1.

The key characteristic for the classification of an asset as “held for sale” is that the carrying
amount of the asset must:

Select one:
a. Principally be recovered through continuing use or utilization
b. Be higher than its net realizable value
c. Be lower than initial cost of the asset
d. Principally be recovered through sale transaction 
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The correct answer is: Principally be recovered through sale transaction

Question  2
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28. A legal obligation is an obligation that derives from

Select one:
a. Any of these 
b. Legislation
c. Contract
d. Other operation of law
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 The correct answer is: Any of these

Question  3
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29. Amazon Inc. received a legal notice on December 15 from the Environmental Protection
Agency Local to fit smoke detectors in its factory on or before June 30 next 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?

Select one:
a. Recognize a provision for P250,000 in the current year financial statements.
b. Recognize a provision for P125,000 in the current year financial statements, because the other 50%
of the estimated amount will be recognized in the financial statements next year.
c. Ignore this for the purposes of the financial statements for the year ended December 31, and neither
disclose nor provide the estimated amount of P250,000.
d. 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, but as there is possible obligation, this warrants disclosure in footnotes to
financial statements. 
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The correct answer is: 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, but as there is possible obligation, this warrants disclosure
in footnotes to financial statements.

Question  4
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3. An entity shall measure a noncurrent asset or disposal group classified as; held for sale’ at

Select one:
a. Carrying amount or “fair value less cost to sell” whichever is lower 
b. Carrying amount or “fair value less cost to sell” whichever is higher
c. Fair value less cost to sell
d. Carrying amount
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The correct answer is: Carrying amount or “fair value less cost to sell” whichever is lower

Question  5
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30. Which of the following does PAS 37 address?

Select one:
a. Provision for restructuring 
b. Provision for impairment losses
c. Provision for depreciation
d. Provision for doubtful accounts
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The correct answer is: Provision for restructuring

Question  6
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31. Which of the following is not dealt with PAS 41?

Select one:
a. The initial measurement of agricultural produce harvested from the entity’s biological assets
b. The processing of agricultural produce after harvesting 
c. The accounting treatment of government grants received in respect of biological assets
d. The accounting for biological assets
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The correct answer is: The processing of agricultural produce after harvesting

Question  7
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32. Which of the following is correct regarding the applicability of PAS 41?

Select one:
a. PAS 41 applies to unconditional government grant related to biological assets measured at cost
b. PAS 41 applies to biological assets and agricultural produce at the point of harvest even if they do
not relate to agricultural activities
c. PAS 41 applies to land on which tree recognized as biological assets are planted
d. PAS 41 applies to living plants and animals only when such items relate to agricultural
activity 
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The correct answer is: PAS 41 applies to living plants and animals only when such items relate to
agricultural activity

Question  8
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33. Regarding the choice of measurement basis used for valuing biological assets, PAS 41

Select one:
a. Recommends the use of historical cost
b. Recommends the use of present value
c. Recommends the use of current cost
d. Sets out several ways of measuring fair value 
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The correct answer is: Sets out several ways of measuring fair value

Question  9
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 34. Which of the following is a required disclosure under PAS 41?

Select one:
a. A quantified description of each group of biological assets distinguishing between consumable and
bearer biological assets
b. The depreciation method used if an entity measures biological assets at their cost less any
accumulated depreciation and accumulated impairment loss
c. A quantified description of each group of biological assets distinguishing between mature and
immature biological assets
d. The amount of change in fair value less costs to sell included in profit or loss due to physical
changes and due to price changes 
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The correct answer is: The depreciation method used if an entity measures biological assets at
their cost less any accumulated depreciation and accumulated impairment loss

Question  10
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35. These are biological assets that have attained harvestable specifications (for consumable
biological assets) or are able to sustain regular harvests (for bearer biological assets)

Select one:
a. Completely mutated biological assets
b. Immature biological assets
c. Harvestable biological assets
d. Mature biological assets 
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The correct answer is: Mature biological assets
 Question  11
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36. PAS 40 shall be applied to which of the following?

Select one:
a. Building that is vacant but is held to be leased out under one or more operating leases 
b. Inventories held for sale in the ordinary course of business
c. Biological assets related to agricultural activity
d. Mineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources
Feedback
The correct answer is: Building that is vacant but is held to be leased out under one or more
operating leases

Question  12
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37. The applicable PFRS/PAS for a property being constructed or developed for future use as
investment property is

Select one:
a. PAS 40
b. PAS 11 and then PAS 40
c. PAS 16 and then PAS 40 
d. PAS 2 and then PAS 40
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The correct answer is: PAS 40

Question  13
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38. Investment properties are initially recognized at cost which comprises purchase price and any
directly attributable expenditures. Which of the following may be treated as direct costs of
acquisition and, therefore increases the cost to be initially recognized for the investment
property?

Select one:
a. Abnormal amounts of wasted material, labor and other resources incurred in constructing or
developing the property
b. Start-up costs
c. Professional fees for legal services and property taxes
d. Operating losses incurred before the investment property achieves the planned level of occupancy 
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The correct answer is: Professional fees for legal services and property taxes

Question  14
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39. All of the following will not qualify as investment property, except

Select one:
a. An agricultural land purchased for appreciation purposes
b. Hotels or motels
c. Equipment purchased for undetermined purpose 
d. Machineries that are held for lease
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The correct answer is: An agricultural land purchased for appreciation purposes

Question  15
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4. PFRS 5 states that noncurrent asset that is to be abandoned should NOT be classified as held
for sale because

Select one:
a. It is difficult to value
b. It is unlikely that there will be an active market for the non-current asset
c. It is unlikely that the noncurrent asset will sold within 12 months
d. Its carrying amount will be recovered principally through continuing use 
 Feedback
The correct answer is: Its carrying amount will be recovered principally through continuing use

Question  16
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40. An investment property is derecognized when

Select one:
a. It is permanently withdrawn from use
b. No future economic benefits are expected from its disposal
c. In any of these 
d. It is disposed to a third party
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The correct answer is: In any of these

Question  17
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41. A business combination may be structured in all of the following, except
 Select one:
a. One entity transfers net assets to another entity.
b. An entity acquires assets that are not a business. 
c. A group of former owners of one of the combining entities obtain control of the combined entity.
d. One or more businesses become subsidiaries of an acquirer.
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The correct answer is: An entity acquires assets that are not a business.

Question  18
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42. Which of the following statements best describes the term control?

Select one:
a. The power to participate in the financial and operating policy decisions of an entity
b. The power to govern the financial and operating policies of an entity so as to obtain benefits
from the activities 
c. The mutual sharing of risks and benefits
d. The holding of a significant proportion of the share capital in another entity
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The correct answer is: The power to govern the financial and operating policies of an entity so as
to obtain benefits from the activities

Question  19
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43. An entity shall account for all business combination by applying?

Select one:
a. Acquisition method 
b. Proportional consolidation
c. Equity method
d. Pooling method
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The correct answer is: Acquisition method

Question  20
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44. Which of the following statements is incorrect concerning an acquirer?

Select one:
a. In a business combination effected by issuing equity interests, the acquirer is usually the entity that
issues the equity interests.
b. The acquirer is usually the combining entity whose relative size is significantly greater than that of
the other combining entity or entities. 
c. If a new entity is formed to issue equity interests to effect a business combination, the new
entity formed is necessarily the acquirer.
d. In a business combination effected by transferring cash or other assets, the acquirer is usually the
entity that transfers the cash or other assets.
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The correct answer is: If a new entity is formed to issue equity interests to effect a business
combination, the new entity formed is necessarily the acquirer.

Question  21
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45. The consideration transferred in a business combination shall be measured at

Select one:
a. Fair value determined by the acquirer 
b. Fair value less cost of disposal
c. Carrying amount
d. Fair value
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The correct answer is: Fair value

Question  22
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46. These are transactions in which the entity receives goods or services as consideration for
equity instruments of the entity including shares and share options.

Select one:
a. Cash settled share based payment transactions
b. Equity payment transactions
c. Equity settled share based payment transactions 
d. Cash payment transactions
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The correct answer is: Equity settled share based payment transactions

Question  23
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47. For equity settled share based payment transactions, the entity shall measure the goods or
services received and the corresponding increase in equity

Select one:
a. Directly at the fair value of the equity instruments
b. Indirectly at the fair value of the goods or services or directly at the fair value of the equity
instruments.
c. Directly at the fair value of goods or services 
d. Directly at the fair value of the goods or services or indirectly at the fair value of equity
instruments.
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 The correct answer is: Directly at the fair value of the goods or services or indirectly at the fair
value of equity instruments.

Question  24
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48. It is the difference between the fair value of the shares to which the counterparty has the right
to subscribe and the price the counterparty is required to pay for those shares.

Select one:
a. Book value
b. Intrinsic value 
c. Fair value
d. Market value
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The correct answer is: Intrinsic value

Question  25
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49. In what circumstances is compensation expense immediately recognized under a share option
plan?

Select one:
a. In all circumstances
b. In circumstances when the options are granted for prior service and the options are
immediately exercisable. 
c. In circumstances when the options are exercisable within two years for services rendered over the
next two years.
d. In no circumstances is compensation expense immediately recognized.
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The correct answer is: In circumstances when the options are granted for prior service and the
options are immediately exercisable.

Question  26
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5. An entity has a noncurrent asset that was previously classified as held for sale. However the
criteria for the said asset to remain as held for sale NO LONGER APPLY. The entity should

Select one:
a. Remeasure the noncurrent asset at fair value
b. 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
revaluation) and its recoverable amount at the date if the decision not to sell 
c. Leave the noncurrent asset in the financial statements at its carrying value
d. Recognize the non- current asset in its carrying amount prior to its classification as held for sale as
adjusted for subsequent depreciation, amortization or revaluation
Feedback
The correct answer is: 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
revaluation) and its recoverable amount at the date if the decision not to sell

Question  27
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50. Which of the following option valuation techniques should not be used as a measure of fair
value in the first instance?

Select one:
a. Intrinsic value 
b. Black-Scholes model
c. Binomial model
d. Monte-Carlo model
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The correct answer is: Intrinsic value

Question  28
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51. This is defined as the first annual financial statements in which an entity adopts PFRS by an
explicit and unreserved statement of compliance with PFRS.

Select one:
a. First PFRS financial statements 
b. Opening PFRS statement of financial position
c. First audited financial statements
d. PFRS financial statements
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The correct answer is: First PFRS financial statements

Question  29
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52. An entity that presents first annual financial statements that conform with PFRS is known as

Select one:
a. An originating entity
b. A provisional presenter
c. An initial reporter
d. A first time adopter 
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The correct answer is: A first time adopter

Question  30
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 53. What is the date of transition to PFRS?

Select one:
a. The end of the earliest period for which an entity presents full comparative information under
PFRS.
b. The beginning of the earliest period for which an entity presents full comparative information
under PFRS. 
c. The beginning of the latest period in the most recent annual financial statements under the previous
GAAP.
d. The end of the latest period in the most recent annual financial statements under the previous
GAAP.
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The correct answer is: The beginning of the earliest period for which an entity presents full
comparative information under PFRS.

Question  31
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54. An entity is a first time adopter of PFRS. The most recent financial statements it presented
under previous GAAP were on December 31, 2020. The entity adopted PFRS for the first time
and intended to present the first PFRS financial statements on December 31, 2021. The entity
plans to present a two-year comparative information for years 2019 and 2020. The opening
PFRS statement of financial position should be prepared on

Select one:
a. January 1, 2021 
b. January 1, 2019
c. January 1, 2018
d. January 1, 2020
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The correct answer is: January 1, 2019
 Question  32
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55. Which is not a required adjustment in an opening PFRS statement of financial position?

Select one:
a. Recognize all assets and liabilities required under PFRS
b. Derecognize all assets and liabilities not permitted under PFRS
c. Measure all recognized assets and liabilities according to principles contained in PFRS.
d. Disclose as comparative information all figures under previous GAAP alongside figures for
the current year presented under PFRS 
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The correct answer is: Disclose as comparative information all figures under previous GAAP
alongside figures for the current year presented under PFRS

Question  33
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56. Which of the following types of information about exposures to risks arising from financial
instruments is not required to be disclosed by PFRS 7?

Select one:
a. Qualitative and quantitative information about liquidity risk
b. Qualitative and quantitative information about credit risk
c. Qualitative and quantitative information about market risk
d. Qualitative and quantitative information about operational risk 
Feedback
The correct answer is: Qualitative and quantitative information about operational risk

Question  34
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57. In accordance with PFRS 7 (Financial Instruments Disclosures), which of the following best
describes the risk an entity will encounter if it has difficulty in meeting obligations associated
with its financial liabilities?

Select one:
a. Financial risk
b. Credit risk
c. Liquidity risk 
d. Payment risk
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The correct answer is: Liquidity risk

Question  35
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58. Under PFRS 7, credit risk refers to

Select one:
a. The risk associated with the extent of fixed charges incurred in a business operation
b. The risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in the market prices
c. The risk that one party to a financial instrument will cause a financial loss for the other party
by failing to discharge an obligation 
d. The risk that an entity will encounter difficulty in meeting obligations associated with financial
liabilities
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The correct answer is: The risk that one party to a financial instrument will cause a financial loss
for the other party by failing to discharge an obligation

Question  36
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59. Under PFRS 7, which two of the following are components of market risk?

Select one:
a. Interest rate risk and liquidity risk
b. Credit risk and liquidity risk
c. Credit risk and currency risk
d. Currency risk and interest rate risk 
 Feedback
The correct answer is: Currency risk and interest rate risk

Question  37
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6. PFRS 8( operating segments) requires that a company report all of the following, EXCEPT

Select one:
a. Segment profit and related information 
b. Liquidity ratios
c. Major customers
d. Segment assets and liabilities
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The correct answer is: Liquidity ratios

Question  38
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60. Which of the following types of information does PFRS 7 does not require to be disclosed
about the significance of financial instruments?
 Select one:
a. Fair values of financial instruments
b. Information about financial instruments, contracts and obligations under share based
payment transactions. 
c. Carrying amounts of categories of financial instruments
d. Information about the use of hedging accounting
Feedback
The correct answer is: Information about financial instruments, contracts and obligations under
share based payment transactions.

Question  39
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7. Determine the most accurate statement concerning the 75% overall size test for operating
segments?

Select one:
a. The total external revenue of all reportable segments is 75% or more of the entity’s total
external revenue 
b. The total and internal revenue of all reportable segment is 75% or more of the entity’s total external
revenue
c. The total external revenue of all reportable segments is 75% or more of the entity’s total external
and internal revenue
d. The total internal revenue of all reportable segments is 75% or more of the entity’s total internal
revenue
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The correct answer is: The total external revenue of all reportable segments is 75% or more of
the entity’s total external revenue

Question  40
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8. The method used to determine what information to report for operating segments is referred to
as

Select one:
a. Segment approach
b. Operating approach
c. Management approach 
d. Enterprise approach
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The correct answer is: Management approach

Question  41
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9. Which statement is incorrect regarding the term “chief operating decision maker (CODM)”?

Select one:
a. None of the choices. 
b. The term identifies a function, not necessarily a manager with a specific title.
c. Often the CODM of an entity is its chief executive officer or chief operating officer but, for
example, it may be a group of executive directors or others.
d. The function of the CODM is to allocate resources to and assess the performance of the operating
segments of an entity.
Question  42
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10. If revenues from transactions with a single external customer amount to 10% or more of an
entity’s revenues, the entity need not disclose

Select one:
a. The identity of the segment or segments reporting the revenue
b. The total amount of revenues from each such customer 
c. The amount of revenues that each segment reports from a major customer
d. The fact
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The correct answer is: The amount of revenues that each segment reports from a major customer
Question  43
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11. Which of the following should be expensed as incurred on a franchise with an estimated
useful life of ten years?

Select one:
a. Periodic payments to a company, other than the franchisor for that company’s franchise
b. Periodic payments to the franchisor based on the franchisee’s revenues 
c. Amount paid to the franchisor for the franchise
d. Legal fees paid to the franchisee’s lawyers to obtain the franchise
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The correct answer is: Periodic payments to the franchisor based on the franchisee’s revenues

Question  44
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12. Which condition must be met for an item to be recognized as an intangible asset other than
goodwill?

Select one:
a. The item is part of an activity aimed at gaining new scientifc or technical knowledge.
b. The fair value can be measured reliably. 
c. The item is expected to be used in the production or supply of goods or services.
d. the item is non-monetary, identifiable and lacks physical substance.
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The correct answer is: The fair value can be measured reliably.

Question  45
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13. Which of the following is an example of activities that would typically be excluded in
research and development costs?

Select one:
a. Design, construction and testing of preproduction prototypes and modes
b. Laboratory research aimed at discovery of new knowledge
c. Quality control during commercial production, including routine testing of products 
d. Testing in search for or evaluation of product or process alternatives
Feedback
The correct answer is: Quality control during commercial production, including routine testing of
products

Question  46
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14. Which of the following cost should be excluded from research and development expense?

Select one:
a. Modification of the design of a product
b. Cost of marketing research for a new product 
c. Engineering activity required to advance the design of a product to the manufacturing stage
d. Acquisition of R and D equipment for use on a current project only
 Feedback
The correct answer is: Cost of marketing research for a new product

Question  47
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15. The following statements relate to accounting for intangible assets. Choose the incorrect
statement.

Select one:
a. Because it has an indefinite life, a trademark need not be amortized
b. Goodwill may represent the excess of the cost of an acquired company over the sum of the fair
values assigned to identifiable assets acquired less liabilities assumed.
c. If a company purchases a competing patent to ensure revenue-generating capability of previously
owned patent, the cost of the purchased patent should be expensed at the time of purchase 
d. The process of assigning the cost of an intangible asset to operations in a systematic and rational
manner is called amortization
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The correct answer is: If a company purchases a competing patent to ensure revenue-generating
capability of previously owned patent, the cost of the purchased patent should be expensed at the
time of purchase

Question  48
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16. Identifiability is seen as the characteristic that conceptually distinguishes other intangible
assets from
 Select one:
a. Franchise
b. Patent
c. Copyright
d. Goodwill 
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The correct answer is: Goodwill

Question  49
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17. An asset with an indefinite life is one where

Select one:
a. The directors feel that the intangible asset will not lose value in the foreseeable future
b. The length of life is over 20 years
c. There is a contractual or legal arrangement that lasts for a period in excess of five years
d. There is no foreseeable limit on the period over which the asset will generate cash flows 
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The correct answer is: There is no foreseeable limit on the period over which the asset will
generate cash flows

Question  50
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18. Which of the following note disclosures is not required by PAS 38?

Select one:
a. Fair value of similar intangible assets used by competitors 
b. Reconciliation of carrying amount at the beginning and the end of the year
c. Contractual commitments for the acquisition of intangible assets
d. Useful life of the intangible assets
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The correct answer is: Fair value of similar intangible assets used by competitors

Question  51
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19. Which of the following is most likely included in research and development expense in
2018?

Select one:
a. The total cost of a building (useful life 25 years, completed January 1, 2018) to be used in various
research and development projects
b. Depreciation in 2018 of the building used for research and development 
c. The cost incurred in 2018 of research activity performed by another firm; the project is expected to
be completed in 2019
d. The cost incurred in 2018 to ensure quality control for existing production process
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The correct answer is: Depreciation in 2018 of the building used for research and development

Question  52
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2. A noncurrent asset is classified as held for sale is highly probable. “highly probable” means
that

Select one:
a. The probability of future sale is higher than “more likely than not” 
b. The sale is certain
c. The future sale is likely to occur
d. The future sale is more likely than not to occur
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The correct answer is: The probability of future sale is higher than “more likely than not”

Question  53
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20. Which of the following confers exclusive right to conduct business in a particular territory?

Select one:
a. Trademark
b. Patent-copyright
c. Franchise 
d. Leasehold improvement
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The correct answer is: Franchise

Question  54
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21. PFRS 6 is applied to which of the following?

Select one:
a. The search and evaluation of mineral resources, agricultural produce and biological assets prior to
commencement of actual production
b. The search for mineral resources before the entity has obtained legal rights to explore in a specific
area
c. The development of mineral resources after the entity has in fact established the existence of
mineral deposits in an area
d. The search for mineral resources after the entity has obtained legal rights to explore in a specific
area 
 Feedback
The correct answer is: The search for mineral resources after the entity has obtained legal rights
to explore in a specific area

Question  55
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22 It refers to the activities geared towards the search for mineral resources after the entity has
obtained legal rights to explore in a specific area?

Select one:
a. Probe and investigation
b. Development
c. Adventure and conquest
d. Exploration and evaluation 
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The correct answer is: Exploration and evaluation

Question  56
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23. Which of the following is incorrect in relation to the provisions of PFRS 6?
 Select one:
a. PFRS 6 permits entities to develop their own accounting policy for exploration and evaluation
assets based entirely on management’s judgment
b. Although PFRS 6 permits entities to develop their own accounting policy, the management of an
entity should comply with the provision of PAS 8 on hierarchy of standards when developing
accounting policy for exploration and evaluation of mineral resources 
c. Exploration and evaluation expenditures cease to be incurred when the existence of reserves is in
fact established
d. Exploration and evaluation expenditures start to be incurred only after the legal right to explore a
specific area is obtained
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The correct answer is: Although PFRS 6 permits entities to develop their own accounting policy,
the management of an entity should comply with the provision of PAS 8 on hierarchy of
standards when developing accounting policy for exploration and evaluation of mineral
resources

stion  57
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24. Tangible development costs (tangible equipment costs)

Select one:
a. Are development costs with no physical substance but nevertheless treated as part of wasting asset
because of the application of substance over form
b. Are not capitalized as cost of natural resource but capitalized as equipment and depreciated
separately
c. Are accounted for under PFRS 6
d. Are capitalized as cost of natural resource and depreciated over the economic life of the natural
resource 
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The correct answer is: Are not capitalized as cost of natural resource but capitalized as
equipment and depreciated separately

Question  58
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25. Changes in residual value or estimated quantity of mineral reserves are

Select one:
a. Changes in accounting estimates accounted for retrospectively
b. Changes in accounting estimates accounted for prospectively
c. Changes in accounting policy accounted for retrospectively
d. Changes in accounting policy accounted for prospectively 
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The correct answer is: Changes in accounting estimates accounted for prospectively

Question  59
Correct

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26. A provision is

Select one:
a. A possible obligation depending on whether some uncertain future event occurs.
b. A present obligation but payment is not probable or the amount cannot be measured reliably.
c. A liability of uncertain timing or amount. 
d. A possible asset that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the
control of the entity.
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The correct answer is: A liability of uncertain timing or amount.

Question  60
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27. In accordance with PAS 37, an entity must recognize a provision if and only if

Select one:
a. A reliable estimate can be made of the amount of obligation
b. A present obligation has arisen as a result of past event
c. All of the above
d. It is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation. 
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The correct answer is: All of the above