IFRS Sample MCQ's

Multiple choice questions on IAS-1
1. Financial statements provide information about an undertaking’s:

(i) Assets.
(ii) Liabilities.
(iii) Equity.
(iv) Income and expenses, including gains and losses.
(v) Other changes in equity.
(vi) Cash flows.
(vii) Employment policies.
1. (i)+(iii)+(iv)+(v)
2. (i) – (iii)
3. (i) – (vi)
4. (i) – (vii)
2. A complete set of financial statements comprises:
(i) a statement of financial position as at the end of the period;
(ii) a statement of comprehensive income for the period;
(iii) a statement of changes in equity for the period;
(iv) a statement of cash flows for the period;
(v) notes, comprising a summary of significant accounting policies and other explanatory information; and
(vi) a statement of financial position as at the beginning of the earliest comparative period when an
undertaking applies an accounting policy retrospectively or makes a retrospective restatement of items in
its financial statements, or when it reclassifies items in its financial statements.
1. (i)+(iii)+(iv)+(v)
2. (i) – (iii)
3. (i) – (iv)+(vi)
4. (i) – (vi)
3. Environmental reports and value added statements are:

1. An integral part of financial statements.
2. Outside the scope of IFRS.
3. Never provide with financial statements.
4. Users knowledge of business and accounting is assumed to be:

1. Reasonable.
2. Negligible.
3. Comprehensive.
5. A fair presentation also requires an undertaking to:
IAS-1 Page 1
(i) Select policies in accordance with IAS 8.
(ii) Provides relevant, reliable, comparable and understandable information.
(iii) Provide additional disclosures.
(iv) Provide an audit report.
1. (i)+(iii)+(iv)
2. (i) – (iii)
3. (ii) – (iv)
4. (iii) – (iv)
6. Inappropriate accounting policies are rectified by:

1. Disclosure of the accounting policies used.
2. Notes.
3. Explanatory material.
4. None of these.
7. When the departure from a Standard creates a continuing impact:

1. A return to the Standard is required.
2. This must be disclosed in each period.
3. A deferred tax asset is created.
8. Accounts produced on a going-concern basis suggest the business will continue in operation
for:
1. 6 months.
2. 1 Year.
3. The foreseeable future.
9. In June, you pay factory rent relating to October, November, and December.
You expense rent in:
1. June.
2. December.
3. Spread it over October, November, and December.
10. In June, you buy some goods on credit. You pay cash in March. Your December accounts will
show:
1. A trade payable.
2. An account receivable.
3. A provision.
11. Consistency entails:

1. The ability to compare the figures of different periods.
2. No changes in accounting policies.
3. No new Standards being introduced.
12. Gains and losses on foreign currencies are reported:

1. Within revenue.
2. On 2 separate lines.
3. Net, on a separate line.
13. Reimbursement of provisions should be:

1. Shown as an asset on the statement of financial position.
IAS-1 Page 2
2. Netted against the provision in the income statement.
3. Shown on separate lines in the income statement.
14. Each component of the financial statements shall be identified clearly. In addition, the
following information shall be displayed prominently:
(i) The name of the reporting undertaking.
(ii) The author(s).
(iii) Whether the financial statements cover the individual undertaking, or a group.
(iv) The end of the reporting period, or the period covered by the financial statements, whichever is
appropriate to that component of the financial statements.
(v) the presentation currency,
(vi) the level of rounding used in presenting amounts in the financial statements.
1. (i)+(iii)-(vi)
2. (i) – (iii)
3. (i) – (iv)
4. (i) – (vi)
15. Assets and liabilities must be presented on the statement of financial position:
1. Split into current and non-current.
2. Broadly in order of liquidity.
3. Either 1 or 2.
16. You need to refinance your long-term loan. Your end of the reporting period is June, you sign
the refinancing in July and approve your financial statements in August. The long-term loan is
shown as:
1. A current liability.
2. A non-current liability.
3. A contingent liability.
17. You breach the terms of your long-term loan. It becomes payable on demand. Your end of the
reporting period is June 30. The lender agrees not to demand payment as a consequence of the
breach prior to June 30, giving you at least 12 months grace to rectify the breach. The long-term
loan is shown as:
18. Deferred tax liabilities are always shown as:

19. The judgement on whether additional items are presented separately is based on an
assessment of:
(i)The nature and liquidity of assets.
(ii)The function of assets.
(iii) The amounts, nature and timing of liabilities.
(iv) The space available in the financial statements.
IAS-1 Page 3
1.(i)+(iii)+(iv)
2. (i) – (iii)
3. (ii) – (iv)
4. (iii) – (iv)
20. As a minimum, the face of the income statement shall include line items that present the
following amounts for the period:
(i) Revenue.
(ii) Finance costs.;
(iii) Share of the income statement of associates, and joint ventures accounted for using the equity
method.
(iv) Pre-tax gain (or loss) recorded on the disposal of assets, or settlement of liabilities attributable to
discontinuing operations.
(v) Tax expense.
(vi) Profit, or loss.
1 (i)+(iii)-(vi)
2. (i) – (iii)
3. (i) – (iv)
4. (i) – (vi)
21. The following:
(i) write-downs of inventories to net realisable value, or of property, plant and equipment to recoverable
amount (as well as reversals of such write-downs);
(ii) restructurings of the activities of an undertaking (and reversals of any provisions for the costs of
restructuring);
(iii) disposals of items of property, plant and equipment;
(iv) disposals of investments;
(v) discontinuing operations;
(vi) litigation settlements; and
(vii) other reversals of provisions.
should be presented:
1. On the face of the income statement.

2. In the notes.
3. Either 1 or 2.
IAS-1 Page 4
22. This presentation is:
Revenue X
Other income X
Changes in inventories of finished X
goods and work in progress
Raw materials and consumables used X
Employee benefits costs X
Depreciation and amortisation expense X
Other expenses X
Total expenses (X)
Profit X
1. Nature of expense method.

2. Cost of sales method.
3. Function of expense method.
23. The Statement of Changes in Equity links:

1. The cash flow statement to equity movements.
2. The income statement to equity movements.
3. The notes to equity movements.
24. An undertaking shall present a statement of changes in equity (plus notes) showing:
(i) Profit (or loss) for the period.
(ii) Each item of income and expense that is recorded directly in equity, and the total of these items.
(iii) Total income and expense (calculated as the sum of (i) and (ii)), showing separately the total amounts
attributable to equity holders of the parent, and to minority interest. and
(iv) For each component of equity, the impacts of changes in accounting policies, and corrections of
errors recorded in accordance with IAS 8.
(v) The amounts of transactions with equity holders acting in their capacity as equity holders, showing
separately distributions to equity holders.
(vi) The balance of retained earnings (accumulated profit (or loss)) at the beginning of the period, and at
the end of the reporting period, and the changes during the period.
(vii) A reconciliation between the carrying amount of each class of contributed equity, and each reserve at
the beginning and end of the period, separately disclosing each change.
1 (i)+(iii)-(vi)
2. (i) – (iv)
3. (i) – (vi)
4. (i) – (vii)
25. The notes shall present, disclose and include:

(i) Present information about the basis of preparation of the financial statements, and the specific policies.
(ii) Disclose the information required by IFRSs that is not presented on the face of the statement of
financial position, income statement, statement of changes in equity, or cash flow statement. and
(iii) Provide additional information relevant to understanding the financial statements.
(iv) A statement of compliance with IFRSs.
(v) A summary of significant policies .
IAS-1 Page 5
(vi) Supporting information for items presented on the face of the statement of financial position, income
statement, statement of changes in equity and cash flow statement, in the order in which each statement
and each line item is presented.
(vii) Other disclosures, including:
- contingent liabilities and unrecorded contractual commitments. and
- non-financial disclosures, such as the undertaking’s financial risk management objectives and policies).
1 (i)+(iii)-(vi)
2. (i) – (iv)
3. (i) – (vi)
4. (i) – (vii)
26. Estimates are necessary to measure:

(i) The recoverable amount of classes of property, plant and equipment.
(ii) The impact of technological obsolescence on inventories.
(iii) Provisions subject to the future outcome of litigation in progress.
(iv) Long-term employee benefit liabilities such as pension obligations.
(v) Accounts receivable.
1 (i)+(iii)-(v)
2. (i) – (iii)
3. (i) – (iv)
4. (i) – (v)
27. Examples of the types of disclosures about uncertainty are:

(i) The nature of the assumption, or other estimation uncertainty.
(ii) The sensitivity of carrying amounts to the methods, assumptions and estimates underlying their
calculation, including the reasons for the sensitivity.
(iii) The expected resolution of an uncertainty, and the range of reasonably possible outcomes within the
next financial year, in respect of the carrying amounts of the assets (and liabilities) affected. and
(iv) An explanation of changes made to past assumptions, concerning those assets and liabilities, if the
uncertainty remains unresolved.
(v) The total number of transactions that have previously been analysed in the same manner.
1 (i)+(iii)-(v)
2. (i) – (iii)
3. (i) – (iv)
4. (i) – (v)
28. An undertaking shall disclose in the notes, if not disclosed elsewhere:

(i) The amount of dividends proposed (or declared) before the financial statements were approved for
issue, but not recorded as a distribution to equity holders during the period, and the related amount per
share.
(ii) The amount of any cumulative preference dividends not recorded.
(iii) The domicile, and legal form, of the undertaking, its country of incorporation and the address of its
registered office (or principal place of business, if different from the registered office).
IAS-1 Page 6
(iv) A description of the nature of the undertaking’s operations, and its principal activities. The name of the
parent and the ultimate parent of the group.
(v) The names of previous directors of the undertaking.
1 (i)+(iii)-(v)
2. (i) – (iii)
3. (i) – (iv)
4. (i) – (v)
Answers to multiple choice questions

Question Answer
1. 3
2. 3
3. 2
4. 1
5. 2
6. 4
7. 2
8. 3
9. 3
10. 1
11. 1
12. 3
13. 2
14. 1
15. 3
16. 1
17. 2
18. 2
19. 2
20. 4
21. 3
22. 1
23. 2
24. 4
25. 4
26. 3
27. 3
28. 3
IAS-1 Page 7
MULTIPLE CHOICE QUESTIONS ON IAS-2
Choose the correct answer:
1. Inventories are defined as:
1) Only tangible products being held for sale, being prepared for sale or materials to be used in
the production process.
2) Tangible goods lying in the store, which are not being sold.
3) Assets being held for sale, being prepared for sale or materials to be used in the production
process or provision of services.
2. Net realisable value is defined as:
1) The estimated selling price, in the ordinary course of business, plus costs of completion, and
less selling costs.
2) The estimated selling price, in the ordinary course of business, less costs of completion, and
less selling costs.
3. Fair value is defined as the value for which:
1) An asset could be sold, or a liability extinguished, between willing independent traders.

2) An asset could be sold, or a liability extinguished, between coerced independent traders.
4. The difference between Net Realisable Value and Fair Value is that:
1) Net realisable value relies on the specific business of the firm that is the subject of the
financial statements. Fair value relates to the market, rather than to individual contracts
2) Fair value relies on the specific business of the firm that is the subject of the financial
statements. Net Realisable value relates to the market, rather than to individual contracts
5. The cost of inventories:
1) Comprises all costs of production, costs of conversion, and other costs incurred in bringing the
inventories to their present location and condition.
2) Comprises only the costs of production, and no costs of conversion or other costs incurred in
bringing the inventories to their present location and condition.
6. The purchase price, transport and handling costs. Taxes and import duties are all
examples of:
1) Costs of conversion
2) Costs of purchase
3) 2 and 3
4) Neither
IAS-1 Page 8
7. Variable Production overheads are:
1) Those direct and indirect costs that vary directly with different levels of production, such as
direct and indirect labour.
2) Variable production overheads are those indirect costs that vary directly with different levels
of production, such as indirect labour and indirect materials.
8. How would unallocated overheads be recognized?

1) Unallocated overheads are recognised as an expense in the income statement, in the period
that they are incurred.
2) Unallocated overheads are recognised as income in the income statement, in the period that
they are incurred.
9. As opposed to fixed production overheads, variable production overheads are:
1) Allocated to all the units of production, as one whole.

2) Allocated to each unit of production, based on the actual usage of facilities.
10. Other costs are to be:
1) Ignored from the cost of inventory despite being incurred in bringing the inventories to their
present location and condition.
2) May be included in the cost of inventory if they are incurred in bringing the inventories to
their present location and condition.
11. Examples of costs expensed in the period they are incurred are:
1) Selling costs, storage costs for finished goods and general administration costs.
2) Costs of purchase and conversion.
3) Abnormal amounts of wasted materials, labour and other production costs.
4) 2 and 3
5) 1 and 3
6) 1, 2 and 3
12. Standard costs or the ‘retail method’ is used as a tool of measurement of cost. The
retail method is:
1) Sales price less profit margin.

2) Sales price plus profit mark up.
13. Reasons for inventories being sold for less than their cost could be:
1) A general fall in market price, damage to goods and obsolescence.

2) Additional costs needed to complete manufacture.
3) Falling costs of production.
4) 2 and 3 only
IAS-1 Page 9
5) 3 only
6) 1 and 2 only
14. If the price at which they will be sold is less than the current cost, allowing for
completion costs, the value of the inventory will be reduced to its:
1) Fair value
2) Net realisable value
15. When inventories are sold, the carrying amounts of the inventories are recognised as:
1) An expense in the period that the revenue is recognised.

2) An income in the period that the revenue is recognized.
16. Any inventory transferred to other asset accounts, such as parts of self-constructed
property, are recognised and expensed:
1) Immediately to be written off.

2) Over the useful life of that asset.
SOLUTIONS
Answers to Multiple-choice questions:
1. 3) 11. 5)
2. 2) 12. 1)
3. 1) 13. 6)
4. 1) 14. 2)
5. 1) 15. 1)
6. 2) 16. 2)
7. 2)
8. 1)
9. 2)
10. 2)
IAS-1 Page 10
Multiple Choice Questions IAS-7
1. A company provides consolidated accounts, with comparative accounts for 5 previous periods.
For how many periods are cash flow statements are required?
1. 1
2. 5
3. 6
2. Cash flow statements are required from:

1. All companies.
2. Listed companies.
3. Financial institutions.
3. A cash flow statement provides information that enables users to evaluate the changes in:
1. Net assets of an undertaking.
2. Its financial structure.
3. Its liquidity.
4. Solvency.
5. Profitability.
4. A cash flow statement helps in examining the relationship between:

1. Profitability.
2. Net cash flow.
3. The use of assets and liabilities.
4. Staffing levels.
1. i
2. i-ii
3. i-iii
4. i-iv
5. Daily sales and purchases, employee costs and general overheads comprise:
1. Operating activities.
2. Investing activities.
3. Financial activities.
6. The acquisition, and disposal, of long-term assets are:

7. Activities that result in changes in the size (and composition) of the equity capital, and
borrowings are:
8. For an investment to qualify as a cash equivalent, it must be:

1. Illiquid and low risk.
2. Liquid and low risk.
3. Liquid and medium risk.
9. The maximum maturity of a cash equivalent is:

1. 3 months.
2. 6 months.
IAS-1 Page 11
3. 1 year.
10. Bank borrowings are generally considered to be:

4. Cash equivalents.
11. If bank overdrafts form an integral part of an undertaking's cash management, they are
considered to be:
4. Cash equivalents.
12. A single transaction:

1. May include cash flows that are classified differently.
2. Must be included in full in one of the three headings.
3. May be spread over more than one period.
13. The amount of cash flows arising from operating activities is a key indicator of the extent to
which the operations have generated sufficient cash flows to:
1. Repay loans.
2. Maintain the operating capability of the undertaking.
3. Pay dividends.
4. Make new investments.
5. All
14. Examples of cash flows from operating activities are:
(i) Receipts from the sale of goods, and the rendering of services.
(ii) Receipts from royalties, fees, commissions and other revenue.
(iii) Payments to suppliers for goods (and services).
(iv) Payments to (and on behalf of) employees.
(v) Receipts and payments of an insurance undertaking for premiums and claims, annuities and
other policy benefits.
(vi) Payments (or refunds) of income taxes unless they can be specifically identified with financing
and investing activities.
(vii) Receipts (and payments) from contracts held for dealing (or trading) purposes.
(viii) Sale of an item of plant, giving rise to a gain (or loss) that is included in net profit.
1. i
2. i-ii
3. i-iii
4. i-iv
5. i-v
6. i-vi
7. i-vii
8. i-viii
IAS-1 Page 12
15. Examples of cash flows arising from investing activities are:
(i) Payments to acquire property, plant and equipment, intangibles and other long-term assets.
These payments include those relating to capitalised development costs and self-constructed
property, plant and equipment.
(ii) Receipts from sales of property, plant and equipment, intangibles and other long-term assets.
(iii) Payments to acquire shares or debt instruments of other undertakings, and interests in joint
ventures (other than for instruments that are cash equivalents, or held for dealing (or trading
purposes)).
(iv) Receipts from sales of shares (or debt) instruments of other undertakings and interests in joint
ventures (other than for instruments that are cash equivalents, or held for trading purposes).
(v) Advances (and loans) made to other parties (other than by a financial institution).
(vi) Receipts from the repayments of advances and loans made to other parties (other than those of a
financial institution).
(vii) Payments for futures contracts, forward contracts, option contracts and swap contracts (except
when the contracts are held for dealing or trading purposes, or the payments are classified as
financing activities).
(viii) Receipts from futures contracts, forward contracts, option contracts and swap contracts not held
for dealing or trading purposes.
1. i
2. i-ii
3. i-iii
4. i-iv
5. i-v
6. i-vi
7. i-vii
8. i-viii
16. Examples of cash flows arising from financing activities are:
(i) Proceeds from issuing shares, or other equity instruments.
(ii) Payments to owners to acquire, or redeem the undertaking's shares.
(iii) Proceeds from issuing debentures, loans, notes, bonds, mortgages and other short or long-term
borrowings.
(iv) Repayments of amounts borrowed.
(v) Payments by a lessee for the reduction of the outstanding liability relating to a finance lease.
(vi) Receipts by a lessor for the reduction of the outstanding liability relating to a finance lease.
1. i
2. i-ii
3. i-iii
4. i-iv
5. i-v
6. i-vi
IAS-1 Page 13
17. Which method of cash flow reporting starts with net profit?
1. Direct method.
2. Indirect method.
3. Both.
4. Neither.
18. Which method of cash flow reporting starts with changes in inventories?
1. Direct method.
2. Indirect method.
3. Both.
4. Neither.
19. If you start with net profit, to calculate the cash generated from operating activities, you:
adjust net profit for the effects of:
(i) Changes in inventories, operating receivables, and payables.
(ii) Non-cash items such as depreciation, provisions, deferred taxes, unrealised foreign currency
gains (and losses), undistributed profits of associates, and minority interests.
(iii) Investing cash flows.
(iv) Financing cash flows.
(v) Social security costs.
1. i
2. i-ii
3. i-iii
4. i-iv
5. i-v
20. Examples of these receipts and payments that can be netted are advances made for (and the
repayment of):
(i) Principal amounts relating to credit card clients.
(ii) The purchase and sale of investments.
(iii) Short-term borrowings (3 months, or less).
1. i
2. i-ii
3. i-iii
21. Cash flows, arising from transactions in a foreign currency, should be recorded in:
1. Local currency.
2. An undertaking's functional currency, at the rate of the date of the transaction.
3. An undertaking's functional currency, at the rate at the end of the period.
22. When translating the cash flows of a foreign subsidiary, use the group's functional currency:
(i) At the rate of the start of the period.
(ii) At the rate at the end of the period.
(iii) At the dates of the transactions.
IAS-1 Page 14
1. (i) Only.
2. (ii) Only.
3. (iii) Only.
4. (i) or (ii)
5. (i) or (iii)
6. (ii) or (iii)
7. (i), (ii) or (iii)
23. Unrealised gains (and losses) arising from changes in foreign currency exchange rates are:
1. Translated at closing rate.
2. Translated at opening rate.
3. Not cash flows.
24. Cash flows from interest and dividends received, and paid, should:
1. Each be disclosed separately.
2. Be shown as a net figure.
3. Be excluded from the cash flow statement.
25. Taxes paid are usually classified as cash flows from:

26. When accounting for an associate, an investor reports the cash flows:
1. Using proportional consolidation.
2. Only the cash flows between itself and the investee.
3. In a separate cash flow statement.
27. When accounting for a joint venture, an investor reports the cash flows:
1. Using proportional consolidation.
2. Only the cash flows between itself and the investee.
3. In a separate cash flow statement.
Answers to Multiple Choice Questions

Question Answer
1. 3 15 8
2. 1 16 5
3. 4 17 2
4. 3 18 4
5. 1 19 4
6. 2 20 3
7. 3 21 2
8. 2 22 3
9. 1 23 3
10. 3 24 1
11. 4 25 1
12. 1 26 2
13. 5 27 1
14. 7
IAS-1 Page 15
Multiple Choice Questions on IAS-8
1. Specific principles bases conventions rules and practices applied in presenting

financial statements. This defines:
1. Accounting estimates.
2. Accounting policies.
3. Prospective application.
2. Adjustment of the carrying amount of an asset or a liability or the consumption

of an asset. This defines:
1. A change in accounting estimate.
2. Accounting policies.
3. Misstatements.
3. Errors include:
i Mathematical mistakes.
ii Mistakes in applying accounting policies.
iii Oversights or misinterpretations of facts.
iv Fraud.
v Changes in provisions for bad debts.
1. i - ii
2. i - iii
3. i - iv
4. i-v
4. Applying a new policy to transactions as if that policy had always been applied.
This is:
1. Retrospective restatement.
2. Retrospective application.
3. Change in accounting estimate.
5. Correcting the recognition measurement and disclosure of amounts in financial
statements as if a prior-period error had never occurred. This is:
3. Change in accounting estimate.
6. You accept advice to accelerate your depreciation policy. To make the change,
you will need:
3. Prospective application.
IAS-1 Page 16
7. In selecting an accounting policy you should review:
1. The Standards only.
2. The Interpretations only.
3. The Framework only.
4. Standards Interpretations and Framework.
8. In the absence of a Standard or an Interpretation management shall use

judgment in developing an accounting policy that results in information that is
relevant to the needs of users; and reliable in that the financial statements:
i Represent the financial position financial performance and cash flows of the
undertaking.
ii Reflect the economic substance of transactions other events and conditions and not
merely the legal form.
iii Are free from bias.
iv Are prudent.
v Are complete in all material respects.
vi Comply with national tax laws.
1. i - ii
2. i - iii
3. i - iv
4. i-v
5. i - vi
9. Changes in accounting policies:

1. Should be applied only in the year of the change.
2. Should make the change to all periods reported.
3. Should only make the change in the following period.
10. It is impractical to make a retrospective application to a period unless you can

determine the impact of the change in:
1. The opening balance sheet.
2. The closing balance sheet.
3. Both opening and closing balance sheets
11. If it is impractical to make a retrospective application to a period

1. Make the change only to the current period.
2. Apply the change to the earliest period that is practical.
3. Do not make the change at all.
12. When you have not applied a new Standard that has been issued but is not yet
effective:
1. You should note this and estimate its impact.
2. Your accounts will not comply with IFRS.
3. You should ignore it.
IAS-1 Page 17
13. Accounting estimates are made for:
i Bad debts.
ii Inventory obsolescence.
iii The fair value of financial assets or financial liabilities.
iv The useful lives of or expected consumption of the benefits embodied in
depreciable assets.
v Warranty obligations.
vi Changes in accounting policy.
1. i - ii
2. i - iii
3. i - iv
4. i - v
5. i - vi
14. A change of estimate should be made to the income statements of:

1. The period of the original estimate.
2. All previous periods reported.
3. The current period and future periods.
4. Future periods only.
15. Prior-period errors, including fraud, should be corrected:

1. Only in the period when the error has been discovered.
2. In the earliest period that is practical.
3. In future periods only.
16. A gain recorded on the outcome of a contingency, such as a lawsuit, is:

1. A change in estimate.
2. A correction of an error.
3. A retrospective restatement.
17. You are introducing a new policy to provide a warranty provision of 2% of

product sales. When you review past warranty data the average was 2% but in
one year the cost was 10% and in another year it was 0%.
When applying your retrospective figures as a provision you
use:
1. The actual costs incurred.
2. 2%.
3. 2% unless there was no charge in a particular year.
18. Retrospective application involves using information that was available:

1. Only at the balance sheet date.
2. When the accounts were approved.
3. At any time.
IAS-1 Page 18
Question Answer
1. 2
2. 1
3. 3
4. 2
5. 1
6. 3
7. 4
8. 4
9. 2
10. 3
11. 2
12. 1
13. 4
14. 3
15. 2
16. 1
17. 2
18. 1
IAS-1 Page 19
1. IAS 10 identifies the period covered by these events as starting immediately after the balance
sheet date, and ending at the date of:
1. Issue of the financial statements.
2. Approval of the financial statements.
3. Publication of the financial statements.
2. 1. On 29 January 2XX7, management of a bank completes draft financial statements for the year to
31 December 2XX6.
2. On 4 February 2XX7, the board of directors reviews the financial statements and approves them
for issue.
3. On 15 February 2XX7, the undertaking announces its profit and selected other financial
information.
4. On 18 March 2XX7, The financial statements are made available to shareholders, and others.
5. On 25 April 2XX7, the shareholders approve the financial statements at the annual meeting.
6. On 29 April 2XX7, the approved financial statements are then filed with a regulatory body .
Which of the above dates marks the end of the period covered by IAS 10?
3. 1. On 14 February 2XX8, the management of a bank approves financial statements for issue to its
supervisory board. The supervisory board is made up solely of non-executives, and may include
representatives of employees, and other outside interests.
2. On 21 February 2XX8, the supervisory board approves the financial statements.
3. On 10 March 2XX8, the financial statements are made available to shareholders, and others.
4. On 17 April 2XX8, the shareholders approve the financial statements at their annual meeting.
5. On 25 April 2XX8, the financial statements are filed with a regulatory body.
Which of the above dates marks the end of the period covered by IAS 10?
4. If there is a public announcement of profit, or other information,

1. The period ends for IAS 10 purposes.
2. The period ends only when the supervisory board approves the IFRS financial statements.
3. The period ends only when the management approves the IFRS financial statements.
5. There is a settlement, after the balance sheet date, of a court case that
confirms that the undertaking had a present obligation, at the balance
sheet date. You need to:
1. Adjust the financial statements.
2. Leave the financial statements, but note the details.
3. Ignore it.
6.There is receipt of information, after the balance sheet date indicating

that an asset was impaired at the balance sheet date.
You need to:
IAS-1 Page 20
3. Ignore it.
7. There is receipt of information, after the balance sheet date indicating

that the amount of a previously-recorded impairment loss for that asset needs to be adjusted.
You need to:
3. Ignore it.
8. You learn of the bankruptcy of a customer, that occurs after the balance sheet date. You need
to:
3. Ignore it.
9. You learn of the determination after the balance sheet date of the cost of assets purchased.
You need to:
3. Ignore it.
10. You learn of a change to the proceeds from assets sold, before the balance sheet date.
You need to:
3. Ignore it.
11.You receive the calculation of the amount of profit-sharing payments, relating to the period of
the financial statements, after the balance sheet date.
You need to:
3. Ignore it.
12. You are informed of a fraud that shows that financial statements that you are about to approve
to be incorrect.
You need to:
3. Ignore it.
13. You learn of a decline in market value of investments, between the balance sheet date, and the
date when the financial statements are approved for issue.
You need to:
3. Ignore it.
14. You make a major acquisition, between the balance sheet date, and the date when the financial
statements are approved for issue.
IAS-1 Page 21
You need to:
3. Ignore it.
15. You announce plans to reorganise your group, between the balance sheet date, and the date
when the financial statements are approved for issue.
The plans include the disposal of a major division.
You need to:
3. Ignore it.
16. Your company declares a dividend, between the balance sheet date, and the date when the
financial statements are approved for issue.
You need to:
3. Ignore it.
17. Your board decides to sell the assets of the bank and liquidate it, between the balance sheet
date, and the date when the financial statements are approved for issue.
You need to:
3. Ignore it.
18. A client goes into liquidation, between the balance sheet date, and the date when the financial
The client owes you a large amount of money, and your bank will not survive the loss.
You need to:
3. Ignore it.
19. A client goes into liquidation, between the balance sheet date, and the date when the financial
The client owes you a large amount of money.
You are unable to secure financing to ensure the bank’s survival before the financial statements
are to be approved.
You need to:
3. Ignore it.
20. Your bank has been sued for anticompetitive behaviour. This has been denied by your bank,
st
and there was only a contingent liability for $ 10 million your financial statements at 31
December 2XX4.
th
On January 4 2XX5, the court awards $10 million damages against your bank.
You need to:
IAS-1 Page 22
3. Ignore it.
21. 5% of your assets are held in Euros. Your currency loses 1% of its value against the Euro
before the financial statements are approved.
You need to:
3. Ignore it.
Answers to multiple-choice questions:

1. 2
2. 2
3. 1
4. 3
5. 1
6. 1
7. 1
8. 1
9. 1
10. 1
11. 1
12. 1
13. 2
14. 2
15. 2
16. 2
17. 1
18. 1
19. 1
20. 1
21. 3
IAS-1 Page 23
1. The start and finish of Construction Contracts normally fall into:
1) the same accounting period.

2) different accounting periods.
2. A key issue of the standard is:
1) The timing of recognition of contract revenue and contract costs.

2) Selection of reporting currency.
3) Balance sheet structure.
3. An effective internal financial budgeting and reporting system to control construction contracts is:
1) Helpful.
2) Unnecessary.
3) Required.
4. Cost-escalation clauses may be a feature of fixed-price contracts:
1) True.
2) False.
5. In a cost-plus contract, you can charge:
1) All costs plus a profit margin.

2) Costs agreed under the contract, plus an agreed profit.
6. You can combine and segment construction contracts:
1) To reduce work.
2) To reflect economic reality, under specified conditions.
7. A contract may provide for an additional asset at the client’s option, or by way of an amendment.
Can this be treated as an additional contract?
1) No.
2) Maybe.
8. Contract revenue should comprise:
1) All cash flows.

2) Initial revenue agreed, plus variations, claims and incentive payments.
9. Variations can only increase revenue.
1) True.
2) False.
10. Claims relate to costs included in the contract price.
IAS-1 Page 24
1) True.
2) False.
11. Incentive payments can be included in the revenue at the start of the contract.
1) True.
2) False.
12. Contract estimates may be revised.
1) True.
2) False.
13. Contract costs only include costs that relate specifically to the contract.
1) True.
2) False.
14. Incidental income, such as from the sale of scrap materials, should be shown as:
1) Revenue.
2) A deduction from costs.
15. Development costs can be charged to contract costs.
1) True.
2) False.
16. Borrowing costs can be charged to contract costs.
1) True.
2) False.
17. Costs incurred in securing contracts may be included in contract costs.
1) True.
2) False.
18. Any expected loss on the contract should be:
1) Ignored.
2) Recognised at the end of the contract.
3) Spread over the life of the contract.
4) Recognised immediately.
19. Contract costs that relate to future work on the contract:
1) Can be ignored.
2) Should be expensed immediately.
3) May be treated as an asset.
20. Advances paid to subcontractors:
IAS-1 Page 25
1) Can be ignored.
2) Should be expensed immediately.
3) May be treated as an asset.
21. If revenue that has already been recognised may not be paid, the uncollectible amount:
1) Is deducted from revenue.

2) Is recognised as an expense.
22. When using the stage of completion method of calculation, the main reference is:
1) The client.
2) Internal records.
3) The contract.
23. When the outcome of a contract cannot be estimated:
1) Revenue should not be recognised.

2) Some revenue may be recognised.
3) All revenue can be recognised.
24. Changes in estimates are:
1) Recognised in the period that the change is made.

2) Recognised at the end of the contract.
3) Ignored.
Solutions
Answers to multiple-choice questions:
1. 2. 7. 2. 13. 2. 19. 3.
2. 1. 8. 2. 14. 2. 20. 3.
3. 3. 9. 2. 15. 1. 21. 2.
4. 1. 10. 2. 16. 1. 22. 3.
5. 2. 11. 2. 17. 1. 23. 2.
6. 2. 12. 1. 18. 4. 24. 1.
IAS-1 Page 26
1.IAS 12 prescribes the accounting treatment for income taxes, and the tax consequences of:
(i) Transactions of the current period that are recorded in an undertaking's financial
statements.
(ii) The future liquidation of the of assets and liabilities that are recorded in an
undertaking's balance sheet.
(iii) Tax planning opportunities.
1. (i)
2. (i)-(ii).
3. (i)-(iii)
2. If liquidation of carrying amounts will make future tax payments larger or smaller, IAS 12
generally requires an undertaking to record a
1. Deferred tax liability (or deferred tax asset).
2. Provision.
3. Contingent liability.
3. Permanent differences require:

1.Deferred tax liability (or deferred tax asset).
2. Provision.
4. None of these.
4. Permanent differences require adjustments in the:

1. Periods prior to the transaction.
2. The periods relating to the transaction.
3. Periods following the transaction.
4. Both 2 & 3.
5. Deferred tax assets are the taxes recoverable, in future periods, in respect of:
(i) Deductible temporary differences.
(ii) Unused tax losses.
(iii) Unused tax credits.
(iv) Taxable temporary differences.
1. (i)
2. (i)-(ii).
3. (i)-(iii)
4. (i)-(iv)
IAS-1 Page 27
6. Deferred tax relates to:
(i) Deductible temporary differences.
(ii) Unused tax losses.
(iii) Unused tax credits.
(iv) Taxable temporary differences.
(v) Permanent differences.
1. (i).
2. (i)-(ii).
3. (i)-(iii).
4. (i)-(iv).
5. (i)-(v).
7. Deferred tax
1. Reverses over time.
2. May reverse over time.
3. Does not reverse.
8. The use of deferred tax:

1. Change the dates of payment of tax.
2. May change the dates of payment of tax.
3. Does not change the dates of payment of any tax.
9. If the tax already paid exceeds the tax due for the period, the excess will be recorded as:
1. Deferred tax.
2. A permanent difference.
3. An asset.
10. If revenue is taxed in the period received, the tax base:

1. Is nil.
2. Is only nil if the revenue is recognised in the same period.
3. Is only nil if the revenue is recognised in the following period.
4. Is the amount received.
11. Research and development costs may be expensed in the current period, but deductible for
tax purposes over subsequent periods. The tax base:
1. Is nil.
2. Is the amount of the deduction that can be claimed in future periods.
3. Is the amount expensed.
12. Temporary differences arise:
IAS-1 Page 28
1. When the carrying amount of an asset or liability differs from its tax base.
2. When deferred tax is applied.
3. When deferred tax differs from current tax.
13. A deductible temporary difference generates a

1. Deferred tax Liability.
2. Deferred tax Asset.
3. Either 1 or 2.
14. A taxable temporary difference gives rise to:

1. Deferred tax Liability.
2. Deferred tax Asset.
3. Either 1 or 2.
15. Taxable temporary differences occur when tax is charged in a period:
1. Before the accounting period benefits from the income in the financial accounts.
2. After the accounting period benefits from the income in the financial accounts.
3. Either 1 or 2.
16. Deductible temporary differences occur when tax is charged in a period:
1. Before the accounting period benefits from the income in the financial accounts.
2. After the accounting period benefits from the income in the financial accounts.
3. Either 1 or 2.
17. Differences arising from fair value adjustments are treated:
1.The same as any other taxable and deductible differences.
2. Differently depending on whether they arise on acquisition or otherwise.
3. Separately for deferred tax.
18. Not all temporary differences are recognised as deferred tax balances.
The exceptions are:
(i) Goodwill.
(ii) Initial recognition of certain assets and liabilities.
IAS-1 Page 29
(iii) Certain investments.
(iv) Property revaluations.

1. (i).
2. (i)-(ii).
3. (i)-(iii).
4. (i)-(iv).
19. The realisation of deferred tax assets depends on:

1. Accounting profits being available in the future.
2. Taxable profits being available in the future.
3. No increase in the rate of income tax.
20. When different rates of tax apply to different types and amounts of taxable income:
1. An average rate is used.
2. No deferred tax is charged.
3. Each item must be listed.
21. An undertaking should review unrecorded deferred tax assets to determine whether new
conditions will permit the recovery of the asset:
1. Every 3 years.
2. Every 5 years.
3. At each balance sheet date.
22. The carrying amount of a deferred tax asset should be reviewed for:
(i) Changes in tax rates.
(ii) Changes in the expected manner of recovery of an asset.
(iii) Changes in future profits.

1. (i).
2. (i)-(ii).
3. (i)-(iii).
23. The difference between the carrying amount of a revalued asset and its tax base is a:
1. Temporary difference.
2. Permanent difference.
3. Either 1 or 2.
24. Standards require or permit certain items to be credited, or charged, directly to equity.
Examples of such items are:
IAS-1 Page 30
(i) A change in carrying amount arising from the revaluation of property, plant and
equipment;
(2) An adjustment to the opening balance of retained earnings, resulting from either a
change in accounting policy applied retrospectively, or the correction of an error. IAS 8
has seriously limited this application.
(iii)Exchange differences, arising on the translation of the financial statements of a foreign

undertaking.
(iv) Amounts arising on initial recognition of the equity component of a compound financial
instrument.
1. (i).
2. (i)-(ii).
3. (i)-(iii).
4. (i)-(iv).

Question Answer
1. 2
2. 1
3. 4
4. 2
5. 3
6. 4
7. 1
8. 3
9. 3
10. 1
11. 2
12. 1
13. 2
14. 1
15. 2
16. 1
17. 1
18. 3
19. 2
20. 1
21. 3
22. 3
23. 1
24. 4
IAS-1 Page 31
1. Residual value is specifically:
1. Scrap value.
2. The net cash amount that you will receive from the ultimate sale of the asset, at the end of its
life
3. The gross cash amount that you will receive from the ultimate sale of the asset, at the end of
its life.
2. Useful life of an asset refers to the life:

1. Of the asset throughout its life, in the hands of any number of owners.
2. Of the asset whilst it is available for use in the firm.
3. The average of 1 & 2.
3. Spare parts and servicing equipment are usually accounted for as:
1. Expenses written off to the income statement on purchase.
2. Inventory.
3. A separate class of fixed assets.
4. Major spare parts and stand-by equipment qualify as property, plant and equipment when:
1. They are expected to be used during more than one period.
2. The firm is in the oil industry.
3. The parts cost more than 20% of the equipment they are supporting.
5. Individually-insignificant items, such computer spare parts may be:

1. Ignored.
2. Expensed on purchase.
3. Aggregated as one asset.
6. Repairs and maintenance costs are normally:

1. Capitalised.
2. Expensed in the income statement as incurred.
3. Recorded as deferred expenses.
7. If the costs of a major inspection (for example, aircraft) are capitalised:

1. They must be shown as a separate asset.
2. Any remaining costs of a previous inspection must be written off.
3. The board of directors must be notified immediately.
8. If the costs of a major inspection (for example, aircraft) are capitalised, and there was no cost
for the initial major inspection in the asset cost:
1. No cost should be deducted from the asset.
2. An estimate of the initial inspection cost should be made to be deducted from the carrying
amount of the asset and to be replaced by the cost of the replacement part.
3. The cost of the new inspection must be expensed.
9. Elements of cost are:

i. The purchase price
ii. Any costs directly attributable to bringing the asset to the location.
iii. The initial estimate of the costs of dismantling, and removing the item.
iv. Overheads of the purchasing department relating to the buy of the asset.
1. i
2. i-ii
3. i-iii
4. i-iv
IAS-1 Page 32
10. Directly attributable costs include:
i. staff costs of arising directly from the construction, or acquisition, of the item of property,
plant and equipment;
ii. site preparation costs;
iii. initial delivery and handling costs;
iv. installation and assembly costs; and
v. costs of testing whether the asset is functioning properly, after deducting the net proceeds
from any samples, or sundry income; and
vi. professional fees.
vii. costs of opening a new facility;
viii. costs of introducing a new product, or service (including costs of advertising and
promotional activities);
ix. costs of running a business in a new location, or with a new class of customer (including
costs of staff training); and
x. administration and other general overhead costs.
1. i-vi
2. i-vii
3. v-x
4. i-x
11. Recognition of costs (to be capitalised) ceases when:

1.The accounting period ends.
2.The item is in the location and capable of operating.
3. Full production capacity has been reached.
12. The following costs

(i) costs incurred while an item, capable of operating in the manner intended by management, has yet
to be brought into use, or is operated at less than full capacity;
(ii) initial operating losses, such as those incurred while demand for the item’s output builds up; and
(iii) costs of relocating, or reorganising part, or all, of an undertaking’s operations.
should be accounted for as:
1. Extraordinary items.
2. (Capitalised as) fixed assets.
3. Expenses.
13. Incidental income and expenses (such as using a site as a temporary car park) should be:
1.Capitalised into the asset.
2.Taken to the income statement.
3.Ignored.
14. Internal profits generated, when creating a self-constructed asset, should be:
1. Eliminated from the asset cost.
2. Depreciated over the life of the asset.
3. Included from the asset cost.
15. The cost of abnormal amounts of wasted material, labour, or other resources incurred in self-
constructing an asset should be:
1.Capitalised.
2.Expensed.
3.Deferred.
IAS-1 Page 33
16. If payment for a fixed asset is deferred beyond normal credit terms, any additional payment
above the cash cost of the asset will be accounted for as:
1. Cost of fixed asset.
2. Borrowing cost.
3. Repairs and maintenance.
17. If one or more assets are exchanged for a new asset, the new asset is valued at:
1.Replacement cost.
2.Fair value.
3.Residual value.
18. In the case of an exchange of assets, if the acquired asset cannot be valued:
1.The cost of the asset given up is used.
2. The residual value is used.
3. The asset cannot be capitalised.
19. An undertaking can choose either the cost model or the revaluation model, as its accounting
policy. It must apply the chosen model to:
1. All fixed assets.
2. An entire class of fixed assets.
3. Major assets.
20. Using the cost model, the asset in accounted for at:
1.Cost.
2.Cost less accumulated depreciation.
3. Cost less accumulated depreciation and any impairment losses.
21. Using the revaluation model, can fair values be estimated, if there is no market-based
evidence?
1. No.
2. Yes, if the asset is specialized, and rarely sold, by using an income, or a depreciated
replacement cost approach.
3. Yes, if the asset is specialized, and rarely sold, by using indexation.
22. Revaluations are required:

1. Annually.
2. Every 3-5 years.
3. When fair values change, or are expected to change.
23. When an item is revalued, any accumulated depreciation at the date of the revaluation is
treated in which of the following ways:
(1) Restated proportionately, with the change in the gross carrying amount of the asset,
so that the carrying amount of the asset after revaluation equals its revalued amount.
(2) Eliminated against the gross carrying amount of the asset and the net amount restated
to the revalued amount of the asset.
(3) Either (1) or (2).
24. Examples of separate classes of fixed assets are:

(i) land.
(ii) land and buildings.
(iii) machinery.
(iv) ships.
(v) aircraft.
(vi) motor vehicles.
(vii) furniture and fixtures.
(viii) office equipment.
(ix ) stationery
IAS-1 Page 34
1. i-v
2. i-viii
3. i-ix
4. vi-ix
25. A class of assets may be revalued on a rolling basis, provided:
1.The revaluation is completed in a short period, and the revaluations are kept up to date.
2. Only one class of assets is involved.
3. It is noted on the face of the balance sheet.
26. If an asset’s carrying amount is increased by revaluation, the increase is;

1. Shown as a gain in the income statement.
2. Taken to revaluation surplus, via the income statement.
3. Taken to revaluation surplus, directly, without being recorded in the income statement.
27. If an asset’s carrying amount is decreased by revaluation and there is no revaluation reserve,
the decrease should be:
1. Capitalised.
2. Expensed.
3. An extraordinary item.
28. Transfers of amounts between Equity - Revaluation Reserve and retained earnings are
allowed:
1. Only on asset disposal.
2. On asset disposal, and in each period, being the difference between the depreciation
charged on a revalued amount and the depreciation of the cost amount.
3. When retained earnings are negative.
29. Depreciation charges for a period are recorded:

1. Only in the income statement.
2. As an exceptional item.
3. In the income statement, or as part of the cost another asset (such as inventories).
30. Changes in the estimated useful life should:

1. Be accounted for under IAS 8.
2. Be expensed immediately.
3. Be noted on the face of the balance sheet.
31. The carrying value of your asset is $10. Its fair value is $12 .
Do you continue depreciation?
1. No.
2. Yes, until the end of its useful life.
3. Yes, but at half the previous rate.
32. The carrying value of your asset equals the residual value.
Do you continue to depreciate it?
1. No.
33. Regular repair and maintenance preserves the value of your hotel.
1. No.
34. Your asset has a residual value.
IAS-1 Page 35
1. No.
2. Yes, until the end of its useful life, but deduct the amount of the residual value from the amount
to be depreciated.
35. Depreciation can cease when an asset is idle.

1.False.
2.Only due to factory closure.
3. Only under a units of production method.
36. In determining the useful life of an asset, consider:

(i) Expected usage of the asset.
(ii) Expected physical wear and tear.
(iii) Technical, or commercial obsolescence.
(iv) Legal, or similar, limits on the use of the asset.
(v) Interest rates.
1. i-ii
2. i-iii
3. i-iv
4. i-v
37. Land and buildings are separate assets, as:

1.They can always be sold separately.
2.Land usually has an unlimited life, but buildings do not.
3.Buildings can be revalued, but land cannot.
38. You buy land and building. The land is revalued at double its cost.
Do you continue to depreciate the building?
1. No.
39. If your land is leased under a finance lease, do you depreciate it?
1. No.
2. Yes, until the end of the lease.
3. Only if it has a building on it.
40. A variety of depreciation methods can be used. These methods include the straight-line
method, the diminishing balance method and the units of production method.
The choice of depreciation method is governed by:
1. Tax laws.
2. The lowest cost option.
3. The expected pattern of consumption of the asset.
41. Compensation from third parties for items impaired, lost or sequestrated should be recorded
as income:
1. When the item is lost.
2. When the compensation is receivable.
3. When the cash is received.
42. The carrying amount will be derecognized (written out of the balance sheet):
(1) On disposal.
(2) When no future benefits are expected from its use.
(3) Either.
43. A gain on the sale of an asset should be recorded as:

1. A capital gain in equity.
IAS-1 Page 36
2. A gain in the income statement.
3. Revenue.
44. The gain, or loss, arising on the sale of an asset is:

1.The cash proceeds.
2. The net proceeds minus the carrying value of the asset.
3. The net proceeds minus the residual value of the asset.

Question Answer
1. 2
2. 2
3. 2
4. 1
5. 3
6. 2
7. 2
8. 2
9. 3
10. 1
11. 2
12. 3
13. 2
14. 1
15. 2
16. 2
17. 2
18. 1
19. 2
20. 3
21. 2
22. 3
23. 3
24. 2
25. 1
26. 3
27. 2
28. 2
29. 3
30. 1
31. 2
32. 1
33. 2
34. 2
35. 3
36. 3
37 2
38 2
39 2
40 3
41 2
42 3
43 2
44 2
IAS-1 Page 37
1. A non-cancellable lease is a lease that is cancellable only:
1. Upon the occurrence of some remote contingency.
2. With the permission of the lessor.
3. If the lessee enters into a new lease for the same, or an equivalent asset, with the same
lessor.
4. Upon payment, by the lessee, of such a large amount that the lease is unlikely ever to be
cancelled.
5. Any of 1-4.
2. Minimum lease payments are:

(i). Payments over the lease term for the goods leased.
(ii) Finance charges.
(iii) Amounts guaranteed by the lessee.
(iv) Contingent rent.
(v) Costs for services.
(vi) Taxes
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
5. (i)-(v)
6. (i)-(vi)
3. You lease a car to a client for 4 years. The cost of the car is $40.000. The anticipated residual
value at the end of the lease is $10.000. A dealer gives you a guarantee to purchase the car for
$8.000 (at the end of the lease). The remaining $2.000 is:
1. Contingent rent.
2. The unguaranteed residual value.
3. The fair value.
4. Gross investment in the lease is the

1. Aggregate of:
2. Higher of:
3. Lower of:
4. Average of:
the minimum lease payments receivable by the lessor under a
finance lease, and
any unguaranteed residual value accruing to the lessor.
5. Examples of situations that would normally lead to a lease being considered to be a finance
lease are:
(i) The lease transfers ownership of the asset to the lessee by the
end of the lease.
(ii) The lessee has the option to purchase the asset at an attractive price.
(iii) The lease term is for the major part of the economic life of the
asset, even if title is not transferred ( >75%).
(iv) The present value of the minimum lease payments amounts to substantially all of the fair value of the
leased asset (>90%).
(v) The leased assets are of such a specialised nature that only the
lessee can use them, without major modifications.
1. (i)
IAS-1 Page 38
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
5. (i)-(v)
6. Indicators of situations that could also lead to a lease being classified as a finance lease are:
(i) If the lessee can cancel the lease, the lessor’s losses associated with the cancellation are borne by the
lessee.
(ii) Gains, or losses, from the change in the fair value of the residual accrue to the lessee (for example, in
the form of a rent rebate equaling most of the sales proceeds at the end of the lease).
(iii) The lessee has the ability to continue the lease for a secondary period, at a rent that is substantially
lower than market rent.
(iv) If the lease does not transfer substantially all risks and rewards of ownership.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
7. Leases of land and of buildings are classified as:

1. Operating leases.
2. Finance leases.
3. Either.
8. For the purposes of lease classification, the land and buildings elements of a lease are
considered:
1. Separately.
2. Together.
3. Either 1 or 2.
9. The minimum lease payments are split between the land and the buildings elements, in
proportion to their:
1. Contingent rents.
2. Relative fair values.
3. Economic lives.
10. Calculation of the net present value removes the:

1. Interest component of a lease.
2. Capital component of a lease.
3. Both components.
11. Leased assets appear on the balance sheet in the case of:
1. Operating leases.
2. Finance leases.
3. All leases.
12. Lease liabilities are:

1. Current liabilities.
2. Non-current liabilities.
3. Split between 1 and 2.
IAS-1 Page 39
13. Any initial direct costs of the lessee, such as negotiating and securing finance leasing
arrangements, are:
1. Added to the amount recorded as an asset.
2. Expensed immediately by the lessee.
3. Added to contingent rent.
14. At the start of the lease:

1. Most of the payment is capital, with a small element of interest.
2. Most of the payment is interest, with a small element of capital.
3. The capital and interest payments are equal.
15. Contingent rents must be:

1. Charged as expense.
2. Added to the lease liability.
3. Prepaid at the start of the lease.
16. A finance lease gives rise to depreciation expense for depreciable

assets. The depreciation policy shall:
1. Match the period of the lease.
2. Match that for depreciable assets that are owned.
3. Be the average of 1 & 2.
17. If the lessee will not obtain ownership by the end of the lease term, the asset is depreciated
over the:
1. Shorter of the lease term, and its useful life.
2. Longer of the lease term, and its useful life.
18. An undertaking shall disclose the total of future

minimum lease payments at the balance sheet date, and their
present value, for each of the following periods:
(i) Not later than one year;
(ii) Later than one year and not later than five years;
(iii) Later than five years.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
19. Lessors shall record assets, held under a finance lease:

1. As a receivable.
2. As held-for-sale assets.
3. As a leased asset.
20. Costs incurred by manufacturer, or dealer lessors, in connection with negotiating and
arranging a lease, are:
1. Included in the definition of initial direct costs.
2. Recorded as an expense at the start of the lease term.
3. Added to the residual value.
21. The sales revenue recognised at the start of the lease term, by a manufacturer, or dealer
lessor, is:
1. The fair value of the asset.
2. The present value of the minimum lease payments, computed at a market rate of interest.
3. The higher of 1 & 2.
4. The lower of 1 & 2.
IAS-1 Page 40
22. If a sale and leaseback transaction results in a finance lease, any
excess of sales proceeds over the carrying amount shall:
1. Be immediately recognised as income by a seller-lessee.
2. Be deferred, and amortised, over the lease term.
3. Be recognised at the end of the lease.
23. If a sale and leaseback transaction results in an operating lease, and

it is clear that the transaction is established at fair value, any profit or
loss shall:
1. Be recognised immediately.
24. For operating leases, if the fair value at the time of a sale and
leaseback transaction is less than the carrying amount of the asset, a
loss equal to the amount of the difference between the carrying
amount and fair value shall:
1. Be recognised immediately.

Question Answer
1. 5
2. 3
3. 2
4. 1
5. 5
6. 3
7. 3
8. 1
9. 2
10. 1
11. 2
12. 3
13. 1
14. 2
15. 1
16. 2
17. 1
18. 3
19. 1
20. 2
21. 4
22. 2
23. 1
24. 1
IAS-1 Page 41
Multiple choice Questions on IAS-18
Choose the answer closest to that you believe to be correct.
1. Revenue:
1) Includes gains.
2) Is the gross inflow of economic benefits of the ordinary activities, when those inflows result in
increases in equity, other than increases relating to contributions from investors.
3) Includes sales taxes and value added tax.
2. Fair Value
1) Is the value for which an asset could be sold, or a liability extinguished, between willing,
independent traders.
2) Is the value agreed between related parties.
3) Is based on historical cost.
3. Trade discounts and volume rebates should:
1) Be ignored.
2) Be subtracted from revenue.
3) Be shown in the balance sheet under equity.
4. Where interest-free, long-term credit is given,
1) Revenue should not be recognised until cash is received.

2) Future receipts should be discounted to net present value.
3) A bad debt provision should be created.
5. Where goods are exchanged:
1) No bookkeeping is necessary.
2) Cash is never involved.
3) Revenue is created.
6. A Transaction involves after sales service:
1) It is no longer regarded as revenue.

2) The revenue relating to the service is spread over the period of the service.
3) It is always a credit transaction.
7. Combined transactions, such as a sale and repurchase agreement:
1) Are dealt with as one transaction.

2) Must be shown separately.
3) Are illegal.
8. When is a sale recognised?
1) Whenever the seller decides to recognise it.

2) At the end of each accounting period.
3) When certain conditions have been satisfied.
9. Normal credit risk derived from sales is:
IAS-1 Page 42
1) The best reason to defer revenue recognition.
2) Not a reason to defer revenue recognition.
3) Detailed in the audit report.
10. Retention of significant risks means that:
1) The sale will not be recognised.

2) There is no problem with revenue recognition.
3) Insurance is mandatory.
11. If the sale is contingent on the buyer deriving revenue from resale of the goods:
1) It should never be recognised as a sale.

2) It should receive shareholder approval.
3) Recognition is deferred.
12. Where foreign exchange control jeopardises the transfer of the sales proceeds:
1) Recognition cannot take place until permission to transfer funds is granted.

2) The sale is cancelled.
3) A bad debt provision should be created.
13. Once an amount has been recognised in revenue, any risk of non-payment is treated as:
1) A reduction in revenue
2) A bad, or doubtful debt expense.
3) A charge to accounts payable.
14. Where warranties are given to the buyer, the cost of these will be recognised:
1) As an expense.
2) As a reduction in revenue.
3) In the following period.
15. Revenue from the provision of services should be recognised by referring to the:
1) Original estimates.
2) Payments received in advance.
3) Stage of completion at the balance sheet date.
16. The stage of completion, the costs to date, and the costs to complete the transaction should
be:
1) Ignored.
2) Listed in the accounts.
3) Reliably measurable.
17. Revisions to estimates:
1) Mean that the financial outcome of the transaction cannot be reliably measured.
2) Mean that the financial outcome of the transaction can be reliably measured.
3) Cancel the transaction.
18. Advances and progress payments received from clients:
IAS-1 Page 43
1) Is proof of the stage of completion.
2) May not reflect the stage of completion.
3) Should be booked to accounts payable.
19. If the costs will probably be recovered, recognise:
1) All revenue.
2) Only that amount of revenue, equal to the costs.
3) No revenue.
20. Interest revenue should be recognised on a:
1) Time-proportion basis, reflecting the effective yield of the asset.

2) Cash basis.
3) Time-proportion basis, reflecting collection periods.
21. Royalties should be recognised on:
1) A cash basis.
2) An accruals basis.
3) An actual basis.
22. Dividends should be recognised:
1) On a cash basis.
2) On an accruals basis.
3) When the shareholder has a legal right to receive payment.
Answers to Multiple Choice Questions:

1. 2 10. 1 19. 2
2. 1 11. 3 20. 1
3. 2 12. 1 21. 2
4. 2 13. 2 22. 3
5. 3 14. 1
6. 2 15. 3
7. 1 16. 3
8. 3 17. 2
9. 2 18. 2
IAS-1 Page 44
1. Termination benefits relate to:
(i) a commitment to terminate employment before the normal retirement date
(ii) a commitment to accept voluntary redundancy in exchange for benefits
(iii) pensions
(iv) post-retirement medical benefits
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
2. An undertaking is committed to a termination:

1. When the directors have made a decision.
2. When there has been a public announcement.
3. When it has a detailed formal plan for the termination and the plan is without realistic
possibility of withdrawal.
3. Where termination benefits fall due more than 12 months after the balance sheet date:
1. They should be discounted to present value.
2. They should be ignored.
3. They should be excluded from staff costs.
4. Equity compensation benefits are staff benefits include transactions where:

(i) Staff are entitled to receive shares of the undertaking or its parent.
(ii) The obligation depends on the future price of shares of the undertaking.
(iii) Shareholders are awarded bonus shares.
1 (i)
2 (i)-(ii)
3 (i)-(iii)
5. IAS 19 requires an undertaking to record:

(i) A liability when staff has provided service for benefits to be paid in the future.
(ii) An expense when the service is provided.
(iii) The names of the staff involved.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
6. Staff includes:
1. Those who provide services on a full-time, part-time, permanent, casual or temporary basis.
2. Directors and other management personnel.
3. Workers of outsourced services.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
7. Short-term staff benefits include items such as:

(i) Salaries and social security contributions.
(ii) Short-term paid absences such as paid annual leave and paid sick leave where the absences
are expected to occur within twelve months after the end of the period in which the staff
render the related staff service
(iii) Profit-sharing and bonuses payable within twelve months after the end of the period in which
the staff render the related service. and
IAS-1 Page 45
(iv) Non-cash benefits such as medical care, housing, cars and free or subsidised goods or
services for current staff.
(i) Pensions.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
5. (i)-(v)
8. An undertaking should recognise the expected cost of profit-sharing and bonus payments
when the following apply:
(i)The undertaking has a present legal or constructive obligation to make such payments as a result
of past events.
(ii)_A reliable estimate of the obligation can be made.
(iii) A reliable estimate of the obligation cannot be made.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
9. Other long-term staff benefits include, for example:
(i) Long-term paid absences such as long-service or sabbatical leave.

(ii) Long-service benefits.
(iii) Long-term disability benefits.
(iv) Profit-sharing and bonuses payable twelve months or more after the end of the period in
which the staff render the related service.
(v) Deferred compensation paid twelve months or more after the end of the period in which it is
earned.
(vi) Pensions.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
5. (i)-(v)
6. (i)-(vi)
10. IAS 19 requires a simplified method of accounting for other long-term staff benefits which
differs from the accounting required for post-employment benefits as follows:
(i) Actuarial gains and losses are recognised immediately and no 'corridor' is applied.
(ii) All past service cost is recognised immediately.
(i) No discounting to present value is used.
(ii) Liabilities are shown as short-term.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
11. For other long-term staff benefits, an undertaking should recognise the net total of the
following amounts as expense or income or in the cost of an asset:
(i) Current service cost.
(ii) Interest cost.
(iii) The expected return on any plan assets and on any reimbursement right such as insurance
recognised as an asset.
(iv) Actuarial gains and losses, which should all be recognised immediately.
IAS-1 Page 46
(v) Past service cost, which should all be recognised immediately.
(vi) The effect of any curtailments or settlements.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
5. (i)-(v)
6. (i)-(vi)
12. A detailed plan for termination benefits should include as a minimum:

(i) The location, function and approximate number of staff whose services are to be terminated.
(ii) The termination benefits for each job classification or function.
(iii) The timing the implementation.
(iv) Staff names.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
13. Termination benefits:

1. Are recognised as an expense immediately.
2. Should be included in pension figures.
3. Should be included in short-term benefits.
14. Multi-employer pension schemes are:

1. Defined contribution schemes.
2. Defined benefit schemes.
3. Either.
15. Most state pension schemes are:

3. Either.
16. Actuaries are needed for:

2. State schemes.
3. Insured benefits funds.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
17. A qualifying insurance policy is a policy:

(i) Where the proceeds of the policy can be used only to finance staff benefits under a defined
benefit plan
(ii) Where the proceeds of the policy are not available to the undertaking's own creditors even in
bankruptcy and cannot be paid to the undertaking, unless either:
a. the proceeds represent surplus assets that are not needed for benefit obligations.
b. the proceeds are returned to the undertaking to reimburse it for benefits already paid.
(iii) Provided by a related party.
1. (i)
2. (i)-(ii)
IAS-1 Page 47
3. (i)-(iii)
18. Past service cost:

1. Is the increase in the present value of the obligation for employee service in prior periods.
2. Is the employment cost for previous years.
3. Can only be positive.
19. Vested staff benefits:

1. Are benefits that are conditional on future employment.
2. Are benefits that are not conditional on future employment.
3. Either 1 or 2.
20. Assets held by a long-term fund are assets that:

(i) are held by a fund that exists solely to finance staff benefits.
(ii) are available to be used only to pay or fund staff benefits, are not available to the
undertaking's own creditors even in bankruptcy and cannot be returned to the reporting
undertaking unless:
a. the remaining assets of the fund are sufficient to meet the obligations of the plan or the
undertaking
b. the assets are returned to the undertaking to reimburse it for benefits already paid.
(iii) Any other assets.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
21. Defined benefit plans may be:

(i) Unfunded.
(ii) Partly funded.
(iii) Wholly funded.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
22. Interest cost is:

1. The increase during a period in the present value of an obligation that arises because
the benefits are one period closer to settlement.
2. Finance charges incurred by the pension fund.
3. Finance charges paid by the company for late payment.
23. Actuarial gains and losses comprise:

(i) Experience adjustments which are the differences between actuarial assumptions and what
has actually occurred.
(ii) Changes in actuarial assumptions.
(iii) Gains and losses made by the investments of the actuary.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
24. Under defined benefit plans:

(i) The undertaking's obligation is to provide the agreed benefits to current and former staff.
(ii) Actuarial risk and investment risk fall on the undertaking. If actuarial or investment returns
are worse than expected, the undertaking's obligation will be increased.
(iii) The undertaking has to provide long-term medical benefits.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
IAS-1 Page 48
25. The ‘10% corridor’ is the net cumulative actuarial gains and losses that exceed the ?????? of:
(i) 10% of the present value of the defined benefit obligation before deducting plan
assets.
(ii) 10% of the fair value of any plan assets.
The missing word is:
1. greater
2. lesser
3. average
26. On first adopting IAS 19, an undertaking may recognise any resulting increase in its liability
for post-employment benefits over not more than:
1. Three years.
2. Five years.
3. Ten years.
27. Your parent company runs a pension plan for staff of the parent and subsidiaries. This should
be treated as:
1. An individual company plan.
2. A multi-employer plan.
3. A state plan.
28. An undertaking may pay insurance premiums to fund a post-employment benefit plan. The
undertaking should normally treat such a plan as a:
1. Defined contribution plan.
2. Defined benefit plan.
3. Multi-employer plan.
4. State plan.
29. The payment of benefits of a defined benefit plan depends on:

(i) The financial position of the fund.
(ii) The investment performance of the fund.
(iii) An undertaking's ability and willingness to provide additional money for any
shortfall in the fund's assets.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
30. For a defined benefit plan, the undertaking must:

(i) Determine the fair value of any plan assets.
(ii) Determine the total amount of actuarial gains and losses and the amount of those
actuarial gains and losses that should be recognised.
(iii) Where a plan has been introduced or changed, determine the resulting past service cost.
(iv) Where a plan has been curtailed or settled, determine the resulting gain or loss.
(v) Write the actuarial report.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
5. (i)-(v)
31. The amount recognised as a defined benefit liability, should be the net total of the following
amounts:
(i) the present value of the obligation at the balance sheet date.
IAS-1 Page 49
(ii) plus any actuarial gains less any actuarial losses not recognised.
(iii) minus any past service cost not yet recognised.
(iv) minus the fair value at the balance sheet date of plan assets if any out of which the
obligations are to be settled directly.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
32. For a defined benefit plan, an undertaking should recognise the net total of the following
amounts as expense or income:
(i) Current service cost.

(ii) Interest cost.
(iii) The expected return on any plan assets and on any reimbursement rights.
(iv) Actuarial gains and losses.
(v) Past service cost.
(vi) The effect of any curtailments or settlements.
(vii) Contributions refunded to the company.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
5. (i)-(v)
6. (i)-(vi)
7. (i)-(vii)
33. The discount rate reflects the time value of money but not:
(i) The actuarial or investment risk.
(ii) The undertaking-specific credit risk borne by the undertaking's creditors.
(iii) The risk that future experience may differ from actuarial assumptions.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
34. An undertaking should recognise past service cost as an expense:

1. Immediately.
2. On a straight-line basis over the average period until the benefits become vested.
3. Deferred until pensions are paid.
35. Where plan assets include qualifying insurance policies that exactly match the amount and
timing of some or all of the benefits payable under the plan, the fair value of those insurance
policies is deemed to be:
1. Nil.
2. The present value of the related obligations.
3. Half of the present value of the related obligations.
36. The difference between the expected return and the actual return on plan assets is:
1. An actuarial gain or loss.
2. Ignored.
3. Repaid to the company.
37. Business combinations. The present value of the obligation includes all of the following, even
if the acquiree had not yet recognised them at the date of the acquisition:
(i) Actuarial gains and losses that arose before the date of the acquisition whether or not
they fell inside the 10% 'corridor'.
IAS-1 Page 50
(ii) Past service cost that arose from benefit changes or the introduction of a plan, before the
date of the acquisition.
(iii) Amounts of assets or liabilities that the acquiree had not recognised.
(iv) Goodwill.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
38. The gain or loss on a curtailment or settlement should comprise:

(i) Any resulting change in the present value of the obligation.
(ii) Any resulting change in the fair value of the plan assets.
(iii) Any related actuarial gains and losses and past service cost that had not previously been
recognised.
(iv) Any administration cost.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
39. A curtailment may arise from an isolated event, such as:

(i) The closing of a plant.
(ii) Discontinuance of an operation.
(iii) Termination of a plan.
(iv) Suspension of a plan.
(v) Replacement of the plan with a new, similar plan.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
4. (i)-(iv)
5. (i)-(v)
40. On first adopting IAS 19, an undertaking should determine its transitional liability for defined
benefit plans at that date as:
(i) the present value of the obligation at the date of adoption.
(ii) minus the fair value, at the date of adoption, of plan assets if any out of which the
obligations are to be settled directly.
(iii) minus any past service cost that should be recognised in later periods.
1. (i)
2. (i)-(ii)
3. (i)-(iii)
41. If the transitional liability is more than the liability that would have been recognised at the
same date under the previous accounting policy, the undertaking should make an irrevocable
choice to recognise that increase as part of its defined benefit liability:
(i) Immediately, under IAS 8.

(ii) As an expense on a straight-line basis over up to five years from the date of adoption. If an
undertaking chooses this option, the undertaking should:
1. apply the limit in measuring any asset recognised in the balance sheet.
2. disclose at each balance sheet date: 1 the amount of the increase that remains
unrecognised. and 2 the amount recognised in the current period.
(iii) Defer the expense until the scheme is curtailed or settled.

1. (i)
2. (i)-(ii)
3. (i)-(iii)
IAS-1 Page 51
Question Answer
1. 2
2. 3
3. 1
4. 2
5. 2
6. 2
7. 4
8. 2
9. 5
10. 2
11. 6
12. 3
13. 1
14. 3
15. 1
16. 3
17. 2
18. 1
19. 2
20. 2
21. 3
22. 1
23. 2
24. 2
25. 1
26. 2
27. 1
28. 1
29. 3
30. 4
31. 4
32. 5
33. 3
34. 2
35. 2
36. 1
37 3
38 3
39 4
40 3
41 2
IAS-1 Page 52
1. IAS 20 deals with:
1. Tax benefits provided to a firm in relation to Government Grants.
2. Government participation in the ownership of firms.
3. Disclosure of government grants.
2. Government assistance includes:
1. Indirect help, such as improving local infrastructure.
2. Direct action to provide economic benefits to qualifying firms.
3. Imposing import tariffs.
3. Government grants are defined as:

1. A transfer of resources to qualifying firms.
2. Transactions with the government in the normal course of trade.
3. Provision of guarantees by the government.
4. A qualifying firm it may receive grants related to the assets from the
government, when it:
1.Buys long-term assets.
2.Builds long-term assets.
3. Acquires long-term assets.
4. Buys, builds, or acquires long-term assets.
5. Government grants may be given in more than one form. They may be given as:
1) Grants related to assets.

2) Grants related to income.
3) Forgivable loans.
4) 1 only
5) 2 and 3 only
6) 1,2 and 3
6. Fair Value of an asset is defined as that value for which:
1) An asset is acquired from a related party.

2) An asset is sold between willing independent traders.
3) A liability is extinguished between willing independent traders.
4) 1 and 2
5) 2 and 3
6) 1,2 and 3
7. Which of the following may be categorized as purposes of government assistance? Tick

all that apply.
1) Boosting capital by investing in specified assets.

2) Reduce unemployment by subsidizing jobs and training.
IAS-1 Page 53
3) Try to promote economic activity in specific regions
4) 1 and 2
5) 2 and 3
6) 1,2 and 3
8. The impact of government assistance on financial statements is which of the following:
1) Financial statements must ignore all assistance.

2) Financial statements must show only 10% of total assistance.
3) Financial Statements must be able to reflect the receipt of government assistance.
9. The recognition of government grants should only be made if:
1. It is likely that the firm will comply with the qualifying conditions.
2. The grants will be received.
3. The grants will never be repaid under any circumstances.
4) 1 and 2
5) 2 and 3
6) 1,2 and 3
10. On the notification that a firm will receive a grant:

1. An account receivable will be set up, but the grant will be recorded on a cash basis.
2. Do nothing until the cash arrives.
3. An account receivable will be set up, and the grant will be recorded on an accruals
basis.
11. If a firm does not comply with the conditions of a government loan, then this may result
in the need:
1. To repay the loan.

2. To record a contingent liability in the future.
3. To account for the loan on a cash basis only.
4. 1 and 2
5. 2 and 3
6. 1,2 and 3
12. If the grants are intended to compensate certain costs, then they should be:
1. Only entered in the books when those costs are incurred.

2. Recognised as income over the periods when the related costs are incurred.
3. Ignored.
13. If grants relate to depreciable assets:
1. They should not be recognised at all since the asset will have no value
eventually.
IAS-1 Page 54
2. Credited immediately to Other income.
3. Recognised as income in the periods in which the depreciation is charged.
14. Where there is a combination of assistance:

1.It may be necessary to split the grant into parts, and recognise the income of the parts
on different bases.
2. If the cash is received together, treat it as one grant, otherwise split the grant into parts.
3. Account for the grants by location.
15. When a grant is given for immediate financial support, or as compensation for costs
already incurred:
1. One half is to be recognised in the current period while the other half is to be
recognised in the next period.
2. It should be capitalised, as there are no matching costs.
3. It should be recognised in the period it becomes receivable.
16. The capital approach and the income approach are two forms of accounting treatment
that may be applied to grants. These should be applied:
1. Before deciding how much of each grant should be recognised in each period.
2. After deciding how much of each grant should be recognised in each period.
3. Only if the grant is received in cash.
17. Both the capital approach and the income approach give differing accounting
treatments to a grant. However a point of similarity between the two approaches is to:
1. Credit the amount of the grant to shareholders‟ funds.

2. Show only the portion of the grant relating to the period.
3. Take the grant to the income statement.
18. When the grant is in the form of land, or other non-monetary assets, then it should:
1. Be entered in the books at fair value, matched by the grant.
2. Not be entered in the books at fair value, since it is a gift.
3. Be entered in the books at fair value, matched by a contingent liability.
19. A grant can be shown as a deferred income on a balance sheet, and then:
1. Shown as sundry expense, over the periods matching the asset‟s life.
2. Recognised as income, over the periods matching the asset‟s life.
3. Amortised directly to equity, over the periods matching the asset‟s life.
IAS-1 Page 55
20. An alternate treatment, with respect to presentation of grants related to assets, may be
that they are shown as:
1. An addition to the carrying amount of the asset.

2. Goodwill.
3. A deduction from the carrying amount of the asset.
21. If part, or all, of a grant becomes repayable to the government then:
1. The firm should use that amount to set up a subsidiary.

2. The repayment should first be shown as an expense.
3. The repayment should first be matched against any remaining deferred income relating
to the grant.
Answers to Multiple Choice questions:

1. 3) 11. 4)
2. 2) 12. 2)
3. 1) 13. 3)
4. 4) 14. 1)
5. 6) 15. 3)
6. 5) 16. 2)
7. 6) 17. 2)
8. 3) 18. 1)
9. 4) 19. 2)
10. 3) 20 3)
21. 3)
IAS-1 Page 56
1. Borrowing costs can be capitalised:
1. Always
2. Never
3. Sometimes
2. Interest on Bank overdrafts, short term and long term borrowings are the only items included in
borrowing costs.
True
False
3. A Qualifying assets includes
1. Inventories converted for sale in a short time

2. Assets ready for sale, or use when acquired
3. Maturing whisky
4. Renting out an upgraded office building that you have purchased is an example of an
investment property. This is an example of an asset that does not qualify.
1. True
2. False
5. Borrowing costs should be recognised as an expense and written off in the period they are
incurred.
1. Only if the asset qualifies

2. When using pooled funds.
3. If the borrowing costs relate to current fast-moving inventory.
6. The basis for treating Borrowing costs should be :
1) Cash basis only

2) Accruals basis only
3) Mixture of 1&2
7. Borrowings can only be capitalised when it is likely that they will generate future economic
benefits
1. True
2. False
8. Other borrowing costs, those which cannot be capitalised, should be recognised as an expense
and written off in the period of incurrence.
1. True
2. False
9. Investment income generated from loans taken in order to finance a qualifying asset should be:
1. Deducted from borrowing costs

2. Added to borrowing costs
IAS-1 Page 57
3. Shown as Investment income in the Income Statement
10. The amount of borrowing costs capitalised will always exceed the total borrowing costs
incurred in that period.
1. True
2. False
11. The general pool of funds used to complement borrowings for a qualifying asset may relate
just to the subsidiary. If this is the case, then use the weighted average cost relating just to the
borrowings of the subsidiary.
1. True
2. False
12. The recoverable amount of an asset is defined as:
1. The asset’s resale value.

2. Its value to the firm as it is stored away in the warehouse.
3. Its value to the firm for internal use.
4. 1 and 2 only
5. 1 and 3 only
13. When capitalising borrowing costs there is a risk that the cost of an asset may be inflated
above its recoverable amount. Any excess of borrowing costs, above the recoverable amount
should be:
1. Ignored
2. Written off
3. Treated as an income
14. Capitalisation is only started when:
1. Costs are being incurred for the asset

2. Borrowing costs are being incurred
3. Action is being taken to prepare the asset for use of sale
4. 1 and 2 only
5. 1,2 and 3
6. 2 and 3 only
15. The total cost of a qualifying asset is increased by any progress payments received or any
government grants
1. True
2. False
16. Capitalisation is also allowed on assets being held, with no present activity, for future
development.
1. True
2. False
17. Capitalisation is suspended if the delays in the development of an asset are
1. Temporary
IAS-1 Page 58
2. Permanent
3. Both of 1&2 above
4. Neither of 1&2 above
18. Capitalisation is suspended if active development of an asset is suspended for an extended

period of time.
1) True
2) False
19. When the building of a qualifying asset is being completed in many parts and each part can be
used independently of other parts, which may still being built, then:
1. Capitalisation should be applied on the eventual complete asset.

2. Capitalisation should be applied for each part separately
3. Neither of 1 or 2.
SOLUTIONS
Answers to Multiple Choice Questions:
1. 3) 11 . 1)
2. 2) 12. 5)
3. 3) 13. 2)
4. 2) 14 . 5)
5. 3) 15. 2)
6. 2) 16 .2)
7. 1) 17. 2)
8. 1) 18. 1)
9. 1) 19. 2)
10. 2)
IAS-1 Page 59
MULTIPLE CHOICE QUESTIONS ON IAS-36
1. An asset is impaired if:
1.Its carrying amount equals the amount to be recovered through use (or sale) of the asset.
2. Its carrying amount exceeds the amount to be recovered through use (or sale) of the asset.
3. The amount to be recovered through use (or sale) of the asset exceeds its carrying amount.
2. After the revaluation requirements have been applied, it is:

1. Unlikely that the revalued asset is impaired.
2. Probable that the revalued asset is impaired.
3. The recoverable amount needs to be estimated.
3. Corporate assets are assets (other than goodwill) that contribute to the cash flows of both the
cash-generating unit under review, and other cash-generating units.
1. Include goodwill.
2. Only contribute to the cash flows of the cash-generating unit.
3. Contribute to the cash flows of both the cash-generating unit, and other cash-generating
units.
4. Costs of disposal are:

1. Incremental costs, directly attributable to the disposal of an asset, excluding finance costs
and income tax expense.
2. Incremental costs, directly attributable to the disposal of an asset (or cash-generating unit),
plus finance costs, but excluding income tax expense.
3. Incremental costs, directly attributable to the disposal of an asset (or cash-generating unit),
plus finance costs and income tax expense.
5. If no indication of an impairment loss is present:

1. IAS 36 still requires an undertaking to make a formal estimate of recoverable amount.
2. IAS 36 does not require an undertaking to make a formal estimate of recoverable amount.
3. IAS 36 does not require an undertaking to make an assessment as to whether an asset may
be impaired.
6. An intangible asset with an indefinite useful life, or an intangible asset not yet available for use:
1. Will not be impaired.
2. Should be tested annually, at different times of the year.
3. Should be tested annually, at the same time each year.
7. External sources of information indicating possible impairment include:
(i) An asset’s market value has declined significantly.

(ii) Significant changes have taken place in the technological environment.
(iii) Interest rates, or other market rates, have increased during the period.
(iv) The carrying amount of the net assets of the undertaking is more than its market capitalisation.
(v) A change in the group structure.
1. (i) – (ii)
2. (i)-(iii)
3. (ii)-(iii)
4. (i)-(iv)
5. (i)-(v)
8. Internal sources of information include:
(i) Cash out flows that are significantly higher, than those budgeted.
IAS-1 Page 60
(ii) Operating profits that are significantly worse than those budgeted.
(iii) A decline in net cash flows.
(iv) Operating losses.
(v) Evidence of obsolescence, or damage of an asset.
(vi) Significant changes, to which an asset is used.
(vii) Evidence that indicates that the performance of an asset is worse than expected.
(viii) A lower cost of capital.
1. (i) – (ii)
2. (i)-(iii)
3. (ii)-(iii)
4. (i)-(iv)
5. (i)-(v)
6. (i)-(vii)
7. (i)-(viii)
9. If previous calculations show that an asset’s recoverable amount is significantly greater than its
carrying amount:
1. Its value in use should be recalculated.
2. The undertaking need not re-estimate its recoverable amount, if no events have
occurred that would eliminate that difference.
3. It should be tested for impairment.
10. If interest rates rise:

1. The discount rate must rise.
2. Cash flows automatically rise.
3. It may not have much effect for an asset with a long life.
11.‘‘Fair value less costs to sell’’ and its ‘‘value in use’’. If either of these amounts exceeds the
asset’s carrying amount:
1.The asset is not impaired, and it is not necessary to estimate the other amount.
2. The other must be calculated
3. The asset is impaired.
12. The ‘value in use’ of an asset held for disposal will consist mostly of:
1. The cash flows from use of the asset.
2. The net disposal proceeds.
3. Depreciation charges.
13. The best evidence of an asset’s ‘fair value less costs to sell’ is:
1. A recent transaction.
2. An active market.
3. A binding sale agreement.
14. Costs of disposal: examples of such costs are:

(i) Finance costs.
(ii) Legal costs.
(iii) Stamp duty and similar transaction taxes.
(iv) Costs of removing the asset.
(v) Direct incremental costs, to bring an asset into condition for its sale.
1 (i) – (ii)
2. (i)-(iii)
3. (ii)-(iii)
4. (i)-(v)
5. (ii)-(v)
IAS-1 Page 61
15. The following is reflected in the calculation of an asset’s ‘value in use’:
(i) The cash flows to be derived from the asset.

(ii) Variations in the amount or timing of those cash flows.
(iii) The time value of money, represented by the risk-free rate of interest.
(iv) The price for bearing the uncertainty inherent in the asset.
(v) Seasonality.
(v) Other factors.
1. (i) – (ii)
2. (i)-(iii)
3. (ii)-(iii)
4. (i)-(v)
5. (i)-(iii)+(v)
16. Unless a longer period can be justified, cash flow projections based on budgets/forecasts
must cover a maximum period of:
1. Three years.
2. Five years.
3. Ten years.
17. Estimates of cash flows must include:

(i) Projections of cash inflows, from the continuing use of the asset;
(ii) Projections of cash outflows to generate the inflows, from continuing use of the asset.
(iii) Net cash flows from the disposal of the asset.
(iv) Finance costs.
(v) Income taxes.
1. (i) – (iii)
2. (i)-(iv)
3. (ii)-(iii)
4. (i)-(v)
5.(i)-(v)
18. If the discount rate includes the impact of inflation, cash flows are expressed:
1. Excluding inflation.
2. Including inflation.
3. Excluding inflation (but include specific price increases, or reductions).
19. ‘Value in use’ does not reflect:

(i) outflows or related cost savings (for example reductions in staff costs) or benefits from a future
restructuring, to which an undertaking is not yet committed; or
(ii) outflows that will improve the asset’s performance;
Value in use’ does not reflect: these as cash flows are estimated:
1. Using net present values.

2. In real terms.
3. For the asset in its current condition.
20. The estimate of net cash flows to be received or paid for the disposal of an asset is similar to
an asset’s ‘fair value less costs to sell’, except that, in estimating those net cash flows:
(i) You use prices for similar assets (that have reached the end of their useful life).
(ii) You adjust prices for the impact of inflation.
(iii) You deduct finance payments.
(iv)You deduct tax payments.
1. (i) – (ii)
2. (i)-(iii)
3. (ii)-(iii)
IAS-1 Page 62
4. (i)-(iv)
21. The discount rate is a pre-tax rate that reflects current market assessments of:
(i) Foreign exchange rates.
(ii) The time value of money.
(iii) The risks specific to the asset.
1. (i) – (ii)
2. (i)-(iii)
3. (ii)-(iii)
22. If an asset, carried at cost, is decreased by impairment, the decrease should be:
1. Capitalised.
2. Expensed.
23.If an impairment loss is recognised,

1. The depreciation charge should be adjusted for future periods.
2. The residual value should be reviewed.
3. Both 1 &2.
4. Neither 1 nor 2.
24. For impairment testing a cash-generating unit is:

1. The lowest aggregation of assets that generate independent cash inflows.
2. Corporate assets.
3. Any unit that generates cash.
25. The recoverable amount of a cash-generating unit is:

1. The lower of the unit’s ‘fair value less costs to sell’ and its ‘value in use’.
2. The higher of the unit’s ‘fair value less costs to sell’ and its ‘value in use’.
3. The average of the unit’s ‘fair value less costs to sell’ and its ‘value in use’.
26. For impairment testing, goodwill is allocated to each cash-generating units:

1. That will benefit from the synergies of the combination.
2. If other assets of the acquiree are assigned to those units.
3. If other liabilities of the acquiree are assigned to those units.
4. If other net assets of the acquiree are assigned to those units.
27. Goodwill is tested for impairment:

1. At group level.
2. At the level at which goodwill is allocated in accordance with IAS 21 Foreign Exchange Rates
3. At a level that reflects the way an undertaking manages its operations.
28. If goodwill has been allocated to a unit, and the undertaking disposes of an operation within
that unit, the goodwill associated with the operation disposed of must be:
(i) Included in the carrying amount of the operation, when determining the gain (or loss on disposal).
(ii) Measured on the basis of the relative values of the operation disposed of, and the part of the unit
retained.
(iii) Discounted by the current market rate.
1. (i) – (ii)
2. (i)-(iii)
3. (ii)-(iii)
29. Your carrying value of your cash-generating unit =

Assets $10m + Goodwill $3m
Its ‘value in use’ = $11m
You should:
IAS-1 Page 63
1. Do nothing.
2. Reduce the goodwill to $1m.
3. Reduce the goodwill to $2m, and the assets to $9m
30. The undertaking impairment tests:

1. The asset first, and records any impairment loss for that asset, before testing for impairment
the unit containing the goodwill.
2. The unit containing the goodwill first, and records any impairment loss for that unit, before
testing for impairment asset.
3. At the same time.
31. Corporate assets:

1. Cannot be impaired.
2. Cannot generate separate cash flows.
3. Carrying amounts can be fully attributed to a cash-generating unit.
32. Your asset is impaired:

(i) its ‘fair value less costs to sell’ = loss of $4k
(ii) its ‘value in use’ = $6k;
Which value do you use?
1. $6k
2. Loss of $4k
3. $1k (average of the two figures).
4. Zero.
(i) its ‘fair value less costs to sell’ (if determinable);

(ii) its ‘value in use’ (if determinable); and
(iii) zero.
33. The carrying amount of your head office is 2.000.

The value in use is 2.400.
The fair value, less cost to sell is 1.600.
Is it impaired?
34. Your asset is impaired:

(i) its ‘fair value less costs to sell’ = loss of $4k
(ii) its ‘value in use’ = loss of $2k
Which value do you use?
1 Loss of $2k
2. Loss of $4k
3. Loss of $3k (average of the two figures).
4. Zero.
IAS-1 Page 64
Question Answer
1. 2
2. 1
3. 3
4. 1
5. 2
6. 3
7. 4
8. 6
9. 2
10. 3
11. 1
12. 2
13. 3
14. 5
15. 5
16. 2
17. 1
18. 2
19. 3
20. 1
21. 3
22. 2
23. 3
24. 1
25. 2
26. 1
27. 3
28. 1
29. 2
30. 1
31. 2
32. 1
33. No, as the value in use is higher than the carrying value.
34. 4
IAS-1 Page 65
1. ‘Profit smoothing’ often involves:
1. Contingent assets.
2. Contingent liabilities.
3. Provisions.
2. Product service warrantees are:

1. Contingent assets.
1. Contingent liabilities.
2. Provisions.
3. IAS 37 provisions include:

1. Depreciation.
2. Impairment of assets.
3. Doubtful debts.
4. Environmental provisions.
4. A provision is :
1. A liability of uncertain timing, or amount.
2. An obligation arising from past events.
3. An event that creates a legal, or constructive obligation.
5. A liability is:
6. An obligating event is:

7. A contract in which the costs exceed the benefits is:

1. An onerous contract.
3. A contingent asset.
8. Provisions are reported:

1. As part of trade payables.
2. As part of accruals.
3. Separately.
9. A constructive obligation:
1. Only relates to construction contracts.
2. Arises when you indicate that you accept certain responsibilities.
3. Arises from a legal duty.
10. A provision is recorded:

1. For a present obligation.
2. For a future obligation.
3. For a future obligation, if the possibility of a penalty is remote.
IAS-1 Page 66
11. If the possibility of a penalty is remote:
1. Do nothing.
2. Record a contingent liability.
3. Record a provision.
12. The cost of transfer of a liability to a third party is used to:

1. Value a contingent liability.
2. Value a contingent asset.
3. Value a provision.
13. Discount rates should be:

1. Pre-tax.
2. Post-tax.
3. Changed annually.
14. Gains from disposal of assets should:

1. Be taken into account in provisions.
2. Be taken into account in provisions, only if closely linked to the event giving rise to the
provision.
3. Not be taken into account in provisions.
15. If it is no longer probable that payment relating to a provision will be required:

1. The provision should be used for other liabilities.
2. The provision should be reversed.
3. The provision should be replaced by a contingent liability.
16. Future operating losses indicate a need to:

1. Test for impairment.
2. Consider making a provision.
3. Consider making a contingent liability.
17. Onerous contracts indicate a need to:

1. Test for impairment.
2. Consider making a contingent asset.
3. Consider making a contingent liability.
18. Examples of restructuring are:

i sale, or termination, of a line of business;
ii the closure of business locations in a country or region, or the relocation of business activities
from one country or region to another;
iii changes in management structure;
iv fundamental reorganisations, that have a material impact on the nature, and focus, of the
undertaking’s operations;
v change of company name.
1. i+iii+iv
2. i – iii
3. i – iv
4. i-v
19. A constructive obligation to restructure only arises when:

1. There is a formal plan.
2. There is an expectation that there will be restructuring.
3. Both 1 +2.
IAS-1 Page 67
20. In November, your board decides to restructure the group. In December, the plan is finalised.
In January it is announced. The group has a constructive obligation in:
1. November.
2. December.
3. January.
21. In November, your board decides to restructure the group. In December, the plan is finalised.
In January it is announced. A provision can be considered in:
1. November.
2. December.
3. January.
22. When a sale is only part of a restructuring, but there is no binding sale agreement:
1. No constructive obligation arises.
2. A constructive obligation can arise for the other parts of the restructuring.
3. A constructive obligation arises from the decision to sell the business.
23. A restructuring provision covers:

1. Retraining, or relocating continuing staff.
2. Marketing.
3. Investment in new systems and distribution networks.
4. Redundancy costs.
24. A restructuring provision:

1. Does not cover future operating losses.
2. Covers reasonable future operating losses.
3. Does not cover future operating losses, unless they relate to an onerous contract.
25. A provision should be recorded when:
1. An undertaking has a present obligation legal, or constructive.

2. It is probable that payment will be required.
3. An estimate can be made of the obligation.
4. 1-3 are all present.
26. If there is a present obligation to pay money, you should record a:

1. Contingent asset.
3. Provision.
27. If there is no present obligation, but one is highly likely, you should record:
1. Nothing.
3. A provision.
28. If there is no present obligation, but one is highly unlikely, you should record:
1. Nothing.
3. A provision.
29. Warranty claims normally generate a:

1. Contingent asset.
3. Provision.
IAS-1 Page 68
30. Provisions should be:
1. Exact amounts only.
2. Estimates only.
3. Either exact amounts or estimates.
31. Provisions are stated:

1. Before tax.
2. After tax.
3. Both before and after tax.
32. Future events will impact the size of provision if:

1. They involve anticipated completely new technology.
2. They involve cost reductions supported by experts.
3. They are normal trading losses.
33. Reimbursements should be booked when:

1. Notified.
2. When it is virtually certain that the money will be received.
3. When you receive the cash.
34. Reimbursements should be recorded as:

1. A reduction of the provision liability.
2. An expense.
3. A separate asset.
35. A contingent liability is:

1. A possible obligation that arises from past events.
2. A specific obligation that arises from past events.
3. A possible obligation that arises from future events.
36. Joint and several liability.

You and your partners are liable for $100 million of environmental damages.
The case has been brought against you, but your partners will reimburse you for $60 million.
You record:
1. A provision of $100 million.
2. A contingent liability for $100 million.
3. You make a provision for $40 million, and a contingent liability for
$60 million.
37. Contingent asset is recorded when cash inflows are:

1. Received.
2. Virtually certain.
3. Probable.
IAS-1 Page 69
Question Answer
1. 3
2. 2
3. 4
4. 1
5. 2
6. 3
7. 1
8. 3
9. 2
10. 1
11. 1
12. 3
13. 1
14. 3
15. 2
16. 1
17. 1
18. 3
19. 3
20. 3
21. 3
22. 2
23. 4
24. 3
25. 4
26. 3
27. 2
28. 1
29. 3
30. 3
31. 1
32. 2
33. 2
34. 3
35. 1
36. 3
37. 3
IAS-1 Page 70
1. Residual value is specifically:
1. Scrap value.
2. The estimated amount that you would currently obtain from disposal of the
asset, net of disposal costs.
3. The gross cash amount that you will receive from the ultimate sale of the
asset, at the end of its life.
2. Useful life of an asset refers to the life:

1. In the hands of any number of owners.
2. Whilst it is available for use in the firm.
3. Elements of cost are:

(i) Purchase price
(ii) Import duties.
(iii) Non-refundable purchase taxes.
(iv) Overheads of the purchasing department relating to the purchase of the
asset.
1. i-iv
2. i-iii
3. i-ii
4. i
4. Directly attributable costs include:

i.profession fees
ii.legal services
(iii) administration and other general overhead costs.
1. i
2. i-ii
3. i-iii
5. The following costs

(i) start-up costs
(ii) training costs
(iii) costs of relocating, or reorganising operations.
2. Capitalised as fixed assets.
3. Expenses.
IAS-1 Page 71
6. If payment for an asset is deferred beyond normal credit terms, any additional
payment above the cash cost of the asset will be accounted for as:
2. Borrowing cost.
7. If one or more assets are exchanged for a new asset, the new asset is valued
at:
1. Replacement cost.
2. Fair value.
3. Residual value.

1. The cost of the asset given up is used.
9. An undertaking can choose either the cost option or the revaluation option, as
its accounting policy. It must apply the chosen model to:
2. An entire class of fixed assets.
3. Major assets.
10. Using the cost option, the asset in accounted for at:
1. Cost.
2. Cost less accumulated depreciation.
11. Using the revaluation option, can fair values be estimated, if there is no
market-based evidence?
1. No.
2. Yes, if the asset is specialised and rarely sold, by using an income, or a
depreciated replacement cost approach.
3. Yes, if the asset is specialised and rarely sold, by using indexation.
12. Revaluations are required:

1. Annually.
2. Every 3-5 years.
3. When fair values change, or are expected to change.
13. When an item is revalued, any accumulated amortisation at the date of the
revaluation is treated in which of the following ways:
(1) Restated proportionately, with the change in the gross carrying amount
of the asset, so that the carrying amount of the asset after revaluation
equals its revalued amount.
IAS-1 Page 72
(2) Eliminated against the gross carrying amount of the asset and the net
amount restated to the revalued amount of the asset.
(3) Either (1) or (2).
14. Examples of separate classes of intangible assets are:
(i) brand names

(ii) mastheads and publishing titles
(iii) computer software
(iv) licences and franchises
(v) copyrights, patents and other industrial property rights, service and operating
rights
(vi) recipes, formulae, models, designs and prototypes
(vii) intangible assets under development.
(viii) office equipment.
(ix) canteen equipment.
1. i-v
2. vi-ix
3. i-vii
4. i-ix
15. May a class of assets may be revalued on a rolling basis?
1. Only if the revaluation is completed in a short period and the revaluations
are kept up to date.
2. Only one class of assets is involved.
3. No.
16. If an asset’s carrying amount is increased by revaluation, the increase is

1. Shown as a gain in the income statement.
2. Taken to revaluation surplus, via the income statement.
3. Taken to revaluation surplus, directly, without being recorded in the
income statement.
17. If an asset’s carrying amount is decreased by revaluation, the decrease

should be:
4. Capitalised.
5. Expensed.
18. Transfers of amounts between revaluation reserve and retained earnings are
allowed:
1. Only on asset disposal.
IAS-1 Page 73
2. On asset disposal and in each period, being the difference between the
depreciation charged on a revalued amount and the depreciation of the
cost amount.
3. When retained earnings are negative.
19. Amortisation charges for a period are recorded:

1. Only in the income statement.
2. As an exceptional item.
3. In the income statement, or as part of the cost another asset (such as
inventories).
20. Changes in the estimated useful life should:

1. e accounted for under IAS 8.
2. Be expensed immediately.
1. Be noted on the face of the balance sheet.
21. The carrying value of your asset is $10 m. Its fair value is $12 m.
Do you continue amortisation?
1. No.
22. The carrying value of your asset equals the residual value.
Do you continue to amortise it?
1. No.
23. Your asset has a residual value.

Do you continue to amortise it?
1. No.
2. Yes, until the end of its useful life, but deduct the amount of the residual
value from the amount to be amortised.
24. In determining the useful life of an asset, consider:

(i) Expected usage of the asset.
(ii) Public information on similar types of assets.
(iii) Technical, or commercial obsolescence.
(iv) Legal, or similar, limits on the use of the asset.
(v) The level of knowledge of operators of the asset.
1. i-ii
2. i-iii
3. i-iv
4. i-v
IAS-1 Page 74
25. A variety of amortisation methods can be used. These methods include the
straight-line method, the diminishing balance method and the units of production
method.
The choice of depreciation method is governed by:
1. Tax laws.
2. The lowest cost option.
3. The expected pattern of consumption of the asset.
26. The carrying amount of an item shall be derecognised (written out of the
balance sheet):
(1) On disposal.
(2) When no future benefits are expected from its use.
(3) Either.
27. Research costs can be capitalised:

1. Never.
2. When the development stage has begun.
3. When the development stage is complete.
28. If there is a third party willing to buy your asset at the end of its useful life, but no active
market for the asset.
1. The residual value is nil.
2. The residual value is halved.
3. The residual value is fully valued.
29. The definition of an intangible asset comprises:
i Identifiability
ii Control over a resource.
iii Existence of future benefits.
iv Residual value.
1 i-ii
2 i-iii
3 i-iv
4 iii
30. Separability:
1. Requires distinction from goodwill.
2. Is necessary for identifiability.
3. Requires separate ownership.
31. Control is:

1. Power to obtain benefits from a resource.
4. Power to restrict access of others to the resource.
5. Both 1 & 2 are required.
32. Future benefits include:

I Revenue
ii Cost savings
iii Residual value
1 i-ii
2 i-iii
3 i
IAS-1 Page 75
33. The cost of an internally-generated asset includes,:
(i) expenditure on materials and services used in generating the asset

(ii) the employment costs of personnel directly engaged in producing the asset
(iii) any expenditure that is directly attributable to the asset, such as fees to register a
legal right and the amortisation of patents and licences
(iv) overheads that are necessary to generate the asset,
(v) profit margin.
a. i-ii
b. i-iii
c. i-iv
d. i-v
34. Expenditure on an intangible item that was initially recorded as an expense, in previous
interim, or annual financial statements:
1. Should not be recorded as part of the cost of an asset.
2. Can be added to the residual value.
3. May be added to the next revaluation.
35. Intangible assets are initially recorded at:

1. Cost.
2. Revalued amount.
3. Either.

Question Answer Question Answer
1 2 20 1
2 2 21 2
3 2 22 1
4 2 23 2
5 3 24 3
6 2 25 3
7 2 26 3
8 1 27 1
9 2 28 3
10 3 29 2
11 1 30 1
12 3 31 3
13 3 32 1
14 3 33 3
15 3 34 1
16 3 35 1
17 2
18 2
19 3
IAS-1 Page 76
1. Fair value is the amount for which an asset:
1. Could be exchanged by related parties.
2. Would realise as scrap value.
3. Could be exchanged by knowledgeable, independent parties.
2. Investment property can be:

1. Land.
2. A building.
3. Part of a building.
4. Both land and building.
5. All of these.
3. Investment property can be held by:

1. The owner.
2. A lessor, under a finance lease.
3. A lessee, under a finance lease.
4. 1 & 2.
5. 1& 3.
6. All.
4. Owner-occupied property:
1 Can be treated as investment property.
2 Cannot be treated as investment property.
3 Can sometimes be treated as investment property.
5. A property that is held by a lessee, under an operating lease, may be held as an

investment property, but only if:
1 It is a hotel.
2 The lessee uses the fair value model.
3 The operating lease exceeds 20 years.
6. If property held under an operating lease is classified as investment property:

1 All property held under operating leases are classified as investment properties.
2 All investment property will be accounted for using the fair value model.
3 Depreciation will no longer be charged.
7. Which of the following are examples of investment properties:
(1) Land held for long-term capital appreciation.

(2) Land held for an undetermined future use. The land is regarded as held for capital
appreciation.
IAS-1 Page 77
(3) A building owned by the bank (or held by the bank under a finance lease) and leased out,
via one, or more, operating leases.
(4) A building that is vacant, but is held to be leased out via one, or more, operating leases.
(5) Property held for sale in the ordinary course of business.
(6) Property being built on behalf of third parties.
(7) Owner-occupied property.
(8) Property that is being built for use as investment property.
(9) Existing investment property that is being redeveloped for continued use as investment
property.
(10) Property that is leased to another bank, under a finance lease.
1. 1-10.
2. 1-7.
3. 1-4.
4. 1-4 + 9.
5. 1-7 +10.
8. If a property is partly an investment property, and partly owner-occupied, the firm

should account for the property:
1. As investment property.
2. As owner-occupied.
3. Each portion should be accounted for separately.
9. If a firm provides significant ancillary services to tenants in its property:

1. It may have to be classified as owner-occupied, rather than an investment property.
2. It may have to be classified as investment property, rather than as owner-
occupied.
3. The service fees should be capitalised.
10. A parent company leases a property to its subsidiary.

It may be classified as an investment property in the:
1. Subsidiary‟s accounts.
2. Consolidated accounts.
3. Parent company‟s individual financial statements.
11. Repairs and maintenance costs are normally:
1. Capitalised.
2. Expensed in the income statement as incurred.
3. Recorded as deferred expenses.
12. If the costs of a major repair (for example, replacement of walls) are capitalised:
1. They must be shown as a separate asset.

2. Any remaining costs of a previous inspection must be written off.
3. The board of directors must be notified immediately.
13. Elements of cost of an investment are:
IAS-1 Page 78
i. Its purchase price
ii. Legal costs.
iii. Property transfers taxes.
iv. Overheads of the property department relating to the purchase of the asset.
5. i-iv
6. i-iii
7. i-ii
8. I
14. The following costs:
(i) start-up costs (unless they are necessary to bring the property to the condition necessary for
it to be capable of operating in the manner intended by management).
(ii) operating losses incurred before the investment property achieves the planned level of
occupancy.
(iii)abnormal amounts of wasted material, labour or other resources incurred in constructing or
developing the property.
5. (Capitalised as) fixed assets.
6. Expenses.
15. If payment for an investment property is deferred beyond normal credit terms, any additional payment above the cash cost of the asset will be
accounted for as:

5. Borrowing cost.
16. The cost of a property interest held under a lease should be valued at:
1. Fair value.
2. The present value of the minimum lease payments.
3. The higher of 1& 2.
4. The lower of 1& 2.
17. If one or more assets are exchanged for a new asset, the new asset is valued at:
1. Replacement cost.
2. Fair value.
3. Residual value.
IAS-1 Page 79
1. The cost of the asset given up is used.
19. A bank can choose either the cost model or the revaluation model, as its accounting policy for investment property. It must apply the chosen
model to:

2. All investment property.
3. Major assets.
20. A gain arising from a change in the fair value of investment property should be recorded:
1. In the revaluation reserve.

2. As an extraordinary item.
3. In the income statement.
21. Fair value includes:
1. Special financial arrangements.

2. Transaction costs incurred in the sale.
3. Both 1 & 2.
4. Neither 1 nor 2.
22. Fair value includes:
(1) additional value derived from the creation of a portfolio of properties in different
locations;
(2) synergies between investment property and other assets;
(3) legal rights, or legal restrictions, that are specific only to the current owner; and
(4) tax benefits, or tax burdens, that are specific to the current owner.
(2) All of 1-4.
(3) None of 1-4.
23. Value in use includes:
(1) Additional value derived from the creation of a portfolio of properties in different
locations;
(2) Synergies between investment property and other assets;
(3) Legal rights, or legal restrictions, that are specific only to the current owner; and
(4) Tax benefits, or tax burdens, that are specific to the current owner.
(5) All of 1-4.
(4) None of 1-4.
24. Fair value accounts for future capital expenditure that will improve the property:
1. By discounting it to present value.

2. By noting it as a contingent liability.
3. By not reflecting it.
25. Using the cost model, the asset in accounted for at:
1. Cost.
IAS-1 Page 80
2. Cost less accumulated depreciation.
26. Transfers to, or from, investment property is made only when there is a change in use, evidenced by:
(1) Start of owner-occupation - transfer from investment property to owner-occupied

property;
(2) Start of development with a view to sale, - transfer from investment property to
inventories;
(3) End of owner-occupation, - transfer from owner-occupied property to investment
property;
(4) Start of an operating lease to another party, - transfer from inventories to investment
property;
(5) End of construction or development, - transfer from property in the course of
construction, or development, to investment property.
(6) Any of 1-5.
(7) None of 1-5.
27. When a bank decides to dispose of an investment property without development:
a. It is transferred to inventory.
b. It continues to treat the property as an investment property.
c. It is reclassified as owner-occupied.
28. If a bank begins to redevelop an existing investment property for continued use as investment property:
1. It is transferred to inventory.
6. It continues to treat the property as an investment property.
7. It is reclassified as owner-occupied.
29. When a bank uses the cost model, transfers between investment property, owner-occupied property and inventories:
1. Do not change the carrying amount of the property transferred.

2. Should be revalued at the date of transfer.
3. Are prohibited.
30. For a transfer from investment property, carried at fair value, to owner-occupied
property or inventories, the property’s cost for subsequent accounting is:
1. Its original cost.
2. Its fair value, at the date of change in use.
3. Its original cost, less accumulated depreciation.
31. For a transfer from inventories to investment property that will be carried at fair
value, any difference between the fair value of the property at that date and its previous
carrying amount is:
1. Recognised in income statement.

2. Discounted to present value.
3. Noted it as a contingent liability.
IAS-1 Page 81
4. Written off over the life of the asset.
32. When a bank completes the construction, or development, of a self-built investment
property that will be carried at fair value, any difference between the fair value of the
property at that date, and its previous carrying amount:
1. Recognised in income statement.
2. Discounted to present value.
3. Noted it as a contingent liability.
4. Written off over the life of the asset.
33. Compensation from third parties for items impaired, lost or sequestrated should be recorded as income:
1. When the item is lost.
2. When the compensation is receivable.
3. When the cash is received.
34. The carrying amount of an item is derecognised (written out of the balance sheet):
1 On disposal.
2 On entering into a finance lease.
3 Either.
35. A gain on the sale of an asset should be recorded as:

1. A capital gain in equity.
2. A gain in the income statement.
3. Revenue.
36. The gain, or loss, arising on the sale of an asset is:

1. The cash proceeds.
2. The net proceeds minus the carrying value of the asset.
3. The net proceeds minus the residual value of the asset.
1. 3 19. 2
2. 5 20. 3
3 5 21. 4
4. 2 22. 6
5. 2 23. 5
6. 2 24. 3
7. 4 25. 3
8. 3 26. 6
9. 1 27. 2
10. 3 28. 2
11. 2 29. 1
12. 2 30. 2
13. 2 31. 1
14. 3 32. 1
15. 2 33. 2
16. 4 34. 3
17. 2 35. 2
18. 1 36. 2
IAS-1 Page 82
Multiple Choice Questions on IFRS-5
1. IFRS 5 covers:
(i) The classification, measurement and presentation of assets ‘held for sale’.
(ii) The classification and presentation of discontinued operations.
(iii) The impairment of long-lived assets to be held and used.
1. i
2. ii
3 iii
4 i-ii
2. Assets that meet the criteria to be classified as ‘held for sale’ are measured
1. Carrying amount.
2. ‘Fair value, less costs to sell’.
3. The lower of 1 and 2.
4. The higher of 1 and 2.
3. For assets that meet the criteria to be classified as ‘held for sale’ depreciation on such assets:
1. Ceases.
2. Is reversed.
3. Is charged to discontinued operations.
4. Held for sale applies to:

1. Non-current liabilities.
2. Non-current assets.
3. Equity.
4. Current assets.
5. A disposal group, which was part of a cash-generating unit:

1.Becomes a separate cash-generating unit.
2. Becomes a non-current asset.
3. Is ignored.
6. A firm purchase commitment is an agreement, binding on both parties, that:

(i) Specifies all significant terms, including the price and timing of the transactions.
(ii) Includes a disincentive for non-performance, which is sufficiently large to make
performance highly probable.
(iii) Is with an unrelated party.
1. i
2. ii
3. iii
4. i- ii
5. i- iii
7. Recoverable amount is an asset’s:

1. ‘fair value, less costs to sell’.
2. value in use.
IAS-1 Page 83
8. For an asset to be held for sale,:
(i) It must be available for immediate sale in its present condition.
(ii) Its sale must be highly probable.
(iii) The management must be committed to a plan to sell the asset.
(iv) The management must have an active programme to locate a buyer.
(v) The asset must be actively marketed for sale.
(vi) The sale should be expected to be completed within one year from the date of
classification.
(vii) The asset should be fully depreciated.
1. i
2. ii
3. iii
4. i- v
5. i- vi
6. i – vii
9. When a bank acquires a non-current asset or disposal group exclusively with a view to its
subsequent disposal, it shall classify the non-current asset or disposal group as ‘held for sale’ at
the acquisition date, only if:
1. The one year requirement is met.
2. A buyer has been identified.
3. It will be sold at a premium to net assets.
10. If the criteria are met after the balance sheet date, a bank shall:
1. Classify a non-current asset as ‘held for sale’ in those financial statements.
2. When those criteria are met, after the balance sheet date, but before the approval of the
financial statements for issue, the bank shall disclose the information in the notes.
3. Classify a non-current asset as ‘discontinued operations’ in those financial statements.
11. If the disposal group to be abandoned:

- represents a separate major line of business or geographical area of operations,
- is part of a single co-ordinated plan to dispose of a separate major line of business or
geographical area of operations or
- is a subsidiary, acquired exclusively with a view to resale,
at the date on which it ceases to be used, the bank shall present the results and cash flows of the
disposal group as:
1. ‘Discontinued operations’.
2. ‘Held for sale’.
3. ‘Continuing operations’.
12. If a newly acquired asset is ‘held for sale’, the asset or disposal group will be measured at:
1. Cost.
2. Fair value, less costs to sell’.
13. If the asset or disposal group is acquired as part of a business combination, it shall be
measured at:
1. Cost.
2. Fair value, less costs to sell’.
IAS-1 Page 84
14.Subsequent remeasurement: Provisions for obsolete inventory and doubtful debts should be
reviewed:
1. Before the group’s ‘fair value, less costs to sell’ is remeasured.
2. After the group’s ‘fair value, less costs to sell’ is remeasured.
3. At the same time that the group’s ‘fair value, less costs to sell’ is remeasured.
15. An adjustment, to the carrying amount of a non-current asset that ceases to be classified as
‘held for sale’, is recorded in:
1. Equity.
2. Income from continuing operations.
3. Income from discontinued operations.

Question Answer
1. 4
2. 3
3. 1
4. 2
5. 1
6. 5
7. 4
8. 5
9. 1
10. 2
11. 1
12. 3
13. 2
14. 1
15. 2
IAS-1 Page 85
Multiple choice questions on IFRS-8
1. Operating segment information should:
(i) increase the number of reported segments and provide more information;
(ii) enable users to see an undertaking through the eyes of management;
(iii) enable an undertaking to provide timely segment information for external interim
reporting with relatively low incremental cost;
(iv) enhance consistency with the management discussion and analysis or other annual
report disclosures;
(v) provide various measures of segment performance:
(vi) reduce staff.
1. (i)-(ii)
2. (i)-(iii)
3. (i)-(iv)
4. (i)-(v)
5. (i)-(vi)
2. Segments based on the structure of an undertaking‟s internal organisation have other

significant advantages:
(i) An ability to see an undertaking “through the eyes of management” enhances a user‟s
ability to predict actions or reactions of management that can significantly affect the
undertaking‟s prospects for future cash flows.
(ii) As information about those segments is generated for management‟s use, the
incremental cost of providing information for external reporting should be relatively low.
(iii) Practice has demonstrated that the term „industry‟ is subjective. Segments based on
an existing internal structure should be less subjective.
(iv) Earnings per share calculations can be compared between segments.
1 (i)-(ii)
2. (i)-(iii)
3. (i)-(iv)
3. An operating segment is a component of an undertaking:
IAS-1 Page 86
(i) that engages in business activities from which it may earn revenues and incur expenses
(including revenues and expenses relating to transactions with other components of the
same undertaking),
(ii) whose operating results are regularly reviewed by the undertaking‟s chief operating
decision maker to make decisions about resources to be allocated to the segment and
assess its performance,
(iii) for which discrete financial information is available,
(iv) which is taxed separately from other components.
1 (i)-(ii)
2. (i)-(iii)
3. (i)-(iv)
4. IFRS 8 requires an undertaking to report information about:
(i) the revenues derived from its products or services (or groups of similar products and
services),
(ii) about the countries in which it earns revenues and holds assets,
(iii) about major clients,
(iv) about transactions with governments.
1 (i)-(ii)
2. (i)-(iii)
3. (i)-(iv)
5. IFRS 8 requires an undertaking to give descriptive information about:
(i) the way the operating segments were determined,

(ii) the products and services provided by the segments,
(iii) differences between the measurements used in reporting segment information and
those used in the undertaking‟s financial statements,
(iv) changes in the measurement of segment amounts from period to period,
(v) the impact of staff development policies on the segment.
1 (i)-(ii)
2. (i)-(iii)
3. (i)-(iv)
4. (i)-(v)
IAS-1 Page 87
6. A component of an undertaking that sells primarily or exclusively to other operating segments
of the undertaking:
1. Must be classed as an operating segment.

2. Must be excluded from being an operating segment.
3. Is included as an operating segment if the undertaking is managed that way.
7. IFRS 8 requires the following information:

(i) factors used to identify the undertaking‟s operating segments, including the basis of
organisation (for example, whether management organises the undertaking around
differences in products and services, geographical areas, regulatory environments, or a
combination of factors and whether segments have been aggregated),
(ii) types of products and services from which each reportable segment derives its
revenues,
(iii) the economic environment of each segment,
(iv) the legal structure of each segment.
1 (i)-(ii)
2. (i)-(iii)
3. (i)-(iv)
8. Interest:
1. Net interest revenue must be shown.

2. Neither interest revenue nor interest expense is required to be shown.
3. Both interest revenue and interest expense are required to be shown.
4. Both interest revenue and interest expense are required to be shown, unless a majority of
the segment‟s revenues are from interest and the chief operating decision maker relies
primarily on net interest revenue to assess the performance of the segment.
9. IFRS 8 shall apply to:
(i) listed companies,

(ii) any company reporting under IFRS that wishes to provide the information,
(iii) all other companies reporting under IFRS.
1 (i)-(ii)
2. (i)-(iii)
10. If information is not presented to the directors in sectors:
1.Look to the next lower level of internal segmentation that reports information along
product and service lines or geographical lines.
IAS-1 Page 88
2.Construct segments solely for external reporting purposes.
3.Segment information is not required for published financial statements.
11. If a financial report contains both the consolidated financial statements of a parent, as well as
the parent‟s separate financial statements, segment information is required:
1. only in the consolidated financial statements

2. only in the parent‟s separate financial statements
3. both sets of financial statements
12. An operating segment may engage in business activities for which it has yet to earn revenues,
for example, start-up operations:
1. will be operating segments before earning revenues.

2. may be operating segments before earning revenues.
3. will not be operating segments before earning revenues.
13. Head office expenses:
1. Can be allocated to segments on a reasonable basis.

2. Must not be allocated to segments.
3. Must be allocated to segments based on their turnover.
14. An undertaking‟s pension plans :
1. will be operating segments.

2. may be operating segments.
3. will not be operating segments.
15. Two or more operating segments may be aggregated into a single operating segment if
aggregation is consistent with the core principle of IFRS 8, the segments have similar economic
characteristics, and the segments are similar in each of the following respects:
(i) the nature of the products and services;

(ii) the nature of the production processes;
(iii) the type or class of client for their products and services;
(iv) the methods used to distribute their products or provide their services;
(v) if applicable, the nature of the regulatory environment, for example, banking,
insurance or public utilities;
(vi) staff numbers.
1 (i)-(ii)
2. (i)-(iii)
3. (i)-(iv)
4. (i)-(v)
5. (i)-(vi)
IAS-1 Page 89
16. As a percentage of sales, profits or assets, a segment should be at least:
1. 5%
2. 7,5%
3. 10%
4. 15%
5. 20%
17. The total amount of revenue that should be covered by reportable segments is, at least:
1. 50%
2. 60%
3. 70%
4. 75%
5. 80%
6. 100%
18. Operating segments that do not meet any of the quantitative thresholds:
1. may be considered reportable, and separately disclosed.

2. must be combined and disclosed in an „all other segments‟.
3. must be ignored.
19. If an operating segment is identified as a reportable segment in the current period, segment
data for a prior period:
1. is not required.
2. is optional.
3. is required unless the necessary information is not available and the cost to develop it
would be excessive.
20. IFRS 8 requires reconciliations of segement totals to total undertaking amounts:
(i) of segment revenues,

(ii) reported segment profit or loss,
(iii) segment assets,
(iv) segment liabilities
(v) other material segment items
(vi) staff numbers.
.
1 (i)-(ii)
2. (i)-(iii)
3. (i)-(iv)
4. (i)-(v)
IAS-1 Page 90
5. (i)-(vi)
21. Information about the segments should include:
(i) revenues from external clients;
(ii) revenues from transactions with other operating segments of the same undertaking;
(iii) interest revenue;
(iv) interest expense;
(v) depreciation and amortisation;
(vi) material items of income and expense;
(vii) the undertaking‟s interest in the profit or loss of associates and joint ventures
accounted for by the equity method;
(viii) income tax expense or income; and
(ix) material non-cash items other than depreciation and amortisation.
1 (i)-(ii)
2. (i)-(iii)
3. (i)-(iv)
4. (i)-(v)
5. (i)-(vi)
6. (i)-(vii)
7. (i)-(viii)
8. (i)-(ix)
22. An undertaking shall report the following geographical information:
(i) revenues from external clients attributed to the undertaking‟s country of domicile and
attributed to all foreign countries in total from which the undertaking derives revenues.
(ii) non-current assets other than financial instruments, deferred tax assets, post-
employment benefit assets, and rights arising under insurance contracts located in the
undertaking‟s country of domicile and located in all foreign countries in total in which
the undertaking holds assets.
(iii) non-current liabilities other than financial instruments, deferred tax liabilities, post-
employment benefit liabilities, and rights arising under insurance contracts located in the
undertaking‟s country of domicile and located in all foreign countries in total in which
the undertaking has liabilities.
IAS-1 Page 91
1 (i)-(ii)
2. (i)-(iii)

Question Answer
1. 4
2. 2
3. 2
4. 2
5. 3
6. 3
7. 1
8. 4
9. 1
10. 1
11. 1
12. 2
13. 1
14. 3
15. 4
16. 3
17. 4
18. 1
19. 3
20. 4
21. 8
22. 1
IAS-1 Page 92

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Multiple choice questions on IAS-1

1. Financial statements provide information about an undertaking’s:

(vi) Cash flows.

(vii) Employment policies.

2. A complete set of financial statements comprises:

(i) a statement of financial position as at the end of the period;

(ii) a statement of comprehensive income for the period;

(iii) a statement of changes in equity for the period;

(iv) a statement of cash flows for the period;

3. Environmental reports and value added statements are:

4. Users knowledge of business and accounting is assumed to be:

5. A fair presentation also requires an undertaking to:

(iii) Provide additional disclosures.

(iv) Provide an audit report.

6. Inappropriate accounting policies are rectified by:

7. When the departure from a Standard creates a continuing impact:

11. Consistency entails:

12. Gains and losses on foreign currencies are reported:

13. Reimbursement of provisions should be:

18. Deferred tax liabilities are always shown as:

21. The following:

1. On the face of the income statement.

1. Nature of expense method.

23. The Statement of Changes in Equity links:

25. The notes shall present, disclose and include:

26. Estimates are necessary to measure:

27. Examples of the types of disclosures about uncertainty are:

28. An undertaking shall disclose in the notes, if not disclosed elsewhere:

Answers to multiple choice questions

1. Inventories are defined as:

2. Net realisable value is defined as:

3. Fair value is defined as the value for which:

1) An asset could be sold, or a liability extinguished, between willing independent traders.

5. The cost of inventories:

8. How would unallocated overheads be recognized?

9. As opposed to fixed production overheads, variable production overheads are:

1) Allocated to all the units of production, as one whole.

10. Other costs are to be:

1) Sales price less profit margin.

1) A general fall in market price, damage to goods and obsolescence.

1) An expense in the period that the revenue is recognised.

1) Immediately to be written off.

2. Cash flow statements are required from:

4. A cash flow statement helps in examining the relationship between:

6. The acquisition, and disposal, of long-term assets are:

8. For an investment to qualify as a cash equivalent, it must be:

9. The maximum maturity of a cash equivalent is:

10. Bank borrowings are generally considered to be:

12. A single transaction:

14. Examples of cash flows from operating activities are:

(ii) Receipts from royalties, fees, commissions and other revenue.

(iii) Payments to suppliers for goods (and services).

(iv) Payments to (and on behalf of) employees.

16. Examples of cash flows arising from financing activities are:

(i) Proceeds from issuing shares, or other equity instruments.

(ii) Payments to owners to acquire, or redeem the undertaking's shares.

(iv) Repayments of amounts borrowed.

(i) Changes in inventories, operating receivables, and payables.

(iii) Investing cash flows.

(iv) Financing cash flows.

(v) Social security costs.

(i) Principal amounts relating to credit card clients.

(ii) The purchase and sale of investments.

(iii) Short-term borrowings (3 months, or less).

IFRS Sample MCQ's

IFRS Sample MCQ's