Choose the most correct

answer for each question

below, unless otherwise stated.
1. Which of the bodies listed below is responsible for revewing International Accounting
Standards and issuing guidance on their application?
A. IFRS Intepretation Committee
B. International Accounting Standards Board
C. IFRS Advisory Council
D. IFRS Foundation
2. Which of the following best describes the role of the IFRS Advisory Coucil?
A. To prepare intepretations of International Accounting Standards
B. To provide the IASB with the views of its members on standard setting projects
C. To promote the use of International Accounting Standards amongst its members
D. To select the members of the IASB
3. The conceptual framework for financial reporting lists the qualitative characteristics of
financial statements.
(i) Comparability (iv) Understandability
(ii) Verifiability (v) Relevance
(iii) Timeliness (vi) Faithful representation
Which two of the above are not included in the enhancing qualitative characteristics listed by
the conceptual framework?
A. (i) and (vii)
B. (ii) and (v)
C. (iv) and (v)
D. (v) and (vi)
4. Which of the following measurement base(s) should be used by an entity according to the
conceptual framework for financial reporting?
A. Historical cost
B. Current cost
C. Present value
D. Any of the above

5. Which of the following statements in relation to income is true?

A. Gains are normally reported separately from revenue in the Statement of profit or loss
and other comprehensive income due to the different probabilities attached to that type
of income.
B. The conceptual framework requires that all items of income are reported on a net
basis.
C. Gains and revenue are different in nature and therefore are recognised as separate
elements of the financial statements per the conceptual framework.
D. The conceptual framework defines income as an increase in economic benefits which
results in an increase in equity.
6. Which of the following statements is incorrect in relation to the recognition criteria for
elements of the financial statements?
A. Assets are recognised when it is probable that future economic benefits will flow to
the entity and the asset has a cost or value that can be measured reliably.
B. Because equity is the arithmetic difference between assets and liabilities, a separate
recognition criteria for equity is not needed in the conceptual framework.
C. Liabilities are recognised when it is probable that an outflow of resources embodying
economic benefits will result from the settlement of a present obligation and the
amount at which settlement will take place can be measured reliably.
D. Income is recognised when an increase in future economic benefits related to a
decrease in an asset or an increase in a liability that has arisen can be measured
reliably.
7. Comparability is identified as an enhancing qualitative characteristic in the
IASB's Conceptual Framework for Financial Reporting. Which of the following does NOT
improve
comparability?
A. Restating the financial statements of previous years when there has been a change of
accounting policy
B. Prohibiting changes of accounting policy unless required by an IFRS or to give more
relevant and reliable information
C. Applying an entity's current accounting policy to a transaction which an entity has not
engaged in before
D. Disclosing discontinued operations in financial statements
8. Which one of the following would be classified as a liability?
A. Dexter's business manufactures a product under licence. In 12 months' time the licence
expires and Dexter will have to pay $50,000 for it to be renewed.
B. Reckless purchased an investment 9 months ago for $120,000. The market for these
investments has now fallen and Reckless's investment is valued at $90,000
Bài 2:
C. Carter has estimated the tax charge on its profits for the year just ended as $165,000.
D. Expansion is planning to invest in new machinery and has been quoted a price of
$570,000.
9. Which of the following is a possible advantage of a rules-based system of financial
reporting?
A. It encourages the exercise of professional judgement
B. It prevents a fire-fighting approach to the formulation of standards
C. It offers accountants more protection in the event of litigation
D. It ensures that no standards conflict with each other
10. Faithful representation is a fundamental characteristic of useful information within the
IASB’s Conceptual framework for financial reporting. Which of the following accounting
treatments correctly applies the principle of faithful representation?
A. Reporting a transaction based on its legal status rather than its economic substance
B. Excluding a subsidiary from consolidation because its activities are not compatible
with those of the rest of the group
C. Recording the whole of the net proceeds from the issue of a loan note which is
potentially convertible to equity shares as debt (liability)
D. Allocating part of the sales proceeds of a motor vehicle to interest received even
though it was sold with 0% (interest free) finance
3. A client sued Lampeter to compensate for the consuming negative effects due to the poor product
quality. However, the lawyer said Lampeter has a 60% likelihood of winning the case.
The Conceptual Framework defines a liability as a present obligation of the entity to transfer an
economic resource as a result of past events.
The liability exists when three criteria must all be satisfied:
+ The entity has an obligation: legal obligation.
+ The obligation is to transfer an economic resource: If present obligation is accepted as existing, its
settlement will be transferred an economic resource (cash) by an entity, but the outcome of that
requirement is conditional on the action.

+ The obligation is a present obligation that exists as a result of past events: must have no practical
ability to avoid the future transfer due to the poor product quality and the act of being sued.
The liability recognition criteria is failed, relevant information as it is uncertain whether a liability
exists (40% possibility of occurrence). Therefore, the liability cannot be recognized. And so, lawsuit
need to disclose contingent liability in the financial statements.