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QUESTION 67-11 Multiple choice (IFRS)
1. The IASB defines SMEs as entities that
a. Do not have public accountability.
b. Have public accountability and publish general C. purpose financial statements for external users.
Do not publish general purpose financial statements for external users.
d. Do not have public accountability and publish general purpose financial statements for external users.
2.Which statement describes the definition of an SME?
a. Entities that have no public accountability
b. Entities that have a specified number of employees
C. Entities that have a statement of financial position
d. Entities that have a certain annual turnover
3. All entities are publicly accountable, except

a. An entity whose shares are traded in a public market.
b. An entity whose debt instruments but not the shares are traded in a public market.
c. An entity whose shares and debt instruments àre traded in an over-the-counter market..
d. An entity that is not in the process of issuing shares and debt instruments for trading in a public market.
4. Which approach has the IASB taken in developing IFRS for SMEs?
a. The exemptions given to smaller entities are prescribed in the mainstream accounting standards.
b. GAAP for SMEs is developed on a national basis.
c. The standard is independently developed.
d. The standard is a simplified self-contained set of accounting principles that are based on full IFRS.
QUESTION 66-12 (Philippine SEC)
1. In the Philippines, which entity is not an SME?
a. A nonpublicly accountable entity with total assets between P3,000,000 and P350,000,000.
b. A nonpublicly accountable entity with total liabilities between P3,000,000 and P250,000,000.
c. An entity that is not a holder of a secondary license issued by a regulatory agency.
d. A public utility
2. Entities with total assets or total liabilities below the floor threshold of P3,000,000 are known as
a. Micro-business entities
b. Macro-business entities
c. Medium-sized entities.
d. Small entities
3. If an SME that uses the PFRS for SMEs in the current year breaches the ceiling of the size criteria at the end. of the current year,
the entity is required to transition to full PFRS
a. At the current year-end.
b. At the current year-end if the event that caused the change is significant and continuing.
c. In the next year if the event that caused the change is significant and continuing.
d. At the discretion of management
4. What is considered significant change that requires transition to PFRS for SMEs?
a. 20% or more of the total assets or total liabilities
b. 50% or more of the total assets or total liabilities
c. 10% or more of the total assets or total liabilities
d. No quantitative threshold can be made
QUESTION 67-13 Multiple choice(IFRS)
1. This is defined as the "first annual financial atatements Standards for SMEs" in which an SME adopts Ihilippine Financial
Reporting
a. IFRS financial statements
b. First financial statements that conform with IFRS for SMEs
C. Opening statement of financial position
d. First audited financial statements
2.An SME that presents first financial statements that conform with IFRS for SMEs is known as
a. An originating entity
b. A provisional presenter
c. A first-time adopter
d. An initial reporter
3. What is the date of transition to IFRS for SMEs?

a. The beginning of the latest period in the most recent annual financial statements under previous GAAP.
b. The end of the latest period in the most recent annual financial statements under previous GAAP.
C. The beginning of the earliest period for which an entity presents full comparative information under IFRS for SMEs.
d. The end of the earliest period for which an entity presents full comparative information under IFRS for SMEs.
4. The statement of financial position at the date of transition to IFRS for SMEs is best described as
a. Provisional statement of financial position
b. Closing statement of financial position

c. Opening statement of financial position
d. Originating statement of financial position
5. In the opening statement of financial position, which cannot be done by the first-time adopter of IFRS for SMEs?
a. Recognize all assets and liabilities whose recognition is required by IFRS for SMEs.
b.Recognize assets and liabilities required by full PFRS but IFRS for SMEs does not require such recognition.
C. Reclassify an item as one type of asset, liability or equity under the previous accounting framework but a different type of asset,
liability or equity under IFRS for SMEs.
d. Apply IFRS for SMEs in measuring all recognized assets and liabilities.
6. IFRS for SMEs contains exemptions for the restatement of the opening statement of financial position. What is the basis for such
exemptions?
a. Cost
b. Impracticability
C. Materiality
d. Relevance
7. The reconciliation of equity under the previous reporting framework to the equity under IFRS for SMEs is made at
a. The date of transition to IFRS for SMEs
b. The end of current reporting period
c. The date of transition to IFRS for SMEs and at the end of latest reporting period
d. The end of the preceding comparative period
8. the reconciliation of profit or loss under the previous reporting framework to the profit or loss under IFRS for SMEs is made for
a. The period before transition to IFRS for SMEs
b. The latest reporting period and transition to IFRS for SMEs
C. The latest reporting period
d. No reconciliation of profit or loss is made

qUESTION 68-14 Multiple choice (IFRS)
1. fair presentation in accordance with IFRS for SMEs is presumed to result from
a. Compliance with IFRS for SMEs by an entity that has public accountability.
b.Compliance with IFRS for SMEs,with additional disclosures where necessary, by an entity that has public
accountability.
C. Compliance with IFRS for SMEs by an entity that does not have public accountability.
d. Compliance with IFRS for SMEs, with additional disclosures where necessary, by an entity that does
not have public accountability.
2 An entity that is not publicly accountable must make an explicit and unreserved statement of compliance with the
IFRS for SMEs
a. If the entity complies with all the requirements of IFRS for SMEs.
b. If the entity complies with the vast majority of the requirements of IFRS for SMEs.
C. If the entity complies with the USA GAAP.
d. If the entity complies with full IFRS.
3.Financial statements prepared by an SME must comply with the IFRS for SMEs. Which of the following statements
suitably describes the nature of the compliance with the Standard?
a. The accounting practices used are a mix of full IFRS and IFRS for SMEs
b. The accounting practices used are a mix of local GAAP and IFRS for SMEs
c. The accountiñg practices used are a mix of full IFRS and local GAAP
d. The SME has followed IFRS for SMEs in its entirety

1. All of the following are considered line items in the statement of financial position of an SME, except
a. Biological assets carried at fair value
b. Investments in joint venture
c. Investment properties carried at cost
d. Total of assets classified as held for sale

2. Which of the following must not be included in the statement of financial position of an SME?
a. Contingent asset
b. Property, plant and equipment
c. Intangible assets
d. Investment property at fair value
3. Which of the following is required to be shown as line item for an SME but not under full IFRS?
a. Inventory
C. Financial asset
d. Investment in joint venture

a. Provisions
b. Noncontrolling interest
c. Equity attributable to the owners of parent
d. Revaluation surplus related to intangible assets
5. All of the following are considered line items in the statement of financial position of an SME,except
a.Trade and other payables
b.Deferred tax liability
C. Financial liability
d. Total of liabilities included in disposal group classified as held for sale

1.Which of the following should be recognized in other comprehensive income of an SME?
a. Gain and loss from discontinued operation
b. Gain and loss from translation of a foreign operation
C.Gain on remeasuring equity investment at FVOCI
d.Extraordinary gain and loss
2. The PERS for SMEs mentions the following components of other comprehensive income, except
a. Gain and loss on hedging instrument
b.Revaluation surplus of property, plant and equipment
C. Actuarial gain and loss of defined benefit plan
d. All of these are SME component of OCI
3. Which of the following can an SME elect as an accounting policy choice to recognize in other comprehensive income
or in profit or loss?
a. Revaluation surplus of propérty, plant and equipment
b. Gain and loss from translation a foreign operation
c. Actuarial gain and loss of defined benefit plan
d. Gain and loss on hedging instrument
4.Which component of OCI of an SME is reclassified to profit or loss?
a. Change in fair value of hedging instrument
b. Revaluation surplus of property plant and equipment
c. Translation gain and loss
d. Actuarial gain and loss

QUESTION 68-17 Multiple choice (IAA)
1. Which method is required for reporting change in accounting policy?
a. Cumulative effect approach
b. Retrospective approach
C. Prospective approach
d. Averaging approach
2. Which of the following is not treated as a change in accounting policy?
a. A change from FIFO inventory valuation to average cost
b. A change from direct writeoff method of recognizing bad debt expense to allowance method
c. A change from cost model to fair value model in measuring investment property
d. A change to a new IFRS requirement
3. Which statement about accounting changes is correct?
a. Changes in accounting policy are always handled in the current or prospective period.
b. Prior year statements should be restated for changes in accounting estimate.
C. A change in accounting estimate is accounted for currently and prospectively.
d. Correction of a prior period error should be an adjustment to current year net income.
4. Prior years statements are not restated for
a. Change in accounting policy
b. Change in accounting estimate
C. Correction of prior period errors
d. All of these require retrospective restatement

Let’s Check Exercise 1 –
1. The IFRS for SMEs is intended for use by certain types of entity. Which of the following descriptions
accurately describes the definition of a SME used by the IASB?
a. Entities that have a certain annual turnover
c. Entities that have no public accountability
d. Entities that have a certain balance sheet total
2. Which of the following would qualify as a small or medium-sized entity in accordance with the criteria
specified in the IFRS for SMEs?
a. A company which is listed on the stock exchange.
b. An unlisted manufacturing company which is not managed by its shareholders.
c. An insurance company.
d. A small owner-managed business.
3. All of the following entities are publicly accountable, except
b. An entity whose debt instruments but not the shares are traded in a public market.
c. An entity whose shares and debt instruments are traded in an “over-the-counter market”.
d. An entity that is not in the process of issuing shares and debt instruments for trading in a public
market.
4. Micro-business entities can use which of the following bases of accounting, except?
a. Full PFRS
b. PFRS for SMEs
c. Another acceptable basis of accounting
d. PFRS for Small Entities

5. Which can be considered as SME?
a. A credit union with total assets of P3 Million.
b. A broker with total liabilities of P3 Million.
c. A bank with total assets of P350 Million.
d. An unlisted entity manufacturing electrical goods with total liabilities of P250 Million. 44
6. What is a “significant” change in the size criteria that requires transition to or from the PFRS for
SMEs?
a. 20% or more of the total assets or total liabilities.
b. 50% or more of the total assets or total liabilities.
c. 10% or more of the total assets or total liabilities.
d. No quantitative threshold can be made because this is dependent on the judgment of management.
7. This is the license given by Securities and Exchange Commission (SEC) to a corporation to engage to
special and particularized activities.
a. Primary SEC Registration or Primary License.
b. Secondary SEC Registration or Secondary License.
c. Business License.
d. Corporation License.
8. If an SME that uses the PFRS for SMEs in the current year breaches the ceiling of the size criteria at
the end of the current year, the entity is
a. Required to transition to full PFRS at the current year-end.
b. Required to transition to full FPRS at the current year-end if the event that caused the change is
significant and continuing.
c. Required to transition to full PFRS in the next year if the event that caused the change is significant
and continuing.
d. Not required to transition to full PFRS.
9. In the Philippines, which of the following entities is not an SME?
a. An nonpublicly accountable entity with total assets between P3 Million and P350 Million or total
liabilities between P3 Million and P250 Million.
b. An entity that is not in the process of filing financial statements for the purpose of issuing any class of
instruments in a public market.
c. An entity that is not a holder of a secondary license issued by a regulatory agency.
d. A public utility.
10. The following are examples of corporation that should have both a primary and secondary SEC
registration, except:
a. Philippine Chamber of Commerce, Inc.
b. San Miguel Corporation.
c. University of Mindanao.
d. Abacus Brokerage
Exercise 2 –
1. The effects of transactions and other events on economic resources and claims are adopted in the
periods in which those effects occur when if the resulting cash receipts and payments occur in a
different period.
a. Accrual basis
b. Cash basis
c. Hybrid basis
d. Income tax basis
2. Users are assumed to have a reasonable knowledge of business and economic activities and
accounting and a willingness to study the information with reasonable diligence.
a. Relevance 45
b. Reliability
c. Understandability
d. Comparability
3. If there is a delay in the reporting of information, it may lose its
a. Relevance
b. Faithful representation
c. Reliability
d. Usefulness
4. Which of the following statements is incorrect?
a. Transactions must be accounted for in accordance with their economic substance rather than legal
forms.
b. Primary responsibility for the preparation and presentation of the financial statements rests with
management.
c. Financial statements must exclude complex matters in order to achieve understandability.
d. The information contained in the financial statements must be free from bias.
5. Consistency is an important factor in comparability within a single entity. The consistency principle
requires that
a. Some costs should be recognized as expense on the basis of presumed direct association with specific
revenue.
b. Assets whose prices or utility are increased by external events other than transfers should be retained
in the accounting records at their recorded amounts until they are exchanged.
c. Historical cost should be the primary basis used in measuring inventory, intangible assets and
property, plant and equipment.
d. Changes in circumstances or in the nature of the underlying transactions should be disclosed.
6. Which statement is incorrect concerning assets?
a. Physical form is not essential to the existence of an asset.
b. In determining existence of an asset, the right of ownership is essential.
c. An asset results from past event.
d. There is a close association between incurring an expenditure and generating asset but the two do
not necessarily coincide.
7. Which statement is incorrect concerning a liability?
a. An essential characteristics of a liability is that the entity has a present obligation.
b. An obligation may be legally enforceable as a consequence of a binding contract or statutory

requirement.
c. A decision by management to acquire an asset in the future in itself gives rise to a present
obligation.
d. An obligation normally arises when the asset is delivered or the entity enters into an irrevocable
agreement to acquire the asset.
8. Asset measurements in the financial statements of an SMEs
a. Are confined to historical costs.
b. Are confined to historical costs and current costs.
c. Are confined to historical costs and fair market value.
d. Reflect several financial attributes. 46
9. Depending on the nature of the entity, revenue may be recognized based on different acceptable
criteria. Which of the following is not an accepted basis for recognition of revenue?
a. Passage of time
b. Performance of service
c. Completion of percentage of a project
d. Upon signing of contract
10.Which of the following statements in relation to the term expense is false?
a. All expenses and losses are expired costs, but not all expired costs are expenses or losses.
b. All expenses decrease owners’ equity, but not all decrease in owners’ equity are expenses.
c. Expense is synonymous with expenditure.
d. Entities do not incur expenses per se but they initially acquire assets.
Exercise 3 –
1. Fair presentation in accordance with PFRS for SMEs is presumed to result from
a. Compliance with PFRS for SMEs by an entity that has public accountability.
b. Compliance with PFRS for SMEs, with additional disclosures where necessary, by an entity that has
public accountabilities.
c. Compliance with PFRS for SMEs by an entity that does not have public accountability.
d. Compliance with PFRS for SMEs, with additional disclosures where necessary, by an entity that does
not have public accountability.
2. An SME must disclose comparative information for
b. The previous comparable period for all amounts reported.
c. The previous comparable period for all amounts reported, and for all narrative and descriptive
information.
d. The previous comparable period for all amount reported, and for all narrative and descriptive
information when it is relevant to an understanding of the financial statements of current period.
e. The previous two comparable periods for all amounted reported.
3. In accordance with PFRS for SMEs, an entity must present additional line items in a statement of
financial position when
a. Such presentation is relevant to an understanding of the financial position of the entity.
b. Such presentation is a generally accepted practice in the sector in which the entity operates.
c. Such presentation is require by the tax authority of the jurisdiction in which the entity operates.
d. Such presentation is relevant to an understanding of the financial position and financial performance
of the entity.
4. Which of the following is required to be shown as line item for an SME but not under full PFRS?
a. Inventory
c. Financial asset
d. Investment in joint ventures
5. Which of the following must be included in the statement of financial position of an SME?
a. Contingent asset
b. Property, plant and equipment analyzed by class
c. Share capital and reserves analyzed by class.
d. Deferred tax.
6. The PFRS for SMEs mentions the following components of other comprehensive income, except
a. Gain or loss on translating financial statements.
b. Change in revaluation surplus
c. Actuarial gains or losses.
d. Gain or loss on hedging instrument
7. An SME whose only changes to the equity arise from profit or loss, payment of dividends, corrections
of prior period errors, and changes in accounting policy
a. Is required to present a statement of income and retained earnings in place of a statement of

comprehensive income and a statement of changes in equity.
b. Is permitted but not required to present a statement of income and retained earnings in place of
statement of comprehensive income and a statement of changes in equity.
c. Must choose to present either a statement of comprehensive income or a statement of changes in

equity.
d. That chooses to present a statement of income and retained earnings must also present a statement
of comprehensive income and a statement of changes in equity.
8. If an SME using PFRS for SMEs changes from a single-statement approach to a two-statement
approach or vice-versa in presenting total comprehensive income, the change is treated as a
a. Change in reporting entity
c. Change in accounting policy
d. Prior period errors
9. A cash dividend that is declared during an accounting period, to be paid in the next accounting period,
is presented in the statement of cash flows for the current period as
a. A use of cash from operating activities.

b. A noncash transaction presented in a separate schedule.
c. A use of cash from financing activities.
d. A use of cash from investing activities.
10.In preparing a statement of cash flows under the indirect method, cash flow from operating activities
a. Is calculated as the difference between revenue and expenses plus the beginning cash balance.
b. Is always equal to the sum of cash flows from investing activities and cash flows from financing
activities.
c. Cash be calculated by appropriately adding to or deducting from net income those items in the
income statement that affect cash and accruals for current assets and current liabilities.
d. Can be calculated by appropriately adding to or deducting from net income those items in the
income statement that do not affect cash.
PROBLEMS
Problem 24-2 (Philippine SEC)
2.Which can be considered an SME?
a. A credit union with total assets of P3,000,000.
b. A broker with total liabilities of P3,000,000.
c. A bank with total 'assets of P350,000,000.
d. None of these can be considered SME.
3. Entities with total assets or total liabilities below the floor threshold of P3,000,000 are known as
a. Micro-business entities
b. Macro-business entities
C. Medium-sized entities.
d.Small entities
4. If an SME that uses the PFRS for SMEs in the current year breaches the ceiling of the size criteria at the end of the
current year, the entity is required to transition to full PFRS
a. At the current year end.
b. At the current year-end if the event that caused the change is significant and continuing.
c. in the next year if the event that caused the change is significant and continuing

5 What is considered significant change that requires transition to pfrs for SMEs
a. 20% or more of the total assets or total liabilities
Problem 24-3 Multiple choice (IFRS)

1. This is defined as the first annual financial atatementa in which an SME adopte IFRS for SME8.
b.First financial statements that conform with IFRS for SMEs
C. Opening statement of financial position
2. What is the date of transition to IFRS for SME?
a. The beginning of the latest period in the most recent annual financial statemefits under prévious GAAP.
b. The end of the latest period in the mostrecent annual financial statements under previous GAAP.
C. The beginning of the earliest period for which an entity presents full comparative information under IFRS
for SMEs.
d. The end of the earliest period for which an entity presents full comparative information under IFRS for SMEs.
3. The statement of financial position at the date of transition to IFRS for SMEs is best described as 18
c. Opening statement of financial position
d. Originating statement of financial position oie
4. In the opening statement of financial position, which cannot be done by the first time adopter of IFRS for SMEs?
a. Recognize all assets and liabilities whose recognition is required by IFRS for SMEs.
b. Recognize assets and liabilities required by full IFRS but IFRS for SMEs does not require such recognition.
C. Reclassify an item as one type of asset, liability or equity under the previous accounting framework but a different
type under IFRS for SMEs.
Problem 25-4(IFRS)
SME provided the following analysis of income and expenses for the current year:
Revenue 5,500,000
Other income 100,000
Purchases 1,100,000
Change in inventory-decrease 130,000
Wages,salaries and benefits 2,260,000
Depreciation 520,000
Other expenses 380,000
Advertising 150,000
Finance cost 60,000
Income tax expense 300,000
Exchange difference on translating foreign operation, net of tax-

10,000
credit
Decrease in the fair value of hedging instrument, net of tax-

6,000
loss
1. What is the net income for the current year?
a.1,000,000
b.1,260,000
C. 700,000
d. 882,000
2. What net amount should be reported as component of other comprehensive income?
a. 10,000
b. 16,000
C. 6,000
d. 4,000
3. What is the total comprehensive income for the year?
a. 684,000
b. 716,000
c. 710,000
d.704,000
problem 25-5(IFRS)
An SME provided the following data for the curent year:
Awng data for the curent year
Sales 6,700,000
Royalty revenue 120,000
Cost of goods sold 5,100,000
Dividend received from an associate-cost model

25,000
Gain on disposal of property
Distribution expenses 60,000
Administrative expenses 175,000
(including amortization on goodwill of P2,000)
Research and development cost 810,000
Foreign exchange loss on trade payables 70,000
Interest on bank loan and overdraft 30,000
Interest on finance lease 20,000
Current tax expense 5,000
Deferred tax benefit 270,000
Retained earnings-beginning 10,000
Dividends 2,100,000
1. What is the total income for the current year?
a. 1,600,000
b. 6,700,000
c. 1,805,000
d. 1,780,000

a. 435,000
b.410,000
c.437,000
d.695,000
3. What amount should be reported as retained earnings at year-end?

a.2,535,000
b. 2,385,000
c. 2,387,000
d.2,441,000

1. Fair presentation in accordance with IFRS for SMEs is presumed to result from
b. Compliance with IFRS for SMEs, with additional disclosures where necessary, by an entity that has public
accountability.
c. Compliance with IFRS for SMEs by an entity that does not have public accountability.
d. Compliance with IFRS for SMEs, with additional disclosures where necessary, by an entity that does not
have public accountability.
2. An entity that is not publicly accountable must make an explicit and unreserved statement of compliance with the
IFRS for SMEs
b. If the entity complies with the vast majority of the requirements of IFRS for SMEs.
c. If the entity complies with USA GAAP.
3. Financial statements prepared by an SME must comply with the IFRS for SMEs. Which of the following
statements suitably. describes the nature of the compliance with the Standard?
c. The accounting practices used are a mix of full IFRS and local GAAP
d. The SME has followed IFRS for SMEs in its entirety.
4. A nonpublicly accountable entity can claim compliance with IFRS for SMEs when the entity
I. Complies with local tax requirements that are substantially the same as IFRS for SMEs.
II. Complies with local tax requirements that are, except in name, word for word the same as IFRS for SMEs.
III.Complies with all the requirements of IFRS for SMEs.
IV.Complies with full IFRS.
a. I and III
b. II and III
c.II,III and IV
d.III and IV
5.The IASB sets effective dates for standards which are sometimes prospective and sómetimes the standards become
almost immediately effective. What is the effective date for the IFRS for SMEs?
a. The IASB has not set an effective date for the Standard because the decision to whether to adopt the IFRS for
SMEs is a matter for each jurisdiction.
b. The IASB will set the date when the Standard has been in existence for a while in order to gauge the acceptance
of the Standard.
c.,The date will be set by the IASB as soon as possible.
d. The effective date was the date on the release of the Standard.

a. Biological asset carried at fair value through profit or loss
b. Investment in associate
C. Investment property carried at cost
2.Which of the following is required to be shown as line item for an SME but not under full IFRS?
a. Inventory
c. Financial asset
3. Which of the following must not be included in the statement of financial position of an SME?
a. Contingent asset
4. All of the following are considered line items in the statement of financial position of an SME,except
a. Provisions
d. Revaluation surplus related to intangible asset
a. Trade and other payables
b. Deferred tax liabilities
c. Financial liabilities

1. Which of the following gain and loss should be recognized in other comprehensive income of an SME?
a. Gain and loss from discontinued operations
b. Gain and loss arising on translating the financial statements of a foreign operation
d. Extraordinary gain and loss
2. All of the following are components of other comprehensive income of an SME, except
a. Gain or loss on hedging instrument
b. Revaluation surplus of property, plant and equipment
c. Actuarial gain and loss
d. All of these are SME components of OCI
3. Which gain and loss can an SME elect to recognize in other comprehensive income or in profit or loss?
a. Revaluation surplus of property, plant and equipment
b. Gain and loss arising on translating the financial statements of a foreign operation
4. Which component of OCI of an SME is reclassified to profit or loss?

c. Translation adjustment related to foreign operation
Problem 25-9 Multiple choice(IAA)
1. When an entity decides to switch from double declining balance to straight line method, this change should be
handled as
c. Prior period error
d. Change in reporting entity

a. Cumulative approach
c. Prospective approach
3.Which of the following changes is not treated as a change in accounting policy?
b. A change from direct writeoff method of recognizing bad debt expense to allowance method
c. A change from cost model to fair value model in measuring investment property

4. Which statement is correct about accounting changes?
a. Change in accounting policy is always handled in the current or prospective period.
b. Prior years' statements should be restated for changes in accounting estimate.
c. A change in accounting estimate is accounted for currently and prospectively.
d. Correction of a prior period rror should be an adjustment to current year net income.
5. Prior years' statements are not restated for
c. Correction of an error
PROBLEMS
Problem 30-1 Multiple choice (PFRS for SEs)

1. Which is not within the definition of a small entity?
a. With total assets or total liabilities between b. P3,000,000 or P100,000,000
Listed in a public market
C. Not in the process of filing financial statements for the purpose issuing equity instruments in a public
market
d. Holder of a secondary license issued by regulatory agency

2. Which small entity is not exempted from the mandatory adoption of PFRS for Small Entities?
a. A small subsidiary of a parent under full PFRS
b. A small subsidiary of a foreign parent moving toward full IFRS
C. A small joint venture under full PFRS
d. A small entity preparing financial statements under full PFRS and has not decided to liquidate.
3. The financial statements of a small entity include all of the following,except

a. Statement of financial position
b. Statement of income
c. Statement of retained earnngs
d. Statement of cash flows
4. The statements of income and changes in equity of a small entity can be combined if the only changes arise from
all of the following, except
a. Net income
b. Payment of dividend
c. Change in accounting estimate
d. Change in accounting policy

5.Which is an adjustment of the opening balance of retained earnings?
C.Change in accounting policy and prior period error
d. Change in accounting estimate and prior period eror
1. Which is not a basic financial instrument of a small entity?

a. Cash in bank
b. Accounts receivable
C. Note payable
d. Investment in convertible preference shares

2.Basic financial instruments'are initially measured at
a. Transaction price including transaction cost
b. Transaction price excluding transaction cost
C. Amortized cost
d. Present value of future payments
3. Which statement is incorrect about subsequent measurement of basic financial instruments?
a. Debt instruments are measured at amortized cost using effective interest
b. Investment in untraded shares are carried at cost less impairment

(
c. Investment in traded shares are measured fair value
d. Investment in traded shares are measured at the lower of cost or fair value
4. For debt instrument at amortized cost, the impairment loss is
a. Excess of carrying amount over the present value of cash flows
b. Excess of present value of cash flows over carrying amount

c. Excess of carrying amount over fair value
d. Excess of fair value over carrying amount
5. For financial asset measured at cost less impairment, the impairment loss is the excess of
a. Carrying amount over the best estimate of selling price
b. Best estimate of selling price over carrying amount
c. Carrying amount over the fair value
d. Fair value over best estimate of selling price
1. Inventories of a small entity are measured at

a. Fair value
b. Market value
c. Lower of cost or market value
d. Lower of cost or net realizable value
2. All investments in associate of a small entity are accounted for using
a. Cost model
b. Equity method
C. Either cost model or equity method
d. Fair value model
3. All investment properties of a small entity are subsequently measured using
a. Cost model
b. Fair value model
C. Either cost model or revaluation model
d. Either cost model or fair value model
4. A small entity shall apply which accounting policy for property, plant and equipment?
a. Cost model
b. Fair value model
C. Either cost model or fair value model
d. Either cost model or revaluation model
5. Which statement is incorrect with respect to government.grant of a small entity?
a. Unconditional monetary grant is recognized in income when receivable.
b. Conditonal monetary grant is recognized in income only when the performance condition is met.
C. Monetary grant is recognized as liability before recognition criteria are met.
d,Nonmonetary grant shall not be recognized.
6. What is the treatment of borrowing cost of a small entity?

a. Expensed as incurred
b. Capitalized C.May be expensed or capitalized depending on circumstances
d. Not recognized
7. A small entity shall measure intangible asset using
a. Cost model
b. Fair value model
c. Revaluation model
8. How is impairment loss of an asset recognized?

a. Excess of carrying amount over recoverable amount
b. Excess of recoverable amount over carrying amount
c. Excess of carrying amount over fair value less cost of disposal
d. Excess of carrying amount over value in use
9. Biological asset of a small entity is measured using
a. Cost model
b. Current market price model
d. Either cost model or current market price model
10. Agricultural produce of a small entity is measured at
a. Current market price at the point of harvest
b. Current market price less cost of disposal at the point of harvest
C. Fair value at the point of harvest.
d. Fair value less cost of disposal at the point of harvest
Problem 30-4 Multiple choice (PFRS for SEs).
1. What is the measurement of a provision?

a. Best estimate at reporting date
b. Best estimate at settlement date
c.' Present value of future payment

d. Midpoint of the range
2. A small entity shall account for a lease using
a. Operating lease model
b. Finance lease model
c. Either operating lease or finance lease
d. Operating lease for lessee and finance lease for lessor
3. A small entity shall account for income tax using
a. Taxes payable method
b. Deferred income taxes method
c. Either taxes payable method or deferred income taxes method
d. Neither taxes payable method nor deferred income taxes method
4. Deferred tax asset or liability shall be measured at
a. Current tax rate
b. Expected future tax rate
c. Enacted future tax rate
d. Average annual tax rate
5. A small entity shall account for postemployment benefit using
a. Accrual method
b. Cash method
c. Either accrual emthod or cash method
d. Either accrual method or projected benefit method
6. The benefit obligation of small entity is calculated under

a. R.A.7641
b. Company policy
c. Company policy if higher than R.A.7641
d. Qualifying insurance policy

7. Equity instruments are measured at
a. The amount of cash received
b. Present value for deferred payment
C. Fair value of noncash consideration received

d. All of these are used in measuring equity instruments
8. Equity settled share-based payment transactions are measured at
a. Net asset value
b. Fair value
C. Liquidation value
d. Assessed value
9. Cash settled share-based payment transactions are measured at
a. Fair value of liability at reporting date /
b. Net asset value of liability at reporting date
C. Fair value of liability at reporting date and remeasured at date of settlement
d. Net asset value of liability at reporting date and remeasured at date of settlement
10. The revenue of small entity from sale of goods is measured at
a. Fair value of consideration received
b. Fair value of consideration received less trade discount, prompt payment discount and volume rebate
c. Cash received les8 trade discount
d. Present value of consideration

PROBLEMS
problem 24-1 Multiple choice (IFRS)

1.The IASB defines SMEs as entities that
8. Do not have public accountability.
b.Have public accountability and publish general C. purpose financial

statements for external usera.
Do not publish general purpose financial statements for external users.
d. Do not have public accountability and publish general purpose financial

statements for external users.
2.Which statement describes the definition of an SME?

a. Entities that have no public accountability
C.Entities that have a certain statement of position total
d. Entities that have a certain annual turnover

3. All of the following entities are publicly accountable, except
b. An entity whose debt instruments but not the shares are traded in a public
market.
c. An entity whose shares and debt instruments are traded in an over-the-

counter market.
d. An entity that is not in the process of issuing shares and debt instruments
for trading in a public market.
4. Which approach has the IASB taken in developing IFRS for SMEs?
a. The exemptions given to smaller entities are prescribed in the mainstream
accounting standards.
b. GAAP for SMEs is developed on a national basis.
c. The standard is independently developed.
d. The standard is a simplified self-contained set of accounting principles that

are based on full IFRS.
Problem 24-2 (Philippine SEC)
1. In the Philippines, which entity is not an SME?
a. A nonpublicly accountable entity with totalassets between P3,000,000

and P350,000,000.
.belwepublicly accountable entit ith total liabilitiea between P3,000,000 and

P250,000,000.
c. An entity that is not a holder of a secondarylicense issued by a regulatory

agency.anl saogma
d. A public utilityoqiog leianog dailduq ton od
2.Which can be considered an SME? (809lx9 1o1
a. A credit union with total assets of P3,000,000.
b. A broker with total liabilities of P3,000,000.
c. A bank with total 'assets of P350,000,000.
d. None of these can be considered SME.
Entites that bave no publie aecotntan

3. Entities with total assets or total iabilities below the floor threshold of
P3,000,000 are known 3 .0
a. Micro-business entities total
b. Macro-business entitiess ovsl tart asdidnf .b
C. Medium-sized entities. d."Small entities sis eonune sniwollot adt to IIA.8
Gxcebt
4. If an SME that uses the PFRS for SMEs in the current year breaches the ceiliig of
the size criteria at the end sof the current year, the entity is reqúired to tfansition to full
PFRS are traded in a
publle market
An entity whose shares and debt tnstrumenta ar
.0
a. At the current year end.

b. At the current year-ond if the event that caused the es1ine change is
significant and continuing.
ssdrem in the next year if the event that caused the change aaar anis significant and
continuingsi dosaigqs noidW
a What is considered significant change that requires

.aiasd20% or more of the total assets or total/liabilities b. 50% or more of the
total assets or total liabilities to tec. b10% or more of the total assets or total
liabilities asdil No quantitative threshold can be made ooo6
1. This is defined as the first annual financial atatementa in which an SME
adopte IFRS for SME8.
b.First financial statements that donform with IFRS for SMEs C.
Opening statement of financial position
2. What is the date of transition to TERS for SME?
a. The beginning of the latest period in the most recent annual financial
statemefits under prévious GAAP.
b. The end of the latest period in the mostrecent annual financial

statements under previous GAAP.
C. The beginning of the earliest period for which anJ entity presents full
comparative information under IFRS for SMEs.
d. The end of the earliest period for which an entity presents full
comparative information under IFRS for SMEs.
3. The statement of financial position at the date of transition to IFRS for SMEs
is best described as 18
osce Opening statement of financial position ysbs o1
d. Originating statement of financial position oie
4. In the opening statement of financial position,which cannot be done by the

first time adopter of IFRS for SMEs?
reportane pertod suinderP

a. Recognize all assets and liabilities whose recognition is required by IFRS
for SMEs.
b. Recognize assets and liabilities required by full IFRS but IFRS for SMEs
does not require such recognition.
C. Reclassify an item as one type of asset, liability or equity under the

previous accounting framework but a different type under IFRS for SMEs.
Problem 25-4(IFRS)
SME provided the following analysis of income and expenses for the current
year:
Revenue 5,500,000
Other income 100,000
Purchases 1,100,000
Change in inventory-decrease 130,000
Wages,salaries and benefits 2,260,000
Depreciation 520,000
Other expenses 380,000
Advertising 150,000
Finance cost 60,000
Income tax expense 300,000
Exchange difference on translating foreign
operation, net of tax-credit 10,000
operation, net of tax-credit
Decrease in the fair value of hedging
instrument, net of tax-loss

6,000
a.1,000,000
b.1,260,000
C. 700,000
d. 882,000
2. What net amount should be reported as component of other comprehensive
income?
a. 10,000
b. 16,000
C. 6,000
d. 4,000
3. What is the total comprehensive income for the year?
a. 684,000
b. 716,000
c. 710,000
d.704,000
problem 25-5(IFRS)
An SME provided the following data for the curent year:
Awng data for the curent year
Sales 6,700,000
Royalty revenue 120,000
5,100,000
Cost of goods sold
Dividend received from an associate-cost model

25,000
Gain on disposal of property
Distribution expenses 60,000
Administrative expenses 175,000
(including amortization on goodwill of P2,000)

Research and development cost 810,000
Foreign exchange loss on trade payables 70,000
Interest on bank loan and overdraft 30,000
Interest on finance lease 20,000
Current tax expense 5,000
Deferred tax benefit 270,000
Retained earnings-beginning 10,000
Dividends 2,100,000
1. What is the total income for the current year?
a. 1,600,000
b. 6,700,000
c. 1,805,000
d. 1,780,000

a. 435,000
b.410,000
c.437,000
d.695,000
3. What amount should be reported as retained earnings at year-end?

a.2,535,000
b. 2,385,000
c. 2,387,000
d.2,441,000
1. Fair presentation in accordance with IFRS for SMEs is presumed to result from
b. Compliance with IFRS for SMEs, with additional disclosures where

necessary, by an entity that has public accountability.
c. Compliance with IFRS for SMEs by an entity that does not have public
accountability.
d. Compliance with IFRS for SMEs, with additional disclosures where

necessary, by an entity that does not have public accountability.
2. An entity that is not publicly accountable must make an explicit and unreserved
statement of compliance with the IFRS for SMEs
b. If the entity complies with the vast majority of the requirements of IFRS for
SMEs.
c. If the entity complies with USA GAAP.
3. Financial statements prepared by an SME must comply with the IFRS for SMEs.
Which of the following statements suitably. describes the nature of the compliance
with the Standard?
c. The accounting practices used are a mix of full IFRS and local GAAP
d. The SME has followed IFRS for SMEs in its entirety.

4. A nonpublicly accountable entity can claim compliance with IFRS for SMEs when
the entity
I. Complies with local tax requirements that are substantially the same as IFRS
for SMEs.
II. Complies with local tax requirements that are, except in name, word for word
the same as IFRS for SMEs.
III.Complies with all the requirements of IFRS for SMEs.
IV.Complies with full IFRS.
a. I and III
b. II and III
c.II,III and IV
d.III and IV
5.The IASB sets effective dates for standards which are sometimes prospective and
sómetimes the standards become almost immediately effective. What is the
effective date for the IFRS for SMEs?
a. The IASB has not set an effective date for the Standard because the decision
to whether to adopt the IFRS for SMEs is a matter for each jurisdiction.
b. The IASB will set the date when the Standard has been in existence for a while
in order to gauge the acceptance of the Standard.
c.,The date will be set by the IASB as soon as possible.
d. The effective date was the date on the release of the Standard.
1. All of the following are considered line items in the statement of financial
position of an SME, except
a. Biological asset carried at fair value through profit or loss
b. Investment in associate
C. Investment property carried at cost
2.Which of the following is required to be shown as line item for an SME but not
under full IFRS?
a. Inventory
c. Financial asset
3. Which of the following must not be included in the statement of financial

position of an SME?
a. Contingent asset
position of an SME,except
a. Provisions
d. Revaluation surplus related to intangible asset
position of an SME, except
a. Trade and other payables

b. Deferred tax liabilities
c. Financial liabilities

1. Which of the following gain and loss should be recognized in other

comprehensive income of an SME?
a. Gain and loss from discontinued operations
b. Gain and loss arising on translating the financial statements of a foreign

operation
d. Extraordinary gain and loss
2. All of the following are components of other comprehensive income of an

SME, except
a. Gain or loss on hedging instrument
b. Revaluation surplus of property, plant and equipment
c. Actuarial gain and loss
d. All of these are SME components of OCI
3. Which gain and loss can an SME elect to recognize in other comprehensive income
or in profit or loss?
a. Revaluation surplus of property, plant and equipment
b. Gain and loss arising on translating the financial statements of a foreign

operation
4. Which component of OCI of an SME is reclassified to profit or loss?

c. Translation adjustment related to foreign operation

Problem 25-9 Multiple choice(IAA)
1. When an entity decides to switch from double declining balance to straight line
method, this change should be handled as
c. Prior period error
d. Change in reporting entity

a. Cumulative approach
c. Prospective approach
3.Which of the following changes is not treated as a change in accounting policy?
b. A change from direct writeoff method of recognizing bad debt expense to

allowance method
c. A change from cost model to fair value model in measuring investment

property

4. Which statement is correct about accounting changes?
a. Change in accounting policy is always handled in the current or prospective
period.
b. Prior years' statements should be restated for changes in accounting

estimate.
c. A change in accounting estimate is accounted for currently and prospectively.
d. Correction of a prior period rror should be an adjustment to current year net

income.
5. Prior years' statements are not restated for
c. Correction of an error

PROBLEMS

1. Which is not within the definition of a small entity?
a. With total assets or total liabilities between b. P3,000,000 or P100,000,000
Listed in a public market
C. Not in the process of filing financial statements for the purpose issuing
equity instruments in a public market
d. Holder of a secondary license issued by regulatory agency

2. Which small entity is not exempted from the mandatory adoption of PFRS for
Small Entities?
a. A small subsidiary of a parent under full PFRS
b. A small subsidiary of a foreign parent moving toward full IFRS
C. A small joint venture under full PFRS
d. A small entity preparing financial statements under full PFRS and has not
decided to liquidate.
3. The financial statements of a small entity include all of the following,except
a. Statement of financial position
b. Statement of income
c. Statement of retained earnngs
d. Statement of cash flows

4. The statements of income and changes in equity of a small entity can be
combined if the only changes arise from all of the following, except
a. Net income
b. Payment of dividend
c. Change in accounting estimate
d. Change in accounting policy

5.Which is an adjustment of the opening balance of retained earnings?
C.Change in accounting policy and prior period error
d. Change in accounting estimate and prior period eror

1. Which is not a basic financial instrument of a small entity?

a. Cash in bank
b. Accounts receivable
C. Note payable
d. Investment in convertible preference shares

2.Basic financial instruments'are initially measured at
a. Transaction price including transaction cost
b. Transaction price excluding transaction cost
C. Amortized cost
d. Present value of future payments

3. Which statement is incorrect about subsequent measurement of basic financial
instruments?
a. Debt instruments are measured at amortized cost using effective interest
b. Investment in untraded shares are carried at cost less impairment

(
c. Investment in traded shares are measured fair value
d. Investment in traded shares are measured at the lower of cost or fair value
4. For debt instrument at amortized cost, the impairment loss is
a. Excess of carrying amount over the present value of cash flows
b. Excess of present value of cash flows over carrying amount
c. Excess of carrying amount over fair value
d. Excess of fair value over carrying amount
5. For financial asset measured at cost less impairment, the impairment loss is the
excess of
a. Carrying amount over the best estimate of selling price
b. Best estimate of selling price over carrying amount
c. Carrying amount over the fair value
d. Fair value over best estimate of selling price

1. Inventories of a small entity are measured at
a. Fair value
b. Market value
c. Lower of cost or market value
d. Lower of cost or net realizable value
2. All investments in associate of a small entity are accounted for using
a. Cost model
b. Equity method
C. Either cost model or equity method
d. Fair value model

3. All investment properties of a small entity are subsequently measured using
a. Cost model
b. Fair value model

C. Either cost model or revaluation model
4. A small entity shall apply which accounting policy for property, plant and
equipment?
a. Cost model
b. Fair value model

d. Either cost model or revaluation model
5. Which statement is incorrect with respect to government.grant of a small entity?

a. Unconditional monetary grant is recognized in income when receivable.
b. Conditonal monetary grant is recognized in income only when the performance

condition is met.
C. Monetary grant is recognized as liability before recognition criteria are met.

d,Nonmonetary grant shall not be recognized.
6. What is the treatment of borrowing cost of a small entity?
a. Expensed as incurred
b. Capitalized C.May be expensed or capitalized depending on circumstances
d. Not recognized
7. A small entity shall measure intangible asset using
a. Cost model
b. Fair value model
c. Revaluation model
8. How is impairment loss of an asset recognized?

a. Excess of carrying amount over recoverable amount
b. Excess of recoverable amount over carrying amount
c. Excess of carrying amount over fair value less cost of disposal
d. Excess of carrying amount over value in use

9. Biological asset of a small entity is measured using
a. Cost model
b. Current market price model
d. Either cost model or current market price model
10. Agricultural produce of a small entity is measured at
a. Current market price at the point of harvest

b. Current market price less cost of disposal at the point of harvest
C. Fair value at the point of harvest.
d. Fair value less cost of disposal at the point of harvest

Problem 30-4 Multiple choice (PFRS for SEs).
1. What is the measurement of a provision?
a. Best estimate at reporting date
b. Best estimate at settlement date
c.' Present value of future payment
d. Midpoint of the range
2. A small entity shall account for a lease using
a. Operating lease model
b. Finance lease model
c. Either operating lease or finance lease
d. Operating lease for lessee and finance lease for lessor
3. A small entity shall account for income tax using
a. Taxes payable method
b. Deferred income taxes method
c. Either taxes payable method or deferred income taxes method
d. Neither taxes payable method nor deferred income taxes method
4. Deferred tax asset or liability shall be measured at
a. Current tax rate
b. Expected future tax rate
c. Enacted future tax rate
d. Average annual tax rate
5. A small entity shall account for postemployment benefit using
a. Accrual method
b. Cash method
c. Either accrual emthod or cash method

d. Either accrual method or projected benefit method
6. The benefit obligation of small entity is calculated under
a. R.A.7641
b. Company policy
c. Company policy if higher than R.A.7641
d. Qualifying insurance policy

7. Equity instruments are measured at
a. The amount of cash received
b. Present value for deferred payment
C. Fair value of noncash consideration received
d. All of these are used in measuring equity instruments
8. Equity settled share-based payment transactions are measured at
a. Net asset value
b. Fair value
C. Liquidation value
d. Assessed value
9. Cash settled share-based payment transactions are measured at
a. Fair value of liability at reporting date /
b. Net asset value of liability at reporting date
C. Fair value of liability at reporting date and remeasured at date of

settlement
d. Net asset value of liability at reporting date and remeasured at date of

settlement
10. The revenue of small entity from sale of goods is measured at
a. Fair value of consideration received
b. Fair value of consideration received less trade discount, prompt payment

discount and volume rebate
c. Cash received les8 trade discount
d. Present value of consideration

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QUESTION 67-11 Multiple choice (IFRS)

1. The IASB defines SMEs as entities that

a. Do not have public accountability.

Do not publish general purpose financial statements for external users.

2.Which statement describes the definition of an SME?

a. Entities that have no public accountability

b. Entities that have a specified number of employees

C. Entities that have a statement of financial position

d. Entities that have a certain annual turnover

3. All entities are publicly accountable, except

b. GAAP for SMEs is developed on a national basis.

c. The standard is independently developed.

QUESTION 66-12 (Philippine SEC)

1. In the Philippines, which entity is not an SME?

c. An entity that is not a holder of a secondary license issued by a regulatory agency.

a. At the current year-end.

d. At the discretion of management

a. 20% or more of the total assets or total liabilities

b. 50% or more of the total assets or total liabilities

c. 10% or more of the total assets or total liabilities

d. No quantitative threshold can be made

QUESTION 67-13 Multiple choice(IFRS)

a. IFRS financial statements

b. First financial statements that conform with IFRS for SMEs

C. Opening statement of financial position

d. First audited financial statements

3. What is the date of transition to IFRS for SMEs?

b. Closing statement of financial position

d. Originating statement of financial position

a. The date of transition to IFRS for SMEs

b. The end of current reporting period

d. The end of the preceding comparative period

a. The period before transition to IFRS for SMEs

b. The latest reporting period and transition to IFRS for SMEs

C. The latest reporting period

d. No reconciliation of profit or loss is made

C. If the entity complies with the USA GAAP.

d. If the entity complies with full IFRS.

d. The SME has followed IFRS for SMEs in its entirety

b. Investments in joint venture

c. Investment properties carried at cost

d. Total of assets classified as held for sale

b. Property, plant and equipment

d. Investment property at fair value

b. Property, plant and equipment

d. Investment in joint venture

c. Equity attributable to the owners of parent

d. Revaluation surplus related to intangible assets

b.Deferred tax liability

d. Total of liabilities included in disposal group classified as held for sale

1.Which of the following should be recognized in other comprehensive income of an SME?

a. Gain and loss from discontinued operation

b. Gain and loss from translation of a foreign operation

C.Gain on remeasuring equity investment at FVOCI

d.Extraordinary gain and loss

a. Gain and loss on hedging instrument

b.Revaluation surplus of property, plant and equipment

C. Actuarial gain and loss of defined benefit plan

d. All of these are SME component of OCI

b. Gain and loss from translation a foreign operation

c. Actuarial gain and loss of defined benefit plan

d. Gain and loss on hedging instrument