QUESTION 12-19 Multiple Choice (PAS 34)

1. Which of the following statements is correct concerning interim financial reporting?

I. PAS 34 does not mandate which entities are required to publish interim financial
reports, how frequently, or how soon after the end of an interim period.
II. Entities that provide interim financial reports in conformity with generally accepted
accounting principles shall conform to the recognition, measurement and disclosure
principles set out in the standard.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

2. The Securities and Exchange Commission and Philippine Stock Exchange require entities covered
by the reportorial requirements of the Revised Securities Act to file.

a. Quarterly interim financial reports within 45 days after the end of each of the first three
quarters.
b. Quarterly interim financial reports within 30 days after the end of each of the first three
quarters.
c. Semi-annual interim financial reports within 45 days after the end of each of the first three
quarters.
d. Semi-annual interim financial reports within 30 days after the end of each of the first three
quarters.

3. Interim financial report means a financial report containing

a. A complete set of financial statements.

b. A condensed set of financial statements.
c. Either a complete set or condensed set of financial statements.
d. Neither a complete set nor condensed set of financial statements.

4. An interim financial report shall include, as a minimum, all of the following components, except

a. Condensed statement of financial position and statement of comprehensive income

b. Condensed statement of cash flows
c. Condensed statement of changes in equity
d. Accounting policies and explanatory notes

5. Publicly traded entities are encouraged to provide interim financial reports

 a. At least at the end of the half year and within 60 days of the end of the interim period.
b. Within a month of the half year-end.
c. On a quarterly basis.
d. Whenever the entity wishes.

6. Which is incorrect concerning presentation of comparative interim financial statements?

a. Statement of financial position as of the end of the current interim period and comparative
statement of financial position as of the end of the immediately preceding fiscal year.
b. Income statements for the current interim period and cumulatively for the current financial
year to date with comparative income statement for the immediately preceding year.
c. Statement of changes in equity cumulatively for the current financial year to date with
comparative income statement for the immediately preceding year.
d. Statement cash flows cumulatively for the current financial year to date with comparative
statement for the comparable year to date period of the immediately preceding year.

7. The financial year ends December 31 and the entity present financial statements in the
quarterly interim financial report on September 30, 2014. Which is an incorrect comparative
presentation?

a. Statement of financial position on September 30, 2014

Statement of financial position on December 31, 2013
b. Income statement for nine months ending September 30, 2014
Income statement for nine months ending September 30, 2013
Income statement for three months ending September 30, 2014
Income statement for three months ending September 30, 2013
c. Statement of cash flows for nine months ending September 30, 2014
Statement of cash flows for year ending December 31, 2013
d. Statement for changes in equity for nine months ending September 30, 2014
Statement of changes in equity for nine months ending September 30, 2013

8. Which of the following statements is incorrect concerning interim financial reporting?

a. To save time and cost, entities often use estimates to measure inventories at interim dates
to a greater extent than at annual reporting dates.
b. Depreciation for an interim period shall be based only on assets owned during the interim
period.
c. The cost of planned major periodic maintenance or overhaul that is expected to occur late in
the year is not anticipated for interim purposes, unless an event has caused the entity to
have a legal or constructive obligation.
 d. Charitable contribution, employee training costs and other costs that are expected to be
incurred irregularly during the financial year shall be accrued at the end of interim reporting
period.

9. A bonus is anticipated for interim purposes when

I. The bonus is a legal obligation or past practice would make the bonus a constructive
obligation for which the entity has no realistic alternative but make the payment.
II. A reliable estimate of the obligation can be made.

a. Both I and II
b. Neither I nor II
c. Either I and II
d. I only

ANSWERS 12-19

1. c 6. b
2. a 7. c
3. c 8. d
4. d 9. a
5. a 10. c

QUESTIONS 12-20 Multiple choice (IFRS)

1. Interim financial reports shall be published

a. Once a year at any time in that year.

b. Within a month of the half year-end.
c. Om a quarterly basis.
d. Whenever the entity wishes.

2. If an entity does not prepare interim financial reports

a. The year-end financial statements are deemed not to comply with PFRS.
b. The year-end financial statements’ compliance with PFRS is not affected.
c. The year-end financial statements will not be acceptable under local legislation.
d. Interim financial reports shall be included in the year-end financial statements.
 3. Interim financial reports shall include as a minimum

a. A complete set of financial statements.

b. A condensed set of financial statements and selected notes.
c. A statement of financial position and an income statement only.
d. A condensed statement of financial position, income statement and statement of cash
flows only.

4. There is a presumption that anyone reading interim financial reports shall

a. Understands all Philippine Financial Reporting Standards.

b. Have access to the records of the entity.
c. Have access to the most recent financial report.
d. Not make decisions based on the report.

5. An entity owns a number of farms that harvest produced seasonally. Approximately 80% of the
sales are in the period August to October. Because the business is seasonal, what does the
standard suggest?

a. Additional notes be written in the interim reports about seasonal nature of the business.
b. Disclosure of financial information for the latest and comparative 12-month period in
addition to the interim report.
c. Additional disclosure in the accounting policy note.
d. No additional disclosure.

ANSWERS 12-20

1. d
2. b
3. b
4. c
5. b

QUESTIONS 12-21 Multiple choice (IFRS)

1. Which of the following statements is incorrect regarding interim financial reporting?

a. Decline in inventory shall be deferred to future interim periods.

b. Use of the gross margin method for computing cost of goods sold must be disclosed.
 c. Costs and expenses not directly associated with interim revenue must be allocated to
interim periods on a reasonable basis.
d. Gains and losses that arise in an interim period shall be recognized in the interim period
in which they arise if they would not normally be deferred at year-end.

2. Which of the following statements in relation to an interim financial report is true?

I. An interim financial report may consist of a complete set of financial statements.

II. An interim financial report may consist of a condensed set of financial statements.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

3. Which of the following statements in relation to interim financial reporting is true?

I. It is necessary to count inventors in full at the end of each interim period.

II. The net realizable value of the inventories is determined by reference to selling
prices at the interim date.

e. I only
f. II only
g. Both I and II
h. Neither I nor II

4. An entity is preparing interim financial statements for the six months ended June 30, 2014. In
the interim financial statements for the six months ended June 30, 2014, a statement of
financial position on June 30, 2014 and a statement of comprehensive income for the six
months ended June 30, 2014 shall be presented. In addition, all of the following shall be
presented, except

a. Statement of financial position on June 30, 2013

b. Statement of financial position on December 31, 2013
c. Statement of comprehensive income for the half year ended June 30, 2013
d. Statements of cash flows for the half year ended June 30, 2013.
 5. An entity is preparing the financial statements for the first half of the current financial year
ending June 30.

One class of inventory has a cost per unit which is higher than net realizable value on June 30.
The business is seasonal and the net realizable value n December 31 is expected to be higher
than cost.

The entity’s budget for the year scheduled a major refurbishment project from April to June. For
legal reasons, the contract for refurbishment was not signed until July 15 on which date the
work was started.

Which of the following statements is true?

I. The inventory shall be carried at cost on June 30.

II. The cost of the major refurbishment project shall be accrued on June 30.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

ANSWERS 12-21

1. a
2. c
3. c
4. a
5. d

QUESTION 12-22 Multiple choice (AICPA Adapted)

1. Interim financial statements are usually presented on a

a. Monthly basis
b. Quarterly basis
c. Semiannual basis
d. Nine-month basis

2. For interim reporting, an inventory loss from a market decline in the second quarter shall be
recognized as a loss
 a. In the fourth quarter
b. Proportionately in each of the second, third and fourth quarters
c. Proportionately in each of the first, second, third and fourth quarters
d. In the second quarter

3. For external reporting purposes, it is appropriate to use estimated gross profit rate to determine
the cost of goods sold for

I. Interim reporting
II. Year-end reporting

a. I only
b. II only
c. Both I and II
d. Neither I nor II

4. For interim financial reporting, an expropriation gain occurring in the second season quarter
shall be

a. Recognized ratably over the last three quarters

b. Recognized ratably over all four quarters with the first quarter being restated
c. Recognized in the second quarter
d. Disclosed by footnote in the second quarter

5. Advertising costs incurred shall be deferred to provide an appropriate expense in each period
for

I. Interim reporting
II. Year-end reporting

a. I only
b. II only
c. Both I and II
d. Neither I nor II

6. An inventory loss from a market price decline occurred in the first quarter. However, in the third
quarter the inventory had a market price recovery that exceeded the interim financial reporting,
the peso amount of net inventory should
 a. Decrease in the first quarter by the amount of the market price decline and increase in the
third quarter by the amount of the market price recovery.
b. Decrease in the first quarter by the amount of the market price decline and increase in the
third quarter by the amount of decrease in the first quarter.
c. Not be affected in the first quarter and increase in the third quarter by the amount of the
market price recovery exceeded the amount of the market price decline.
d. Not be affected in either the first quarter or the third quarter.

7. Due to a decline in market price in the second quarter, an entity incurred an inventory loss. The
market price is expected to return to previous level by the end of the year. At the end of the
year, the decline had not reversed. When should the loss be reported in the interim income
statement?
a. Ratably over the second, third and fourth quarters
b. Ratably over the third and fourth quarters
c. In the second quarter only
d. In the fourth quarter only

8. How is income tax expense for the third quarter interim period computed?
a. The annual rate multiplied by the third quarter pretax earnings
b. The estimated tax for the first three quarters based on an annual rate less a similar estimate
for the first two quarters.
c. The rate applicable during the third quarter multiplied by four times the third quarter pretax
earnings
d. One-half of the difference between total estimated annual income tax expense and the
income tax for the first two quarters

9. Conceptually, interim financial statements can be described as emphasizing

a. Timeliness over reliability
b. Reliability over relevance
c. Relevance over comparability
d. Comparability over neutrality

10. Interim financial reporting should be viewed

a. As a special type of reporting that need not follow financial reporting standards
b. As useful only if activity is evenly spread throughout the year so that estimates are
unnecessary
c. As reporting for an integral part of an annual period
d. As reporting for an separate accounting period
Answer 12-22

1. b 6. b
2. d 7. c
3. a 8. b
4. c 9. a
5. d 10. c

QUESTIONS 12-23 Multiple choice (IAA)

1. The accountancy profession indicates that

a. All entities that issue an annual report should issue interim financial report
b. The integral view is the most appropriate approach in preparing interim financial report
c. A complete set of financial statements should be presented each time an interim period is
reported upon
d. The same accounting principles used for the annual reports should be employed for interim
financial report
2. Which of the following statements is incorrect regarding interim reporting?
a. PFRS requires a complete set of financial statements at the interim reporting date
b. PFRS requires entities to expense interim amount like advertising expenditures that could
benefit later interim periods
c. PFRS does not mention about the integral and independent view of interim financial
reporting
d. No accruals or deferrals in anticipation of future events during the year should be reported

3. Accounting policies are modified at interim dates for which of the following?
a. Revenue
b. Losses
c. Revenue and losses
d. None of these

4. Entities should disclose all of the following in interim reports, except

a. Basic and diluted earnings per share
b. Changes in accounting policy
c. Post-statement of financial position events
d. Seasonal revenue, cost or expenses

5. For interim financial reporting, the income tax expense for the second quarter should be
computed by using the
a. Statutory tax rate for the year
b. Effective tax rate expected to be applicable for the second quarter
 c. Effective tax rate expected to be applicable for the full year as estimated at the end of the
first quarter.
d. Effective tax rate expected to be applicable for the full year as estimated at the end of the
second quarter

ANSWER 12-23

1. d
2. a
3. d
4. c
5. a