TOA 2014 FC (3)

210. When it is difficult to distinguish between a change of estimate and a change in accounting policy, then an entity should A. Treat the entire change as a change in estimate with appropriate disclosure. B. Apportion, on a reasonable basis, the relative amounts of change in estimate and the change in accounting policy and treat each one accordingly. C. Treat the entire change as a change in accounting policy. D. Since this change is a mixture of two types of changes, it is best if it is ignored in the year of the change; the entity should then wait for the following year to see how the change develops and then treat it accordingly.

A. Treat the entire change as a change in estimate with appropriate disclosure.

201. PFRS 3 requires all identifiable intangible assets of the acquired business to be recorded at their fair values. Many intangible assets that may have been subsumed within goodwill must be now separately valued and identified. Under PFRS 3, when would an intangible asset be "identifiable"? A. When it meets the definition of an asset in the Framework document only B. When it meets the definition of an intangible asset in PAS 38, Intangible Assets, and its fair value can be measured reliably C. If it has been recognized under local generally accepted accounting principles even though it does not meet the definition in PAS 38 D. Where it has been acquired in a business combination

A. When it meets the definition of an asset in the Framework document only

180. Transfers from investment property to property, plant, and equipment are appropriate A. When there is change of use B. Based on the entity's discretion C. Only when the entity adopts the fair value model under PAS 38 D. The entity can never transfer property into another classification on the statement of financial position once it is classified as investment property

A. When there is change of use

165. Goodwill should be tested for impairment A. If there is an indication of impairment B. Annually C. Every five years D. On the acquisition of a subsidiary

B. Annually

169. Which of the following impairment losses should never be reversed? A. Loss on property, plant, and equipment B. Loss on goodwill C. Loss on a business segment D. Loss on inventory

B. Loss on goodwill

156. Value-in-use is A. The market value B. The discounted present value of future cash flows arising from use of the asset and from its disposal C. The higher of an asset's fair value less cost to sell and its market value D. The amount at which the asset is recognized in the statement of financial position

B. The discounted present value of future cash flows arising from use of the asset and from its disposal

179. In case of property held under an operating lease and classified as investment property A. The entity has to account for the investment property under the cost model only B. The entity has to use the fair value model only C. The entity has the choice between the cost model and the fair value model D. The entity needs only to disclose the fair value and can use the cost model under PAS 38

B. The entity has to use the fair value model only

160. Which of the following is the best evidence of an asset's fair value less costs to sell? A. An asset that is trading in an active market B. The price in a binding sale agreement C. Information available that determines the disposal value of the asset in an arm's length transaction D. The carrying value of the asset

B. The price in a binding sale agreement

157. If the fair value less costs to sell cannot be determined A. The asset is not impaired B. The recoverable amount is the value-in use C. The net realizable value is used D. The carrying value of the asset remains the same

B. The recoverable amount is the value-in use

185. Joice, a public limited company, has granted share options to its employees prior to the date from which PFRS 2 became applicable (November 7, 2002). The company decided after the issuance of PFRS 2 to reprice the options. The original exercise price of P20 was repriced at P15 per option. PFRS 2 would require the company to A. Apply the Standard to the share options from the original grant date and ignore the repricing B. Apply the Standard to the share options from the original grant date, taking into account the repriced award C. Apply the Standard to the repriced award only D. Ignore the Standard for the whole award of share options

C. Apply the Standard to the repriced award only

227. Which of the following criteria do not have to be met in order for an operation to be classified as discontinued? A. The operation should represent a separate line of business or geographical area B. The operation is part of a single plan to dispose of a separate major line of business or geographical area C. The operation is a subsidiary acquired exclusively with a view to resale D. The operation must be sold within three months of the year-end

D. The operation must be sold within three months of the year-end

164. A cash-generating unit is A. The smallest business segment B. Any grouping of assets that generates cash flows C. Any group of assets that is reported separately to management D. The smallest group of assets that generates independent cash flows from continuing use

D. The smallest group of assets that generates independent cash flows from continuing use

217. Healthy Inc. bought a private jet for the use of its top-ranking officials. The cost of the private jet is P 15 million and can be depreciated either using a composite useful life or useful lives of its major components. It is expected to be used over a period of 7 years. The engine of the jet has a useful life of 5 years. The private jet's tires are replaced every 2 years. The private jet will be depreciated using the straight-line method over A. 7 years composite useful life B. 5 years useful life of the engine, 2 years useful life of the tires, and 7 years useful life applied to the balance cost of the jet C. 2 years useful life based on conservatism (the lowest useful life of all the parts of the jet) D. years useful life based on a simple average of the useful lives of all major components of the jet

B. 5 years useful life of the engine, 2 years useful life of the tires, and 7 years useful life applied to the balance cost of the jet

220. PAS 16 requires that revaluation surplus resulting from initial revaluation of property, plant, and equipment should be treated in one of the following ways. Which of the four options mirrors the requirements of PAS 16? A. Credited to retained earnings as this is an unrealized gain B. Released to the income statement an amount equal to the difference between the depreciation calculated on historical cost vis-à-vis revalued amount C. Deducted from current assets and added to the property, plant, and equipment D. Debited to the class of property, plant, and equipment that is being revalued and credited to a reserve captioned "revaluation surplus," which is presented under "equity"

D. Debited to the class of property, plant, and equipment that is being revalued and credited to a reserve captioned "revaluation surplus," which is presented under "equity"

176. Which of the following disclosures is not required by PAS 38? A. Useful lives of the intangible assets B. Reconciliation of carrying amount at the beginning and the end of the year C. Contractual commitments for the acquisition of intangible assets D. Fair value of similar intangible assets used by its competitors

D. Fair value of similar intangible assets used by its competitors

202. Which of the following examples is unlikely to meet the definition of an intangible asset for the purpose of PFRS 3? A. Marketing related, such as trademarks and internet domain names B. Customer related, such as customer lists and contracts C. Technology based, such as computer software and databases D. Pure research based, such as general expenditure on research

D. Pure research based, such as general expenditure on research

223. In order for a noncurrent asset to be classified as held for sale, the sale must be highly probable. "Highly probable" means that A. The future sale is likely to occur B. The future sale is more likely than not to occur C. The sale is certain D. The probability is higher than more likely than not

D. The probability is higher than more likely than not

208. The management of an entity is unsure how to treat a restructuring provision that they wish to set up on the acquisition of another entity. Under PFRS 3, the treatment of this provision will be A. A charge in the income statement in the post-acquisition period B. To include the provision in the allocated cost of acquisition C. To provide for the amount and, if the provision is overstated, to release the excess to the income statement in the post-acquisition period D. To include the provision in the allocated cost of acquisition if the acquired entity commits itself to a restructuring within a year of acquisition

A. A charge in the income statement in the post-acquisition period

153. The weighted average number of shares outstanding during the period for all periods (other than the conversion of potential ordinary shares) shall be adjusted for A. Any change in the number of ordinary shares without a change in resources. B. Any prior-year adjustment. C. Any new issue of shares for cash. D. Any convertible instruments settled in cash.

A. Any change in the number of ordinary shares without a change in resources.

167. When impairment testing a cash-generating unit, any corporate assets, such as the head office business or computer equipment, should A. Be allocated on a reasonable and consistent basis B. Be separately impairment tested C. Be included in the head office assets or parent's assets and impairment tested along with that cash-generating unit D. Not be allocated to cash-generating units

A. Be allocated on a reasonable and consistent basis

190. The lease of land and buildings when split causes difficulty in the allocation of the minimum lease payments. In this case the minimum lease payments should be split A. According to the relative fair value of two elements B. By the entity based on the useful life of the two elements C. Using the sum of the digits method D. According to any fair method devised by the entity

A. According to the relative fair value of two elements

174. The board of directors of ABC Inc. decided on December 15, P, to wind up international operations in the Far East and move them to Australia. The decision was based on a detailed formal plan of restructuring as required by IAS 37. This decision was conveyed to all workers and management personnel at the headquarters in Europe. The cost of restructuring the operations in the Far East as per this detailed plan was P2 million. How should ABC Inc. treat this restructuring in its financial statements for the year-end December 31, P? A. Because ABC Inc. has not announced the restructuring to those affected by the decision and thus has not raised an expectation that ABC Inc. will actually carry out the restructuring (and as no constructive obligation has arisen), only disclose the restructuring decision and the cost of restructuring of P2 million in footnotes to the financial statements B. Recognize a provision for restructuring since the board of directors has approved it and it has been announced in the headquarters of ABC Inc. in Europe C. Mention the decision to restructure and the cost involved in the chairman's statement in the annual report since it a decision of the board of directors D. Because the restructuring has not commenced before year-end, based on prudence, wait until next year and do nothing in this year's financial statements

A. Because ABC Inc. has not announced the restructuring to those affected by the decision and thus has not raised an expectation that ABC Inc. will actually carry out the restructuring (and as no constructive obligation has arisen), only disclose the restructuring decision and the cost of restructuring of P2 million in footnotes to the financial statements

177. An investment property should be measured initially at A. Cost B. Cost less accumulated impairment losses C. Depreciable cost less accumulated impairment losses D. Fair value less accumulated impairment losses

A. Cost

154. Where ordinary shares are issued but not fully paid, then the ordinary shares are treated in the calculation of basic EPS A. In the same way as fully paid ordinary shares. B. As a fraction of an ordinary share to the extent that they are entitled to participate in dividends. C. In the same way as warrants or options and are included only in diluted EPS. D. Are ignored for the purposes of basic and diluted EPS.

B. As a fraction of an ordinary share to the extent that they are entitled to participate in dividends.

193. The profit on a finance lease transaction for lessors who are manufacturers or dealers should A. Not be recognized separately from finance income B. Be recognized in the normal way on the transaction C. Only be recognized at the end of the lease term D. Be allocated on a straight-line basis over the life of the lease

B. Be recognized in the normal way on the transaction

175. A newly set up dot-com entity has engaged you as its financial advisor. The entity has recently completed one of its highly publicized research and development projects and seeks your advice on the accuracy of the following statements made by one of its stakeholders. Which one is it? A. Costs incurred during the "research phase" can be capitalized B. Costs incurred during the "development phase" can be capitalized if criteria such as technical feasibility of the project being established are met C. Training costs of technicians used in research can be capitalized D. Designing of jigs and tools qualify as research activities

B. Costs incurred during the "development phase" can be capitalized if criteria such as technical feasibility of the project being established are met

194. In the case of sale and leaseback transactions, if the sale is at below the fair value of the assets and the loss is compensated by future lease payments, then the loss is A. Recognized immediately in reserves B. Deferred and amortized over the useful life of the asset C. Deferred until the end of the lease term D. Recognized immediately in the profit and loss

B. Deferred and amortized over the useful life of the asset

161. When calculating the estimates of future cash flows, which of the following cash flows should not be included? A. Cash flows from disposal B. Income tax payments C. Cash flows from the sale of assets produced by the asset D. Cash outflows on the maintenance of the asset

B. Income tax payments

214. At the statement of financial position date, December 31, 2014, ABC Inc. carried a receivable from XYZ, a major customer, at P 10 million. The "authorization date" of the financial statements is on February 16, 2015. XYZ declared bankruptcy on Valentine's Day (February 14, 2015). ABC Inc. will A. Disclose the fact that XYZ has declared bankruptcy in the footnotes. B. Make a provision for this subsequent event in its financial statements (as opposed to disclosure in footnotes). C. Ignore the event and wait for the outcome of the bankruptcy because the event took place after the year-end. D. Reverse the sale pertaining to this receivable in the comparatives for the prior period and treat this as an "error" under PAS 8.

B. Make a provision for this subsequent event in its financial statements (as opposed to disclosure in footnotes).

191. An entity classifies a lease of land and buildings as an investment property under PAS 40. The entity has adopted the fair value model. In this case A. Separate measurement of the lease of land and buildings is compulsory. B. Separate measurement of the lease of land and buildings is not required. C. The lease is treated as an operating lease. D. The lease cannot be treated as an operating lease.

B. Separate measurement of the lease of land and buildings is not required.

205. On acquisition, all identifiable assets and liabilities, including goodwill, will be allocated to cash-generating units within the business combination. Goodwill impairment is assessed within the cash-generating units. If the combined organization has cash generating units significantly below the level of an operating segment, then the risk of an impairment charge against goodwill as a result of PFRS 3 is A. Significantly decreased because goodwill will be spread across many cash generating units B. Significantly increased because poorly performing units can no longer be supported by those that are performing well C. Likely to be unchanged from previous accounting practice D. Likely to be decreased because goodwill will be a smaller amount due to the greater recognition of other intangible assets

B. Significantly increased because poorly performing units can no longer be supported by those that are performing well

186. The classification of a lease as either an operating or finance lease is based on A. The length of the lease B. The transfer of the risks and rewards of ownership C. The minimum lease payments being at least 50% of the fair value D. The economic life of the asset

B. The transfer of the risks and rewards of ownership

188. The classification of a lease is normally carried out A. At the end of the lease term B. After a "cooling off" period of one year C. At the inception of the lease D. When the entity deems it to be necessary

C. At the inception of the lease

168. When allocating an impairment loss, such a loss should reduce the carrying amount of which asset first? A. Property, plant, and equipment B. Intangible assets C. Goodwill D. Current assets

C. Goodwill

225. Any gain on a subsequent increase in the fair value less cost to sell of a noncurrent asset classified as held for sale should be treated as follows: A. The gain should be recognized in full B. The gain should not be recognized C. The gain should be recognized but not in excess of the cumulative impairment loss D. The gain should be recognized but only in retained earnings

C. The gain should be recognized but not in excess of the cumulative impairment loss

189. Where there is a lease of land and buildings and the title to the land is not transferred, generally the lease is treated as if A. The land is a finance lease, the building is a finance lease B. The land is a finance lease, the building is an operating lease C. The land is an operating lease, the building is a finance lease D. The land is an operating lease, the building is an operating lease

C. The land is an operating lease, the building is a finance lease

200. Purchase accounting requires an acquirer and an acquiree to be identified for every business combinations. Where a new entity (H) is created to acquire two preexisting entities, S and A, which of these entities will be designated as the acquirer? A. H B. S C. A D. A or S

D. A or S

155. PAS 36 applies to which of the following assets? A. Inventories B. Financial assets C. Assets held for sale D. Property, plant, and equipment

D. Property, plant, and equipment

159. Estimates of future cash flows normally would cover projections over a maximum of A. Five years B. Ten years C. Fifteen years D. Twenty years

A. Five years

228. PFRS 5 states that a noncurrent asset that is to be abandoned should not be classified as held for sale. The reason for this is because A. Its carrying amount will be recovered principally through continuing use B. It is difficult to value C. It is unlikely that the noncurrent asset will be sold within 12 months D. It is unlikely that there will be an active market for the noncurrent asset

A. Its carrying amount will be recovered principally through continuing use

221. How should the income from discontinued operations be presented in the income statement? A. The entity should disclose a single amount on the face of the income statement with analysis in the notes or a section of the income statement separate from continuing operations B. The amounts from discontinued operations should be broken down over each category of revenue and expense C. Discontinued operations should be shown as a movement on retained earnings D. Discontinued operations should be shown as a line item after gross profit with the taxation being shown as part of income tax expense

A. The entity should disclose a single amount on the face of the income statement with analysis in the notes or a section of the income statement separate from continuing operations

158. If assets are to be disposed of A. The recoverable amount is the fair value less costs to sell B. The recoverable amount is the value-inuse C. The asset is not impaired D. The recoverable amount is the carrying value

A. The recoverable amount is the fair value less costs to sell

224. An entity acquires a subsidiary exclusively with a view to selling it. The subsidiary meets the criteria to be classified as held for sale. At the statement of financial position date, the subsidiary has not yet been sold, and six months have passed since its acquisition. How will the subsidiary be valued in the statement of financial position at the date of the first financial statements after acquisition? A. At fair value B. At the lower of its cost and fair value less cost to sell C. At carrying value D. In accordance with applicable PFRS

B. At the lower of its cost and fair value less cost to sell

219. An entity installed a new production facility and incurred a number of expenses at the point of installation. The entity's accountant is arguing that most expenses do not qualify for capitalization. Included in those expenses are initial operating losses. These should be A. Deferred and amortized over a reasonable period of time B. Expensed and charged to the income statement C. Capitalized as part of the cost of the plant as a directly attributable cost D. Taken to retained earnings since it is unreasonable to present it as part of the current year's income statement

B. Expensed and charged to the income statement

178. The applicable PFRS/PAS for a property being constructed or developed for future use as investment property is A. PAS 2, Inventories, until construction is complete and then it is accounted for under PAS 40, Investment Property B. PAS 40, Investment Property C. PAS 11, Construction Contracts, until construction is complete and then it is accounted for under PAS 40, Investment Property D. PAS 16, Property, Plant, and Equipment, until construction is complete and then it is accounted for under PAS 40, Investment Property

B. PAS 40, Investment Property

172. A competitor has sued an entity for unauthorized use of its patented technology. The amount that the entity may be required to pay to the competitor if the competitor succeeds in the lawsuit is determinable with reliability, and according to the legal counsel it is less than probable (but more than remote) that an outflow of the resources would be needed to meet the obligation. The entity that was sued should at year-end: A. Recognize a provision for this possible obligation B. Make a disclosure of the possible obligation in footnotes to the financial statements C. Make no provision or disclosure and wait until the lawsuit is finally decided and then expense the amount paid on settlement, if any D. Set aside, as an appropriation, a contingency reserve, an amount based on the best estimate of the possible liability

B. Make a disclosure of the possible obligation in footnotes to the financial statements

206. The "excess of the acquirer's interest in the net fair value of acquiree's identifiable assets, liabilities, and contingent liabilities over cost" (formerly known as negative goodwill) should be A. Amortized over the life of the assets acquired B. Reassessed as to the accuracy of its measurement and then recognized immediately in profit or loss C. Reassessed as to the accuracy of its measurement and then recognized in retained earnings D. Carried as a capital reserve indefinitely

B. Reassessed as to the accuracy of its measurement and then recognized immediately in profit or loss

163. An impairment loss that relates to an asset that has been revalued should be recognized in A. Profit or loss B. Revaluation reserve that relates to the revalued asset C. Opening retained profits D. Any reserve in equity

B. Revaluation reserve that relates to the revalued asset

218. XYZ Inc. owns a fleet of over 100 cars and 20 ships. It operates in a capital-intensive industry and thus has significant other property, plant, and equipment that it carries in its books. It decided to revalue its property, plant, and equipment. The company's accountant has suggested the alternatives that follow. Which one of the options should XYZ Inc. select in order to be in line with the provisions of PAS 16? A. Revalue only one-half of each class of property, plant, and equipment, as that method is less cumbersome and easy compared to revaluing all assets together. B. Revalue an entire class of property, plant, and equipment. C. Revalue one ship at a time, as it is easier than revaluing all ships together. D. Since assets are being revalued regularly, there is no need to depreciate.

B. Revalue an entire class of property, plant, and equipment.

222. How should the assets and liabilities of a disposal group classified as held for sale be shown in the statement of financial position? A. The assets and liabilities should be offset and presented as a single amount B. The assets of the disposal group should be shown separately from other assets in the statement of financial position, and the liabilities of the disposal group should be shown separately from other liabilities in the statement of financial position C. The assets and liabilities should be presented as a single amount and as a deduction from equity D. There should be no separate disclosure of assets and liabilities that form part of a disposal group

B. The assets of the disposal group should be shown separately from other assets in the statement of financial position, and the liabilities of the disposal group should be shown separately from other liabilities in the statement of financial position

170. When can a "provision" be recognized in accordance with PAS 37? A. When there is a legal obligation arising from a past (obligating) event, the probability of the outflow of resources is more than remote (but less than probable), and a reliable estimate can be made of the amount of the obligation B. When there is a constructive obligation as a result of a past (obligating) event, the outflow of resources is probable, and a reliable estimate can be made of the amount of the obligation C. When there is a possible obligation arising from a past event, the outflow of resources is probable, and an approximate amount can be set aside toward the obligation D. When management decides that it is essential that a provision be made for unforeseen circumstances and keeping in mind this year the profits were enough but next year there may be losses

B. When there is a constructive obligation as a result of a past (obligating) event, the outflow of resources is probable, and a reliable estimate can be made of the amount of the obligation

226. An entity has an asset that was classified as held for sale. However, the criteria for it to remain as held for sale no longer apply. The entity should therefore A. Leave the noncurrent asset in the financial statements at its current carrying value B. Remeasure the noncurrent asset at fair value C. Measure the noncurrent asset at the lower of its carrying amount before the asset was classified as held for sale (as adjusted for subsequent depreciation, amortization, or revaluations) and its recoverable amount at the date of the decision not to sell D. Recognize the noncurrent asset at its carrying amount prior to its classification as held for sale as adjusted for subsequent depreciation, amortization, or revaluations

C. Measure the noncurrent asset at the lower of its carrying amount before the asset was classified as held for sale (as adjusted for subsequent depreciation, amortization, or revaluations) and its recoverable amount at the date of the decision not to sell

171. Amazon Inc. has been served a legal notice on December 15, P, by the local environmental protection agency (EPA) to fit smoke detectors in its factory on or before June 30, 2015 (before June 30 of the following year). The cost of fitting smoke detectors in its factory is estimated at P250,000. How should Amazon Inc. treat this in its financial statements for the year ended December 31, P? A. Recognize a provision for P250,000 in the financial statements for the year ended December 31, P B. Recognize a provision for P125,000 in the financial statements for the year ended December 31, P, because the other 50% of the estimated amount will be recognized next year in the financial statement for the year ended December 31, 2015 C. Because Amazon Inc. can avoid the future expenditure by changing the method of operations and thus there is no present obligation for the future expenditure, no provision is required at December 31, P, but as there is a possible obligation, this warrants disclosure in footnotes to the financial statements for the year ended December 31, P D. Ignore this for the purposes of the financial statements for the year ended December 31, P, and neither disclose nor provide the estimated amount of P250,000

C. Because Amazon Inc. can avoid the future expenditure by changing the method of operations and thus there is no present obligation for the future expenditure, no provision is required at December 31, P, but as there is a possible obligation, this warrants disclosure in footnotes to the financial statements for the year ended December 31, P

173. A factory owned by XYZ Inc. was destroyed by fire. XYZ Inc. lodged an insurance claim for the value of the factory building, plant, and an amount equal to one year's net profit. During the year there were a number of meetings with the representatives of the insurance company. Finally, before year-end, it was decided that XYZ Inc. would receive compensation for 90% of its claim. XYZ Inc. received a letter that the settlement check for that amount had been mailed, but it was not received before year-end. How should XYZ Inc. treat this in its financial statements? A. Disclose the contingent asset in the footnotes B. Wait until next year when the settlement check is actually received and not recognize or disclose this receivable at all since at year-end it is a contingent asset C. Because the settlement of the claim was conveyed by a letter from the insurance company that also stated that the settlement check was in the mail for 90% of the claim, record 90% of the claim as a receivable as it is virtually certain that the contingent asset will be received D. Because the settlement of the claim was conveyed by a letter from the insurance company that also stated that the settlement check was in the mail for 90% of the claim, record 100% of the claim as a receivable at year-end as it is virtually certain that the contingent asset will be received, and adjust the 10% next year when the settlement check is actually received

C. Because the settlement of the claim was conveyed by a letter from the insurance company that also stated that the settlement check was in the mail for 90% of the claim, record 90% of the claim as a receivable as it is virtually certain that the contingent asset will be received

211. When an independent valuation expert advises an entity that the salvage value of its plant and machinery had drastically changed and thus the change is material, the entity should A. Retrospectively change the depreciation charge based on the revised salvage value B. Change the depreciation charge and treat it as a correction of an error. C. Change the annual depreciation for the current year and future years. D. Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expected to be recovered in future.

C. Change the annual depreciation for the current year and future years.

216. International Inc. deals extensively with foreign entities, and its financial statements reflect these foreign currency transactions. Subsequent to the end of the reporting period, and before the "date of authorization" of the issuance of the financial statements, there were abnormal fluctuations in foreign currency rates. International Inc. should A. Adjust the foreign exchange year-end balances to reflect the abnormal adverse fluctuations in foreign exchange rates. B. Adjust the foreign exchange year-end balances to reflect all the abnormal fluctuations in foreign exchange rates (and not just adverse movements). C. Disclose the subsequent event in footnotes as a nonadjusting event. D. Ignore the subsequent event.

C. Disclose the subsequent event in footnotes as a nonadjusting event.

197. Which of the following costs may not be eligible for capitalization as borrowing costs under PAS 23? A. Interest on bonds issued to finance the construction of a qualifying asset B. Amortization of discounts or premiums relating to borrowings that qualify for capitalization C. Imputed cost of equity D. Exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to interest costs pertaining to a qualifying asset

C. Imputed cost of equity

204. If the impairment of the value of goodwill is seen to have reversed, then the company may A. Reverse the impairment charge and credit income for the period B. Reverse the impairment charge and credit retained earnings C. Not reverse the impairment charge D. Reverse the impairment charge only if the original circumstances that led to the impairment no longer exist and credit retained earnings

C. Not reverse the impairment charge

162. When deciding on the discount rate that should be used, which factors should not be taken into account? A. The time value of money B. Risks that relate to the asset for which future cash flow estimates have not been adjusted C. Risks specific to the asset for which future cash flow estimates have been adjusted D. Pretax rates

C. Risks specific to the asset for which future cash flow estimates have been adjusted

199. Which of the following is not a disclosure requirement under PAS 23? A. Accounting policy adopted for borrowing costs B. Amount of borrowing costs capitalized during the period C. Segregation of assets that are "qualifying assets" from other assets on the statement of financial position or as a disclosure in the footnotes to the financial statements D. Capitalization rate used to determine the amount of borrowing costs eligible for capitalization

C. Segregation of assets that are "qualifying assets" from other assets on the statement of financial position or as a disclosure in the footnotes to the financial statements

183. On June 1, P, an entity offered its employees share options subject to the award being ratified in a general meeting of the shareholders. The award was approved by a meeting on September 5, P. The entity's year-end is June 30. The employees were to receive the share options on June 30, 2016. At which date should the fair value of the share options be valued for the purposes of IFRS 2? A. June 1, P B. June 30, P C. September 5, P D. June 30, 2016

C. September 5

166. Where part of the cash-generating unit is disposed of, the goodwill associated with the element disposed of A. Shall be written off to the income statement entirely B. Shall not be included in the calculation of gain or loss on disposal C. Shall be included in the calculation of gain or loss on disposal D. Shall be written off against retained profits

C. Shall be included in the calculation of gain or loss on disposal

213. A new drug named "EEE" was introduced by Genius Inc. in the market on December 1, 2014. Genius Inc.'s financial year ends on December 31, 2014. It was the only company that was permitted to manufacture this patented drug. The drug is used by patients suffering from an irregular heartbeat. On March 31, 2015, after the drug was introduced, more than 1,000 patients died. After a series of investigations, authorities discovered that when this drug was simultaneously used with "BBB," a drug used to regulate hypertension, the patient's blood would clot and the patient suffered a stroke. A lawsuit for P 100,000,000 has been filed against Genius Inc. The financial statements were authorized for issuance on April 30, 2015. Which of the following options is the appropriate accounting treatment for this subsequent event under PAS 10? A. The entity should provide P 100,000,000 because this is an "adjusting event" and the financial statements were authorized to be issued after the accident. B. The entity should disclose P 100,000,000 as a contingent liability because it is an "adjusting event." C. The entity should disclose P 100,000,000 as a "contingent liability" because it is a present obligation with an improbable outflow. D. Assuming the probability of the lawsuit being decided against Genius Inc. is remote, the entity should disclose it in the footnotes, because it is a nonadjusting material event.

C. The entity should disclose P 100,000,000 as a "contingent liability" because it is a present obligation with an improbable outflow.

192. Which is the correct accounting treatment for a finance lease in the accounts of a lessor? A. Treat as a noncurrent asset equal to net investment in lease. Recognize all finance payments in income statements. B. Treat as a receivable equal to gross amount receivable on lease. Recognize finance payments in cash and by reducing debtor. C. Treat as a receivable equal to net investment in the lease. Recognize finance payment by reducing debtor and taking interest to income statement. D. Treat as a receivable equal to net investment in the lease. Recognize finance payments in cash and by reduction of debtor.

C. Treat as a receivable equal to net investment in the lease. Recognize finance payment by reducing debtor and taking interest to income statement.

196. Which of the following may not be considered a "qualifying asset" under PAS 23? A. A power generation plant that normally takes two years to construct B. An expensive private jet that can be purchased from a local vendor C. A toll bridge that usually takes more than a year to build D. A ship that normally takes one to two years to complete

D. A ship that normally takes one to two years to complete

215. Excellent Inc. built a new factory building during 2014 at a cost of P 20 million. At December 31, 2014, the net book value of the building was P 19 million. Subsequent to year-end, on March 15, 2015, the building was destroyed by fire and the claim against the insurance company proved futile because the cause of the fire was negligence on the part of the caretaker of the building. If the date of authorization of the financial statements for the year ended December 31, 2014, was March 31, 2015, Excellent Inc. should A. Write off the net book value to its scrap value because the insurance claim would not fetch any compensation. B. Make a provision for one-half of the net book value of the building. C. Make a provision for three-fourths of the net book value of the building based on prudence. D. Disclose this nonadjusting event in the footnotes.

D. Disclose this nonadjusting event in the footnotes.

212. ABC Ltd. decided to operate a new amusement park that will cost P 1 million to build in the year 2014. Its financial year-end is December 31, 2014. ABC Ltd. has applied for a letter of guarantee for P 700,000. The letter of guarantee was issued on March 31, 2015. The audited financial statements have been authorized to be issued on April 18, 2015. The adjustment required to be made to the financial statement for the year ended December 31, 2014, should be A. Booking a P 700,000 long-term payable B. Disclosing P 700,000 as a contingent liability in 2014 financial statement C. Increasing the contingency reserve by P 700,000 D. Do nothing.

D. Do nothing.

181. An investment property is derecognized (eliminated from the statement of financial position) when A. It is disposed to a third party B. It is permanently withdrawn from use C. No future economic benefits are expected from its disposal D. In all of the above cases

D. In all of the above cases

209. PFRS 3 requires that the contingent liabilities of the acquired entity should be recognized in the statement of financial position at fair value. The existence of contingent liabilities is often reflected in a lower purchase price. Recognition of such contingent liabilities will A. Decrease the value attributed to goodwill, thus decreasing the risk of impairment of goodwill B. Decrease the value attributed to goodwill, thus increasing the risk of impairment of goodwill C. Increase the value attributed to goodwill, thus decreasing the risk of impairment of goodwill D. Increase the value attributed to goodwill, thus increasing the risk of impairment of goodwill

D. Increase the value attributed to goodwill, thus increasing the risk of impairment of goodwill

184. Many shares and most share options are not traded in an active market. Therefore, it is often difficult to arrive at a fair value of the equity instruments being issued. Which of the following option valuation techniques should not be used as a measure of fair value in the first instance? A. Black-Scholes model B. Binomial model C. Monte-Carlo model D. Intrinsic value

D. Intrinsic value

207. Which one of the following reasons would not contribute to the creation of negative goodwill? A. Errors in measuring the fair value of the acquiree's net identifiable assets or the cost of the business combination B. A bargain purchase C. A requirement in an IFRS to measure net assets acquired at a value other than fair value D. Making acquisitions at the top of a "bull" market for shares

D. Making acquisitions at the top of a "bull" market for shares

203. An acquirer should at the acquisition date recognize goodwill acquired in a business combination as an asset. Goodwill should be accounted for as follows: A. Recognize as an intangible asset and amortize over its useful life B. Write off against retained earnings C. Recognize as an intangible asset and impairment test when a trigger event occurs D. Recognize as an intangible asset and annually impairment test (or more frequently if impairment is indicated)

D. Recognize as an intangible asset and annually impairment test (or more frequently if impairment is indicated)

198. Capitalization of borrowing costs A. Shall be suspended during temporary periods of delay B. May be suspended only during extended periods of delays in which active development is delayed C. Should never be suspended once capitalization commences D. Shall be suspended only during extended periods of delays in which active development is delayed

D. Shall be suspended only during extended periods of delays in which active development is delayed

195. Lessors should show assets that are out on operating leases and income therefrom as follows A. The asset should be kept off the statement of financial position and the lease income should go to reserves. B. The asset should be kept off the statement of financial position and the lease income should go to the income statement. C. The asset should be shown in the statement of financial position according to its nature and the lease income should go to reserves. D. The asset should be shown in the statement of financial position according to its nature with the lease income going to the income statement.

D. The asset should be shown in the statement of financial position according to its nature with the lease income going to the income statement.

187. Which of the following situations would prima facie lead to a lease being classified as an operating lease? A. Transfer of ownership to the lessee at the end of the lease term B. Option to purchase at a value below the fair value of the asset C. The lease term is for a major part of the asset's life D. The present value of the minimum lease payments is 50% of the fair value of the asset

D. The present value of the minimum lease payments is 50% of the fair value of the asset

182. Which of the following is true regarding the requirements of PFRS 2? A. Private companies are exempt B. "Small" companies are exempt C. Subsidiaries using their parent entity's shares as consideration for goods and services are exempt D. There are no exemptions from PFRS 2

D. There are no exemptions from PFRS 2