IAS 1 - Presentation of Financial Statements

When the entity's normal operating cycle is not clearly identifiable, it is assumed to be a. 12 months b. 3 months c. 6 months d. no assumption

a. 12 months

Which of the statements is false? a. A loss caused by impairment in the value of an intangible asset should be classified as an extraordinary item. b. If a franchise becomes worthless prior to the end of its estimated useful life, the unamortized balance in the franchise account should be immediately written off as an impairment loss. c. A lease bonus payment made in advance should be debited to a leasehold account, which is an asset account. d. Leasehold improvements should be amortized over the shorter of the term of the lease or the useful life of the improvements.

a. A loss caused by impairment in the value of an intangible asset should be classified as an extraordinary item.

Which of the following statements is correct regarding reporting comprehensive income? a. Accumulated other comprehensive income is reported in the shareholders' equity section of the statement of financial position. b. A separate income statement is required. c. Comprehensive income must include all changes in shareholders' equity for the period. d. Comprehensive income is reported in the year-end statements but not in the interim statements.

a. Accumulated other comprehensive income is reported in the shareholders' equity section of the statement of financial position.

Identify the incorrect statement. a. An entity shall not present any items of income or expense as extraordinary items, in the statement of profit or loss and other comprehensive income or the separate income statement (if presented), but such items may be disclosed in the notes. b. An entity shall disclose the amount of income tax relating to each component of other comprehensive income, including reclassification adjustments, either in the statement of profit or loss and other comprehensive income or in the notes. c. An entity may present components of other comprehensive income either net of related tax effects, or before related tax effects with one amount shown for the aggregate amount of income tax relating to those components. d. An entity may present reclassification adjustments in the statement of profit or loss and other comprehensive income or in the notes.

a. An entity shall not present any items of income or expense as extraordinary items, in the statement of profit or loss and other comprehensive income or the separate income statement (if presented), but such items may be disclosed in the notes.

Which of the following statements is incorrect? a. Comprehensive income includes all revenues, expenses, gains, losses, and prior period adjustments. b. PAS 1 requires an entity to disclose income tax relating to each component of other comprehensive income. c. The presentation of disclosures on dividends in the statement of profit or loss and other comprehensive income is not permitted. d. An entity may present components of other comprehensive income gross of tax or net of tax on the face of the statement of profit or loss and other comprehensive income.

a. Comprehensive income includes all revenues, expenses, gains, losses, and prior period adjustments.

How is working capital defined? a. Current assets minus current liabilities b. Total current assets c. Capital contributed by shareholders d. Capital contributed by shareholders plus retained earnings

a. Current assets minus current liabilities

In which section of the statement of financial position should employment taxes that are due for settlement in 15 months' time be presented, according to PAS1 Presentation of Financial Statements? a. Current liabilities b. Current assets c. Non-current liabilities d. Non-current assets

a. Current liabilities

Which of the following items is not classified as "other comprehensive income"? a. Extraordinary gains from extinguishment of debt b. Foreign currency translation adjustments c. Minimum pension liability equity adjustment for a defined-benefit pension plan d. Unrealized gains for the year on FVOCI investments

a. Extraordinary gains from extinguishment of debt

Are the following statements true or false, according to PAS1 Presentation of Financial Statements? I. Dividends paid should be recognized in the statement of profit or loss and other comprehensive income. II. A loss on disposal of assets should be recognized in the statement of changes in equity. a. False, False b. False, True c. True, False d. True, True

a. False, False

Which obligations are classified as current liabilities even if they are due to be settled after more than twelve months from the end of the reporting period? I. Trade payables and accruals for employee and other operating cost that are part of the entity's working capital II. A portion of long-term interest-bearing liabilities III. Bank overdrafts arising from settlements of purchases of inventory IV. Dividends payable a. I and III b. I, III, and IV c. III only d. all of these

a. I and III

All of the following are not acceptable methods of reporting other comprehensive income and its components, except a. In a statement of comprehensive income. b. In a statement of income c. In the notes only d. In a statement of changes in equity.

a. In a statement of comprehensive income

A liability shall be classified as current in all of the following instances, except a. It is a non-trade payable due to be settled within twelve months after balance sheet date or within the normal operating cycle, whichever is longer. b. It is expected to be settled in the entity's normal operating cycle. c. It is held primarily for the purpose of being traded. d. The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

a. It is a non-trade payable due to be settled within twelve months after balance sheet

Which of the following best describes an income statement? a. It reports income and expenses for a specific accounting period. b. It reports the amount and composition of assets and liabilities for a specific accounting period. c. It reports investment activities for a specified accounting period. d. It reports cash receipts and cash disbursements for a specific accounting period.

a. It reports income and expenses for a specific accounting period.

The major distinction between the multiple-step and single-step income statement formats is the separation of a. Operating and nonoperating data b. income tax expense and administrative expenses c. cost of goods sold expense and administrative expenses. d. The effect on income taxes of extraordinary items and the effect on income taxes of profit or loss from ordinary activities

a. Operating and nonoperating data

A currently maturing long-term debt is classified as noncurrent when a. The borrower has the discretion to refinance or roll over the liability for at least twelve months after the reporting period under the existing loan facility. b. The lender has the discretion to refinance or roll over the liability for at least twelve months after the balance sheet date under the existing loan facility. c. An agreement to reschedule payment on a long-term basis is completed after the reporting period but before the financial statements are authorized for issue. d. Equity security has in fact been issued after the reporting period and before the statements are authorized for issue the proceeds from which are used to settle the liability at maturity date.

a. The borrower has the discretion to refinance or roll over the liability for at least twelve months after the reporting period under the existing loan facility.

Which of the following statements is incorrect? a. Total comprehensive income for the period provides a good measure of a business's debt-paying ability. b. PAS 1 requires an entity to disclose reclassification adjustments and income tax relating to each component of other comprehensive income. c. PAS 1 requires the presentation of dividends recognized as distributions to owners and related amounts per share in the statement of changes in equity or in the notes. Dividends are distributions to owners in their capacity as owners and the statement of changes in equity presents all owner changes in equity. d. PAS 1 requires an entity to disclose comparative information in respect of the previous period, i.e., to disclose as a minimum two of each of the statements and related notes.

a. Total comprehensive income for the period provides a good measure of a business's debt-paying ability.

Of the following items, the one which should be classified as a current asset is a. Trade installment receivables normally collectible in 18 months. b. Cash designated for the redemption of callable preferred stock. c. Cash surrender value of a life insurance policy of which the company is beneficiary. d. A deposit on machinery ordered, delivery of which will be made within sixteen months.

a. Trade installment receivables normally collectible in 18 months.

Periodic net earnings are conventionally measured by a a. Transactions approach. b. Transactions approach including recognition of unrealized gains and losses in other comprehensive income. c. Capital maintenance approach. d. Market value approach including recognition of all realized gains and some unrealized losses.

a. Transactions approach.

Which of the following items would cause earnings to differ from comprehensive income for an enterprise in an industry not having specialized accounting principles? a. Unrealized loss on investments classified as FVOCI securities. b. Unrealized loss on investments classified as held for trading securities. c. Loss on exchange of similar assets. d. Loss on exchange of dissimilar assets.

a. Unrealized loss on investments classified as FVOCI securities.

Comprehensive income includes which of the following? (Item #1) Loss on Discontinued Operations; (Item #2) Investment by Owners a. Yes, No b. Yes, Yes c. No, Yes d. No, No

a. Yes, No

Comprehensive income includes which of the following? (Item #1) Operating income; (Item #2) Investments by owners a. Yes, No b. Yes, Yes c. No, Yes d. No, No

a. Yes, No

As of year-end, an entity had unsettled income taxes to the government. Such liability is charged to the "Income taxes payable" account and is expected to be settled within twelve months after the reporting date. In the statement of financial position prepared as of year-end, the liability for the taxes is normally shown as a. a separate line item in the current liabilities section b. included in "Trade and other payables" in the current liability section c. a separate line item in the noncurrent liabilities section d. a separate line item in the current assets section

a. a separate line item in the current liabilities section

A complete set of financial statement does not include: a. a statement of retained earnings b. a cash flow statement c. notes to financial statements d. statement of profit or loss and other comprehensive income

a. a statement of retained earnings

An entity shall present a statement of changes in equity showing in the statement all of the following, except a. components of total comprehensive income for the period b. total comprehensive income for the period c. the effects of retrospective application or retrospective restatement d. reconciliation of each component of equity

a. components of total comprehensive income for the period

Which of the following statements is true? a. deferred charges are distinguished from prepaid expenses on the basis of the time over which their benefits will be realized. b. working capital is a very useful measure because it reveals how much would be left if all the assets were to be sold and the proceeds were used to pay all the current liabilities. c. the normal operating cycle of a business is the average length of the time from cash expenditure, to inventory, to sale and back to accounts receivable. d. Retained earnings often is restricted (or appropriated) to ensure that cash will be available for plant expansion earnings are restricted the cash cannot be spent

a. deferred charges are distinguished from prepaid expenses on the basis of the time over which their benefits will be realized.

Reclassification adjustments will not arise on all of the following, except a. derecognition of foreign operation b. changes in remeasurements of the net defined benefit liability (asset) c. on derecognition of FVOCI d. changes in revaluation surplus

a. derecognition of foreign operation

If an entity expects, and has the discretion, to refinance or roll over an obligation for at least twelve months after the reporting period under an existing loan facility, it classifies the obligation as non-current, a. even if it would otherwise be due within a shorter period. b. only if the remaining period to maturity of the original obligation exceeds 12 months from the end of reporting period. c. only if the original maturity of the obligation is longer than 12 months. d. choices b and c

a. even if it would otherwise be due within a shorter period.

Sales revenue less cost of goods sold is called a. gross profit. b. cost of sales c. net earnings. d. earnings before income taxes.

a. gross profit.

The preferred method of presenting statement of changes in equity in current PFRSs is a. horizontal presentation where each component is presented in columns and reconciled downwards. b. vertical presentation where there are at least two columns representing information for the current period and the comparative period c. dramatic presentation d. high definition and 3D

a. horizontal presentation where each component is presented in columns and reconciled downwards.

The operating cycle of an enterprise a. is the time between the acquisition of materials entering into a process and their realization in cash or an instrument that is readily convertible into cash. b. causes the distinction between current and noncurrent items to depend on whether they will affect cash within one year. c. is the period of time normally elapsed from the time the enterprise expends cash to the time it converts trade receivables back into cash. d. Is a period of one year.

a. is the time between the acquisition of materials entering into a process and their realization in cash or an instrument that is readily convertible into cash

The heading for the statement of changes in equity contains a. name of the business, name of the statement, and period covered b. name of the business, name of the statement, and current date c. name of the business, current date, and period covered d. name of the business, name of the owner, and period covered

a. name of the business, name of the statement, and period covered

Components of other comprehensive income are presented in the a. statement of profit or loss and other comprehensive income b. separate income statement c. notes d. statement of changes in equity

a. statement of profit or loss and other comprehensive income

PAS 1 requires an entity to disclose reclassification adjustments and income tax relating to each component of other comprehensive income. Reclassification adjustments are a. the amounts reclassified to profit or loss in the current period that were currently or previously recognized in other comprehensive income. b. the amounts reclassified to total comprehensive income that were previously recognized in equity. c. the amounts that previously caused the statement elements to be misstated. d. the amounts that previously recognized using an inappropriate accounting policy

a. the amounts reclassified to profit or loss in the current period that were currently or previously recognized in other comprehensive income.

All of the following components are shown in the statement of profit or loss and other comprehensive income net of applicable income taxes except a. Gain or loss on valuation adjustments of FVOCI b. Cumulative effect of a change in accounting principle. c. Discontinued operations. d. Remeasurements of the net defined benefit liability (asset)

b. Cumulative effect of a change in accounting principle.

According to current standards, profit or loss for the period a. Is the same as comprehensive income. b. Excludes certain income and expenses that are included in comprehensive income. c. Include certain income and expenses that are excluded from comprehensive income. d. Include certain losses that are excluded from comprehensive income.

b. Excludes certain income and expenses that are included in comprehensive income.

According to PAS1 Presentation of Financial Statements, which of the following must be included in an entity's statement of financial position? I. Investment property II. Number of shares authorized III. Provisions IV. Shares in an entity owned by that entity a. I, II, and III b. I and III c. III and IV d. all of these

b. I and III

This refers to presenting separately on the face of financial statements items which are material and combining immaterial items with similar items. a. Offsetting b. Materiality and aggregation c. Fair presentation d. Frequency of reporting

b. Materiality and aggregation

Deferred tax assets and liabilities shall be classified on the balance sheet as a. Current b. Noncurrent c. Partly current and partly noncurrent d. Part of equity

b. Noncurrent

Which of the following statements is correct? a. Normally, all items of income and expense recognized in a period are included in profit or loss. This includes the effects of changes in accounting policies and correction of prior period errors. b. Other Standards deal with items that may meet the Conceptual Framework definitions of income or expense but are usually excluded from profit or loss. c. The use of different measurement bases for different classes of assets suggests that their nature or function differs and, therefore, that they should be presented as one line item. d. An entity shall not present any items of income and expense as extraordinary items on the face of the income statement but it may do so in the notes. e. Entities classifying expenses by nature shall disclose additional information on the function of expenses, including depreciation and amortization expense and employee benefits expense.

b. Other Standards deal with items that may meet the Conceptual Framework definitions of income or expense but are usually excluded from profit or loss.

For accounting purposes, the "operating cycle concept" a. Causes the distinction between current and noncurrent items to depend on whether they will affect cash within one year. b. Permits some assets to be classified as current even though they are expected to be realized beyond one year from the end of the reporting period. c. Has become obsolete. d. Affects the income statement but not the balance sheet.

b. Permits some assets to be classified as current even though they are expected to be realized beyond one year from the end of the reporting period.

Which of the following names is not associated with the income statement? a. Profit or loss b. Statement of financial position c. Statement of Operations d. a and c

b. Statement of financial position

Which of the following changes during a period is not a component of other comprehensive income? a. Unrealized gains or losses on FVOCI b. Stock dividends issued to shareholders. c. Foreign currency translation adjustments. d. Minimum pension liability adjustments

b. Stock dividends issued to shareholders.

Which of the following statements is incorrect? a. The relationship of current assets and current liabilities provides a good measure of a business's debt-paying ability. b. The single-step and multistep income statements result in different profit or loss figures. c. The difference between gross sales and net sales is equal to the sum of sales discounts and returns and allowances. d. Components of comprehensive income are not permitted to be presented in the statement of changes in equity.

b. The single-step and multistep income statements result in different profit or loss figures.

HIATUS BREAK Co. engages in a buy-and-sell business. During the year, HIATUS prepared two income statements covering the same period. One statement is prepared using the nature of expense method while the other one is prepared using the function of expense method. Which of the following statements is correct regarding these income statements? a. The nature of expense method income statement will show higher profit than the function of expense method. b. The sum of the amounts in the line items "net change in inventories" and "net purchases" in the nature of expense method income statement equals the amount of "cost of sales" in the function of expense method income statement. c. The same disclosure requirements apply whether HIATUS uses the nature of expense method or the function of expense method. d. A "gross profit" line item will appear in both income statements.

b. The sum of the amounts in the line items "net change in inventories" and "net purchases" in the nature of expense method income statement equals the amount of "cost of sales" in the function of expense method income statement

Regarding the presentation of the statement of financial position, which of the following statements is correct? a. PAS 1 requires that the line item "Property, plant and equipment" be the first line item to be presented in the financial statements. b. The use of different measurement bases for different classes of assets suggests that their nature or function differs and, therefore, that an entity presents them as separate line items. c. When the statement of financial position is presented using the current and noncurrent classification, the line item "Cash and cash equivalents" should always be presented first under the current assets section. d. When an entity opts not to present its statement of financial position using the current and noncurrent classification, no disclosure in the notes is necessary for assets and liabilities expected to be realized or settled within 12 months and beyond 12 months after the reporting date.

b. The use of different measurement bases for different classes of assets suggests that their nature or function differs and, therefore, that an entity presents them as separate line items.

The following statements relate to the concept of asset. Which is false? a. The primary characteristic of an asset is its capacity to provide the entity with probable economic benefits. b. There is an expiration of economic benefits when an asset is used up in the production of another asset. c. A business entity may recognize an asset even if it does not possess legal title. d. The assets of an entity result from past transactions or other past events.

b. There is an expiration of economic benefits when an asset is used up in the production of another asset.

What is the purpose of reporting comprehensive income? a. To report changes in equity due to transactions with owners. b. To report a measure of overall enterprise performance. c. To replace net income with a better measure. d. To combine income from continuing operations with income from discontinued operations and extraordinary items.

b. To report a measure of overall enterprise performance

Which of the following changes during a period is not a component of other comprehensive income? a. Minimum pension liability. b. Treasury share, at cost. c. Foreign currency translation adjustment on foreign operation. d. Reclassification adjustments

b. Treasury share, at cost.

Which of the following statements is (are) correct? I. Under the accrual basis of accounting, income is recognized in the period in which cash is received. II. Net sales minus Cost of goods sold equals income from operations. III. The combination of Selling expenses and Administrative expenses is referred to as total expenses. IV. Cash basis of accounting best measures profitability during a short time interval. V. Gross profit minus all other expenses recognized in profit or loss except cost of sales is best defined as the profit or loss for the year. a. III and V b. V only c. III, IV and V d. all of these

b. V only

Which of the following statements is incorrect? a. Reports prepared at the request of an entity's management are not general purpose financial statements if they are prepared specifically to meet the needs of management only. b. When preparing financial statements, the accountant shall never assume that the business will continue to operate indefinitely. c. Applying accrual accounting results in more accurate measurement of profit or loss for the period than cash basis accounting. d. One objective of financial reporting is to help financial statement users evaluate the cash flows of the reporting entity.

b. When preparing financial statements, the accountant shall never assume that the business will continue to operate indefinitely.

Comprehensive income includes which of the following? (Item #1) Fair value gains; (Item #2) Gross Margin a. Yes, No b. Yes, Yes c. No, Yes d. No, No

b. Yes, Yes

Comprehensive income includes which of the following? (Item #1)Gross margin; (Item #2) Operating income a. Yes, No b. Yes, Yes c. No, Yes d. No, No

b. Yes, Yes

The income statement heading will specify which of the following? a. a point in time b. a period of time c. a or c d. a and c

b. a period of time

The ratio of total cash, trade receivables and marketable securities to current liabilities is a. current ratio b. acid test ratio c. working capital d. receivable turnover

b. acid test ratio

The cost of a depreciable long-lived asset is expensed a. when it is paid for. b. as the asset benefits the company. c. in the period in which it is acquired. d. in the period in which it is disposed of.

b. as the asset benefits the company

When alternative acceptable accounting methods exist, a better quality of earnings generally is produced from selecting an accounting method that has the effect of reporting the a. greatest amount of retained earnings currently. b. greatest amount of assets currently. c. lowest amount of future earnings. d. lowest amount of current earnings

b. greatest amount of assets currently

Increases in revaluation surplus are presented in the statement of profit or loss and other comprehensive income as a. income b. item of other comprehensive income c. revenue d. not presented

b. item of other comprehensive income

Banks and other financial institutions present their statement of financial position based on a. current and noncurrent classification b. liquidity c. nature of expense d. function of expense

b. liquidity

In Philippine settings, current assets and current liabilities are most commonly presented in the balance sheet in the order of a. materially b. liquidity c. chronologically d. alphabetically

b. liquidity

The income statement format that segregates the operating income and expenses from the non-operating income and expenses is the a. single-step b. multiple-step c. a or b d. neither a nor b

b. multiple-step

The income statement line item gross profit will appear on which income statement format? a. single-step b. multiple-step c. a or b d. neither a nor b

b. multiple-step

Is a retailer's Interest Expense an operating expense or a non-operating expense? a. operating expense b. non-operating expense c. a or b d. neither a nor b

b. non-operating expense

Amounts earned by an entity from its main operating activities are a. income b. revenues c. gains d. b or d

b. revenues

When an entity breaches an undertaking under a long-term loan agreement on or before the balance sheet date with the effect that the liability becomes payable on demand, (choose the incorrect statement) a. the liability is classified as current, even if the lender has agreed, after the balance sheet date and before the authorization of the financial statements for issue, not to demand payment as a consequence of the breach b. the liability is classified as non-current, even if the lender has agreed, after the balance sheet date and before the authorization of the financial statements for issue, not to demand payment as a consequence of the breach c. The liability is classified as current because, at the balance sheet date, the entity does not have an unconditional right to defer its settlement for at least twelve months after that date. d. The liability is normally classified as current, however, the liability is classified as non-current if the lender agreed by the balance sheet date to provide a period of grace ending at least twelve months after the balance sheet date, within which the entity can rectify the breach and during which the lender cannot demand immediate repayment.

b. the liability is classified as non-current, even if the lender has agreed, after the balance sheet date and before the authorization of the financial statements for issue, not to demand payment as a consequence of the breach

Accounting income is a concept in which: a. income is measured as the amount of "real wealth" that an entity could consume during a period and be as well off at the end of that period as it was at the beginning b. the transactions approach is used to record income, expenses, gains and losses throughout the reporting period c. market values adjusted for the effects of inflation or deflation are used to calculate real wealth d. income equals the change in market value of the firm's outstanding common stock for the period

b. the transactions approach is used to record income, expenses, gains and losses throughout the reporting period

Which of the following item is not an element of working capital? a. temporary investments b. treasury stock c. good-in process d. cash in bank

b. treasury stock

The method of income determination which measures the results of enterprise transactions and involves the determination of the amount of revenue earned by an entity during a given period and the amount of expenses applicable to that revenue is known as the: (Item #1) Transaction approach; (Item #2) Economic approach a. no, yes b. yes, no c. no, no d. yes, yes

b. yes, no

Which of the following statements is incorrect? a. An investor in an associate may present in its other comprehensive income its share in the associate's other comprehensive income. b. An investor in an associate shall present in profit or loss its share in the associate's profit or loss. c. An investor in an associate shall not recognize dividends received from the associate in its profit or loss but may recognize the dividends received in its other comprehensive income. d. Dividends received by an investor from its associate are accounted for as reduction in the investment in associate account.

c. An investor in an associate shall not recognize dividends received from the associate in its profit or loss but may recognize the dividends received in its other comprehensive income.

Which statement is correct concerning presentation of information on the face of the statement of financial position? I. Additional line items, headings and subtotals shall be presented on the face of the balance sheet when such presentation is relevant to an understanding of the entity's financial position. II. PAS 1 does not prescribe the order or format in which items are to be presented. a. I only b. II only c. Both I and II d. Neither I nor II

c. Both I and II

Regarding the preparation of a statement of changes in equity, which of the following statements is incorrect? a. PAS 1 Presentation of Financial Statements requires an entity to present, in a statement of changes in equity, all owner changes in equity. b. All non-owner changes in equity (i.e. comprehensive income) are required to be presented in one statement of profit or loss and other comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). c. Components of comprehensive income not presented in the statement of profit or loss and other comprehensive income are presented in the statement of changes in equity. d. Components of comprehensive income are not permitted to be presented in the statement of changes in equity

c. Components of comprehensive income not presented in the statement of profit or loss and other comprehensive income are presented in the statement of changes in equity.

Which of the following is not classified as other comprehensive income? a. Remeasurements of the net defined benefit liability (asset). b. Subsequent decreases of the fair value of FVOCI securities that have been previously written down as impaired. c. Decreases in the fair value of securities measured at amortized cost. d. None of the above.

c. Decreases in the fair value of securities measured at amortized cost.

A corporation paid a six year insurance premium on January 1, Year 1 ,for P12,000. It recorded the prepayment in two asset accounts -one with a P2,000 debit balance and one with a P10,000 debit balance. Under which of the following captions should the account with the P10,000 balance be classified on a balance sheet dated January, Year 1? a. Operational assets b. Other assets c. Deferred charges d. Current assets

c. Deferred charges

When an entity opts to present the income statement classifying expenses by function, which of the following is not required to be disclosed as "additional information"? a. Depreciation expense. b. Employee benefits expense. c. Director's remuneration. d. Amortization expense.

c. Director's remuneration

Comprehensive income excludes changes in equity resulting from which of the following? a. Loss from discontinued operations. b. Effect of changes in accounting estimate to current operations c. Dividends paid to stockholders. d. Unrealized loss on securities classified as FVOCI.

c. Dividends paid to stockholders

The components of other comprehensive income exclude a. Changes in revaluation surplus b. Remeasurements of the net defined benefit liability (asset) c. Fair value gains and losses on FVPL securities d. Effective portion of a cash flow hedge

c. Fair value gains and losses on FVPL securities

According to PAS1 Presentation of Financial Statements, which of the following must be included in an entity's statement of financial position? I. Cash and cash equivalents II. Property, plant and equipment analyzed by class III. Share capital and reserves analyzed by class IV. Deferred tax a. I, II, and III b. I and III c. I and IV d. all of these

c. I and IV

The judgment on whether additional items are presented separately on the statement of financial position is based on an assessment of: I. the nature and liquidity of assets II. the function of assets within the entity III. the amounts, nature and timing of liabilities IV. the need for external financing a. I, III b. I, II c. I, II, III d. II, III, IV

c. I, II, III

As a minimum, the face of the income statement shall include line items that present the following amounts for the period: I. revenue II. finance costs III. share of the profit or loss of associates and joint ventures accounted for using the equity method IV. tax expense V. a single amount comprising the total of (i) the post-tax profit or loss of discontinued operations and (ii) the post-tax gain or loss recognized on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group(s) constituting the discontinued operation VI. a single amount comprising the total of the post-tax profit or loss on early extinguishment of long-term financial debts VII. profit or loss a. I, II, V, VII b. I, II, III, IV, V, VII c. I, II, III, IV, V, VII d. all of these

c. I, II, III, IV, V, VII

Which of the following statements is (are) correct? I. Presentation of assets or liabilities by order of liquidity can be chosen anytime should management so desires it. II. A liability held primarily for the purpose of being traded is to be classified as current a. I is true b. I and II are true c. II is true d. I and II are not true

c. II is true

Which of the following items belong to the classes of expenses? I. expenditures to acquire assets II. distribution to owners III. costs of assets used to produce revenue IV. costs of assets ceasing to provide future economic benefits V. costs of assets that have expired during the period a. all of these b. I, III, IV and V only c. III, IV and V only d. III and IV only

c. III, IV and V only

A public utility reports noncurrent assets as the first item on its balance sheet. This is an example of a. Improper statement presentation b. Conservatism c. Industry practice d. Substance over form

c. Industry practice

According to PAS 1, a liability shall be classified as current when (choose the incorrect one) a. It is expected to be settled in the entity's normal operating cycle. b. It is held primarily for the purpose of being traded. c. It is due to settled within twelve months after balance sheet date or within the normal operating cycle, whichever is longer. d. The entity does not have an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

c. It is due to settled within twelve months after balance sheet date or within the normal operating cycle, whichever is longer.

DECRY TO BELITTLE Company has a loan due for repayment in six months' time, but DECRY has the option to refinance for repayment two years later. DECRY plans to refinance this loan. In which section of its statement of financial position should this loan be presented, according to PAS1 Presentation of Financial Statements? a. Current liabilities b. Current assets c. Non-current liabilities d. Non-current assets

c. Non-current liabilities

It comprises items of income and expense including reclassification adjustments that are not recognized in profit or loss as required or permitted by other PFRSs. a. Comprehensive income b. Profit or loss elements c. Other comprehensive income d. Nominal accounts

c. Other comprehensive income

Which of the following statements is correct regarding the provisions of PAS 1? a. PAS 1 requires the presentation of an income statement that includes items of income and expense recognized in profit or loss. Items of income and expense not recognized in profit or loss should be presented in the statement of changes in equity, together with owner changes in equity. b. PAS 1 labels the statement of changes in equity comprising profit or loss, other items of income and expense and the effects of changes in accounting policies and correction of errors as 'statement of recognized income and expense. c. PAS 1 requires an entity to disclose income tax relating to each component of other comprehensive income. d. PAS 1 permits non-owner changes in equity to be presented together with owner changes in equity in the statement of changes in equity.

c. PAS 1 requires an entity to disclose income tax relating to each component of other comprehensive income.

Elements in the equity section is normally reported in order of: a. Classes of share capital b. Time to maturity c. Permanency d. Liquidity

c. Permanency

Which of the following statements is incorrect? a. Management motivations can influence the accounting policy choices made. b. Performance evaluation is an objective of financial reporting. c. Profit or loss for the period provides a good measure of a business's debt-paying ability. d. PAS 1 requires that the components of total comprehensive income should be presented prominently in the financial statements rather than in the notes.

c. Profit or loss for the period provides a good measure of a business's debt-paying ability.

Corrections of errors are reported in a. Other comprehensive income. b. Other income/(expense). c. Retained earnings. d. Stockholders' equity

c. Retained earnings.

The balance sheet allows investors to assess all of the following except a. How efficient the company's assets are used. b. The liquidity and financial flexibility of the company. c. The capital structure of the company d. The net realizable value of the company.

c. The capital structure of the company

Are the following statements true or false, according to PAS1 Presentation of Financial Statements? I. Provisions should be recognized in the statement of financial position. II. A revaluation surplus on non-current assets should be recognized in profit or loss. a. False, False b. False, True c. True, False d. True, True

c. True, False

Amortization is the process of a. valuing an asset at its fair value. b. increasing the value of an asset over its useful life in a rational and systematic manner. c. allocating the cost of an asset to expense over its useful life in a rational and systematic manner. d. writing down an asset to its fair value each reporting period.

c. allocating the cost of an asset to expense over its useful life in a rational and systematic manner

Conventionally, accountants measure income a. as a change in the value of owners' equity b. by applying a value-added concept c. by using a transaction approach d. by equity method

c. by using a transaction approach

The current assets section of a balance sheet should never include a. a receivable from a customer not collectible for over one year. b. the premium paid on short-term bond investment. c. goodwill arising from the purchase of a going business not expected to be disposed of within 12 months from end of reporting period. d. customers' accounts with credit balances.

c. goodwill arising from the purchase of a going business not expected to be disposed of within 12 months from end of reporting period.

Most components of the balance sheet are reported at a. historical cost plus allowance for inflation. b. fair value. c. historical cost. d. replacement value.

c. historical cost

An operating cycle a. is twelve months or less in length b. is the average time required for a company to collect its receivable c. is used to determine current assets when it is longer than one year d. starts with inventory and ends with cash

c. is used to determine current assets when it is longer than one year

The main purpose of the statement of financial position is to reflect a. the fair value of the entity's assets at some point in time. b. the status of the entity 's assets in case of forced liquidation of the firm. c. items of value, debts and net worth. d. the firm's potential for growth in stock values in the stock market.

c. items of value, debts and net worth.

Which one of the following assets is similar to certain current assets, but is not one? a. Accounts receivable b. Prepaid insurance c. long term payment of expenses d. short-term investment in equity security

c. long term payment of expense

Depreciation is a process of allocating the cost of a building over its useful life in a(n) a. equal and equitable manner. b. accelerated and accurate manner. c. rational and systematic manner. d. conservative market based manner

c. rational and systematic manner

The account Freight-out is shown on the income statement as a a. component of the cost of goods sold. . b. deduction from sales. c. selling expense d. general and administrative expense.

c. selling expense.

To prepare a statement of changes in owner`s equity you need to know a. the owners' names b. the date the company started c. the beginning balance in the capital account d. the address of the company

c. the beginning balance in the capital account

PAS 1 requires an entity to include in a complete set of financial statements a statement of financial position as at the beginning of the preceding period whenever the entity retrospectively applies an accounting policy or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements. The purpose of this requirement is a. to discourage auditors from subsuming in retained earnings unaccounted differences in accounts and required reconciliations b. to promote vigilance on entities over errors and to discourage frequent changes in accounting policies c. to provide information that is useful in analyzing an entity's financial statements d. any of these

c. to provide information that is useful in analyzing an entity's financial statements

PAS 1 requires an entity to include in a complete set of financial statements a statement of financial position as at the beginning of the preceding period whenever the entity retrospectively applies an accounting policy or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements. The purpose of this requirement is a. to discourage auditors from subsuming in retained earnings unaccounted differences in accounts and required reconciliations b. to promote vigilance on entities over errors and to discourage frequent changes in accounting policies c. to provide information that is useful in analyzing an entity's financial statements d. all of these

c. to provide information that is useful in analyzing an entity's financial statements

Which of the following accounts would not be classified under current assets on the balance sheet? a. Supplies b. Prepaid Insurance c. 90-day Note Receivable d. 2-year Note Receivable

d. 2-year Note Receivable

A corporation owed the following notes payable, which will mature during the coming year. The corporation plans to settle the notes as follows: Note payable A: Refinance by issuing a new 10 year bond Note payable B: Give the holder merchandise inventory Note payable C: Give the creditor a long term investment in equity instruments of another entity Which note is properly classified as a current liability? a. Note payable A b. Note payable B c. Note payable C d. All are current liabilities

d. All are current liabilities

Identify the correct statement. a. PAS 1 does precludes presenting financial statements based on a 53-week period or longer, because the resulting financial statements are likely to be materially different from those that would be presented for one year. b. When the method of presentation adopted by an entity is the classification based on liquidity, the entity need not disclose amounts of assets or liabilities expected to be recovered or settled after more than twelve months. c. For financial institutions, such as banks, a presentation of assets and liabilities based on the current/noncurrent presentation is more appropriate. d. An entity is permitted to present some of its assets and liabilities using a current/non-current classification and others in order of liquidity. e. The Function of Expense Method should be used in income statement presentation and the Nature of Expense should be used in the notes. Entities are prohibited from using the Nature of Expense Method in presenting of income statements.

d. An entity is permitted to present some of its assets and liabilities using a current/non-current classification and others in order of liquidity.

Which of the following statements is incorrect regarding comprehensive income? a. Comprehensive income is a broad measure of the changes in equity over a period except for contributions from, or distributions to, owners. Comprehensive income includes all income items which ultimately increase equity from transactions related to non-owner sources. b. Comprehensive income is broader than profit or loss and includes certain items of income and expenses not included in profit or loss. c. Comprehensive income includes any type of inflow which culminates to an earning process, other than from an owner acting in his capacity as owner. d. An unrealized loss on investments in FVOCI is not recognized in current earnings and is not a factor in measuring comprehensive income.

d. An unrealized loss on investments in FVOCI is not recognized in current earnings and is not a factor in measuring comprehensive income.

When classifying assets as current and non-current for reporting purposes, a. The amount at which current assets are carried and reported must reflect realizable cash values. b. Prepayments for items such as insurance or rent are included in an "other assets" group rather than as current assets as they will ultimately be expensed. c. The time period by which current assets are distinguished from non-current assets is determined by the seasonal nature of the business. d. Assets are classified as current if they are reasonably expected to be realized in cash, or consumed during the normal operating cycle.

d. Assets are classified as current if they are reasonably expected to be realized in cash, or consumed during the normal operating cycle.

When a full set of general-purpose financial statements are presented, comprehensive income and its components should a. Appear as a part of discontinued operations, extraordinary items, and cumulative effect of a change in accounting principle. b. Be reported net of related income tax effect, in total and individually. c. Appear in a supplemental schedule in the notes to the financial statements. d. Be displayed in a financial statement that has the same prominence as the other components of a complete set of financial statements.

d. Be displayed in a financial statement that has the same prominence as the other components of a complete set of financial statements

The statement of changes in equity may prominently display all of the following, except a. Effect of changes in accounting policies b. Correction of prior period errors c. Dividends to owners d. Components of comprehensive income for the period

d. Components of comprehensive income for the period

Which one of the following is not required to be presented as minimum information on the face of the statement of financial position, according to PAS 1? a. Investment property. b. Investments accounted under the equity method. c. Biological assets. d. Contingent liability.

d. Contingent liability.

Working capital is a. The group assets which enables the business to operate profitably b. Capital which has been reinvested in the business. c. Unappropriated retained earnings. d. Current assets less current liabilities.

d. Current assets less current liabilities.

Which of the following items would not be reported on a statement of profit or loss and other comprehensive income? a. Revaluation losses b. Prior period adjustments c. Share in associate's revaluation gain d. Discontinued operations

d. Discontinued operations

Which of the following statements is incorrect? a. The choice of method of presenting expenses is not irrevocable. If the other method is expected to present more relevant information, a change should made. However, changes between permitted accounting policies should not be made so often so as not to violate the principle of consistency. b. In a single-statement presentation, all items of income and expense are presented together in one statement. c. In a two-statement presentation, the first statement ('income statement') presents income and expenses recognized in profit or loss and the second statement ('statement of comprehensive income') begins with profit or loss and presents, in addition, items of income and expense that PFRSs require or permit to be recognized outside profit or loss. d. Dividends received from investments in associates accounted for using the equity method are not recognized in profit or loss but may be recognized in other comprehensive income.

d. Dividends received from investments in associates accounted for using the equity method are not recognized in profit or loss but may be recognized in other comprehensive income.

Which of the following is deducted from goods available for sale to determine cost of goods sold? a. Purchases b. Freight in c. Beginning inventory d. Ending inventory

d. Ending inventory

As a minimum, the face of the statement of financial position shall include all of the following line items, except a. Biological assets b. Investment property c. Deferred tax assets and liabilities d. Goodwill

d. Goodwill

Which of the following options for displaying comprehensive income is(are) preferred under PAS 1? I. A continuation of profit or loss at the bottom of the statement of profit or loss and other comprehensive income. II. A separate statement that begins with profit or loss. III. In the statement of changes in equity. a. I. b. II. c. II and III. d. I and II.

d. I and II.

The Income Statement: I. reflects the current operating performance of the entity. II. indicates whether the entity is healthy and growing or not. III. explains the changes in assets, liabilities and equity of the entity. IV. is a snapshot of a entity's operations at a given time. a. I, II & IV b. II & III c. I, II, III & IV d. I only

d. I only

In respect of loans classified as current liabilities, if the following events occur between the balance sheet date and the date the financial statements are authorized for issue, these events qualify for disclosure as non-adjusting events in accordance with PAS 10 Events After the Reporting Period. I. refinancing on a long-term basis II. rectification of a breach of a long-term loan agreement III. the receipt from the lender of a period of grace to rectify a breach of a long-term loan agreement ending at least twelve months after the balance sheet date a. I, II b. II c. II, III d. I, II, III

d. I, II, III

When an entity breaches a covenant under a long-term loan agreement on or before the balance sheet date with the effect that the liability becomes payable on demand, the liability is classified as noncurrent when I. The lender has agreed after the balance sheet date and before the financial statements are authorized for issue not to demand payment as a consequence of the breach. II. The lender has agreed on or before the balance sheet date to provide a grace period ending at least twelve months after the balance sheet date for the entity to rectify the breach. a. Both I and II b. Neither I nor II c. I only d. II only

d. II only

Which of the following statements is(are) correctly stated? I. The write-off of intangible assets generally should be reported as part of continuing operations but disclosed in the notes as an extraordinary item. II. For an item to be disclosed in the notes as extraordinary but presented as part of continuing operations in the profit or loss, the event or transaction which gave rise to it should either be unusual in nature or infrequency of occurrence. III. An income statement is usually not sufficient to describe total change in equity during a period. IV. The income statement of a period should include and properly describe all items of income and expenses that do not result from transactions with owners. V. An income statement is sufficient to describe the total change in owners' equity during a period because changes arise from sources other than profit oriented activities. a. I, III, IV b. I, III, V c. III, IV d. III only

d. III only

The basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts a. Inventory back into cash, or 12 months, whichever is shorter. b. Receivables back into cash, or 12 months, whichever is longer. c. Tangible fixed assets back into cash, or 12 months. whichever is longer. d. Inventory back into cash, or 12 months, whichever is longer.

d. Inventory back into cash, or 12 months, whichever is longer

A liability shall be classified as a current liability when it satisfies any of the following criteria, except a. It is expected to be settled in the entity's normal operating cycle. b. It is primarily held for the purpose of being traded. c. It is expected to be realized within twelve months after the balance sheet date. d. It is cash or a cash equivalent that is restricted from being exchanged or used to settle a liability for at least twelve months after the balance sheet date

d. It is cash or a cash equivalent that is restricted from being exchanged or used to settle a liability for at least twelve months after the balance sheet date

Accumulated other comprehensive income should be reported on the balance sheet as a component of (Item #1) Retained earnings; (Item #2) Additional paid-in capital a. Yes, Yes b. Yes, No c. No, Yes d. No, No

d. No, No

Which of the following should be included in general and administrative expenses? (Item #1) Interest; (Item #2) Advertising a. Yes, Yes b. Yes, No c. No, Yes d. No, No

d. No, No

In which section of the statement of financial position should cash that is restricted to the settlement of a liability due 18 months after the reporting period be presented, according to PAS1 Presentation of Financial Statements? a. Current assets b. Equity c. Non-current liabilities d. Non-current assets

d. Non-current assets

The operating cycle of a business is that span of time which a. Coincides with economy's business cycle which runs from one trough of the company's business activity to the next. b. Corresponds with its natural business year which runs from one trough of the particular firm's business activity to the next. c. Is set by the industry's trade association usually on an average length of time for all firms which are members of the association. d. Runs from cash disbursement for items of inventory through their sale to the realization of cash from sale.

d. Runs from cash disbursement for items of inventory through their sale to the realization of cash from sale

Which of the following statements is incorrect? a. Items of Other Comprehensive Income may be presented in the statement of profit or loss and other comprehensive income gross of tax or net of tax. b. The statement of profit or loss and other comprehensive income does not include transactions with owners in their capacity as owners. Such transactions are presented in the statement of changes in equity. c. All non-owner changes in equity should be presented in a single statement or in two statements. d. The choice of one of the methods of presenting expenses is irrevocable, hence, once chosen it must not be changed unless the going concern assumption becomes inappropriate.

d. The choice of one of the methods of presenting expenses is irrevocable, hence, once chosen it must not be changed unless the going concern assumption becomes inappropriate.

In case of a breach of a loan covenant with the effect that the liability becomes payable on demand, the liability is classified as noncurrent when a. It is not probable that further breaches or violations will occur within twelve months of the balance sheet date. b. The lender has agreed, prior to the approval of the financial statements, not to demand payment as a consequence of the breach. c. The lender has agreed after the balance sheet date and before the statements are authorized for issue to provide a grace period ending at least twelve months after the balance sheet date. d. The lender has agreed on or before the balance sheet date to provide a grace period ending at least twelve months after the balance sheet date for the entity to rectify the breach.

d. The lender has agreed on or before the balance sheet date to provide a grace period ending at least twelve months after the balance sheet date for the entity to rectify the breach.

Some borrowing agreements incorporate covenants which have the effect that the liability becomes payable on demand if certain conditions related to the covenants are breached. In these circumstances, the liability is classified as noncurrent when: a. The lender has agreed, prior to the approval of the financial statements, not to demand payment as a consequence of the breach. b. It is not probable that further breaches or violations will occur within twelve months of the balance sheet date. c. The lender has agreed after the balance sheet date and before the statements are authorized for issue to provide a grace period ending at least twelve months after the balance sheet date. d. The lender has given the lender, on or before the balance sheet date, a grace period to rectify the breach ending at least twelve months after the balance sheet date.

d. The lender has given the lender, on or before the balance sheet date, a grace period to rectify the breach ending at least twelve months after the balance sheet date.

Are the following statements true or false, according to PAS1 Presentation of Financial Statements? I. An entity presenting a single statement of profit or loss and other comprehensive income should present a statement of changes in equity II. An entity presenting a separate income statement and a statement of comprehensive income should present a statement of changes in equity a. False, False b. False, True c. True, False d. True, True

d. True, True

Are the following statements true or false, according to PAS1 Presentation of Financial Statements? I. Biological assets should be shown in the statement of financial position. II. The number of shares authorized for issue should be shown in the statement of financial position or the statement of changes in equity or in the notes. a. False, False b. False, True c. True, False d. True, True

d. True, True

Which of the following statements is incorrect regarding financial statement presentation? a. PAS 1 affects only the presentation of owner changes in equity and of comprehensive income. It does not change the recognition, measurement or disclosure of specific transactions and other events required by other PFRSs. b. PAS 1 requires an entity to present all owner changes in equity in a statement of changes in equity. c. All non-owner changes in equity are required to be presented in one statement of profit or loss and other comprehensive income or in two statements d. When an income statement is presented it is part of a complete set of financial statements and shall be displayed immediately after the statement of comprehensive income.

d. When an income statement is presented it is part of a complete set of financial statements and shall be displayed immediately after the statement of comprehensive income.

An entity shall present an analysis of expenses recognized in profit or loss using a classification based on a. Function b. Nature c. Liquidity d. a or b

d. a or b

Income and expenses for the period is presented in a. a statement of profit or loss and other comprehensive income b. a separate income statement and a statement of comprehensive income c. income statement only d. a or b

d. a or b

The current asset section of a balance sheet most likely will include: a. all deferred income taxes resulting from interperiod income tax allocation b. goodwill arising in a business combination accounted for as acquisition c. rent receivable for a security deposit on a lease d. a receivable from a customer not collectible for over one year

d. a receivable from a customer not collectible for over one year

Which of the following is/are a limitation(s) of a Balance Sheet? I. It does not contain certain assets and liabilities despite its claim to be the statement of all assets and liabilities II. Some factors, which have a vital bearing on the earnings of the entity, are not disclosed III. Personal judgment plays a great part in determining the figures on the balance sheet. a. I b. II and III c. III d. all of these

d. all of these

Interest earned on investments would appear in which section of a multiple-step income statement? a. non-operating b. operating c. would not appear d. as part of gross income

d. as part of gross income

The first row in a statement of changes in equity is most likely the a. profit b. owners' investments c. distribution to owners d. beginning capital

d. beginning capital

Gross profit is the difference between net sales and cost of goods sold. Which of the following most likely will not affect gross profit? a. write-down of inventories b. freight incurred by the consignor in delivering consigned goods to the consignee c. allowance for sales returns d. freight-out incurred by the seller

d. freight-out incurred by the seller

Which of the following is not included in comprehensive income? a. translation differences related to foreign operations b. fair value gains or losses on FVOCI securities. c. fair value gains or losses on FVPL securities. d. gains on reissuance of treasury shares

d. gains on reissuance of treasury shares

Which of the following is not included in comprehensive income? a. Remeasurements of the net defined benefit liability (asset) b. revaluation gains on property, plant, and equipment c. fair value gains or losses on investment properties. d. gains on retirement of ordinary shares

d. gains on retirement of ordinary shares

Total comprehensive income is (choose the incorrect statement) a. the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. b. includes increases or decreases in revaluation surplus during the period. c. includes both unrealized gains or losses on FVPL securities and FVOCI. d. includes only changes in assets that are not recognized in profit or loss but rather credited directly in equity (e.g. revaluation surplus and changes in fair values of FVOCI)

d. includes only changes in assets that are not recognized in profit or loss but rather credited directly in equity (e.g. revaluation surplus and changes in fair values of FVOCI)

An asset shall be classified as current when it satisfies any of the following criteria, except a. it is expected to be realized in, or is intended for sale or consumption in, the entity's normal operating cycle b. it is held primarily for the purpose of being traded c. it is expected to be realized within twelve months after the balance sheet date d. it is cash or a cash equivalent that is restricted

d. it is cash or a cash equivalent that is restricted

Gains or losses from extraordinary items should be shown on the income statement a. immediately following income from continuing operations. b. after discontinued operations. c. as an item in other revenues and expenses. d. not specifically identified as extraordinary items

d. not specifically identified as extraordinary items

An entity sold FVOCI securities during the year. In preparing the statement of profit or loss and other comprehensive income, the entity should a. compute the gain by deducting the historical cost of the FVOCI from the proceeds b. should not present the gain in the statement of profit or loss and other comprehensive income but in equity c. make a reclassification adjustment for the cumulative unrealized gains or losses previously recognized in equity. d. recognize directly in equity any cumulative unrealized gains or losses on the FVOCI sold

d. recognize directly in equity any cumulative unrealized gains or losses on the FVOCI sold

PAS 1 requires the presentation of dividends recognized as distributions to owners and related amounts per share in the a. in the notes b. statement of financial position or in the notes c. statement of income, statement of changes in equity, or in the notes d. statement of changes in equity or in the notes

d. statement of changes in equity or in the notes

A currently maturing long-term debt is classified as noncurrent when a. an agreement to reschedule payment on a long-term basis is completed after the end of reporting period but before the statements are authorized for issue. b. equity security has in fact been issued after the end of reporting period but before the statements are authorized for issue, the proceeds from which are used to settle the liability on the date of maturity. c. the lender has the discretion to refinance or roll over the liability for at least twelve months after the end of reporting period under an existing loan facility. d. the borrower has the discretion to refinance or roll over the liability for at least twelve months after the end of reporting period under an existing loan facility

d. the borrower has the discretion to refinance or roll over the liability for at least twelve months after the end of reporting period under an existing loan facility

A liability shall be classified as current when it satisfies any of the following criteria, except a. it is expected to be settled in the entity's normal operating cycle b. it is held primarily for the purpose of being traded c. it is due to be settled within twelve months after the balance sheet date d. the entity has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

d. the entity has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

The "bottom line" in a statement of profit or loss and other comprehensive income is a. profit or loss b. other comprehensive income c. gross profit d. total comprehensive income

d. total comprehensive income

Reclassification adjustments may arise on which of the following? a. on settlements of employee pension benefits under a defined benefit plan b. changes in revaluation surplus c. on derecognition of FVOCI securities d. when a hedged forecast transaction affects profit or loss

d. when a hedged forecast transaction affects profit or loss

All of the following statements are correct, except a. The operating cycle of an entity is the time between the acquisition of assets for processing and their realization in cash or cash equivalents. b. When the entity's normal operating cycle is not clearly identifiable, its duration is assumed to be twelve months. c. Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realized as part of the normal operating cycle even when they are not expected to be realized within twelve months after the balance sheet date. d. Some liabilities are part of the working capital used in the entity's normal operating cycle. Such operating items are classified as current liabilities even if they are due to be settled more than twelve months after the balance sheet date. e. All of these are correct.

e. All of these are correct.