilutive effect on EPS when they are exercised.
True or False?
a) True
b) False sl 17

QUESTION FIVE
Earnings per share is calculated before accounting for which of the following items?
a) Preference dividend for the period.

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b) Ordinary dividend. Sl 4,7
c) Taxation.
d) Minority interest.

QUESTION SIX a or b
Ordinary shares issued as part of a business combination are included in the EPS
calculation in the case of the “purchase” method from
a) The beginning of the accounting period. Sl 24
b) The date of acquisition.
c) The end of the accounting period.
d)The midpoint of the accounting year.

QUESTION SEVEN
Entity A has an ordinary “A” class, non-voting share, which is entitled to a fixed dividend
of 6% per annum. The “A” class ordinary share will
a) Be included in the “per share” calculation after adjustment for the fixed dividend.
b) Be included in the “per share” calculation for EPS without adjustment for the fixed dividend.
c) Not be included in the “per share” calculation for EPS. Sl 9 and 11
d) Be included in the calculation of diluted EPS.

QUESTION EIGHT
When an enterprise makes a bonus issue/stock split/stock dividend or a rights issue, then
a) The previous year’s EPS is not adjusted for the issue.
b) The previous year’s EPS is adjusted for the issue. Sl 24 par1
c) Only a note of the effect on the previous year’s EPS is made.
d) Only the diluted EPS for the previous year is adjusted.

QUESTION NINE
If a stock option is converted on March 31, 20X1, then
a) The potential ordinary shares (stock option) are included in diluted EPS up to March 31,20X1,
and in basic EPS from the date converted to the year-end (both weighted accordingly).
b) The ordinary shares are not included in the diluted EPS calculation but are included in basic
EPS.
c) The ordinary shares are not included in the basic EPS but are included in diluted EPS.
d) The effects of the stock option are included only in previous year’s EPS calculation.par 1

QUESTION TEN
A company's issued share capital throughout an accounting period consists of 500,000
ordinary shares of 20p and 80,000 preference shares of £1. Profit after tax for the period is
£320,000 and the preference dividend is £8,000. Basic EPS for the period is:
a) 64p

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 b) 62.4p cf ias 33 in french pge 79(320 000-8 000/500 000)
c) 55.2p
d) £3.12

QUESTION 11
On 1 January 2015, a company's issued share capital consisted of 120,000 ordinary shares
of £1. On 1 May 2015, the company issued another 30,000 ordinary shares and on 1 July
2015 the company issued a further 50,000 shares. Both issues were made at full market
price. The weighted average number of shares outstanding during the year to 31 December
2015 was:
a) 165,000 (=120000)+(30000*8/12)+(50000+6/12)
b) 160,000
c) 156,667
d) 175,000

QUESTION 12
A company's profit after tax for the year to 30 June 2016 was £1m. The company's issued
share capital at 1 July 2015 consisted of 2,400,000 ordinary shares of 50p each. A further
300,000 shares were issued at full market price on 1 September 2015. Basic EPS for the
year is:
a) 75.5p
b) 39.2p
c) 78.4p
d) 37.7p

QUESTION 13
A company's profit after tax for the year to 31 December 2015 was £150,000. The
comparative figure for 2014 was £135,000. The company's issued share capital at 1 January
2014 consisted of 240,000 ordinary shares. A 1 for 4 bonus issue was made on 1 July 2015.
There were no other share issues in either year. Basic EPS for 2015 and restated basic EPS
for 2014 are:
a) 55.6p and 50p
b) 50p and 45p
c) 50p and 56.25p
d) 55.6p and 56.25p

QUESTION 14

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In February 2016, a company makes a 1 for 10 rights issue at 70p per share. The market
value of the company's shares just before this rights issue was £1.25 per share. The
theoretical market value per share after the rights issue has been made is:
a) 70p
b) £1.32
c) £1.20
d) £1.14

QUESTION 15
A company's profit after tax for the year to 31 December 2015 was £275,000. The
company's issued share capital on 1 January 2015 consisted of 350,000 ordinary shares. On
1 April 2015, the company made a 1 for 7 rights issue at £1 per share. The market value of
the company's shares just before this rights issue was £1.40 per share. Basic EPS for 2015
is:
a) 70.1p
b) 75.8p
c) 68.75p
d) 70.4p

IAS34: INTERIM FINANCIAL REPORTING

PRACTICE QUESTIONS

QUESTION ONE
Under IAS 34, interim financial reports should be published
a) Once a year at any time in that year.
b) Within a month of the half-year-end. Sl 4
c) On a quarterly basis.
d) Whenever the entity wishes.

QUESTION TWO
The IASB encourages publicly traded entities to provide interim financial reports

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a) At least at the end of the half-year and within 60 days of the end of the interim period. sl4
b) Within a month of the half-year-end.
c) On a quarterly basis.
d) Whenever the entity wishes.

QUESTION THREE
If an entity does not prepare interim financial reports, then
a) The year-end financial statements are deemed not to comply with IFRS.
b) The year-end financial statements’ compliance with IFRS is not affected.
c) The year-end financial statements will not be acceptable under local legislation.
d) Interim financial reports should be included in the year-end financial statements. sl 7

QUESTION FOUR
Interim financial reports should include as a minimum
a) A complete set of financial statements complying with IAS 1. sl7
b) A condensed set of financial statements and selected notes.
c) A balance sheet and income statement only.
d) A condensed balance sheet, income statement, and cash flow statement only.

QUESTION FIVE
IAS 34 states a presumption that anyone reading interim financial reports will
a) Understand all International Financial Reporting Standards.
b) Have access to the records of the entity.
c) Have access to the most recent annual report. Sl8
d) Not make decisions based on the report.

IAS 36: IMPAIRMENT OF ASSETS

PRACTICE QUESTIONS
QUESTION ONE
IAS 36 applies to which of the following assets?
a) Inventories.
b) Financial assets.
c) Assets held for sale.
d) Property, plant, and equipment. Sl3, 4

QUESTION TWO
An impairment loss is:
a) The amount by which the carrying amount of an asset exceeds its market value

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 b) The amount by which the recoverable amount of an asset exceeds its carrying amount
c) The amount by which the recoverable amount of an asset exceeds its written down value
d) The amount by which the carrying amount of an asset exceeds its recoverable amount sl 6

QUESTION THREE
Which of the following is not an external indication of impairment?
a) An unexpected decline in the asset's market value
b) An adverse technological change
c) The asset becoming idle sl8
d) An adverse change in the market in which the entity operates

QUESTION FOUR
An asset's recoverable amount is equal to:
a) The higher of the asset's fair value less costs of disposal and its value in use sl6,10
b) The lower of the asset's fair value less costs of disposal and its value in use
c) The higher of the asset's value in use and its carrying amount
d) The lower of the asset's value in use and its carrying amount

QUESTION FIVE
Value-in-use is
a) The market value.
b) The discounted present value of future cash flows arising from use of the asset and from its
disposal. Sl7, 12
c) The higher of an asset’s fair value less cost to sell and its market value.
d) The amount at which the asset is recognized in the balance sheet.

QUESTION SIX
How often should goodwill acquired in a business combination be tested for impairment?
a) Never
b) Every year sl11, French doc p 84 2.2
c) Whenever there are internal indications of impairment gpe sl8
d) Whenever there are external indications of impairment

QUESTION SEVEN
The IAS36 definition of "corporate assets" specifically excludes goodwill. True or False?
a) True sl4
b) False

QUESTION EIGHT
Which of the following is not an internal indication of the fact that an impairment loss has
now decreased or no longer exists?
a) A favourable change has occurred to the extent to which the asset will be used
b) A favourable change has occurred to the manner in which the asset will be used
c) The asset's market value has increased significantly
d) There is evidence that the economic performance of the asset will be better than expected

Page 45 of 56
QUESTION NINE
A previously-recognised impairment loss relating to goodwill should be reversed if there is
evidence that the loss no longer exists. True or False?
a) True French doc p 86 3.2,sl35
b) False

QUESTION 10
The carrying amount of a CGU is £525,000. This consists of goodwill £75,000, development
costs £150,000 and property, plant and equipment £300,000. The CGU has a recoverable
amount of £330,000.
What is the carrying amount of the property, plant and equipment after the impairment
loss has been allocated?
£180,000
£220,000
£240,000
£300,000

QUESTION 11
An asset has a carrying amount of £22,500 and is expected to yield cash flows of £8,000 per
annum for the next three years. The asset's fair value less costs of disposal is £17,200.
Assuming that all cash flows occur at the end of the year concerned and that the
appropriate discount rate is 7%, the amount of the impairment loss is:
a) £5,300 (recoverable amount = 17.200; carrying amount = 22 500; the amount of the
impairment loss is 22 500 -17200) cf. formule

b) £1,500
c) £nil
d) £1,508

QUESTION 12
An asset's carrying amount is £25,000. Its fair value less costs of disposal is £15,000 and its
value in use is £19,000. There is an impairment loss of:
a) £6,000
b) £nil
c) £4,000
d) £10,000

QUESTION 13
The carrying amount of a CGU is £900,000. This consists of goodwill £250,000 and
property, plant and equipment £650,000. The CGU has a recoverable amount of only
£520,000. How is the impairment loss allocated between the assets of the CGU?

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 a) Goodwill £130,000, PPE £250,000
b) Goodwill £190,000, PPE £190,000
c) Goodwill £nil, PPE £380,000
d) Goodwill £250,000, PPE £130,000

QUESTION 14
An asset is expected to generate cash inflows of £20,000 per annum for each of the next
three years and then to be scrapped. These cash inflows will occur at the end of each year.
The asset will generate no cash outflows. Using a discounting rate of 10% per annum, what
is the asset's value in use?
a) £49,720
b) £54,000
c) £60,000
d) £54,540

IAS 37: PROVISIONS, CONTIGENT LIABILITIES AND CONTIGENT ASSETS

PRACTICE QUESTIONS
QUESTION ONE
International standard IAS37 defines a provision as:
a) A liability which is not legally enforceable
b) A liability of uncertain timing or amount sl 5
c) A liability which is legally enforceable
d) A reduction in the carrying amount of an asset

QUESTION TWO
In order that a provision should be recognized in an entity's financial statements, it is
necessary that:

Page 47 of 56
 a) It is possible that an outflow of economic benefits will be required
b) The entity has a present obligation sl9
c) The entity has a legally enforceable obligation
d) The entity has a constructive obligation

QUESTION THREE
A past event is an obligating event only if it gives rise to a legally enforceable obligation.
True or False?
a) True
b) False sl7

QUESTION FOUR
The amount of a provision should be the "best estimate" of the expenditure required to
settle the obligation concerned. This estimate:
a) Should be the amount that would rationally be paid to settle or transfer the obligation sl
15
b) Should always be discounted to present value
c) Should not be adjusted to reflect future events that may affect the amount of the required
expenditure, whether or not those events are likely to occur.
d) Must always be made on the basis of advice from independent experts

QUESTION FIVE
If a provision relates to a large population of items, the amount of the provision should be
calculated as:
a) The maximum expenditure that could possibly be required to settle the obligation
b) The expected value of the expenditure that will be required to settle the obligation sl 15
par 1
c) The present value of the maximum expenditure that could possibly be required to settle
the obligation
d) The minimum expenditure that could possibly be required to settle the obligation

QUESTION SIX
Should a provision be recognised in relation to:
(a) future operating losses?
(b) onerous contracts?
(a) No (b) Yes doc in word
(b) Yes (b) No
(c) No (b) No
(a) Yes (b) Yes

QUESTION SEVEN
In general terms, a contingent liability is a possible obligation that depends upon the
outcome of a future event that is within the control of the entity. True or False?

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 a) True
b) False sl6

QUESTION EIGHT
Contingent liabilities are:
a) Always recognised in the statement of financial position
b) Recognised in the statement of financial position unless the possibility of an outflow of
economic benefits is remote
c) Disclosed in the notes unless the possibility of an outflow of economic benefits is remote
sl11,6
d) Always disclosed in the notes to the financial statements

QUESTION NINE
Contingent assets are:
a) Disclosed in the notes if an inflow of economic benefits is probable sl12
b) Always disclosed in the notes to the financial statements
c) Disclosed in the notes unless an inflow of economic benefits is only remotely possible
d) Always recognised in the statement of financial position
QUESTION TEN
When can a “provision” be recognized in accordance with IAS 37?
a) When there is a legal obligation arising from a past (obligating) event, the probability of

b) the outflow of resources is more than remote (but less than probable), and a reliable estimate
can be made of the amount of the obligation.

c) When there is a constructive obligation as a result of a past (obligating) event, the outflow of
resources is probable, and a reliable estimate can be made of the amount of the obligation. Sl9

d) When there is a possible obligation arising from a past event, the outflow of resources is
probable, and an approximate amount can be set aside toward the obligation.

e) When management decides that it is essential that a provision be made for unforeseen
circumstances and keeping in mind this year the profits were enough but next year there may be
losses
QUESTION 11
Amazon Inc. has been served a legal notice on December 15, 20X1, by the local
environmental protection agency (EPA) to fit smoke detectors in its factory on or before
June 30, 20X2 (before June 30 of the following year). The cost of fitting smoke detectors in
its factory is estimated at $250,000. How should Amazon Inc. treat this in its financial
statements for the year ended December 31, 20X1?
a) Recognize a provision for $250,000 in the financial statements for the year ended
December31, 20X1.

b) Recognize a provision for $125,000 in the financial statements for the year ended
December31, 20X1, because the other 50% of the estimated amount will be recognized next year
in the financial statement for the year ended December 31, 20X2.

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c) Because Amazon Inc. can avoid the future expenditure by changing the method of operations
and thus there is no present obligation for the future expenditure, no provision is required at
December 31, 20X1, but as there is a possible obligation, this warrants disclosure in footnotes to
the financial statements for the year ended December 31,20X1.

d) Ignore this for the purposes of the financial statements for the year ended December 31,20X1,
and neither disclose nor provide the estimated amount of $250,000.

QUESTION 12
A competitor has sued an entity for unauthorized use of its patented technology. The
amount that the entity may be required to pay to the competitor if the competitor succeeds
in the lawsuit is determinable with reliability, and according to the legal counsel it is less
than probable (but more than remote) that an outflow of the resources would be needed to
meet the obligation. The entity that was sued should at year end:
a) Recognize a provision for this possible obligation.
b) Make a disclosure of the possible obligation in footnotes to the financial statements.
c) Make no provision or disclosure and wait until the lawsuit is finally decided and then expense
the amount paid on settlement, if any.
d) Set aside, as an appropriation, a contingency reserve, an amount based on the best estimate of
the possible liability.

QUESTION 13
A factory owned by XYZ Inc. was destroyed by fire. XYZ Inc. lodged an insurance claim
for the value of the factory building, plant, and an amount equal to one year’s net profit.
During the year, there were a number of meetings with the representatives of the insurance
company. Finally, before year-end, it was decided that XYZ Inc. would receive
compensation for 90% of its claim. XYZ Inc. received a letter that the settlement check for
that amount had been mailed, but it was not received before year-end. How should XYZ
Inc. treat this in its financial statements?
a) Disclose the contingent asset in the footnotes.

b) Wait until next year when the settlement check is actually received and not recognize or
disclose this receivable at all since at year-end it is a contingent asset.

c) Because the settlement of the claim was conveyed by a letter from the insurance company that
also stated that the settlement check was in the mail for 90% of the claim, record 90% of the
claim as a receivable as it is virtually certain that the contingent asset will be received.

d) Because the settlement of the claim was conveyed by a letter from the insurance company that
also stated that the settlement check was in the mail for 90% of the claim, record 100% of the
claim as a receivable at year-end as it is virtually certain that the contingent asset will be
received, and adjust the 10% next year when the settlement check is actually received.

QUESTION 14

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The board of directors of ABC Inc. decided on December 15, 20XX, to wind up
international operations in the Far East and move them to Australia. The decision was
based on a detailed formal plan of restructuring as required by IAS 37. This decision was
conveyed to all workers and management personnel at the headquarters in Europe. The
cost of restructuring the operations in the Far East as per this detailed plan was $2 million.
How should ABC Inc. treat this restructuring in its financial statements for the year-end
December 31, 20XX?
a) Because ABC Inc. has not announced the restructuring to those affected by the decision and
thus has not raised an expectation that ABC Inc. will actually carry out the restructuring (and as
no constructive obligation has arisen), only disclose the restructuring decision and the cost of
restructuring of $2 million in footnotes to the financial statements.

b) Recognize a provision for restructuring since the board of directors has approved it and it has
been announced in the headquarters of ABC Inc. in Europe.

c) Mention the decision to restructure and the cost involved in the chairman’s statement in the
annual report since it a decision of the board of directors.

d) Because the restructuring has not commenced before year-end, based on prudence, wait until
next year and do nothing in this year’s financial statements.

IAS 40: INVESTMENT PROPERTY

QUESTION ONE
Which TWO of the following properties fall under the definition of investment property and
therefore within the scope of IAS 40?
(i) Property occupied by an employee paying market rent
(ii) A building owned by an entity and leased out under an operating lease
(iii) Property being constructed on behalf of 3rd parties
(iv) Land held for long term appreciation
(i) and (ii)
(ii) and (iv) sl5
(ii) and (iii)
(iii) and (iv)

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QUESTION TWO b or d
Which one of the following would be recognised as an investment property under IAS 40 in the
consolidated financial statements of Buildco?
a) A property intended for sale in the ordinary course of business
b) A property held by Buildco under a finance lease and leased out under an operating lease
c) A property being constructed for a customer
d) A property owned by Buildco and leased out to a subsidiary

QUESTION THREE c or d
Which one of the following is NOT TRUE concerning the treatment of investment properties
under IAS 40?
a) Following initial recognition, investment property can be held at either cost or fair value.
b) An investment property is initially measured at cost, including transaction costs. Pge 2/6
c) If an investment property is held at fair value, this must be applied to all of the entity's
investment property. Pge 3/6 doc de 6 pages
d) A gain or loss arising from a change in the fair value of an investment property should be
recognised in other comprehensive income.

QUESTION FOUR b or d
If a property is partly an investment property, and partly owner-occupied, the firm should account
for the property:
a. As owner-occupied
b. Each portion should be accounted for separately
c. Investment properties

QUESTION FIVE
An investment property should be measured initially at
a) Cost. Sl14
b) Cost less accumulated impairment losses.
c) Depreciable cost less accumulated impairment losses.
d) Fair value less accumulated impairment losses.

QUESTION SIX
In case of property held under an operating lease and classified as investment property
a) The entity has to account for the investment property under the cost model only.
b) The entity has to use the fair value model only.
c) The entity has the choice between the cost model and the fair value model. Sl16,pge 3.2 sum
in french
d) The entity needs only to disclose the fair value and can use the cost model

QUESTION SEVEN
Which TWO of the following disclosures must be made when fair value model is adopted?
(i) Net gains or losses from fair value adjustments
(ii) Useful lives or depreciation rates used
(iii) The amount of impairment losses recognized

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(iv) Additions resulting from acquisitions through business combinations
(i) and (ii)
(ii) and (iv)
(i) and (iv) pge 5/6 doc property word
(iii) and (iv)

QUESTION EIGHT
A gain arising from a change in the fair value of an investment property for which an entity has
opted to use the fair value model is recognized in
a) Net profit or loss for the year. Pge 3/6
b) General reserve in the shareholders’ equity.
c) Valuation reserve in the shareholders’ equity.
d) None of the above.

QUESTION NINE
The applicable IFRS/IAS for a property being constructed or developed for future use as
investment property is
a) IAS 2, Inventories, until construction is complete and then it is accounted for under IAS 40,
Investment Property.
b) IAS 40, Investment Property.
c) IAS 16, Property, Plant, and Equipment, until construction is complete and then it is
accounted for under IAS 40, Investment Property.

QUESTION TEN
Transfers from investment property to property, plant, and equipment are appropriate
a) When there is change of use.
b) Based on the entity’s discretion.
c) Only when the entity adopts the fair value model
d) The entity can never transfer property into another classification on the balance sheet once it is
classified as investment property.

QUESTION 11
Under IAS 40, Investment Property, which additional disclosure must be made when an entity
chooses the cost model as its accounting policy for investment property?
a) The present value of the property
b) The net realisable value of the property
c) The value in use of the property
d) The fair value of the property par 76 p e in frenchcf IAS-IFRS French summary 4.0

QUESTION 12
Hook Ltd (Hook) purchases an investment property on 1 July 20X0 for $100 000. At 30 June
20X1, Hook determines the fair value of the investment property to be $150 000. Hook’s

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accounting policy is to measure investment properties at fair value. Which one of the following
journal entries is processed by Hook on 30 June 20X1?
a) No entry is required
b) Dr. Investment property $50 000/Cr. Asset revaluation reserve $50 000
c) Dr. Investment property $50 000/Cr. Rental revenue $50 000
d) Dr. Investment property $50 000/Cr. Gain on revaluation (profit or loss) $50 000

QUESTION 13
Anchor Ltd (Anchor) purchases an investment property on 1 July 20X0 for $100 000. At 30 June
20X1, Anchor determines the fair value of the investment property to be $150 000. At 30 June
20X2, the fair value of the investment property had fallen to $80 000. Anchor’s accounting policy
is to carry investment properties at fair value. Which one of the following journal entries is
processed by Anchor on 30 June 20X2?
a) Dr. Asset revaluation reserve $70 000/Cr. Investment property $70 000
b) Dr. Loss on revaluation (profit or loss) $50 000/Cr. Investment property $50 000
c) Dr. Asset revaluation reserve $50 000/Dr. Loss on revaluation (profit or loss) $20 000/Cr.
Investment property $70 000
d) Dr. Loss on revaluation (profit or loss) $70 000/Cr. Investment property $70 000

QUESTION 14
Speculate owned an office building with a depreciated historical cost of $2 million and a remaining
useful life of 20 years at 1 April 20X2. On 1 October 20X2 Speculate ceased to occupy the
building and let it out to a third party. The property was reclassified as an investment property,
applying the revaluation model in accordance with IAS 40 Investment Property. The value of the
property was independently assessed at $2.3 million at 1 October 20X2 and had risen to $2.34
million by 31 March 20X3. What amount will be charged/credited to profit or loss in respect of
this property for the year ended 31 March 20X3?
a) Credit $40,000
b) Charge $10,000
c) Charge $50,000
d) No charge or credit

QUESTION 15
Plethora plc has an administration building which it no longer needs. On 1 July 20X9 Plethora plc
entered into an agreement to lease the building out to another company. The building cost
$600,000 on 1 January 20X0 and is being depreciated over 50 years, based on the IAS 16 cost
model. Plethora plc applies the fair value model under IAS 40 - Investment property and the fair
value of the building was judged to be $800,000 on 1 July 20X9. This valuation had not changed at
31 December 20X9. What is the amount of the revaluation surplus that will be recognised in
respect of the building?
a) $200,000
b) $308,000
c) $314,000
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 d) Nil

OPC-TRAINING
IAS 41: BIOLOGICAL ASSETS
PRACTICE QUESTIONS
QUESTION ONE
Which of the following is not dealt with by IAS 41?
a) The accounting for biological assets.
b) The initial measurement of agricultural produce harvested from the entity’s biological assets.
c) The processing of agricultural produce after harvesting. Sl 6
d) The accounting treatment of government grants received in respect of biological assets.

QUESTION TWO
Where there is a long aging or maturation process after harvest, the accounting for such products
should be dealt with by
a) IAS 41.
b) IAS 2, Inventory. Sl 6 □2
c) IAS 16, Property, Plant, and Equipment.
d) IAS 40, Investment Property.

QUESTION THREE
Generally speaking, biological assets relating to agricultural activity should be measured using
a) Historical cost.
b) Historical cost less depreciation less impairment.
c) A fair value approach. Sl20
d) Net realizable value.

QUESTION FOUR
Entity A had a plantation forest that is likely to be harvested and sold in 30 years. The income
should be accounted for in the following way:
a) No income should be reported until first harvest and sale in 30 years.
b) Income should be measured annually and reported using a fair value approach that recognizes
and measures biological growth.
c) The eventual sale proceeds should be estimated and matched to the profit and loss account
over the 30-year period.
d) The plantation forest should be valued every 5 years and the increase in value should be
shown in the statement of recognized gains and losses.

QUESTION FIVE

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Regarding the choice of measurement basis used for valuing biological assets, IAS 41
a) Sets out several ways of measuring fair value. Sl 20,21
b) Recommends the use of historical cost.
c) Recommends the use of current cost.
d) Recommends the use of present value.

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