Quiz 3- PAS 1
1. PAS 1 applies to which of the following? a. The preparation and presentation of general purpose financial statements. b. The recognition and measurement of specific assets, liabilities, income and expenses. c. The disclosure requirements for specific transactions and other events. d. All of these.
A
1. The financial statements of Entity A shows line items described as "Other current assets," "Other noncurrent liabilities," and "Miscellaneous expenses." Which of the following is correct? a. Entity A considers the items included in these line items as dissimilar and cannot be included in material classes of similar items and are also individually immaterial to warrant separate presentation. b. Entity A considers the items included in these line items as individually material but with dissimilar nature or function. c. Entity A considers the items included in these line items as comprising a material class of similar items. d. This manner of presenting items is unacceptable under PAS 1.
A
1. The statement of financial position of which of the following entities does not show current and noncurrent distinctions among assets and liabilities? a. Banks and other financial institutions b. Mining companies c. Trading enterprises d. Manufacturing firms
A
Which of the following statements is incorrect regarding the provisions of PAS 1? a. An entity is required to present separate sections of profit or loss and other comprehensive income. b. Presenting an income statement or statement of profit or loss in addition to a statement of other comprehensive income is permitted when an entity elects to use the "two-statement presentation. c. Presenting an income statement or statement of profit or loss alone without a statement of other comprehensive income is allowed. d. Presenting comprehensive income as a note disclosure only is prohibited.
A & C
1. Which of the following is not correct when an entity opts to use the "two-statement presentation of income and expenses? a. The separate income statement forms part of a complete set of financial statements and shall be displayed immediately before the statement presenting comprehensive income. b. The profit or loss section is not presented anymore in the statement presenting comprehensive income. c. The profit or loss section is required to be presented in the statement presenting comprehensive income. d. The separate statement presenting comprehensive income begins with the amount of profit or loss.
B
Which of the following best reflects the definition of normal operating cycle under PAS 1? a. For a manufacturing entity, this is the usual time it takes for the entity to acquire raw materials, process those raw materials into finished goods, and sell the finished goods. b. For a manufacturing entity, this is the usual time it takes for the entity to acquire raw materials, process those raw materials into finished goods, sell the finished goods on account, and collect the receivables. c. For a manufacturing entity, this is the usual time it takes for the entity to acquire raw materials on account and settle the account. d. For a manufacturing entity, this is the usual time it takes for the entity to sell finished goods on account and collect the receivables.
B
4. The statement of financial position is also called
Balance Sheet
1. According to PAS 1, a complete set of financial statements includes which of the following? a. Income tax return b. Directors' reports c. Notes d. All of these
C
1. Which of the following is not an acceptable method of presenting income and expenses? a. Presenting income and expenses that affect profit or loss and those that are components of other comprehensive income in a single statement. b. Presenting an income statement in addition to a statement that presents comprehensive income. c. Presenting an income statement alone without a statement that presents comprehensive income. d. All of these are acceptable methods of presentation.
C
The statement of financial position may be presented either showing current/non-current distinction (classified) or based on liquidity (unclassified). PAS 1 encourages a(an)
Classified Presentation
This is the most commonly used method of presenting a statement of financial position. It facilitates the computation of liquidity and solvency ratios.
Classified Presentation
1. Entity A wants to change the presentation of and the classification of some items in its financial statements. Which of the following statements is incorrect? a. Entity A can make the change if it is required by a PFRS. b. Entity A can make the change if the change is expected to result in reliable and more relevant information to the users of its financial statements. c. Entity A may be required to provide an additional balance sheet dated as at the beginning of the preceding period. d. Entity A can make the change only if it makes an irrevocable promise not to make another change within the next five years.
D
1. PAS 1 requires an entity to present an additional statement of financial position as at the beginning of the preceding period when an entity makes any of the following except a. the retrospective application of an accounting policy. b. the retrospective restatement of items in the financial statements. c. the reclassification of items in the financial statements. d. the prospective application of a change in accounting estimate.
D
1. When an entity changes the end of its reporting period and presents financial statements for a period longer or shorter than one year, an entity shall disclose all of the following, except a. the period covered by the financial statements. b. the reason for using a longer or shorter period. c. the fact that amounts presented in the financial statements are not entirely comparable. d. a quantification of the possible adjustments that would eliminate the effects of the longer or shorter reporting period.
D
1. Which of the following is a current liability? a. Deferred tax liability b. An obligation for which the entity has an unconditional right to defer. c. A long-term obligation that becomes payable on demand because of a breach of loan agreement but the lender agrees before the balance sheet date to provide a grace period for the lender to rectify the breach. d. An obligation for which the entity has a conditional right to defer.
D
1. Which of the following is not a purpose of the notes? a. to present information about the basis of preparation of the financial statements and the specific accounting policies b. to disclose the information required by PFRSS that is not presented elsewhere in the financial statements c. to provide information that is not presented elsewhere in the financial statements but is relevant to an understanding of any of the financial statements. d. to rectify inappropriate accounting policies
D
6. Which of the following is not considered an appropriate application of offsetting under PAS 1? a. Presenting a gain from the sale of a noncurrent asset net of the related selling expenses. b. Deducting foreign exchange losses from foreign exchange gains and presenting only the net amount. c. Deducting unrealized losses from unrealized gains from trading securities and presenting only the net amount. d. Deducting accumulated depreciation from the equipment account and presenting only the carrying amount.
D
7. PAS 1 requires an entity to provide an additional balance sheet dated as of the beginning of the preceding period if certain instances occur. Which of the following is not one of those instances? (Assume all of the following has a material effect) a. Retrospective application of an accounting policy. b. Retrospective restatement c. Reclassification of items in the financial statements d. Change in the frequency of reporting
D
8. The PFRSs apply to which of the following? a. A management's review of the entity's financial performance during the period vis-à-vis its targets for that period contained in the entity's annual report, which also includes the entity's financial statements. b. Schedules, reconciliations and returns required by the Bureau of Internal Revenue (BIR) to be filed together with the financial statements. c. Environmental reports required by the Department of Environment and Natural Resources (DENR) that are included in the entity's annual report. d. Explanatory material and other information that are disclosed in the notes to the financial statements.
D
Which of the following is a current asset a. Deferred tax asset expected to reverse within 3 months from the reporting date b. Property, plant and equipment c. Non-trade note receivable due in 13 months d. Accounts receivable
D
According to PAS 1, PFRSs apply to financial statements as well as to other information presented in an annual report, a regulatory filing, or another document. (T/F)
FALSE
According to PAS 1, assets and liabilities or income and expenses are offset, unless separate presentation is required or permitted by a PFRS. (T/F)
FALSE
According to PAS 1, the line item "Cash and cash equivalents" should always be presented first in the statement of financial position. (T/F)
FALSE
An entity may omit the notes when presenting general purpose financial statements. (T/F)
FALSE
PAS1 encourages, but does not require, the presentation or the preceding year's financial statements as comparative information to the current year's financial statements. (T/F)
FALSE
1. This method of presenting expenses is more difficult to apply but has the potential of providing more relevant information to users. Its downside, however, is that it involves considerable judgment and may require arbitrary allocations.
Function of Expense
2. Entity A's financial statements in the current period is comparable with Entity A's financial statements in the previous period. This type of comparability is called
Intra-Comparability
Who is responsible for the preparation and fair presentation of an entity's financial statements in accordance with the PFRSs?
Management
According to PAS 1, an entity shall make an explicit and unreserved statement of compliance with the PFRSs in the notes only if the entity complies with all the requirements of PFRSs. (T/F)
TRUE
If profit or loss is P100 while other comprehensive income is P20, total comprehensive income must be P120. (T/F)
TRUE
PAS 1 does not prescribe an order or format of presenting items in the financial statements. (T/F)
TRUE
PAS 1 requires the disclosure of an entity's domicile and legal form, its country of incorporation and the address of its registered office and a description of the nature of its operations and its principal activities. (T/F)
TRUE
The application of PFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. (T/F)
TRUE
1. According to PAS 1, items of other comprehensive income are presented according to the following groupings
a. those that are subsequently reclassified to profit or loss and those that are not
1. Entity A reclassifies a gain that was previously recognized in other comprehensive income to the current period's profit or loss. According to PAS 1, how should Entity A present the reclassification adjustment in the other comprehensive income section of the statement of comprehensive income?
as a deduction
1. In 20x3, Entity A makes a retrospective application of an accounting policy that has a material effect on the information in the statement of financial position as at the beginning of the preceding period. Entity A wishes to provide comparative information in addition to the minimum requirement of PAS 1, i.e., Entity A will be presenting its 20x3 financial statements together with the 20x2 and 20x1 financial statements. In this case, the additional statement of financial position required by PAS 1 will be dated
as at January 1, 20x2.
5. When preparing financial statements, PAS 1 requires management to assess the entity's ability to continue as a going concern. The assessment covers a minimum period of
at least one year from the end of the reporting period.
When a separate statement of profit or loss (income statement) is presented,
it shall be displayed immediately before the statement presenting comprehensive income.
3. The Scope of PAS 1 is
the preparation and presentation of general purpose financial statements.
1. Objective of PAS 1 is
to ensure comparability by prescribing the basis for presentation of general purpose financial statements.