1-2

PFRS 13 Fair Value Measurements

Q-A
1. Does Fair Value is not adjusted to any transport cost but adjusted to any transaction cost?
Answer: No. Fair value is adjusted in any transport cost and not on transaction cost.
2. If Entity’s Active Market 1 consist
Market Price P 100,000
Transport Cost 10,000
Transaction Cost 5,000
How much is the fair value?
Market Price P 100,000
Transport Cost (10,000)
Answer: Fair Value P 90,000

2. What is the formula to calculate fair value?

Market Price - Transport Cost = Fair Value
3. What is a price paid to acquire an asset or price received to assume a liability and what is another
term of it?
Answer: Transaction price also called the ENTRY PRICE.
4. What price would be received to sell an asset or paid to transfer a liability and what is another term of
it?
Answer: Fair Value also called the EXIT PRICE.
5. Bid Price may be used as fair value for an asset to be acquired. True or False?
Answer: Ask Price is the one that may be used as fair value for an asset to be acquired.
6. What Level in the Fair Value Hierarchy is the most reliable?
Answer: Level 1 Observable inputs that reflect quoted prices for identical assets or liabilities in active
markets
7. Applies to the fair value and related disclosures of an asset, liability or equity when other PFRs require
measurement at fair value or fair value less costs to sell.
Answer: PFRS 13

PFRS 14
1. In order to meet the objective of OFRS 14, an entity shall disclose:
Information that identifies and explains the amounts recognized in the entity’s
financial statements that arise from rate regulation
2. All specified requirements for reporting regulatory deferral account balances, and any
exceptions to, or exemptions from, the requirements of other IFRSs that are related to those
balances, are contained within PFRS 14 instead of within those other PFRSs.
True
3. PFRS 14 is an optional standard that is available only to first-time adopters. Existing PFRS users
are not prohibited from using PFRS 14
Statement 1 is true while Statement 2 is false
4. When an entity presents earnings per share in accordance with PAS 33 Earnings per Share, the
entity shall present additional basic and __________, which are calculated using the earnings
amounts required by PAS 33 but excluding __________.
Diluted earnings per share; movements in regulatory deferral account balances
5. An entity that elects to apply PFRS 14 shall disclose information that enables users to assess:
A) The nature of the rate regulation that establishes the price that the entity can charge
customers for the goods or services it provides
B) The risks associated with the rate regulation that establishes the price that the entity can
charge customers for the goods or services it provides
C) The effects of that rate regulation on its financial position, financial performance and cash
flows
PFRS 15 Q and A
1. According to PFRS 15, revenue from a performance obligation that is not satisfied over time is
recognized
a. Over time as the entity progresses towards the complete satisfaction of the obligation.
b. At a point in time when the performance obligation is satisfied.
c. When the contract ceases to be enforceable.
d. A or B
Answer: D
2. It is the amount of consideration to which an entity expects to be entitled in exchange for
transferring promised goods or services to a customer, excluding amounts collected on behalf of
third parties.
Answer: Transaction Price
3. What is the Step 2 in Revenue Recognition?
Answer: Identify the PO in the contract
4. The price at which a promised good or service can be sold separately to a customer.
Answer: Stand-alone selling price
5. The PO will be satisfied either:
Answer: Over time or At a point in time
6. An entity’s obligation to transfer goods or services to a customer for which the entity has
received consideration from the customer.
Answer: Contract Liability

PFRS 16: LEASES

1. What are the three criteria to identify a lease?
Answer: There is an identified asset,
Customer has the right to obtain substantially all of the economic benefit
and right to direct the use
2. In accounting for lease by lessee, what are the two accounts that the lessee recognizes?
Answer: Lease Liability and Right of use Asset
3. Define Finance Lease and Operating Lease in your own word.
Finance Lease is a lease that transfer risks and rewards to ownership of an asset and recognize
as lease receivable at the end of the period.
Operating lease does not transfer any rewards and risks and continue to recognize as the
property that generates income.
4. State at least 3 indicators of a finance lease
Answer: Transfer of ownership
Bargain purchase option
The lease term is at least 75% of the economic life of the leased asset.
Present value of the lease payments is at least 90% of the fair value of the lease asset
at the inception date.
Leased asset is of specialized nature that only lessee can use it without major
modifications.
5. Differentiate Inception Date and Commencement Date.
Inception date is the date of the agreement or commitment of parties while Commencement
date is the date when the lessor makes the asset available for use. (puwede rin kayo magbigay
ng example)
PFRS 17- INSURANCE CONTRACT
1) Insurance risk includes which of the following ?
a. financial risk
b. expense risk
c. lapse or persistency risk
d. pure risk
2. It is the party that has an obligation under an insurance contract to compensate a policyholder if an
insured event occurs.
INSURER
3. “risk, other than financial risk, transferred from the holder of a contract to the issuer.”
INSURANCE RISK
4. Two types of insurance contracts
DIRECT INSURANCE CONTRACT
REINSURANCE CONTACT
5. It is the unearned profit in a group of insurance contracts that the entity recognizes as it provides
services in the future.
CONTRACTUAL SERVICE MARGIN
6. An uncertain future event that is covered by an insurance contract and creates insurance risk.
INSURED EVENT

BSACC 1 – 4
Q and A for PFRS 13: FAIR VALUE MEASUREMENT
Identification
1. Differentiate transaction price and fair value.
Answer: The transaction price is the price paid to acquire an asset or price received to assume a
liability. Thus, it is also called as the entry price. Meanwhile, the fair value is the price that would
be received to sell an asset or paid to transfer a liability. It is also called as the exit price.

2. It pertains to the market with the greatest volume and level of activity for the asset or liability.
Answer: Principal Market

3. It applies to the fair value measurement, and related disclosures, of an asset, liability or equity
when other PFRSs requirement at fair value or fair value less costs to sell.
Answer: PFRS 13
True or False
4. PFRS 13 requires the use of a valuation technique when measuring a fair value.
Answer: True
5. If the price market is identifiable, the price in that market is used in measuring the fair value of
an asset or liability, even if the price in another market is potentially more advantageous.
Answer: True
6. In Fair Value Hierarchy, Level III inputs are the most reliable fair value measurements and Level I
inputs are the least reliable.
Answer: False
Problem Solving
CMDK Company’s Assets have a carrying amount of P100,000 before year-end
adjustments. The PFRSs require these assets to be measured at fair value at each reporting
date. Location is a characteristic of the assets. Information at year-end is as follows:
Active Market No. 1 Active Market No. 2
Quoted Price P 130,000 Quoted Price P 135,000
Transport Costs 10,000 Transport Costs 12,000
Costs to Sell 2,000 Costs to Sell 3,000

7. If Active Market No. 1 is the principal market for CMDK Company’s assets, how much is the fair
value?
a. 130,000
b. 120,000
c. 118,000
d. 123,000
 Solution:

8. If neither Active Market No. 1 nor Active Market No. 2 is the principal market, how much is the
fair value?
a. 135,000
b. 132,000
c. 120,000
d. 123,000
Solution:

PFRS 14
1. 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.
Answer: Rate Regulation
2. An authorized body that is empowered by statue or regulation to establish the rate or a
change of rates that bind an entity.
A.Account Regulator
B.Rate Regulator
C.Policy Regulator
D.Entity Regulator
3. Applied when determining whether estimates and assumptions relating to regulatory
deferral account balances need to adjusted for events after the reporting period.
Answer: PAS 10 EVENTS AFTER THE REPORTING PERIOD
4. Applied when recognizing deferred tax assets and liabilities and income tax expense
relating to rate regulated activities.
A.PAS 10
B.PAS 12
C.PAS 36
D.PAS 33
5. PFRS 5 do not apply when regulatory deferral account balances are included in a disposal
group or discontinued operations. TRUE OR FALSE
Answer: TRUE
6. If an entity had recognized regulatory deferral account balances in respect of its
subsidiary, associate or joint venture, it shall make separate disclosures for those balances in
relation to disclosure requirements of PFRS 3. TRUE OR FALSE
Answer: FALSE (PFRS 12)
7. ______ specifies the financial reporting requirements for regulatory deferral account
balances arising from the sale of goods or services that are subject to rate regulation
Answer: PFRS 14
8. _____ is applied to the impairment testing of regulatory account balances that are included
in CGUs.
Answer: PAS 36
PFRS 15 – REVENUE FROM CONTRACTS WITH CUSTOMERS

1. PFRS 15 shall be applied to _______ wherein the counterparty is a ________.

Answer: Contracts, customer
2. _____ is the income arising in the course of an entity’s ordinary activities.
Answer: Revenue
3. A contract where either party has performed is presented in the statement of financial
position as ________ or an entity’s obligation to transfer goods services to a customer for
which the entity has received consideration (or the amount is due) from the customer.
Answer: a contract liability
4. Which is false?
Statement 1: A contract is an agreement between two or more parties that creates
unenforceable rights and obligations.
Statement 2: A contract can be written, oral, or implied by an entity's customary business
practice.
A. Statement 1
B. Statement 2
C. Both statements are false.
Answer: A. Statement 1
Explanation: Contract must be enforceable.
5. 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 obligation in the contract.

A. IV, I, V, III, II
B. III, IV, I, V, II
C. IV, I, III, V, II
D. IV, III, I, V, II

6. PRFS 15 shall not be applied to the following:

A. Lease of contracts
B. Insurance contracts
C. Financial instruments
D. Non-monetary exchanges between entities in the same line of business to facilitate sales to
customers
E. All of the above
Answer: E. All of the above
7. State the Core Principle of PFRS 15 – Revenue From Contracts With Customers.
Answer: An entity recognizes revenue to depict the transfer of promised goods and services to
customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services.
8. For a performance obligation that is satisfied at a point in time, when is revenue recognized?
Answer: When the performance obligation is satisfied.
9. For each performance obligation satisfied over time, how shall an entity recognize revenue
over time?
Answer: by measuring the progress towards complete satisfaction of that performance
obligation

PFRS 16---Q AND A--- (BSACC 1-4)

1. It is a part of contract that conveys the right to use an asset for a period of time in exchange
for consideration
ANSWER: LEASE
2. True or False----Right to direct the use includes contractual restrictions designed to protect
the supplier's interest in the asset or its personnel, or to ensure compliance with laws or
regulations.
ANSWER: FALSE, PROTECTIVE RIGHTS
3. This is the period in which a contract is enforceable
ANSWER: NON-CANCELLABLE PERIOD
4. Which of these is not included in lease payments
A.variable lease payments
B.fixed payments
C.lease incentives
D.payments for penalties for terminating the lease
5. TRUE OR FALSE----Under the operating lease, the rewards and risk are transferred to lessee
ANSWER: FALSE, IT SHOULD BE UNDER FINANCE LEASE
6. A portion of assets is an identified asset if it is _______________.
ANSWER: PHYSICALLY DISTINCT
7. TRUE OR FALSE--- An asset can be identified by being explicitly stated in the contract or by
being implicitly specified at the time asset is made available for use by the customer
ANSWER: TRUE
8. In accounting for operating lease, the lessor recognizes the lease payments as income on a
__________________ over the least term.
ANSWER: STRAIGHT LINE BASIS
PFRS 17
1. Which of the following is not one of the characteristics of an insurance contract?
a. Transfer of significant insurance risk from the policyholder to the issuer
b. Policyholder pays then issuer for the transfer of risk
c. Issuer indemnifies the policyholder for the losses when the insured event occurs
d. Transfer of significant insurance risk from the issuer to the policyholder
2. Under the general model of PFRS17, a group of insurance contracts are initially measured at
a. The fulfillment of cash flows
b. The contractual service margin
c. A or b, as an accounting policy choice
d. Sum of a and b
3. According to PFRS 17, an insurance contract is not derecognized when
a. It is extinguished
b. It has expired
c. Its terms have been modified and the modification is substantive
d. Its terms have been modified and the modification is not substantive
4. Differentiate the Reinsurance Contract to Retrocession.
- Reinsurance contract is an insurance contract issued by one insurer (the reinsurer) to
compensate another insurer (the cedant) for losses on one or more contracts issued by the
cedant. While, a Retrocession is a transaction in which a reinsurer transfers risks it has reinsured
to another reinsurer.
5. When does an insurance contract become onerous at initial recognition?
- An insurance contract is onerous at initial recognition if the total of the Fulfillment Cash Flows
(FCF), any previously recognized acquisition cash flows and any cash flows arising from the
contract at that date is a net outflow.
6. An entity shall derecognize an insurance contract only when it is extinguished. (TRUE OR FALSE)
FALSE -An entity shall derecognize an insurance contract when it is extinguished, or if any of the
conditions of a substantive modification of an insurance contract are met.
7. It is the unearned profit in a group of insurance contracts that the entity recognizes as it
provides services in the future.
Contractual Service Margin
8. An uncertain future event that is covered by an insurance contract and creates insurance risk.
Insured event