Consolidated Financial Statements Quiz: Proposed Dividends, Prior Period Items, and Accounting Policies

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Questions and Answers

According to IAS-28, how is goodwill/capital reserve computed on acquisition?

Acquisition value basis

Historical cost basis

Present value basis

Net fair value basis (correct)

What is the requirement under IAS-34 for restatement of figures in case of a change in accounting policy?

Restate only previous year's figures

Restate figures of prior interim periods of the current financial year and comparable figures of previous periods (correct)

No restatement is required

Restate only current period figures

What is the presumption under AS-26 regarding the useful life of an intangible asset?

There is no presumption

There is a rebuttable presumption (correct)

The useful life is perpetual

The useful life is infinite

What is the treatment under IAS-34 for provision for Leave encashment?

Separate guidance is available (B) Signup and view all the answers

What is the requirement under IAS-28 for impairment testing?

Impairment testing is required only if decline in value is permanent (A) Signup and view all the answers

What is the requirement under AS-25 for disclosure of changes in equity?

No disclosure is required (B) Signup and view all the answers

Which method does IAS-10 require for the proposed dividends?

Showing them as a liability (B) Signup and view all the answers

How should changes in accounting policies be accounted for according to IAS-8?

Accounted for retrospectively (D) Signup and view all the answers

Under which item should prior period items be included as per AS-5?

Net profit for the current period (B) Signup and view all the answers

How does IAS-18 prescribe recognizing revenue from rendering services?

Percentage of completion method (A) Signup and view all the answers

What method does IAS-18 require for recognizing interest income?

Effective interest method (A) Signup and view all the answers

In the context of accounting for proposed dividends, why should they not be shown as a disclosure?

To avoid adjusting opening retained earnings (B) Signup and view all the answers

What is the primary purpose of the consistency principle in accounting?

To ensure that accounting policies are consistent from one period to another (C) Signup and view all the answers

According to the accrual principle, when should revenue be recorded?

When the revenue is earned, regardless of when payment is made (B) Signup and view all the answers

What type of assets are inventories?

Assets held for sale or in the process of production (A) Signup and view all the answers

What is the purpose of the prudence principle in accounting?

To make right estimates under conditions of uncertainty (C) Signup and view all the answers

What is the main objective of the materiality principle?

To disclose all items and facts that influence user decisions (C) Signup and view all the answers

Which principle ensures that transactions are recorded in accordance with their economic reality?

Substance over form (B) Signup and view all the answers

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.

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Description

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.