Testbank

to accompany

Applying International
Accounting Standards
by
Alfredson, Leo, Picker, Pacter & Radford
Prepared by
Victoria Wise

John Wiley & Sons Australia, Ltd 2006

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CHAPTER 10 Business combinations

Question 1
When determining the fair values to be used in accounting for a business combination, IFRS 3
Business Combinations, allows an acquirer how much time from the acquisition date in this
process?
A
B
C
D

1 month;
3 months;
12 months;
2 years.

Question 2
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, is not applicable to the
following assets:
A
B
C
D

property;
land and buildings;
financial assets that are already carried at fair value;
plant and equipment.

Question 3
The key characteristic for the classification of an asset as held for sale is that the carrying
amount of the asset must:
A
B
C
D

principally be recovered through a sale transaction;

principally be recovered through continuing use;
be lower than initial cost of the asset;
be higher than its net realisable value.

Question 4
The following criteria are used to determine whether an asset should be categorised as held for
sale:
I.
II.
III.
IV.

The asset should be available for immediate sale.

The asset should be available for sale at a future date yet to be determined.
The sale of the asset should be highly probable.
The sale of the asset is a possibility.

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VI.

There should be an active program to locate a buyer.

There need not be an active marketing program for the asset.
A
B
C
D

I and III only;

I, III and V only;
II, IV and VI only;
IV and VI only.

Question 5
When assets are held for sale they must be measured, under IFRS 5 Non-current Assets Held
for Sale and Discontinued Operations, using which of the following approaches?
A
B
C
D

lower of cost, and replacement cost;

lower of fair value, and net present value;
lower of carrying amount, and fair value less costs to sell;
fair value.

Question 6
Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, when an asset is
acquired in a business combination and is held for sale, it is initially recorded at:
A
B
C
D

initial cost;
fair value less costs to sell;
fair value;
net present value.

Question 7
While an asset is held for sale IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations, prohibits:
A
B
C
D

any further costs being capitalised as part of the asset;

the recognition of any maintenance costs for the asset in profit or loss of the period;
the recognition of any cash flows from the asset as operating cash flows;
the asset from being depreciated.

Question 8
For a particular component of an entity to be classified as a discontinued operation, it must be
held for sale, or already disposed of, and meet one of the following criteria:

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A
B
C
D

it must represent an insignificant part of a geographical are of operations;

it must be a subsidiary acquired exclusively with a view to resale;
it must be an immaterial component in one of the lines of the business operations;
it may not have any cash flows attributable to its activities.

Question 9
An individual non-current asset classified as held for sale must be disclosed:
A
B
C
D

amongst non-current inventories on a balance sheet;

amongst property, plant and equipment assets on the balance sheet;
separately from the other assets in the balance sheet;
only in the notes to the financial statements.

Question 10
When reporting the impact of discontinued operations, IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations, requires disclosure on the face of the income statement:
I
A single amount for the after tax profit or
loss of discontinued operations
The revenue and expenses of discontinued operations
The net cash flows attributable to discontinued operations

A
B
C
D

II

III

Yes Yes No
Yes No Yes
No Yes No

IV
No
No
No

I;
II;
III;
IV.

Question 11
Where assets are removed from the classification of held for sale, IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations, requires disclosure of the effects of the decision on
the results of operations for the period, in the:
A
B
C
D

income statement;
cash flow statement;
statement of changes in equity;
notes.

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Question 12
In relation to assets that have been sold during the reporting period, IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations, requires disclosure of the following items:
I.
II.
III.
IV.

A description of the non-current asset or disposal group.

The gain or loss recognised in profit or loss.
A description of the facts or circumstances of the sale.
The segment in which the non-current asset is reported.
A
B
C
D

I, II, III and IV;

I, III and IV only;
II, and IV only;
I, II and IV only.

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ANSWERS
1

10

11

12

Applying International Accounting Standards Chapter 10