Question 1

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Which of the following statements are TRUE when applying IFRS 1 First-time Adoption of International
Financial Reporting Standards for a company presenting IFRS financial statements for the first time for
the year ended 31 December 20X4?

1. A recent previous GAAP valuation can be used as deemed cost at the date of transition to
IFRSs for investment properties to be held under the fair value model under IFRSs
2. Fair value at the date of transition to IFRSs can be used as deemed cost at the date for plant to
be held under the revaluation model under IFRSs
3. A 3G telecoms licence can be revalued to its market value at the date of transition to IFRSs
and subsequently held under the cost model under IFRSs
4. Depreciated cost under previous GAAP adjusted for prices changes can be used as deemed
cost at the date of transition to IFRSs for equivalent to be held under the cost model under
IFRSs

Select one:

A. 2, 3 and 4 only

B. All of them

C. 2 only

D. 1 and 3 only

Question 2
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Which of the following would not require a prior period adjustment to be made?

Select one:

A. When calculating the net realisable value of inventories for the previous year, packaging costs were
overlooked. This would have resulted in the net realisable value being below cost for a significant
number of product lines.

B. A provision made last year based on all available information at the time has now been doubled for
the current year financial statements before the financial statements were authorised for issue

C. A typed response by the lawyers was misread. The letter stated that losses for an onerous contract
were significant, however, the directors read it as insignificant and therefore did not raise a provision.

D. The directors have decided to measure their investment properties under the fair value model rather
than the cost model
Question 3
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Which of the following is definitely NOT true in respect of a company adopting IFRS for the first time?

Select one:

A. Certain financial instruments not designated as fair value through profit or loss can be designated as
such at the date of transition

B. Translation differences on outstanding monetary assets and monetary liabilities can be deemed zero
at the date of transition

C. A reconciliation of profit is required in respect if the last reported profit figure under previous GAAP

D. A previous GAAP valuation of properties may be used

Question 4
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With reference to the standard setting process, which of the following are correct?

1. Consultation with the IFRS Advisory Council is required before adding a topic to the IASB's
agenda
2. A Discussion Paper is always published for public comment
3. An Exposure Draft is always published for public comment
4. After considering all comments received, an IFRS is only issued if approved by at least 10
votes (if there are 15 members) of the IASB

Select one:

A. 1 and 3 only

B. 2, 3 and 4 only

C. All of them

D. 2 and 4 only
Question 5
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Which of the following will require the comparative figures to be restated in the financial statements for
the year to 31 December 20X3?

1. A valuation report being misread giving rise to a material understatement of property plant and
equipment
2. A provision made at the previous year end based on information available at the time was
found to be materially inadequate to cover the damages when the case was finally settled in
court
3. During the year, a new standard came into effect which was radically different to the existing
treatment with no standard-specific transitional rules
4. During the year, a customer went into liquidation who owed a substantial sum at the previous
year end. The liquidation was caused by a technological advancement in the industry in
January 20X4 which this customer had not been prepared for.

Select one:

A. All of them

B. 1 only

C. 1, 3 and 4 only

D. 1 and 3 only

Question 6
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Which of the following could be classified as cash or cash equivalents in a company's statement of
cash flows for the year ended 30 December 20X4?

1. Investments in shares classified as fair value through profit or loss

2. Fixed rate government bonds purchased on the open market on 31 August, maturing on 30
November 20X4
3. Deposits in a 30 day notice account
4. Foreign currency cash
5. Petty cash in hand

Select one:

A. All of them

B. 3, 4 and 5 only

C. 2, 3, 4 and 5 only

D. 4 only
Question 7
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Which of the following are required disclosures for intangible assets?

1. Research and development costs expensed

2. The estimated fair value of intangible assets held under the cost model
3. A reconciliation of the movement in any revaluation surplus
4. Any intangible assets with a charge over them

Select one:

A. 1, 2 and 3 only

B. 1 and 3 only

C. All of them

D. 1, 3 and 4 only

Question 8
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Cazza Co bought a second-hand paper making machine for €950,000. This price included €141,500 of
recoverable sales tax (VAT). Costs of preparing the new site for the machine were €60,000. In addition
Cazza Co used 250 hours of its own staff to commission the machine. These staff are normally
charged out at €38 per hour which is cost plus a mark-up of 50%.
The total cost of the paper machine to be capitalised is:

Select one:

A. €874,833

B. €873,250

C. €878,000

D. €1,019,500
Question 9
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ABC has incurred the following costs in respect of a new assembly line it has developed
for internal use:

€'0

Cost of raw materials purchased externally (including irrecoverable sales tax (VAT) of €51,000) 3

Cost of own inventories produced internally used for the project

Labour costs of internal staff working directly on the project (including employer pension contributions of
€4,000)

Income from renting out part of the warehouse space before installation of the assembly line

Allocation of central administration costs incurred by the company

Fees paid to external engineers

Staff training day pm the mew assembly line

How much should be recognised as an asset under IFRS?

Select one:

A. €351,000

B. €389,000

C. €411,000

D. €402,000
Question 10
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Verbalise Co is a telecommunications company that incurred the following expenditure during the year
to 31 December 20X4.

01.01.20X4 Acquired a patent for €1.2m. The patent has ten years left to run at the date of acquisition.

31.03.20X4 Spent €2.5m on an advertising campaign to maintain the value of the company's main brand, Conn

Paid €6.5m to acquire a licence to supply broad brand communications support to off-shore oil pla
31.12.20X4
in open competition and is readily marketable.

31.12.20X4 The company has spent significant amounts of money in training its workforce and building a cust
that this has generated goodwill in the business of €9.5m.

The amount that could be included as intangible non-current assets at 31 December 20X4 is:

Select one:

A. €10.08m

B. €7.58m

C. €17.08m

D. €7.7m

Question 11
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Which of the following should be disclosed in relation to properties revalued during the period?

1. The name of the valuer

2. Whether the valuer was independent
3. The valuation method
4. The amount that would have been recognised had the cost model been used

Select one:

A. 2 and 4 only

B. 1, 2 and 4 only

C. 4 only

D. All of the above

Question 12
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Alpha sells an asset to Beta for €20,000 in 20X3 and at the same time agrees to buy it back in 20X4 for
€25,000. The machine remains on Alpha’s premises and Alpha continues to use it and insure the
machine. How should this be treated in the books of Alpha in the 20X3 financial statements at the date
of sale of the asset?

Select one:

A. Recognition of the cash received and a corresponding liability to Beta.

B. Disposal of the asset, with the appropriate gain/loss on disposal, then the subsequent purchase.

C. No transaction should be recorded.

D. Disposal of the asset, with an appropriate gain/loss on disposal.

Question 13
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Bertie sold a car to Marmaduke on 1 May 20X2. Marmaduke has agreed to pay €23,000 on 30 April
20X4 in settlement. A similar car had been sold for cash of €20,000 on the same day. The imputed rate
of interest in this transaction is 7.238%.
What should Bertie recognise in his profit or loss for the year ended 30 April 20X4?

Select one:

A.

Revenue Finance income

Nil €1,552

B.

Revenue Finance income

€20,000 €1,500

C.

Revenue Finance income

€21,448 Nil

D.

Revenue Finance income

€20,000 €1,448
Question 14
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A company decides to offer a warranty on all of the products it sells. The warranty cannot be purchased
separately as it is provided on all products. The terms are that a 3 month, no quibble warranty will be
offered on goods priced at more than €500 and a 6 month no quibble warranty will be offered on goods
priced over €1,000. The company has a price list which shows that there currently are no items for sale
priced at over €1,000 and only the type 45 machines priced at over €500. On average, 17 type 45
machines are sold each month and the production cost to the company is €650 each.
A customer who purchased two type 45 machines is taking legal action as one of the machines failed
after 5 months. The customer claims that the total expenditure was over €1,000 and as no individual
item is priced over that figure, the warranty must relate to total spend. The value of the claim is for a
replacement machine plus €400 costs. The company’s lawyers have agreed that whilst there is validity
in the principle action of the claim, the costs part are unlikely to be awarded. It is also suspected that
following the settlement, there may be additional actions by customers who have experienced similar
problems which may need to be settled in a similar way. The costs associated with the additional
claims may be a further €3,400. The type 45 machines are regarded as being very reliable with only 1
machine in 10 being returned under the warranty.
How much should be recognised as a provision at 31 December 20X4?

Select one:

a. €13,910

b. €7,365

c. €4,365

d. €3,965

Question 15
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Are the following statements in relation to deferred tax true or false?
1) Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of
taxable temporary differences
2) Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of
deductible permanent differences

Select one:

a. Statement 1 is false and statement 2 is true

b. Both statements are false

c. Both statements are true

d. Statement 1 is true and statement 2 is false

Question 16
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Which of the following could be classified as low-value assets, if leased, under IFRS 16 Leases?

1. A tablet computer (cost €800 if purchased outright)

2. A second hand car (cost €2,500 if purchased outright, cost when new €16,000)
3. 100 PCs (cost €1,000 each if purchased outright) leased for the office
4. Filing cabinet (cost €500 if purchased outright)

Select one:

A. 1, 3 and 4 only

B. 2 and 3 only

C. 1, 2 and 4 only

D. 1 and 4 only
Question 17
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Androcles Ltd enters into a lease (as lessee) under the following terms:

Lease term 4 years from 1 January 20X4

Annual payments €13,500 in arrears on 31 Decembe

Interest rate implicit in the lease 11.0%

Present value of lease payments not paid at the lease commencement date €41,883

Fair value of the asset on 1 January 20X3 €46,200

Useful life of the asset to the company 6 years from 1 January 20X4

How much should be shown in the statement of financial position as the carrying amount of the right -
of-use asset and lease liability (including any interest payable) for the year end 31 December 20X4?

Select one:

A.

Right-of-use asset Lease liability

€34,903 €33,465

B.

Right-of-use asset Lease liability

€38,500 €33,465

C.

Right-of-use asset Lease liability

 €31,412 €32,990

D.

Asset net book value Lease liability

€34,650 €32,990

Question 18
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Bexley hires a machine on 1 January 20X4 for 5 years. Annual payments are due on 31 December
each year. Bexley expects to be able to sell the asset at the end of the lease period for approximately
€22,000. Harris, the lessee, has guaranteed that the machine value will not be less than €15,000 at that
date. The interest rate implicit in the lease has been calculated as approximately 4%.
What is the unguaranteed residual value at the date of inception of the lease?

Select one:

a. €5,753

b. €7,000

c. €12,329

d. €18,082
Question 19
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Which of the following would generate a deferred tax liability?

1. Interest payable capitalised for accounting purposes, but tax deductible in the period to which it
relates on a accruals basis
2. Tax losses in the current period that can be carried back to previous periods
3. An asset depreciated faster for accounting purposes than for tax purposes
4. Unrealised losses in intragroup trading

Select one:

A. 1 and 3 only

B. 1 only

C. All of them

D. 1, 3 and 4 only
Question 20
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On 31 January 20X4 Key purchased T40,000 of goods from Clef, a company based in Treblia where
the currency is the Ton (T). On the same day, Key took out a forward contract to provide the necessary
Tons to pay Clef on 30 June.
Relevant exchange rates were:

31 January 20X4 €1 : T6.0

31 January forward rate for delivery on 30 June 20X4 €1 : T7.1

31 May 20X4 €1 : T6.3

30 June 20X4 €1 : T6.4

At what value would the initial purchase on 31 January 20X4 be recorded in the statement of profit or
loss of Key?

Select one:

A. €6,349

B. €6,250

C. €5,634

D. €6,667