Page | 1

PFRS 1 First-time Adoption of PFRSs

5. Under PFRS 1, the early application of PFRSs that have not yet become effective as
of the current reporting period
QUIZ:
a. is required.
1. An entity that presents its first PFRS financial statements is referred to under PFRS b. is permitted, but not required.
1 as a c. is required, but not permitted.
a. first-timer. d. is prohibited.
b. first-time adopter.
6. PFRS 1 requires a first time adopter to do which of the following in the opening
c. PFRS novice.
PFRS statement of financial position?
d. first-time PFRSer.
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
2. PFRS 1 requires an entity to prepare and present an
recognition.
a. opening PFRS financial statements.
c. Reclassify items that it recognized in accordance with previous GAAP as one
b. opening PFRS statement of financial position.
type of asset, liability or component of equity, but are a different type of asset,
c. opening PFRS statement of profit or loss and other comprehensive income.
liability or component of equity in accordance with PFRSs.
d. opening notes to the financial statements.
d. Apply PFRSs in measuring all recognized assets and liabilities.
e. All of these
3. The date to transition to PFRSs is
a. the beginning of the earliest period for which an entity presents full
7. Retrospective application of accounting policies means
comparative information under PFRSs in its first PFRS financial statements.
a. as if PFRSs have been used all along.
b. the end of the earliest period for which an entity presents full comparative
b. as if PFRSs are used only in prior periods.
information under PFRSs in its first PFRS financial statements.
c. as if PFRSs are used only in the current period.
c. the beginning of the first PFRS reporting period.
d. restating the financial statements in order to correct all errors.
d. the end of the first PFRS reporting period.
e.

4. The statement of financial position of ABC Co. as of January 1, 20x4 included an PFRS 2 Share-based payments
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 QUIZ:
receivable which was actually written off on January 5, 20x4 (the 20x3 financial 1. Many shares and most share options are not traded in an active market. Therefore,
statements were authorized for issue on March 1, 20x4). ABC Co. could not have it is often difficult to arrive at a fair value of the equity instruments being issued.
foreseen this event on December 31, 20x3. Does ABC Co. need to revise its previous Which of the following option valuation techniques should not be used as a
estimate of bad debts as of January 1, 20x4 (date of transition) on December 31, 20x5 measure of fair value in the first instance?
(end of first PFRS reporting period)? a. Black-Scholes model.
a. No. The receipt of the information on January 5, 20x4 is accounted for b. Binomial model.
prospectively as a non-adjusting event after the reporting period. c. Monte-Carlo model.
b. Yes. The receipt of the information on January 5, 20x4 is accounted for d. Intrinsic value.
retrospectively as an adjusting event after the reporting period. (Adapted)
c. No. The event should be ignored because it is within the scope of the previous
GAAP and not the PFRSs. 2. Elizabeth, a public limited company, has granted 100 share appreciation rights to
d. Yes. Although, PFRS 1 does not require the adjustment, other PFRSs do. each of its 1,000 employees in January 20X4. The management feels that as of
 Page | 2

December 31, 20X4, 90% of the awards will vest on December 31, 20X6. The fair d. (478,000)
value of each share appreciation right on December 31, 20X4, is P10. What is the SOLUTION:
fair value of the liability to be recorded in the financial statements for the year 3. A {2,000,000 + [(6,000,000 – 3,500,000) x 40%]} – (6,000,000 – 3,500,00) = 500,000
ended December 31, 20X4?
a. P300,000
PFRS 5 Non-current assets Held for Sale and Discontinued Operations
b. P10 million
QUIZ:
c. P100,000 1. The statement of profit or loss includes which of the following?
d. P90,000 a. Revenue, cost of goods sold, distribution costs, general and administrative
SOLUTION: expenses and extraordinary items.
2. A (100 × 1000 × 90% × P10 × 1/3) b. Discontinued operations.
PFRS 3 Business Combinations c. Gains and losses arising from treasury share transactions.
d. Other comprehensive income.
QUIZ:
1. The “excess of the acquirer’s interest in the net fair value of acquiree’s identifiable
2. Assets that are classified as held for sale under PFRS 5 are
assets, liabilities, and contingent liabilities over cost” (formerly known as negative
a. required under PAS 36 to be tested for impairment annually.
goodwill) should be
b. amortized over a period not exceeding 5 years.
a. Amortized over the life of the assets acquired.
c. depreciated.
b. Reassessed as to the accuracy of its measurement and then recognized d. not depreciated.
immediately in profit or loss.
c. Reassessed as to the accuracy of its measurement and then recognized in 3. According to PFRS 5, gains and losses on remeasurement of assets held for sale are
retained earnings. a. recognized in profit or loss.
d. Carried as a capital reserve indefinitely. b. recognized in other comprehensive income.
(Adapted) c. recognized only for impairment losses.
d. not recognized.
2. The acquisition date is
a. the date on which the acquirer obtains control of the acquiree. 4. Which of the following statements is true regarding the accounting treatment of
b. the opening date. costs to sell under PFRS 5?
c. the date the acquirer transfers to the acquiree the consideration in a business a. Costs to sell are added to the fair value when determining the measurement
combination. basis for an asset held for sale.
b. Costs to sell are never discounted because held for sale assets should be sold
d. any of these
within one year.
c. Costs to sell are discounted if it is expected that the sale will be made beyond
3. On January 1, 20x1, ABC Co. acquired 60% interest in XYZ, Inc. for ₱2,000,000 cash.
one year.
ABC Co. incurred transaction costs of ₱100,000 in the business combination. ABC
d. a and c
Co. elected to measure NCI at the NCI’s proportionate share in XYZ, Inc.’s
identifiable net assets. The fair values of XYZ’s identifiable assets and liabilities at
5. According to PFRS 5, the assets and liabilities of a disposal group are presented
the acquisition date were ₱6,000,000 and ₱3,500,000, respectively. How much is the
a. as one line item in either current assets or current liabilities.
goodwill (gain on a bargain purchase)?
b. as one line item in either noncurrent assets or noncurrent liabilities.
a. 500,000
c. separately on the face of the statement of financial position.
b. 478,000 d. a or b
c. (500,000)
 Page | 3

PFRS 6 Exploration for and Evaluation of Mineral Resources PFRS 8 Operating Segments
QUIZ:
QUIZ:
1. Exploration and evaluation assets are initially measured at 1. ABC Co. has identified the following five operating segments: “Credit,” “Hotel,”
a. cost. “Transportation,” “Grocery,” and “Events planning.” ABC Co. treats the “Hotel”
b. revalued amount. and “Events planning” as a single segment for internal reporting purposes. Each
of the “Events planning” and “Transportation” segments does not qualify under
c. fair value.
any of the quantitative thresholds of PFRS 8. How should ABC Co. disclose its
d. a or b
reportable segments?
a. ABC Co. shall treat each of the “Hotel,” “Credit,” and “Grocery” as reportable
2. Exploration and evaluation assets are exploration and evaluation expenditures
segments. The other segments should not be disclosed.
recognized as
b. ABC Co. shall treat each of the “Hotel,” “Credit,” and “Grocery” as reportable
a. assets in accordance with the entity’s accounting policy.
segments. The other segments should be combined and disclosed in the “All
b. expenses in accordance with applicable PFRSs.
other segments” category.
c. assets in accordance with (a) above, subject to the limitations provided under
c. ABC Co. shall treat the “Hotel” and “Events planning” as a single reportable
PAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
segment and each of the “Credit” and “Grocery” segments also as reportable
d. any of these
segments. The “Transportation” segment shall be included in the “All other
PFRS 7 Financial Instruments: Disclosures segments” category.
QUIZ: d. ABC Co. shall treat the “Hotel” and “Events planning” as a single reportable
1. Mark Ngina’s Sari-sari Store has a sign that reads “Your credit is good but I need segment and combine all the other segments and report them under the “All
cash.” What type of risk is Mr. Mark trying to avoid by putting up that sign? other segments” category.
a. credit risk
2. An entity recently has acquired a new brand from a competitor company. The
b. market risk
brand qualifies as a component of an entity and represents a major line of business
c. liquidity risk
for which discrete financial information is available. This operating segment does
d. store risk 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
2. How does PFRS 7 define “liquidity risk”? operating segments of the entity. Which of the following statements is correct?
a. The risk that an entity will encounter difficulty in meeting obligations a. The entity can disclose this new segment separately if it is a distinguishable
associated with financial liabilities. component and is used by management in internal reporting even though it
b. The risk that an entity will encounter difficulty in disposing a financial asset does not meet the PFRS criteria.
due to lack of market liquidity. b. The entity cannot voluntarily disclose this new segment separately because
c. The risk that an entity will encounter difficulty in meeting cash flow needs PFRS 8 discourages voluntary disclosure of operating segments. Operating
due to cash flow problems. segments are reportable only if they either result from aggregation or qualify
d. The risk that an entity’s cash inflows will not be sufficient to meet the entity’s under any of the quantitative thresholds.
cash outflows. c. The entity can disclose this new segment separately only if it can be
(Adapted) 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.
 Page | 4

3. According to PFRS 8, a reportable operating segment is one which 3. If the entity’s business model’s objective is to hold assets in order to collect
a. management uses in making decisions about operating matters. contractual cash flows and cash flows are solely payments of principal and interest
b. results from aggregation of two or more segments and qualify under any of on the principal amount outstanding, the financial asset is classified
the quantitative thresholds. a. according to management’s intention of holding the securities.
b. as financial asset measured at amortized cost.
c. a and b
c. as financial asset measured at fair value through other comprehensive
d. none of these
income.
d. any of these
4. Which of the following is not among the quantitative thresholds under PFRS 8?
a. at least 10% of total revenues (external and internal). PFRS 10 Consolidated Financial Statements
b. at least 10% of the higher of total profits of segments reporting profits and QUIZ:
total losses of segments reporting losses, in absolute amount. Use the following information for the next two questions:
c. at least 10% of total assets (inclusive of intersegment receivables). Parent Co. acquires Subsidiary Co. on January 1, 20x1. The financial statements of
Parent and Subsidiary on the acquisition date are shown below:
d. at least 10% of total revenues (external only)
Parent Co. Subsidiary Co.
5. According to PFRS 8, disclosures for major customer shall be provided if revenues
from transactions with a single external customer amount to Cash in bank 12,000 6,000
Accounts receivable 36,000 14,400
a. at least 75% of the entity’s external and internal revenues.
Inventory 48,000 27,600
b. at least 75% of the entity’s external revenues.
Investment in subsidiary 90,000 -
c. 10% or more of the entity’s external revenues. Building, net 216,000 48,000
d. less than 10% of the entity’s external revenues. Total assets 402,000 96,000
PFRS 9 Financial Instruments

Accounts payable 60,000 7,200

QUIZ: Share capital 204,000 60,000
Share premium 78,000 -
1. 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 Retained earnings 60,000 28,800
minus the cumulative amortization using the effective interest method of any Total liabilities and equity 402,000 96,000
difference between that initial amount and the maturity amount and, for financial
assets adjusted for any loss allowance. Additional information:
● The carrying amounts of subsidiary’s net identifiable assets approximate their
a. cost c. amortized cost
acquisition-date fair values, except for the following:
b. carrying amount d. fair value
- Inventory, ₱37,200
- Building, net, ₱57,600
2. Which of the following is measured at fair value with fair value changes
recognized in profit or loss?
● The computations required under PFRS 3 resulted to the following:
a. Held to maturity investments
- Goodwill, ₱3,600
b. Financial assets designated at FVPL
- NCI in net assets, ₱21,600.
c. FVOCI
d. All of these
1. How much is the consolidated total assets on January 1, 20x1?
a. 428,600 c. 430,800
 Page | 5

b. 440,800 d. 465,800 PFRS 12 Disclosure of Interests in Other Entities

2. How much is the consolidated total equity on January 1, 20x1?

a. 336,600 c. 328,600 QUIZ:
b. 363,600 d. 336,800 1. 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
SOLUTION: significant influence over the arrangement.
1. C Solution: c. investments measured at fair value through other comprehensive income.
Entity A Entity B Consolidated
d. investments accounted for under the equity method.
Cash in bank 12,000 6,000 18,000
2. According to PFRS 12, interest in another entity refers to
Accounts rec. 36,000 14,400 50,400
a. only contractual involvement that exposes an entity to variability of returns
Inventory 48,000 27,600 (48K + 37.2K) 85,200 from the performance of another entity.
Inv. in sub. 90,000 - eliminated - b. only non-contractual involvement that exposes an entity to variability of
Building, net 216,000 48,000 (216K + 57.6K) 273,600 returns from the performance of another entity.

Goodwill Given c. contractual and non-contractual involvement that exposes an entity to

3,600
variability of returns from the performance of another entity.
Total assets 402,000 96,000 430,800
d. a typical customer-supplier relationship.

PFRS 13 Fair Value Measurement

Accounts payable 60,000 7,200 67,200

QUIZ:
Share capital 204,000 60,000 parent's only 204,000
1. Which of the following are not considered transaction costs or costs to sell?
Share premium 78,000 - parent's only a. commissions to brokers
78,000
b. levies by regulatory agencies and commodity exchanges
Retained earnings 60,000 28,800 parent's only 60,000
c. transfer taxes and duties
NCI in net assets Given 21,600
d. transport costs
Total liab. & equity 342,000 96,000 430,800
2. There are multiple active markets for a financial asset with different observable
market prices:
2. B 204,000 + 78,000 + 60,000 + 21,600 (see table above) = 363,600 Market Quoted Price Transaction Costs
A ₱76 ₱5
B ₱74 ₱2

There is no principal market for the financial asset. What is the fair value of the asset?
a. 71
b. 72
c. 74
d. 76
 Page | 6

Solution: 2. Assume the lease in problem #1 above qualifies for accounting under the recognition
2. The “most advantageous market” is Market B. The quoted price in this market, without exemption under PFRS 16. Which of the following statements is correct?
a deduction for transaction costs, is the fair value. a. Entity X recognizes annual depreciation of ₱80,061 on the right-of-use asset.
b. Entity X recognizes a lease liability of ₱252,314 at the lease commencement
PFRS 15 Revenue from Contracts with Customers date.
c. Entity X recognizes a lease liability of ₱200,000 at the lease commencement
QUIZ: date.
1. Arrange the following steps of revenue recognition in accordance with PFRS 15. d. Entity X recognizes lease expense of ₱100,000 in the first year of the lease.
I. Identify the performance obligations in the contract
II. Recognize revenue when (or as) the entity satisfies a performance obligation 3. Use the information in problem #1 above. Assume the lease is a finance lease. The
III. Determine the transaction price lessor will recognize a net investment in the lease at the lease commencement
IV. Identify the contract with the customer equal to
V. Allocate the transaction price to the performance obligations in the contract a. 240,183. c. 252,314.
a. IV, I, V, III, II c. III, IV, I, V, II b. 248,685 . d. 0.
b. IV, I, III, V, II d. IV, III, I, V, II
4. Use the information in problem #1 above. Assume the lease is an operating lease. The
2. Certain criteria must be met before a contract with a customer is accounted for lessor will recognize a net investment in the lease at the lease commencement
under PFRS 15. Which of the following precludes a contract from being accounted equal to
for under PFRS 15? c. 240,183. c. 200,000.
a. The consideration is collected in advanced. d. 248,685 . d. 0.
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. SOLUTION:
d. The contract is neither oral nor written but rather implied by the entity’s
business practices. 1. Solution:
Fixed payments 100,000
PFRS 16 Leases
Multiply by: PV of an ordinary annuity of ₱1 @10%, n=3 2.48685
Lease liability 248,685
QUIZ:
1. On January 1, 20x1, Entity X enters into a 3-year lease of equipment for an annual
rent of ₱100,000 payable at the end of each year. The equipment has a remaining
useful life of 10 years. The interest rate implicit in the lease is 10% while the lessee’s
incremental borrowing rate is 12%. Entity X uses the straight-line method of
depreciation. The relevant present value factors are as follows:
- PV of an ordinary annuity of ₱1 @10%, n=3………… 2.48685
- PV of an ordinary annuity of ₱1 @12%, n=3………… 2.40183

How much is the lease liability to be recognized by Entity X on initial recognition?

a. 240,183 c. 252,314
b. 248,685 d. 0
 Page | 7

c. reinsurance contacts held

d. insurance contracts with significant variability in their fulfillment cash flows.

5. 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.

PFRS 17 Insurance Contracts

QUIZ:
Use the following information for the next three questions:
Entity A, a manufacturing entity, obtains insurance against product liability from
Entity B, an insurance company. Entity B then cedes the insurance contact with Entity
C, another insurance company.

1. 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

2. 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

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

4. The "premium allocation approach" cannot be applied to which of the following

insurance contracts?
a. insurance contracts issued
b. reinsurance contracts issued