HOMEWORK ON PRESENTATION OF FINANCIAL STATEMENTS (IAS 1)

1. IAS1, Presentation of Financial Statements, does not apply to structure and content of
A. separate financial statements. C. complete interim financial statements.
B. consolidated financial statements. D. condensed interim financial statements.

2. International Financial Reporting Standards (IFRSs) are Standards and Interpretations issued by the
International Accounting Standards Board (IASB) which are comprised of the following, except
A. PIC and IC Interpretations C. International Accounting Standard
B. IFRIC and SIC Interpretations D. International Financial Reporting Standards

3. Which of the following statements is incorrect concerning the purpose of financial statements?
A. Financial statements also show the results of the management’s stewardship of the resources
entrusted to it.
B. Financial statements are a structured representation of the financial position and financial
performance of an entity.
C. Information about an entity’s assets, liabilities, equity, income and expenses, contributions by and
distributions to owners in their capacity as owners, cash flows along with other information in the
notes assists users of financial statements in predicting the entity’s future cash flows and, in
particular, their timing and certainty.
D. The objective of financial statements is to provide financial information about the reporting entity
that is useful to existing and potential investors, lenders and other creditors in making decisions
about providing resources to the entity.

4. A complete set of financial statements comprises:

I. a statement of profit or loss and other comprehensive income for the period.
II. a statement of changes in equity for the period.
III. a statement of cash flows for the period.
IV. a statement of financial position for the period.
V. notes, comprising significant accounting policies and other explanatory information.
VI. comparative information in respect of the preceding period.
VII. a statement of financial position as at the beginning of the preceding period when an entity applies
an accounting policy retrospectively or makes a retrospective restatement of items in its financial
statements, or when it reclassifies items in its financial statements.

A. I, II, III and V only C. I, II, III, V, VI and VII only

B. I, II, III, IV and V only D. I, II, III, IV, V, VI and VII

5. Which of the following statements is incorrect regarding the general features of financial statements?
A. An entity whose financial statements comply with IFRSs shall make an explicit and unreserved
statement of such compliance in the notes.
B. An entity shall prepare all of its financial statements using the accrual basis of accounting.
C. An entity shall present separately each material class of similar items and items of a dissimilar
nature or function unless they are immaterial.
D. An entity shall not offset assets and liabilities or income and expenses, unless required or
permitted by an IFRS.

6. Which of the following statements is incorrect concerning the general features of financial statements?
A. When preparing financial statements, management shall make an assessment of an entity’s ability
to continue as a going concern.
B. An entity shall present a complete set of financial statements (including comparative information)
on a quarterly basis.
C. Except when IFRSs permit or require otherwise, an entity shall present comparative information in
respect of the preceding period for all amounts reported in the current period’s financial
statements.
D. An entity shall retain the presentation and classification of items in the financial statements from
one period to the next unless it is apparent that another presentation or classification would be
more appropriate having regard to the criteria for the selection and application of accounting
policies in IAS 8 or an IFRS requires a change in presentation.
7. Which of the following items is not among the basic features in the preparation and presentation of financial
statements under IAS1?
A. Accrual C. Reliability
B. Offsetting D. Going concern
8. Financial statements include a statement of financial position, a statement of comprehensive income, a
statement of changes in equity and a statement of cash flows. Which of the following is also included within
the financial statements?
A. a directors’ report C. an independent auditor’s report
B. accounting policies D. a statement of management’s responsibility

9. Which of the following financial statements provide users with information about the performance of an
enterprise that is required in order to assess potential changes in the economic resources in the future?
A. statement of cash flows. C. statement of financial position
B. statement of changes in equity D. statement of comprehensive income

10. What is the purpose of reporting comprehensive income?

A. To replace a net income with a better measure.
B. To report a measure of overall entity performance.
C. To report changes in equity due to transactions with owners.
D. To combine income from continuing operations with income from discontinued operations.

11. The term “comprehensive income”

A. is synonymous with the term “net income”
B. is the net change in owner’s equity for the period
C. must be reported on the face of the income statement
D. is most closely associated to all changes in equity during a period except those resulting from
investments by and distributions to owners

12. Which of the following is incorrect concerning the presentation of the statement of comprehensive income?
A. IAS 1 requires the use of cost of sales method than the nature of expense method
B. The choice between the natural and functional presentation depends on historical and industry factors
and the nature of the entity
C. The function of expense method means that expenses are classified according to their function as cost
of sales, distribution or administrative activities.
D. The nature of expense method means that expenses are aggregated according to their nature and are
not reallocated among various functions within the entity.

13. Which of the following items is required to be disclosed in the income statement?
A. finance costs, tax expense and income.
B. gross profit, operating profit and net profit.
C. revenue, cost of goods sold and operating expenses.
D. operating expenses, non-operating expenses and extraordinary items.

14. One criticism not normally aimed at a statement of financial position is

A. an extensive use of estimate.
B. failure to reflect current value information.
C. the extensive use of separate classifications.
D. failure to include items of financial value that cannot be recorded objectively.

15. The operating cycle of an entity

A. is the time between the acquisition of assets for processing and the realization in cash and cash
equivalents.
B. causes the distinction between current and noncurrent items to depend on whether they will affect cash
within one year.
C. is set by the industry’s trade association usually on an average length of time for all firms which are
members of the organization.
D. is the period of time that normally elapsed from the time the entity expends cash to the time it converts
trade receivables back into cash.
16. Which statement is incorrect concerning the “line items” on the face of the statement of financial position?
A. IAS 1 does not prescribe the order or format in which the line items are to be presented on the face of
the statement of financial position.
B. Additional line items, headings and subtotals shall be presented on the face of the statement of financial
position when such presentation is relevant to the understanding of the entity’s financial position.
C. When an entity presents current and noncurrent captions, it shall classify deferred tax assets and
deferred tax liabilities on the statement of financial position as either current or noncurrent depending
on the period of reversal.
D. As a minimum, IAS 1 requires that the face of the statement of financial position shall include certain line
items. It simply provides a list of items that are sufficiently different in nature or function to warrant
separate presentation on the face of the statement of financial position.

17. An entity shall classify an asset as current when: (choose the incorrect one)
A. it expects to realize the asset, or intends to sell or consume it, in its normal operating cycle
B. it holds the asset primarily for the purpose of trading
C. it expects to realize the asset within twelve months after the reporting period
D. the asset is cash or a cash equivalent restricted for the purchase of a noncurrent asset within twelve
months after the reporting period.

18. An entity shall classify a liability as current when: (choose the incorrect one)
A. it expects to settle the liability in its normal operating cycle.
B. it holds the liability primarily for the purpose of trading.
C. the liability is due to be settled within twelve months after the reporting period.
D. it has unconditional right to defer settlement of the liability for at least twelve months after the
reporting period.

19. Noncurrent liabilities include (choose the incorrect one)

A. deferred tax liability.
B. the currently maturing portion of long-term debt.
C. obligations payable at some date beyond the operating cycle.
D. obligations not expected to be liquidated within the operating cycle.

20. Which of the following is not acceptable treatment for the presentation of current liabilities?
A. Listing current liabilities in order of maturity
B. Listing current liabilities according to amount.
C. Showing current liabilities in order of liquidation preference.
D. Offsetting current liabilities against assets that are to be applied to their liquidation

21. An entity shall present a third statement of financial position as at the beginning of the preceding period in
addition to the minimum comparative financial statements required in any of the following circumstances,
except
A. when it reclassifies items in its financial statements.
B. when it applies an accounting policy retrospectively.
C. when it changes any of its estimates used in accounting.
D. when it makes a retrospective restatement of items in its financial statements.

22. Which of the following is not covered by the presentation and disclosure requirements of PAS 1?
A. statement of cash flows
B. statement of changes in equity
C. statement of financial position
D. statement of comprehensive income

23. Notes to financial statements provide

A. the report of the independent auditors.
B. management’s discussions about plans for the future.
C. comparative financial information with the previous year.
D. discussions that further explain items shown in the financial statements.
24. IAS 1 Presentation of Financial Statements recommends the sequence of presenting the notes to financial
statements. In what order are these notes normally presented?
I. Summary of significant accounting policies
II. Supporting computations for items presented on the face of the statements
III. Other disclosures, including contingent liabilities, unrecognized contractual commitments and
nonfinancial disclosures
IV. Statement of compliance with IFRS

A. I, II, III and IV C. IV, I, II and III

B. II, III, IV and I D. no specific order

25. Which of the following is not among the disclosures in the financial statements?
A. A description of the nature of the entity’s operations and its principal activities.
B. The amount of amount of any noncumulative preference share dividends not declared.
C. Information that enables users of its financial statements to evaluate the entity’s objectives, policies and
processes for managing capital.
D. The amount of dividends proposed or declared before the financial statements were authorized for issue
but not recognized as a distribution to owners during the period, and the related amount per share.

26. Which of the following information is not specifically a required disclosure of PAS 1?
A. The presentation currency.
B. The names of major shareholders of the entity.
C. The level of rounding used in presenting amounts in the financial statements.
D. The domicile and legal form of the entity, its country of incorporation and the address of its registered
office (or principal place of business, if different from the registered office).

27. The disclosure of accounting policies

A. is encouraged but not required.
B. should not appear in the notes to financial statements.
C. should not describe unusual or innovative applications of GAAP.
D. may describe policies that are peculiar to the reporting company’s industry.

28. Which of the following is not among the disclosures in the financial statements?
A. the amount of dividends proposed or declared before the financial statements were authorized for
issue but not recognised as a distribution to owners during the period, and the related amount per
share;
B. The amount of amount of any noncumulative preference share dividends not declared.
C. A description of the nature of the entity’s operations and its principal activities.
D. Information that enables users of its financial statements to evaluate the entity’s objectives, policies
and processes for managing capital.

29. Which of the following is not included among the nonfinancial disclosures?
A. Contingencies and commitments
B. The name of the parent and the ultimate parent of the group
C. A description of the nature of the entity’s operations and its principal activities..
D. Domicile and legal form of the entity, its country of incorporation and the address of the registered
office.

30. The notes to the financial statements should be used to (choose the incorrect one)
A. describe significant accounting policies.
B. describe depreciation method employed.
C. describe the principles and methods peculiar to the industry.
D. correct an improper presentation in the financial statements.