MEET THE STANDARDS (Elimination)

EASY

1. PFRS 16 is effective:
a. For annual periods beginning on or before 1 January 2019
b. For annual periods beginning on or after 1 January 2019
c. For annual periods beginning on or after 1 January 2018
d. For semi-annual periods beginning on or before 1 July 2019

2. A lessee shall apply PFRS 16 to its leases :

I. Retrospectively to each prior reporting period presented applying PAS 8.
II. Retrospectively with the cumulative effect of initially applying PFRS 16 recognized
at the date of initial application in accordance with paragraphs C7-C13 of the
transition guidance.
a. Either I or II
b. Both I and II
c. I only
d. II only

3. On its effective date, PFRS 16 will supersede:

I. PAS 17 Leases
II. Philippine IFRIC 4 Determining whether an Arrangement contains a Lease
III. SIC-15 Operating Leases–Incentives
IV. SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease

a. I, II. III and IV

b. I, II and III only
c. I and II only
d. I only

4. True or False
Statement 1: Under PFRS 16, lease is defined as an agreement whereby the lessor conveys
to the lessee in return for a payment or series of payments the right to use an asset for an
agreed period of time.
Statement 2: If the customer have right to obtain substantially all the economic benefits
from use of asset throughout the period of use, the contract is possibly as lease.

a. True, True
b. True, False
c. False, True
d. False, False
5. The lessor’s right to substitute is substantive only if two of the following conditions are met:
I. The supplier has the practical ability to substitute alternative assets throughout the
period of use.
II. The customer has the practical ability to substitute alternative assets throughout the
period of use.
III. The supplier would benefit economically from the exercise of its right to substitute
the asset.
IV. The customer would benefit economically from the exercise of its right to substitute
the asset.
a. Both I and III
b. Both II and III
c. Both II and IV
d. Either I or II

6. True or false
Statement 1: Evaluation of whether a supplier’s substitution right is based on facts and
circumstances at inception of the contract.
Statement 2: If the customer cannot readily determine whether the supplier has a
substantive substitution right, the customer shall presume that any substitution right is not
substantive.
a. True, True
b. True, False
c. False, True
d. False, False

7. NACUT ANG QUESTION SO CHOICES LANG MERON #sorrynotsorry

a. The customer has the right to direct how and for what purpose asset is used throughout
period of use.
b. The supplier has the right to direct how and for what purpose asset is used throughout
period of use.
c. Neither the customer nor the supplier has the right to direct how and for what purpose
asset is used throughout period of use.
d. The customer have right to obtain substantially all the economic benefits from use of
asset through period of use.

8. On initial measurement, all of the following are relevant in computing the right-of-use asset,
except:
a. Discount Rate
b. Lease Term
c. Estimated useful life of the underlying asset
d. Lease payments
 9. True or false
Statement 1: A lessee elects not to apply the lessee accounting model in PFRS 16 (i.e. not
recognize right-of-use asset and lease liability) for short-term leases or leases for which the
underlying asset is of low value.
Statement 2: If a lessee applies short-term lease, it shall recognize the lease payments as an
expense both a straight-line basis over the lease term and another systematic basis.

a. True, True
b. True, False
c. False, True
d. False, False

10. True or false

Statement 1: The election for short-term leases shall be made by class of underlying asset to
which the right of use relates.
Statement 2: The election for leases for which the underlying asset is of low value can be
made on a lease-by-lease basis.
Statement 3: A lessee shall assess the value of an underlying asset based on the value of the
asset as of the commencement date.

a. All statements are true.

b. One statement is true.
c. One statement is false.
d. All statements are false.

ANSWERS

1. B
2. A
3. A
4. C
5. A
6. A
7. B
8. C
9. B
10. C
AVERAGE

1. For an entity’s financial statements to be presented fairly in conformity with generally

accepted accounting principles, the principles selected should:
a. Be applied on a basis consistent with those followed in the prior year.
b. Be approved by the Auditing Standards Council or the appropriate industry
subcommittee.
c. Reflect transactions in a manner that presents the financial statements within a range of
acceptable limits.
d. Match the principles used by most other entities within the entity’s particular industry.

2. The following statements are subject to your evaluation:

I. Per revised PAS19 on Employee Benefits, expected returns are replaced by recording
interest income in profit or loss, which is calculated using the expected rate of return.
II. A company may exclude a short-term obligation from current liabilities if the firm intends
to refinance the obligation on a long-term basis.
a. Both statements are correct.
b. Both statements are incorrect.
c. Only the first statement is correct.
d. Only the first statement is incorrect.

3. A graph is set up with “yearly depreciation” on the vertical axis and “time” on the horizontal
axis. Assuming linear relationships, how would the graphs for straight-line and sum-of-the-
years’-digits depreciation, respectively, be drawn?
a. Vertically and sloping down to right.
b. Vertically and sloping up to right.
c. Horizontally and sloping down to right.
d. Horizontally and sloping up to right.

4. The cost of purchasing patent rights for a product that might otherwise have seriously
competed with one of the purchaser’s patented products should be
a. charged off in the current period
b. amortized over the legal life of the purchased patent
c. added to the factory overhead and allocated to production of the purchaser’s product
d. amortized over the remaining estimated life of the original patent covering the product
whose market would have been impaired by competition from the newly patented
product.

5. According to IAS29 Financial reporting in hyperinflationary economies, which TWO of the

following are monetary items?
a. Trade payables
b. Inventories
c. Administration costs paid in cash
d. Loan repayable at par value
6. On 1 January 20X8 The Ebro Company commenced trading to provide key skills education
facilities in a region identified for technology development. Also on 1 January 20X8, the
company received two grants from its government for setting up its operations in this
location:
Grant (a) – was paid to give financial assistance for start-up costs already incurred.
Grant (b) – was paid to subsidize the costs of purchasing computer software over
the five-year period. The company is almost certain to keep the facilities
operational for the next five years.
The company’s accounting year end is 31 December. Are the following statements
concerning recognition of the income from the two government grants true or false,
according to IAS20 Government grants and government assistance?
(1) Income from Grant (a) should be recognized in full on receipt in 20X8.
(2) Income from Grant (b) should be recognized in full at the end of 5 years.

Statement (1) Statement (2)

a. False False
b. False True
c. True False
d. True True

7. The Hopkins Company is a manufacturing company. The cost per unit of an item of
inventory is shown on its card as follows:

PHP
Materials 30
Production labor costs 33
Production overheads 12
General administrative costs 10
Marketing costs 5
According to IAS2 Inventories, what is the value of one completed item of inventory
in Hopkin’s statement of financial position?

a. PHP63
b. PHP85
c. PHP75
d. PHP90

8. The Coral Company accounts for non-current assets using the cost model. On 20 July 20X7
Coral classified a non-current asset as held for sale in accordance with IFRS Non-current
assets held for sale and discontinued operations. At that date the asset’s carrying amount was
PHP14,500, its fair value was estimated at PHP21,500 and the costs to sell at PHP1,450. The
asset was sold on 18 October 20X7 for PHP21,200. In accordance with IFRS5, at what
amount should the asset be stated in Coral’s statement of financial position at 30 September
20X7?
a. PHP20,050
 b. PHP21,500
c. PHP21,200
d. PHP14,500

9. Given are components of defined benefit costs and their recognition. Which of the following
components are properly recognized:
a. Service Costs are attributable to the current and past periods are recognized in Profit or
Loss
b. Actuarial Gains and Losses are recognized in Profit or Loss
c. Some changes in the effect of the asset ceiling are recognized in Other Comprehensive
Income and reclassified to Profit or Loss in a subsequent period
d. Only a and c are properly recognized

10. Which of the following statements is correct when computing the lease liability?
a. The present value of the exercise price of a purchase option at the end of the lease term
is added if the entity is not reasonably certain to exercise such option.
b. It includes only the fixed lease payments if the entity is reasonably certain to terminate.
c. The useful life of the underlying asset is not directly relevant in computing the lease
liability.
d. If the entity is reasonably certain to terminate the lease, the lease liability is equal to the
present value of all fixed lease payments plus the present value of the payment of
penalty for terminating the lease, whether the entity is reasonably certain to terminate
or not.

ANSWERS

1. C
2. B
3. C
4. D
5. A
6. C
7. C
8. D
9. A
10. C
DIFFICULT

1. After the commencement date, a lessee shall measure the lease liability by doing the
following, except:
a. increasing the carrying amount to reflect interest on the lease liability
b. reducing the carrying amount to reflect the lease payments made
c. remeasuring the carrying amount to reflect any reassessment or lease modifications or
to reflect revised in-substance fixed lease payments, as applicable
d. None of the above

2. After the commencement date, the lessee shall recognize the following within profit or loss:

Interest Depreciation Variable lease payments not

Expense Expense included in the measurement of the
lease liability
a. Yes Yes Yes
b. Yes Yes No
c. Yes No Yes
d. No Yes Yes

3. Under PFRS 16, a lessee shall remeasure the lease liability by discounting the revised lease
payments using a revised discount rate, if:
I. There is a change in the lease term.
II. There is a change in the assessment of an option to purchase the underlying asset.
III. There is a change in liquidity risk of the lease liability.

a. Either I or II
b. Either II or III
c. Both I and II
d. Both II and III

4. A lessee shall account for a lease modification as a separate lease if:

I. The modification increases the scope of lease by adding the right to use one
or more underlying assets.
II. The consideration for the lease increases by an amount commensurate with
the stand-alone price for the increase in scope and any appropriate
adjustments to that stand-alone price to reflect the circumstances of the
particular contract.
III. The change in lease payments results from a change in floating interest
rates.

a. Either I or II
b. Either II or III
c. Both I and II
 d. Both II and III

5. For a lease modification that is not accounted for as a separate lease, the lessee shall
account for the remeasurement of the lease liability by:
I. Decreasing the carrying amount of the right-to-use asset to reflect the partial
or full termination of the lease for lease modifications that decrease the
scope of the lease.
II. Recognizing in profit or loss any gain or loss relating to the partial or full
termination of the lease.
III. Making a corresponding adjustment to the right-of-use asset for all other
lease modifications.
a. All statements are true.
b. One statement is true.
c. One statement is false.
d. All statements are false.

6. In the statement of cash flows, the lease shall present the following cash items under:

Principal portion of Interest portion of the Short-term lease payments,

the lease liability lease liability payments for leases of low-
value assets
a. Operating Operating or Financing Operating
b. Financing Operating Operating
c. Financing Operating or Financing Operating
d. Financing Financing Financing

7. As defined under PFRS 16, paragraph 28, Variable lease payments that depend on an index
or a rate include all of the following examples, except:
a. Payments linked to a consumer price index.
b. Payments linked to a benchmark interest rate (such as LIBOR).
c. Payments that vary to reflect changes in market rental rates.
d. Payments that depend on the future events (such as Sales).

8. After the commencement date, a lessee shall measure the right-of-use asset applying any of
the following:
I. Cost model under PAS 16, Property, plant and equipment.
II. Revaluation model under PAS 16, Property, plant and equipment
III. Fair value model under PAS 40, Investment Property

Cost Model Revaluation Model Fair Value Model

a. Yes Yes Yes
b. Yes Yes No
c. Yes No Yes
d. No Yes Yes
 9. Statement 1: If the lease transfers ownership of the underlying asset to the lessee by the end
of the lease term or if the cost to the right-of-use asset reflects that the lessee will exercise a
purchase option, the lessee shall depreciate the right-of-use asset from the commencement
date to the end of the useful life of the underlying asset or the end of the lease term,
whichever is shorter.
Statement 2: If the lease do not transfers ownership of the underlying asset to the lessee by
the end of the lease term or if the cost of the right-of-use asset do not reflect that the lessee
will exercise a purchase option, the lessee shall depreciate the right-of-use asset from the
commencement date to the end of the useful life of the right-of-use asset.
Statement 3: Right-of-use asset is not within the scope of PAS 36 Impairment of Assets.
a. All statements are true.
b. One statement is true
c. One statement is false
d. All statements are false

10. At the commencement date, the lease payments included in the measurement of the lease
liability comprise the following payments for the right to use the underlying asset during
the lease term that are not paid at the commencement date, except:
a. Fixed payments (including in-substance fixed payments) less any lease incentives
receivable.
b. Variable lease payments that depend on an index or a rate, initially measures using the
index or rate as at commencement date.
c. The exercise price of a purchase option, whether the lease is reasonably certain to
exercise that option or not.
d. Payments of penalties for terminating the lease, if the lease term reflects the lessee
exercising an option to terminate the lease.

ANSWERS

1. D
2. A
3. A
4. C
5. A
6. C
7. D
8. A
9. D
10. C
FINALS ROUND

1. When a full set of general-purpose financial statements are presented, comprehensive

income and its components should
a. Appear as a part of discontinued operations.
b. Be reported net of related income tax should effect, in total and individually.
c. Appear in a supplemental schedule in the notes to financial statements.
d. Be displayed in a financial statement that has the same prominence as other financial
statements.

2. Which is an acceptable method for reporting comprehensive income under IFRS?

a. One comprehensive income statement.
b. Two statements, an income statement and a comprehensive income statement.
c. In the statement of changes in equity.
d. One comprehensive income statement or two statements, an income statement and a
comprehensive income statement.

3. Which of the following is true about financial statement requirements?

a. Prior year comparative financial statements are required.
b. Income statements for three years are required.
c. Statements of financial position for three years are required.
d. There are no specific requirements regarding comparative financial statements.

4. Which of the following items would cause earnings to differ from comprehensive income?
a. Unrealized loss on investment classified as available for sale.
b. Unrealized loss on investment classified as trading.
c. Loss on exchange of similar asset.
d. Loss on exchange of dissimilar asset.

5. Which of the following statements conforms to the realization concept?

a. Equipment depreciation was assigned to a production department and then to product
unit cost.
b. Depreciated equipment was sold in exchange for a note receivable.
c. Cash was collected on accounts receivable.
d. Product unit costs were assigned to cost of goods sold when the units were sold.

6. A voluntary change in accounting method may only be made if

a. A new standard mandates the change in method.
b. Management prefers the new method.
c. The new method provides reliable and more relevant information.
d. There is no prohibition for the change.

7. The loss on disposal of a discontinued component should

a. Exclude associated employee relocation cost
 b. Exclude operating loss for the period.
c. Include associated employee termination cost
d. Exclude associated lease cancelation cost

8. An entity recently moved to a new building. The old building is being actively marketed for
sale, and the entity expects to complete the sale in four months. Each of the following
statements is correct regarding the old building, except
a. It will be reclassified as an asset held for sale.
b. It will be classified as a current asset.
c. It will no longer be depreciated.
d. It will be valued at historical cost.

9. Financial statements shall include disclosures of material transactions between related

parties, except
a. Nonmonetary exchanges by affiliates.
b. Sales of inventory by a subsidiary to the parent.
c. Expense allowances for executives which exceed normal business practice.
d. An entity’s agreement to act as surety for a loan to the chief executive officer.

10. What is the purpose of information presented in notes to financial statements?

a. To provide disclosures required by generally accepted accounting principles.
b. To correct improper presentation in the financial statements.
c. To provide recognition of amounts not included in the totals of the financial statement.
d. To present management responses to auditor comments.

11. Which is true about the revaluation model for valuing plant, property and equipment?
a. Revaluation of assets must be made on the last day of the fiscal year.
b. Revaluation of assets must be made on the same date each year.
c. There is no rule for the frequency or date of revaluation.
d. Revaluation of assets must be made every two years.

12. An entity uses the fair value model for reporting investment property. Which of the
following statements is true?
a. Changes in fair value are reported in profit or loss in the current period
b. Changes in fair value are reported in other comprehensive income for the period
c. Changes in fair value are reported as an extraordinary gain in the income statement
d. Changes in fair value are reported as deferred revenue for the period

13. When accounting for property, plant and equipment, an entity

a. Must use the cost model for presenting the assets
b. May elect to use the cost model or the revaluation model on any individual asset.
c. May elect to use the cost model or the revaluation model on any asset class.
d. Must use the cost model for land
14. An entity that acquires an intangible asset may use the revaluation model subsequent
measurement only if
a. The useful life of the intangible asset can be reliably determined.
b. An active market exists for the intangible asset.
c. The cost of the intangible asset can be measures reliably.
d. The intangible asset is a monetary asset.

15. Which is a criterion that must be met in order for an item to be recognized as an intangible
asset other than goodwill?
a. The fair value can be measured reliably.
b. The item is part of the activities aimed at gaining new scientific or technical knowledge.
c. The item is expected to be used in the production or supply of goods or services
d. The item is identifiable and lacks physical substance.

16. Which of the following statements is true regarding interim reporting?

a. The discrete view is required for interim financial statements.
b. Interim reports are required on a quarterly basis.
c. Interim reports are not required.
d. Interim reports require the preparation of only a statement of comprehensive income
and a statement of financial position.

17. In financial reporting for segment of a business, an entity shall disclose all of the following,
except
a. Types of products and services from which each reportable segment derives revenue.
b. The title of the chief operating decision maker of each reportable segment.
c. Factors used to identify the reportable segments.
d. The basis of measurement of segment profit or loss and segment assets.

18. For segment reporting purposes, which tests must be applied to determine if a component
is a reportable operating segment?
a. Revenue test and asset test
b. Revenue test, asset test and profit or loss test
c. Revenue test, asset test and expense test
d. Revenue test, asset test and cash flow test

19. The most relevant measure of liabilities at initial recognition and fresh start measurement
should always reflect
a. The expectation of the management
b. Historical cost
c. The credit standing of the entity
d. The single most likely minimum or maximum possible amount
20. In calculating present value in a situation with a range of possible outcomes all discounted
using the same interest rate, the expected present value would be
a. The most-likely outcome
b. The maximum outcome
c. The minimum outcome
d. The sum of probability-weighted present values

21. Which is a true statement for electing the fair value option for valuing bonds payable?
a. The effective interest method of amortization must be used to calculate interest
expense.
b. Discount or premium is disclosed in the notes to the financial statements.
c. The fair value of the bond and the principal obligation value must be disclosed.
d. If the fair value option is elected, it must be applied to all bonds

22. What method may be used to report the bonds payable at year-end?
a. Amortized cost
b. Fair value through other comprehensive income
c. Amortized cost and fair value through other comprehensive income
d. Amortized cost and fair value through profit or loss

23. Issued convertible bonds are

a. Separated into debt and equity components with the liability component recorded at
fair value and the residual assigned to the equity component
b. Always recorded using the fair value option
c. Recorded at face value for the liability along with the associated premium or discount
d. Recorded at face value without consideration of a premium or discount.

24. Which of the following methods is used in IFRS to account for defined benefit plans?
a. Projected unit credit method
b. Benefit-years-of-service method
c. Accumulated benefits method
d. Vested years of service method

25. An entity has several pension plans covering various classes of employees. When may the
entity net assets and liabilities of the various plans?
a. Assets and liabilities may always be netted.
b. Assets and liabilities may be netted when there is a legally enforceable right to use the
assets of one plan to settle the obligations of another plan.
c. When the estimated cash inflows and outflows are similar in pattern.
d. When the assets and liabilities are both financial.
ANSWERS

1. D
2. D
3. A
4. A
5. B
6. C
7. C
8. D
9. B
10. A
11. C
12. A
13. –
14. B
15. A
16. C
17. –
18. B
19. C
20. D
21. C
22. D
23. A
24. A
25. B