ACC 103 – QUIZ #9

CHOOSE THE BEST ANSWER

1. Liabilities arise from either legal or constructive obligation. Which of the following is a source
of constructive obligation?
a. contract c. quasi-contract
b. law d. an established pattern of past practice
2. According to PAS 37, provisions are measured at
a. the entity's best estimate of the settlement amount.
b. the expected value of the settlement amount.
c. the mid-point amount of a range of estimates.
d. any of these, whichever is most appropriate
3. According to PAS 37, a provision does not arise from
a. restructuring. c. product warranties.
b. future operating losses. d. constructive obligation.

4. According to PAS 37, a provision is

a. a present obligation that cannot be measured reliably.
b. a possible obligation that arises from past events.
c. a liability of uncertain timing or amount.
d. all of these
5. According to PAS 37, contingent liabilities are
a. recognized and disclosed.
b. always disclosed.
c. disclosed only, if their expected occurrence is probable.
d. not disclosed if their expected occurrence is remote.
6. Which of the following statements is correct?
a. A provision is recognized only when it represents a present obligation.
b. An event or transaction that meets both the “probable outflow of economic benefits" and
"reliable measurement" criteria is always recognized.
c. A contingent asset that is possible is ignored.
d. A contingent liability that is possible is ignored.

7. Which of the following assets is not tested for impairment in accordance with PAS 36?
a. Investment property measured under the cost model
b. Investment in associate
c. Goodwill
d. Accounts receivable
8. According to PAS 36, an asset is impaired if its carrying amount exceeds its recoverable amount.
Recoverable amount is the asset's
a. fair value less costs of disposal.
b. value in use.
c. higher of a and b
d. lower of a and b
9. Entity A uses a calendar year accounting period. On May 21, 20x1, Entity A acquires an
intangible asset with an indefinite useful. According to PAS 36, the first impairment testing of the
asset is
a. on May 21, 20x2.
b. anytime between May 21, 20xl to May 21, 20x2.
c. on or before December 31, 20x1.
d. when an indication of impairment is assessed to exist for the asset.
10. The impairment loss on which of the following assets is never reversed?
a. Intangible assets with indefinite useful life
b. Goodwill
c. Intangible assets not yet available for use
d. All of these
Use the following information for the next two questions:

1. On December 31, 20x1, Entity A determines that its building is impaired. Entity A gathers the
following information:
Building 2,000,000
Accumulated depreciation 600,000
Fair value less costs of disposal (FVLCD) 900,000
Value in use (VIU) 1,080,000
After the impairment, the building is assessed to have a remaining useful life of six years and no
residual value. How much is the impairment loss?

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2. On December 31, 20x2, Entity A determines an indication that the impairment loss recognized
in the prior period may no longer exist. The revised recoverable amount of the building on
December 31, 20x2 is P1,280,000. If no impairment loss had been recognized in the prior period,
the carrying amount of the building on December 31, 20x2 would have been P1,200,000. How
much is the gain on reversal of impairment on December 31, 20x2?

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