Financial Accounting and Reporting (FAR) Preweek Theory May 2024 CPALE PDF

CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING PREWEEK LECTURE MAY 2024 CPALE BATCH 95 1. The Financia...

CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING PREWEEK LECTURE MAY 2024 CPALE BATCH 95 1. The Financial Reporting Standards Council is renamed a. Financial and Sustainability Reporting Standards Council (FSRSC) b. International Sustainability Standards Board (ISSB) c. International Reporting Standards Council d. Philippine Reporting Standards Council 2. The standard-setting board created by IFRS Foundation that sets IFRS Sustainability Disclosure standards for general purpose financial statements is known as a. International Sustainability Standards Board (ISSB) b. International Sustainability Accounting Standards Board c. International Sustainability Board d. International Sustainability Reporting Standards Council 3. The Continuing Professional Development is required for a. Renewal of CPA license b. Accreditation to practice the accountancy profession c. Both renewal of CPA license and accreditation to practice the accountancy profession d. Neither renewal of CPA license nor accreditation to practice the accountancy profession 4. Which of the following statements that relate to the Continuing Professional Education for CPAs is true? a. R.A. No. 10912 mandated the continuing professional education for CPAs for the renewal of CPA license and accreditation to practice the accountancy profession every three years. b. CPAs are required to comply with 120 CPA credit units for accreditation to practice the accounting profession but only 15 CPA credit units are required for the renewal of CPA license. c. A CPA upon reaching the age of 65 years shall be permanently exempted from CPD requirements for renewal of CPA license but not for accreditation to practice the accountancy profession. d. All of these statements are true. 5. Which of the following statements relate the accountancy profession is true? a. The law regulating the practice of accountancy in the Philippines is R.A. 9298 otherwise known as the Philippine Accountancy Act of 2004. b. The Board of Accountancy is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines. c. Certified Public Accountants generally practice their profession in three main areas, namely public accounting, private accounting and government accounting. d. All of these statement are true. 6. Which of following statements that relate to the practice of public accounting is false. a. Single practitioners for the practice of public accounting shall be registered CPAs in the Philippines b. Partners of partnership formed for the practice of public accounting shall be registered CPAs in the Philippines c. The Securities and Exchange Commission can register any corporation organized for the practice of public accounting d. The Professional Regulation Commission upon favorable recommendation of the Board of Accountancy shall issue certificate of accreditation to CPAs in public practice provided the registrant has acquired a minimum of three years of meaningful experience in public practice. 7. The national professional organization of CPAs include all of the following, except a. Association CPAs in Public Practice (ACCPAP) b. Association of CPAs in Commerce and industry (ACPACI) c. National Association of CPAs in Education (NACPAE) d. Financial Executives Institute of the Philippines 7304  Page 2 8. What is the authoritative status of the Conceptual Framework? a. The Conceptual Framework has the highest level of authority b. In the absence of a standard or an interpretation that specifically applies to a transaction, the Conceptual Framework shall be followed c. In the absence of a standard or an interpretation that specifically applies to a transaction, management shall consider the applicability of the Conceptual Framework in developing and applying an accounting policy that results in information that is relevant and reliable d. The Conceptual Framework applies only when the IASB develops new standard 9. Which of the following statements that pertain to qualitative characteristics of financial statements is not true? a. Qualitative characteristics are either fundamental or enhancing. b. The fundamental qualitative characteristics are relevance, faithful representation and materiality. c. The enhancing qualitative characteristics are comparability, understandability, verifiability and timeliness. d. Qualitative characteristics are the attributes that make the information provided in the financial statements useful for the users. 10. Which of the following statements that pertain to the fundamental and enhancing qualitative characteristics is true?. a. Accounting information is considered relevant when it is capable of making a difference in a decision. b. Relevant information must possess predictive value and confirmatory value. c. To achieve faithful representation, the financial statements must be complete, neutral and free from error. d. All of these statements are true. 11. Which of the following statements that pertain to the underlying assumptions is true?. a. The term going concern means the ability to continue in operation for the foreseeable future. b. The economic entity assumption is applicable only to corporate form of business organization. c. When a parent and subsidiary relationship exists, consolidated financial statements are prepared in recognition of legal entity. d. Inflation is ignored in accounting due to accounting period assumption. 12. Which of the following statements that relate to the recognition and measurement of items in the financial statements is not true? a. Recognition is the process of including in the financial statements an item that meets the definition of an asset, liability, equity, income and expense. b. The measurement bases include historical cost and current value. c. Current value includes fair value, value in use, fulfillment value and current cost. d. Fulfillment value is the absolute amount of cash expected for the payment of liability. 13. Which of the following statements that relate to the accounting process is true? a. Adjusting entries conform with accrual whereby revenue or expense recognition precedes cash flow. b. Closing entries are made after adjusting entries and reversing entries have been prepared. c. Reversing entries apply to all adjusting entries. d. The preparation of closing entries and reversing entries is optional. 14. The IASB declared that the merits of proposed standards are assessed a. From a position of neutrality b. From a position of materiality c. Based on possible impact on behavior d. Based on arguments of lobbyist 7304  Page 3 15. What is the chronological order in the standard setting process? a. Exposure draft, Research, Standard and Discussion paper b. Research, Exposure draft, Discussion paper and Standard c. Standard, Research, Discussion paper and Exposure draft d. Research, Discussion paper, Exposure draft and Standard 16. IFRIC Interpretations a. Are considered authoritative and must be followed. b. Cover newly identified financial reporting issues not specifically addressed. c. Cover issues where unsatisfactory or conflicting interpretations have developed d. All of these are correct regarding IFRIC Interpretations 17. The due process system in developing financial accounting standards a. Is an efficient system for collecting dues from members. b. Enables interested parties to express their views on issues under consideration. c. Identifies the accounting issues that are the most important. d. Requires that all accountants must receive a copy of financial accounting standards. 18. Which inventory cost flow assumption would consistently result in the highest income in a period of sustained inflation? a. FIFO b. LIFO c. Weighted average d. Specific identification 19. Which statement is incorrect regarding LCNRV? a. Net realizable value is the estimated selling price less estimated cost to complete and estimated cost of disposal. b. In most situations, entities measure inventory on a total inventory basis. c. The direct method may be used to record the income effect of valuing inventory at net realizable value. d. An entity may use an allowance account to reduce inventory to net realizable value. 20. An investor uses the equity method to account for a 30% ownership in an investee. At year end, the investor has a receivable from the investee. How should the receivable be reported? a. The total receivable should be reported separately. b. The total receivable should be included as part of the investment, without separate disclosure. c. Seventy percent of the receivable should be reported separately, with the balance offset against the investee’s payable to the investor. d. The total receivable should be offset against the investee’s payable to the investor. 21. Which statement is true for a bond maturing on a single date when the effective interest method of amortizing bond discount is used? a. Interest expense as a percentage of the bond carrying amount varies from period to period b. Interest expense increases each six-month period c. Interest expense remains constant each six-month period d. Nominal interest rate exceeds effective interest rate 22. In theory, the proceeds from the sale of a bond would be equal to a. The face amount of the bond b. The present value of the principal amount due at the end of the life of the bond plus the present value of the interest payments made during the life of the bond c. The face amount of the bond plus the present value of the interest payments d. The sum of the face amount of the bond and the periodic interest payments 7304  Page 4 23. An operating segment is considered reportable when any of the following conditions is met, except a. Segment revenue is 10% or more of the combined revenue of all of the entity’s segments b. Segment assets are 10% or more of the combined assets of all segments c. Segment liabilities are 10% or more of the combined liabilities of all segments d. Segment profit or loss is 10% or more of the greater between combined profit of all profitable segments and combined loss of unprofitable segments 24. A nonpublicly accountable entity can claim compliance with IFRS for SMEs when the entity I. Complies with local tax requirements that are substantially the same as IFRS for SMEs II. Complies with local tax requirements that are, except in name, word for word the same as IFRS for SMEs III. Complies with all the requirements of IFRS for SMEs IV. Complies with full IFRS a. I and III b. II and III c. II, III and IV d. III and IV 25. Which statement is not correct with respect to IFRS for SMEs? a. All borrowing costs are expensed immediately in the period when incurred b. Intangible assets shall be measured using either cost method or revaluation model c. Goodwill is amortized and tested for impairment where there is an indication of impairment d. Investment in associate shall be accounted for using cost model, fair value model or equity method. 26. Which statement is incorrect concerning small entity? a. Inventories are measured at the lower of cost or market value b. Investment in associate shall be accounted for using cost model, fair value model or equity method c. Property, plant and equipment shall be accounted for using either the cost model or fair value method d. The benefit obligation of a small entity is calculated under company policy if higher than R. A. 7641 27. Which statement is incorrect about small entity? a. Investment property shall be measured using either cost model or fair value model b. All borrowing costs shall be recognized as expense when incurred c. Biological asset shall be measured using either cost model or current market price model d. Leases are accounted for using either operating lease model or finance lease model 28. What standard shall be applied by SMES? a. IFRS for SMEs b. Full IFRS c. Any acceptable accounting framework d. Either IFRS for SMEs or full IFRS 29. Which standard shall be applied by micro entities? a. Full IFRS b. IFRS for SMEs c. Any acceptable accounting framework d. PFRS for Small Entities or Income Tax Basis 30. Which standard shall be applied by small entities? a. PFRS for Small Entities b. PFRS for SMEs c. Full PFRS d. Either PFRS for Small Entities or PFRS for SMEs 7304  Page 5 31. Under IFRS 1, the first annual financial statements in which an entity adopts IFRS by an explicit and unreserved statement of compliance with IFRS is called a. IFRS financial statements b. First IFRS financial statements c. Opening IFRS statement of financial position d. First audited financial statements 32. An entity that presents first annual financial statements that conform with IFRS is known as a. An originating entity b. A provisional presenter c. A first time adopter d. An initial reporter 33. What is the date of transition to IFRS? a. The beginning of latest period in most recent annual financial statements under previous GAAP. b. The end of latest period in most recent annual financial statements under previous GAAP c. The beginning of the earliest period for which an entity presents full comparative information under IFRS d. The end of the earliest period for which an entity presents full comparative information under IFRS. 34. The statement of financial position at the date of transition to IFRS is best described as a. Provisional IFRS statement of financial position b. Closing IFRS statement of financial position c. Opening IFRS statement of financial position d. Originating IFRS statement of financial position 35. Which is not a required adjustment in an opening IFRS statement of financial position? a. Recognize all assets and liabilities whose recognition is required under IFRS. b. Derecognize assets and liabilities if IFRS does not permit such recognition c. Disclose as comparative information all figures under previous GAAP alongside figures for the current year presented under IFRS. d. Measure all recognized assets and liabilities according to principles contained in IFRS. End 7304