NEGROS ORIENTAL STATE UNIVERSITY CHAPTER EXAM

CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS

NEGROS ORIENTAL STATE UNIVERSITY

College of Business Administration
Accountancy Department

CFAS (OVERVIEW, CONCEPTUAL FRAMEWORK FOR REPORTING & PRESENTATION OF FINANCIAL

STATEMENTS )

INSTRUCTION: READ THE PROBLEMS CAREFULLY AND ANSWER IT CORRECTLY.

PROBLEM 1

1. The financial statements are authorized for issue

A. When the board of directors reviews the financial statements and authorizes them for issue.
B. When the financial statements are made available to shareholders.
C. When shareholders approve the financial statements at their annual meeting.
D. When the approved financial statements are filed with a regulatory body.

2. Adjusting events after reporting period include all of the following except

A. The settlement of a court case after the issuance of the financial statements that confirms that the
entity has a present obligation.
B. Bankruptcy of a customer occurring between the end of the reporting period and date of issuance of
financial statements.
C. Determination after reporting period and before the issuance of the statements of the cost of asset
purchased at the reporting period.
D. The discovery of fraud or errors between the end of the reporting period and the date of issuance of
financial statements.

3. Which of the following events after the reporting period would require adjustments before issuance of
the financial statements?

A. Loss of plant as a result of fire.

B. Change in the quoted market price of financial asset held as an investment
C. Loss on inventory resulting from a storm surge
D. Loss on a lawsuit the outcome of which was deemed uncertain at year-end.

4. Nonadjusting events after reporting period that require disclosure include all of the following, except

A. A major business combination after reporting period.

B. Announcing a plan to discontinue an operation
C. Expropriation of major asset after reporting period.
D. Destruction of a major production plant by a fire before the end of the reporting period.

5. Which of the following events after the reporting period would require disclosure in the financial
statements?

A. Retirement of the president

B. Settlement of litigation when the event that gave rise to the litigation occurred prior to the end of
reporting period.
C. Strike of employees
D. Issue of a large amount of ordinary shares.

PROBLEM 2

1. According to PAS 10, these are those events, favorable and unfavorable, that occur between the end of
the reporting period and the date when the financial statements are authorized for issue.
a. Events after the reporting period c. Adjusting events
b. Non-adjusting events d. all of these

Page 1 of 2
NEGROS ORIENTAL STATE UNIVERSITY CHAPTER EXAM
CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS
2. The Sarin Company's financial statements for the year ended 30 April 20X8 were approved by its finance
director on 7 July 20X8 and a public announcement of its profit for the year was made on 10 July 20X8.
The board of directors authorised the financial statements for issue on 15 July 20X8 and they were
approved by the shareholders on 20 July 20X8. Under PAS 10, after what date should consideration no
longer be given as to whether the financial statements to 30 April 20X8 need to reflect adjusting and non-
adjusting events?
a. 7 July 20X8
b. 10 July 20X8
c. 15 July 20X8
d. 20 July 20X8
(Adapted)

3. Which of the following is an example of a non-adjusting event?

a. Sale of inventory for less than its carrying value shortly after the reporting period
b. Amounts received in respect of an insurance claim being negotiated at the period end
c. Destruction of a machine by fire after the reporting period
d. Bankruptcy of a major customer with a balance owing at the period end
(Adapted)

4. One of Entity A’s delivery trucks had an accident on February 14, 20x2. The truck is totally wrecked and
is uninsured. Entity A’s December 31, 20x1 current-period financial statements were authorized for issue
on March 31, 20x2. Entity A asked you if it can write-off the carrying amount of the destroyed truck
from its December 31, 20x1 statement of financial position. What will you tell Entity A?
a. Yes, go ahead. Write-off the truck because the event is an adjusting event.
b. No. Don’t write-off the truck because the event is a non-adjusting event.
c. No. Don’t write-off the truck because the event is a non-adjusting event. You should, however,
disclose the event if you deem it to be material.
d. Yes, go ahead. I will support you.

5. Which of the following is most likely to be a non-adjusting event?

a. A major customer liquidates its business after the end of the reporting period.
b. The entity announces a major restructuring after the end of the reporting period.
c. The settlement after the reporting period of a court case that confirms that the entity has a present
obligation at the end of reporting period.
d. The determination after the reporting period of the cost of asset purchased, or the proceeds from
asset sold, before the end of reporting period.

“For the Lord gives wisdom; from his mouth come knowledge and understanding.” (Proverbs 2:6)

Page 2 of 2