11. An entity makes a change in accounting estimate.

How does the entity recognize the effects of

the change in profit or loss?

a. Prospectively in the current period

b. Prospectively in the current and future periods

c. Retrospectively starting from the earliest period presented

d. a or b

12. Materiality does not make any difference with regard to

a. the separate presentation of items in the financial statements.

b. the disclosure of additional information in the notes.

c. intentional errors.

d. the level of rounding-off of amounts in the financial statements.

13. Identify the qualitative characteristics that enhance the usefulness of financial information.

I. Relevance

II. Reliability

III. Faithful representation

IV. Comparability

V. Verifiability

VI. Timeliness

VII. Understandability

a. I and II

b. I and III

c. II, III, IV, V and VII

d. IV, V, VI and VII

14. Under this qualitative characteristic, users are assumed to have a reasonable knowledge of
business activities and willingness to study the information with reasonable diligence.
a. Relevance

b. Faithful representation

c. Understandability

d. Comparability

15. Which of the following statements is incorrect concerning materiality?

a. Materiality can be assessed quantitatively or qualitatively

b. There are no specific materiality thresholds provided under the PFRSs

c. Materiality is a matter of judgment

d. Materiality is a quantitative matter. It should never be assessed qualitatively.

16. The elements of faithful representation do not include

a. comparability.

b. neutrality.

c. completeness.

d. free from error.

17. The ability through consensus among measurers to ensure that information represents what it
purports to represent is an example of the concept of

a. relevance.

b. comparability.

c. verifiability.

d. feedback value.

18. According to the Conceptual Framework, the pervasive constraint on the information that can
be provided by financial reporting is

a. materiality.

b. historical.

c. cost-benefit.
d. going concern.

19. The element that is related to the measurement of an entity’s financial performance is

a. income.

b. expenses.

c. a and b

d. neither a nor b

20. According to the revised Conceptual Framework, an item is recognized if

a. it meets the definition of an asset, liability, equity, income or expense.

b. recognizing it would provide useful information.

c. it is probable that the item will result to an inflow or outflow of economic benefits and its cost
can be measured reliably.

d. a and b

21. Which of the following may result to an expense?

a. Increase in asset

b. Decrease in liability

c. Increase in liability

d. Distribution to holders of equity claims

22. The Conceptual Framework uses the term “economic resources” to refer to

a. assets.

b. equity.

c. liabilities.

d. income.