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1. An entity that presents its first PFRS financial statements is referred to under PFRS 1 as a
a. first-timer.
b. first-time adopter.
c. PFRS novice.
d. first-time PFRSer.

2. PFRS 1 requires an entity to prepare and present an

a. opening PFRS financial statements.
b. opening PFRS statement of financial position.
c. opening PFRS statement of profit or loss and other comprehensive income.
d. opening notes to the financial statements.

3. The date to transition to PFRSs is

a. the beginning of the earliest period for which an entity presents full comparative
information under PFRSs in its first PFRS financial statements.
b. the end of the earliest period for which an entity presents full comparative information
under PFRSs in its first PFRS financial statements.
c. the beginning of the first PFRS reporting period.
d. the end of the first PFRS reporting period.

4. The statement of financial position of ABC Co. as of January 1, 20x4 included an allowance for
bad debts computed using the “aging of accounts receivable” method. The “over 120 days”
category in the aging schedule included a ₱200,000 receivable which was actually written off on
January 5, 20x4 (the 20x3 financial statements were authorized for issue on March 1, 20x4). ABC
Co. could not have foreseen this event on December 31, 20x3. Does ABC Co. need to revise its
previous estimate of bad debts as of January 1, 20x4 (date of transition) on December 31, 20x5 (end
of first PFRS reporting period)?
a. No. The receipt of the information on January 5, 20x4 is accounted for prospectively as a
non-adjusting event after the reporting period.
b. Yes. The receipt of the information on January 5, 20x4 is accounted for retrospectively as an
adjusting event after the reporting period.
c. No. The event should be ignored because it is within the scope of the previous GAAP and
not the PFRSs.
d. Yes. Although, PFRS 1 does not require the adjustment, other PFRSs do.

5. Under PFRS 1, the early application of PFRSs that have not yet become effective as of the current
reporting period
a. is required.
b. is permitted, but not required.
c. is required, but not permitted.
d. is prohibited.

6. PFRS 1 requires a first time adopter to do which of the following in the opening PFRS statement of
financial position?

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a. Recognize all assets and liabilities whose recognition is required by PFRSs.

b. Not recognize items as assets or liabilities if PFRSs do not permit such recognition.
c. Reclassify items that it recognized in accordance with previous GAAP as one type of asset,
liability or component of equity, but are a different type of asset, liability or component of
equity in accordance with PFRSs.
d. Apply PFRSs in measuring all recognized assets and liabilities.
e. All of these

7. Retrospective application of accounting policies means

a. as if PFRSs have been used all along.
b. as if PFRSs are used only in prior periods.
c. as if PFRSs are used only in the current period.
d. restating the financial statements in order to correct all errors.

8. The “excess of the acquirer’s interest in the net fair value of acquiree’s identifiable assets,
liabilities, and contingent liabilities over cost” (formerly known as negative goodwill) should be
a. Amortized over the life of the assets acquired.
b. Reassessed as to the accuracy of its measurement and then recognized immediately in profit
or loss.
c. Reassessed as to the accuracy of its measurement and then recognized in retained earnings.
d. Carried as a capital reserve indefinitely.
(Adapted)

9. The acquisition date is

a. the date on which the acquirer obtains control of the acquiree.
b. the opening date.
c. the date the acquirer transfers to the acquiree the consideration in a business combination.
d. any of these

10. Which of the following statements is true regarding the accounting treatment of costs to sell
under PFRS 5?
a. Costs to sell are added to the fair value when determining the measurement basis for an
asset held for sale.
b. Costs to sell are never discounted because held for sale assets should be sold within one
year.
c. Costs to sell are discounted if it is expected that the sale will be made beyond one year.
d. a and c

11. According to PFRS 5, the assets and liabilities of a disposal group are presented
a. as one line item in either current assets or current liabilities.
b. as one line item in either noncurrent assets or noncurrent liabilities.
c. separately on the face of the statement of financial position.
d. a or b

12. Exploration and evaluation assets are initially measured at

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a. cost.
b. revalued amount.
c. fair value.
d. a or b

13. Exploration and evaluation assets are exploration and evaluation expenditures recognized as
a. assets in accordance with the entity’s accounting policy.
b. expenses in accordance with applicable PFRSs.
c. assets in accordance with (a) above, subject to the limitations provided under PAS 8
Accounting Policies, Changes in Accounting Estimates and Errors.
d. any of these

14. Mark Ngina’s Sari-sari Store has a sign that reads “Your credit is good but I need cash.” What
type of risk is Mr. Mark trying to avoid by putting up that sign?
a. credit risk
b. market risk
c. liquidity risk
d. store risk

15. How does PFRS 7 define “liquidity risk”?

a. The risk that an entity will encounter difficulty in meeting obligations associated with
financial liabilities.
b. The risk that an entity will encounter difficulty in disposing a financial asset due to lack of
market liquidity.
c. The risk that an entity will encounter difficulty in meeting cash flow needs due to cash flow
problems.
d. The risk that an entity’s cash inflows will not be sufficient to meet the entity’s cash outflows.
(Adapted)

16. ABC Co. has identified the following five operating segments: “Credit,” “Hotel,”
“Transportation,” “Grocery,” and “Events planning.” ABC Co. treats the “Hotel” and “Events
planning” as a single segment for internal reporting purposes. Each of the “Events planning”
and “Transportation” segments does not qualify under any of the quantitative thresholds of
PFRS 8. How should ABC Co. disclose its reportable segments?
a. ABC Co. shall treat each of the “Hotel,” “Credit,” and “Grocery” as reportable segments. The
other segments should not be disclosed.
b. ABC Co. shall treat each of the “Hotel,” “Credit,” and “Grocery” as reportable segments. The
other segments should be combined and disclosed in the “All other segments” category.
c. ABC Co. shall treat the “Hotel” and “Events planning” as a single reportable segment and
each of the “Credit” and “Grocery” segments also as reportable segments. The
“Transportation” segment shall be included in the “All other segments” category.
d. ABC Co. shall treat the “Hotel” and “Events planning” as a single reportable segment and
combine all the other segments and report them under the “All other segments” category.

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17. An entity recently has acquired a new brand from a competitor company. The brand qualifies as
a component of an entity and represents a major line of business for which discrete financial
information is available. This operating segment does not meet any of the threshold criteria for a
reportable segment. Furthermore, this segment is unique and does not share similar
characteristics with the other operating segments of the entity. Which of the following
statements is correct?
a. The entity can disclose this new segment separately if it is a distinguishable component and
is used by management in internal reporting even though it does not meet the PFRS criteria.
b. The entity cannot voluntarily disclose this new segment separately because PFRS 8
discourages voluntary disclosure of operating segments. Operating segments are reportable
only if they either result from aggregation or qualify under any of the quantitative
thresholds.
c. The entity can disclose this new segment separately only if it can be aggregated with another
operating segment and the combined segment qualifies in all of the quantitative thresholds.
d. The entity can disclose this new segment separately only if it can be aggregated with another
operating segment and the combined segment qualifies in any of the quantitative thresholds.

18. According to PFRS 8, a reportable operating segment is one which

a. management uses in making decisions about operating matters.
b. results from aggregation of two or more segments and qualify under any of the quantitative
thresholds.
c. a and b
d. none of these

19. Which of the following is not among the quantitative thresholds under PFRS 8?
a. at least 10% of total revenues (external and internal).
b. at least 10% of the higher of total profits of segments reporting profits and total losses of
segments reporting losses, in absolute amount.
c. at least 10% of total assets (inclusive of intersegment receivables).
d. at least 10% of total revenues (external only)

20. According to PFRS 8, disclosures for major customer shall be provided if revenues from
transactions with a single external customer amount to
a. at least 75% of the entity’s external and internal revenues.
b. at least 75% of the entity’s external revenues.
c. 10% or more of the entity’s external revenues.
d. less than 10% of the entity’s external revenues.

21. According to PFRS 9, it is the amount at which a financial asset or a financial liability is
measured at initial recognition minus principal repayments, plus or minus the cumulative
amortization using the effective interest method of any difference between that initial amount
and the maturity amount and, for financial assets adjusted for any loss allowance.
a. cost c. amortized cost
b. carrying amount d. fair value

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22. Which of the following is measured at fair value with fair value changes recognized in profit or
loss?
a. Held to maturity investments
b. Financial assets designated at FVPL
c. FVOCI
d. All of these

23. If the entity’s business model’s objective is to hold assets in order to collect contractual cash
flows and cash flows are solely payments of principal and interest on the principal amount
outstanding, the financial asset is classified
a. according to management’s intention of holding the securities.
b. as financial asset measured at amortized cost.
c. as financial asset measured at fair value through other comprehensive income.
d. any of these

24. PFRS 12 applies to

a. contracts relating to post-employment benefit plans.
b. interest in joint arrangements that does not give the entity joint control or significant
influence over the arrangement.
c. investments measured at fair value through other comprehensive income.
d. investments accounted for under the equity method.

25. According to PFRS 12, interest in another entity refers to

a. only contractual involvement that exposes an entity to variability of returns from the
performance of another entity.
b. only non-contractual involvement that exposes an entity to variability of returns from the
performance of another entity.
c. contractual and non-contractual involvement that exposes an entity to variability of returns
from the performance of another entity.
d. a typical customer-supplier relationship.

26. Which of the following are not considered transaction costs or costs to sell?
a. commissions to brokers
b. levies by regulatory agencies and commodity exchanges
c. transfer taxes and duties
d. transport costs

27. According to PFRS 14, rate-regulation is

a. a framework for establishing the prices that can be charged to customers for goods or
services and that framework is subject to oversight and/or approval by a rate regulator.
b. the balance of any expense (or income) account that would not be recognized as an asset or a
liability in accordance with other Standards, but that qualifies for deferral because it is
included, or is expected to be included, by the rate regulator in establishing the rate(s) that
can be charged to customers.

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c. an authorized body that is empowered by statute or regulation to establish the rate or a

range of rates that bind an entity. The rate regulator may be a third-party body or a related
party of the entity, including the entity’s own governing board, if that body is required by
statute or regulation to set rates both in the interest of the customers and to ensure the
overall financial viability of the entity.
d. all of these

28. According to PFRS 14, an entity presents regulatory deferral accounts in the statement of
financial position
a. showing those with debit balances separately from those with credit balances.
b. showing only the net debit or the net credit balance of the accounts.
c. a or b, as a matter of accounting policy choice
d. An entity shall not present regulatory deferral accounts in the statement of financial position,
but only disclose them in the notes.

29. Arrange the following steps of revenue recognition in accordance with PFRS 15.
I. Identify the performance obligations in the contract
II. Recognize revenue when (or as) the entity satisfies a performance obligation
III. Determine the transaction price
IV. Identify the contract with the customer
V. Allocate the transaction price to the performance obligations in the contract
a. IV, I, V, III, II c. III, IV, I, V, II
b. IV, I, III, V, II d. IV, III, I, V, II

30. Certain criteria must be met before a contract with a customer is accounted for under PFRS 15.
Which of the following precludes a contract from being accounted for under PFRS 15?
a. The consideration is collected in advanced.
b. The contract is made orally.
c. The contract does not result to a change in the risk, timing or amount of the entity’s future
cash flows.
d. The contract is neither oral nor written but rather implied by the entity’s business practices.

31. How does Entity B account for the insurance contract with Entity A?
a. General model
b. Premium Allocation Approach
c. a or b
d. Not accounted for under PFRS 17

32. How does Entity C account for the insurance contract ceded by Entity B?
a. General model
b. Premium Allocation Approach
c. a or b
d. Modification to general model for reinsurance contracts held

33. How does Entity B account for the insurance contract ceded to Entity C?

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a. General model
b. Premium Allocation Approach
c. a or b
d. Modification to general model for reinsurance contracts held

34. The "premium allocation approach" cannot be applied to which of the following insurance
contracts?
a. insurance contracts issued
b. reinsurance contracts issued
c. reinsurance contacts held
d. insurance contracts with significant variability in their fulfillment cash flows.

35. The unearned profit from a group of insurance contracts is referred to under PFRS 17 as
a. fulfillment cash flows.
b. contractual service margin.
c. onerous contracts.
d. discretionary participation feature.

36. Entity A (customer) enters into a contract with Entity B (supplier) for the use of a data
processing equipment. According to the contract, Entity A shall operate the equipment only in
accordance with the standard operating procedures stated in the accompanying user’s manual.
In assessing the existence of a lease, does Entity A have the right to direct the use of the asset?
a. No, because the asset’s use is restricted.
b. Yes, because Entity A has the right to direct how and for what purpose the asset is used.
c. Yes, because the asset’s use is predetermined and Entity B is precluded from changing that
predetermined use.
d. Maybe yes, maybe no, but exactly I don’t know.

37. Which of the following is not one of the criteria when determining whether a contract is or
contains a lease?
a. Identified asset
b. Identified liability
c. Right to obtain substantially all of the economic benefits from use of an identified asset
throughout the period of use
d. Right to direct the use of the identified asset throughout the period of use

38. Which of the following statements is correct regarding the accounting for leases?
a. The lessor depreciates the leased asset under a finance lease.
b. The lessee depreciates the leased asset under a “short-term” or a “low-valued asset” lease.
c. When discounting lease payments the lessor and the lessee use the interest rate implicit in
the lease.
d. An entity can never be both a lessor and a lessee of a same leased asset.

39. A lessor’s gross investment in a finance lease is computed as

a. lease payments plus unguaranteed residual value

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b. present value of (a)

c. difference between (a) and (b)
d. sum of (a) and (b)

40. A lessor’s unearned interest income in a finance lease is computed as

a. lease payments plus unguaranteed residual value
b. present value of (a)
c. difference between (a) and (b)
d. sum of (a) and (b)

41. Which of the following does not correctly relate to the accounting for leases?
a. The underlying asset in a lease contract is recognized by the lessee in its financial statements.
b. The lessor recognizes a finance lease receivable equal to the net investment in a finance lease.
c. A manufacturer or dealer lessor recognizes gross profit or loss on commencement of a
finance lease in accordance with its policy for outright sales.
d. The lessor recognizes lease payments receivable from an operating lease as income in the
period earned.
e. The lessor continues to recognize an asset subject to a finance lease in its financial
statements.

42. Regarding the accounting for the residual value of a leased asset, which of the following
statements is incorrect?
a. A lessee accounts for a residual value only if it is guaranteed.
b. A lessor accounts for a residual value only if it is guaranteed.
c. A lessor accounts for a residual value whether guaranteed or not.
d. Both lessee and lessor will account for a residual value only if the leased asset reverts back to
the lessor.

43. Under operating leases, lessors

a. recognize rent income using a straight line basis, unless another method is more appropriate.
b. recognize interest income using the effective interest method.
c. recognize different amounts of rent income each year depending on the contractual
payments
d. any of these

44. Security deposits that are refundable

a. are treated as unearned income by lessors under an operating lease.
b. are not discounted because they are normally of a short-term nature
c. are treated as receivable by lessees and as payable by lessors.
d. are discounted only by lessees but not by lessors

45. If the lessor recognizes rent income (lease income), then the lease must have been classified as
a. finance lease c. a or b
b. operating lease d. none of these

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46. Which of the following statements is false regarding the accounting for leases?
a. The lessor may not use the straight line basis for recognizing lease income under an
operating lease if another systematic basis is more representative of the pattern in which
benefit from the use of the underlying asset is diminished.
b. The amount of lease income recognized each year under an operating lease is typically
constant even though the contractual payments increase every year by a certain amount
specified in the contract.
c. It is possible that the lessor does not depreciate the leased asset even if the lease is classified
as an operating lease.
d. Under an operating lease, the lessor capitalizes initial direct costs. These costs will increase
the lease income each year.

47. Which of the following is correct regarding the accounting for operating leases?
a. A lessor under an operating lease may classify the lease as either direct operating lease or
sales type operating lease.
b. A lessor includes a rent collected in advance as part of the cost of the leased asset.
c. A lessor includes initial direct costs incurred on the operating lease as part of the cost of the
leased asset to be recognized in profit or loss on the same basis as rent income is recognized.
d. A lessor includes initial direct costs incurred on the operating lease as part of the cost of the
leased asset to be recognized in profit or loss on the same basis as depreciation expense is
recognized

“From the ends of the earth I call to you, I call as my heart grows faint; lead me to the rock that is higher than
I.” (Psalms 61:2)

END OF EXAMINATION!

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