18 Questions
According to IAS-28, how is goodwill/capital reserve computed on acquisition?
Net fair value basis
What is the requirement under IAS-34 for restatement of figures in case of a change in accounting policy?
Restate figures of prior interim periods of the current financial year and comparable figures of previous periods
What is the presumption under AS-26 regarding the useful life of an intangible asset?
There is a rebuttable presumption
What is the treatment under IAS-34 for provision for Leave encashment?
Separate guidance is available
What is the requirement under IAS-28 for impairment testing?
Impairment testing is required only if decline in value is permanent
What is the requirement under AS-25 for disclosure of changes in equity?
No disclosure is required
Which method does IAS-10 require for the proposed dividends?
Showing them as a liability
How should changes in accounting policies be accounted for according to IAS-8?
Accounted for retrospectively
Under which item should prior period items be included as per AS-5?
Net profit for the current period
How does IAS-18 prescribe recognizing revenue from rendering services?
Percentage of completion method
What method does IAS-18 require for recognizing interest income?
Effective interest method
In the context of accounting for proposed dividends, why should they not be shown as a disclosure?
To avoid adjusting opening retained earnings
What is the primary purpose of the consistency principle in accounting?
To ensure that accounting policies are consistent from one period to another
According to the accrual principle, when should revenue be recorded?
When the revenue is earned, regardless of when payment is made
What type of assets are inventories?
Assets held for sale or in the process of production
What is the purpose of the prudence principle in accounting?
To make right estimates under conditions of uncertainty
What is the main objective of the materiality principle?
To disclose all items and facts that influence user decisions
Which principle ensures that transactions are recorded in accordance with their economic reality?
Substance over form
Study Notes
- Accounting policies should be consistent from one period to another.
- The principle of accrual in accounting involves recording revenue or costs in financial statements based on when they are related, regardless of actual receipt or payment.
- Prudence in accounting refers to making accurate estimates in uncertain conditions when preparing financial statements.
- Substance over form principle dictates that transactions should be recorded based on actual economic reality, not just legal form.
- Materiality in financial reporting requires disclosing items that are significant enough to impact the decisions of financial statement users.
- Inventories include assets held for sale, in production for sale, or as materials for production or services, excluding machinery.
- Proposed dividends should not be disclosed as a liability according to IAS-10 and AS-4 regulations.
- Changes in accounting policies must be accounted for retrospectively, with adjustments made to opening retained earnings.
- Revenue recognition for services under IAS-18 allows only the percentage of completion method.
- AS-23 prescribes historical cost basis for goodwill/capital reserve identification, while IAS-28 requires a fair value basis.
- Impairment testing is necessary for investments under IAS-28 but not under AS-23.
- Interim financial reporting requirements differ between IAS-34 and AS-25, with specific guidelines for different provisions and restatements.
- Under AS-26, there is a rebuttable presumption about the useful life of intangible assets, unlike under IAS-38.
Test your knowledge on IAS-10, AS-4, and IAS-8 related to consolidated financial statements. Explore topics like proposed dividends, treatment of prior period items, and changes in accounting policies.
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