FOM IA WS24 PDF

## FOM IA WS24 ### 18: The sources of regulation which comprise the regulatory framework for financial reporting include: - Legislation - Accounting standards - Stock exchange regulations - All of the above ### 19: "An entity which adopts international financial reporting standards must always ad...

## FOM IA WS24 ### 18: The sources of regulation which comprise the regulatory framework for financial reporting include: - Legislation - Accounting standards - Stock exchange regulations - All of the above ### 19: "An entity which adopts international financial reporting standards must always adhere to the requirements of every standard, no matter what the circumstances". True or False? - True - False ### 20: The primary users of general purpose financial reports are: - Investors and employees - Investors and lenders - Employees and lenders - Investors and customers ### 21: An entity which complies with IFRS may depart from the requirements of an international standard: - Whenever it wishes to do so - If compliance would produce misleading information - If compliance costs would be excessive - Never ### 22: Standards issued by the International Accounting Standards Board (IASB) are known as: - Financial Reporting Standards (FRSs) - International Accounting Standards (IASS) - International Financial Reporting Standards (IFRSs) - International Financial Standards (IFSs) ### 23: What is NOT an underlying principle of IFRS Accounting? - Fair presentation - Accrual basis of accounting - Comparative information - Timeliness - Going Concern - Consistency of presentation ### 24: The "Prudence Principle" is the underlying principle of: - German GAAP (HGB) - IFRS Accounting ### 25: IFRS and HGB are... - Rule-based accounting systems - Principle-based accounting systems - Number-based accounting systems - Quality-based accounting systems ### 26: One of the main advantages of standardisation in financial reporting is: - Comparability between accounting periods and between entities - The production of prudent financial statements - Increased flexibility in financial reporting - The use of creative accounting practices ### 27: The conceptual framework for financial reporting is: - A set of items which make up an entity's financial statements - A set of principles which underpin financial reporting ### 28: The fundamental qualitative characteristics of financial information under the framework are: - Relevance and faithful representation - Relevance and comparability - Faithful representation and comparability - Verifiability and understandability ### 29: The elements of financial statements which relate to financial position are: - Income and expenses - Income, expenses and equity - Assets, liabilities and equity - Assets, liabilities, income and expenses ### 30: Which of the following is NOT a component of a complete set of financial statements? - A statement of changes in equity - A management commentary - A set of notes - A statement of cash flows ### 31: The main financial performance statement is: - The statement of profit or loss and other comprehensive income - The statement of financial position - The statement of cash flows ### 32: Which of the following items qualifies as property, plant and equipment? - A machine bought for resale to a customer - A machine bought for use during a single accounting period - A machine bought for use in more than one accounting period - Computer software bought for use in more than one accounting period ### 33: The "carrying amount" of an item of property, plant and equipment generally refers to: - The cost of the item - The replacement cost of the item - The depreciable amount of the item - The amount at which the item is recognised in the financial statements ### 34: On 31 December 2012, a company acquires land for £500,000. The land is revalued at £530,000 on 31 December 2013, and £460,000 on 31 December 2014. 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: - 2013 Income £30,000, 2014 Expense £70,000 - 2013 Other comprehensive income £30,000, 2014 Expense £70,000 - 2013 Other comprehensive income £30,000, 2014 Negative other comprehensive income £70,000 - 2013 Other comprehensive income £30,000, 2014 Negative other comprehensive income £30,000, Expense £40,000 ### 35: PPE is initially measured at: - Fair value - Market value - Cost - Fair value less depreciation ### 36: In subsequent periods PPE can be measured using the: - Cost model - Fair value model - Accrual model - Revaluation model ### 37: 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? - True - False ### 38: Which of the following items cannot be included in the cost of inventories? - Irrecoverable import duties payable on the acquisition of inventories - Fixed production overheads - The cost of abnormal wastage of materials and labour - Variable production overheads ### 39: The cost formulas permitted by IAS2 are: - FIFO and LIFO - FIFO and AVCO - LIFO and AVCO - FIFO, LIFO and AVCO ### 40: The FIFO cost formula assumes that: - The inventory items which are sold or consumed are those acquired most recently - The inventory items which are sold or consumed are those acquired longest ago - The inventory items which are sold or consumed are a mixture of those acquired in the last 12 months - Newer inventory items are sold or consumed before older inventory items ### 41: On 31 December 2013, 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. The cost, and the net realizable value of this inventory at 31 December 2013 are: - £26,300 and £36,600 - £26,300 and £38,600 - £35,200 and £45,500 - £35,200 and £47,500 ### 42: The stage of completion of a construction contract may be determined by: - Comparing the costs incurred for the work performed to date with the estimated total costs - Carrying out a survey of the work performed to date - Considering the physical proportion of the contract work completed - Any of the above ### 43: The expected profits of a construction contract are spread over the period of the contract, but any expected losses are accounted for in full, as soon as they become probable. True or False? - True - False ### 44: Which of the following situations would normally lead to a lease being classified as a finance lease? - The lease does not transfer ownership of the leased asset to the lessee by the end of the lease term - The lessee has the option to purchase the asset at a price which makes it reasonably certain that this option will be exercised - The lease term is not for the major part of the asset's economic life - At the inception of the lease, the present value of the minimum lease payments does not amount to substantially all of the fair value of the asset ### 45: A lease of land which does not transfer legal title to the lessee by the end of the lease term cannot be a finance lease. True or False? - True - False ### 46: In relation to operating leases, which of the following statements is true? - The lessor does not keep the risks and rewards incidental to ownership - The lease payments are recognized as an expense in the lessee's financial statements - The leased item is not shown as an asset in the lessor's financial statements ### 47: At the commencement of a finance lease, IAS17 requires that the lessee should recognize both an asset and a liability to the lessor. These should be measured at: - The fair value of the leased item - The present value of the minimum lease payments - The lower of the fair value of the leased item, and the present value of the minimum lease payments - The higher of the fair value of the leased item, and the present value of the minimum lease payments ### 48: In the case of a finance lease, the statement of financial position of the lessor shows the leased item as an asset so long as legal title to the item is not transferred to the lessee. True or False? - True - False ### 49: A financial instrument according to IAS 32 is... - A type of contract - A type of asset - A type of liability ### 50: According to IFRS 9, equity instruments are usually valued at... - Amortized costs - Fair value through profit and loss - Fair value through other comprehensive income ### 51: If a debt instrument passes the business model test and the cash flow characteristics test it must be measured at: - Fair value through profit and loss - Fair value through other comprehensive income - Amortised cost ### 52: Goodwill does not fall within the IAS38 definition of an intangible asset because: - It is a monetary asset - It is not separable - It may not generate future economic benefits - None of the above ### 53: How should research and development expenditure be dealt with, in an entity's financial statements? - Research and development expenditure should always be written off as an expense - Research and development expenditure should always be capitalised as an intangible asset - Research expenditure should always be written off as an expense, but development expenditure should always be capitalised as an intangible asset - Research expenditure should always be written off as an expense, but development expenditure should be capitalised as an intangible asset if it satisfies certain conditions `## 54: Expenditure on advertising and promotion never gives rise to the acquisition of an intangible asset. True or False? - True - False `## 55: The revaluation model cannot be used, for the measurement of an intangible asset, unless: - The asset is revalued every year - The fair value of the asset is determined by a professional valuer - There is an active market in that type of asset - The revaluation model, is also used for tangible assets `## 56: The amortisation method used, in relation to an intangible asset, should be chosen so as to: - Write off the asset as soon as possible - Reflect the usage pattern of the asset - Evenly spread the cost of the asset over its useful life - Maximise the amortisation charge, in the early years of the asset's useful life `## 57: International standard IFRS3 states that goodwill, acquired in a business combination, is: - An asset which arises from the acquired entity's good reputation - An asset which arises from the acquired entity's strong customer relationships - An asset which arises from assets acquired in the business combination, that are individually identified - An asset which arises from assets acquired in the business combination, that are not individually identified `## 58: Goodwill acquired in a business combination, should subsequently be measured: - At cost - At cost less accumulated amortisation - At cost less accumulated impairment losses - At cost less accumulated amortisation, and less accumulated impairment losses `## 59: An impairment loss is: - The amount by which the recoverable amount of an asset, exceeds its carrying amount - The amount by which the recoverable amount of an asset, exceeds its written down value - The amount by which the carrying amount of an asset, exceeds its recoverable amount - The amount by which the carrying amount, of an asset exceeds its market value `## 60: Which of the following, is not an external indication of impairment: - An unexpected decline, in the asset's market value - The asset becoming idle - An adverse technological change - An adverse change, in the market in which the entity operates `## 61: A previously recognized impairment loss relating to goodwill, should be reversed if there is evidence that the loss no longer exists. True or False? - True - False