CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ
BATCH 92 OCTOBER 2022 CPALE
MULTIPLE CHOICE - SMEs
1. The IASB defines SMEs as entities that
a. Do not have public accountability.
b. Have public accountability and publish general purpose financial statements for external users.
c. Do not publish general purpose financial statements for external users.
d. Do not have public accountability and publish general purpose financial statements for external users.
2. Which description accurately describes the definition of an SME used by the IASB?
a. Entities that have no public accountability
b. Entities that have a specified number of employees
c. Entities that have a certain statement of financial position total
d. Entities that have a certain annual turnover
3. Which entity has no public accountability?
a. An entity whose shares are traded in a public market.
b. An entity whose debt instruments but not its shares are traded in a public market.
c. An entity whose shares and debt instruments are traded in an “over-the-counter market”.
d. An entity that is not in the process of issuing its shares and debt instruments for trading in a public market.
4. Which approach has the IASB taken in developing IFRS for SMEs?
a. The exemptions given to smaller entities are prescribed in the mainstream accounting standards
b. GAAP for SMEs is to be developed on a national basis
c. The standard is an independently developed set of standards
d. The standard is a simplified self-contained set of accounting principles based on full IFRS
5. In the Philippines, which entity cannot be considered an SME?
a. A nonpublicly accountable entity with total assets between P3,000,000 and P350,000,000 OR total
liabilities between P3,000,000 and P250,000,000
b. An entity that is not in the process of filing its financial statements for the purpose of issuing any class of
instruments in a public market
c. An entity that is not a holder of a secondary license issued by a regulatory agency
d. A public utility
6. Which can be considered SME?
a. Bank and finance company
b. Insurance company and investment house
c. Pre-need company and securities broker
d. None of these can be considered SME
7. Entities with total assets or total liabilities below the floor threshold of P3,000,000 are known as
a. Micro-business entities
b. Macro-business entities
c. Medium-sized entities
d. Small entities
8. If an SME that uses the IFRS for SMEs in the current year breaches the ceiling of the size criteria at the end
of the current year, the entity is required to transition to full IFRS
a. At the current year-end.
b. At the current year-end if the event that caused the change is significant and continuing.
c. In the next year if the event that caused the change is significant and continuing
d. At the discretion of management.
9. What is the considered significant change that requires transition to IFRS for SMEs?
a. 20% or more of total assets or total liabilities
b. 50% or more of total assets or total liabilities
c. 10% or more of total assets or total liabilities
d. No quantitative threshold
10. It is defined as “first annual financial statements in which an SME adopts IFRS for SMEs”
a. IFRS financial statements
b. First financial statements that conform with IFRS for SMEs
c. Opening statement of financial position
d. First audited financial statements
11. An SME that presents first financial statements that conform with IFRS for SMEs is known as
a. An originating entry
b. A provisional presenter
c. A first-time adopter
d. An initial reporter
12. The statement of financial position at the date of transition to IFRS for SMEs is described as
a. Provisional statement of financial position
b. Closing statement of financial position
c. Opening statement of financial position
d. Originating statement of financial position
13. What is the date of transition to IFRS for SMEs?
a. The beginning of latest period in most recent annual financial statements under previous GAAP
b. The end of the latest period the most recent annual financial statements under previous GAAP
c. The beginning of the earliest period for which an entity presents full comparative information under IFRS
for SMEs
d. The end of the earliest period for which an entity presents full comparative information under IFRS for
SMEs
14. If the first time adopter adopts IFRS for SMEs on December 31, 2023 on a comparative basis, what is the date
of transition to IFRS for SMEs?
a. December 31, 2023
b. December 31, 2022
c. January 1, 2022
d. January 1, 2021
15. All of the following can be done by a first-time adopter of IFRS for SMEs in the opening statement of financial
position, except
a. Recognize all assets and liabilities whose recognition is required by IFRS for SMEs.
b. Recognize all assets and liabilities required by full IFRS even if the IFRS for SMEs does not require such
recognition.
c. Reclassify items that it recognized under a previous accounting framework as one type of asset, liability
or equity but a different type of asset, liability or equity under IFRS for SMEs.
d. Apply IFRS for SMEs in measuring all recognized assets and liabilities.
16. The resulting adjustments in the opening statement of financial position at the date of transition to IFRS for
SMEs shall be
a. Recognized directly in retained earnings
b. Recognized directly in equity
c. Recognized directly in retained earnings or another category of equity, if appropriate
d. Disregarded
17. The opening statement of financial position cannot be restated retroactively because of
a. Cost
b. Impracticability
c. Materiality
d. Relevance
18. Fair presentation in accordance with IFRS for SMEs is presumed to result from
a. Compliance for IFRS for SMEs by an entity that has public accountability
b. Compliance for IFRS for SMEs, with additional disclosures where necessary, by an entity that has public
accountability
c. Compliance for IFRS for SMEs by an entity that does not have public accountability
d. Compliance for IFRS for SMEs, with additional disclosures where necessary, by an entity that does not
have public accountability
19. A nonpublicly accountable entity must make an explicit and unreserved statement of compliance with the
IFRS for SMEs
a. If the entity complies with all the requirements of IFRS for SMEs.
b. If the entity complies with the vast majority of the requirements of IFRS for SMEs.
c. If the entity complies with the US GAAP.
d. If the entity complies with full IFRS.
20. A nonpublicly accountable entity can claim compliance with IFRS for SMEs when the entity
I. Complies with local tax requirements that are substantially the same as IFRS for SMEs.
II. Complies with local tax requirements that are, except in name, word for word the same as IFRS for SMEs.
III. Complies with all the requirements of IFRS for SMEs.
IV. Complies with full IFRS
a. I and III
b. II and III
c. II, III and IV
d. III and IV
21. Which statement suitably describes the nature of the compliance with the Standard?
a. The accounting practices used are a mix of full IFRS and IFRS for SMEs
b. The accounting practices used are a mix of local GAAP and IFRS for SMEs
c. The accounting practices used are a mix of full IFRS and local GAAP
d. The SME has followed IFRS for SMEs in its entirety.
22. Which accounting issue is not addressed in IFRS for SMEs?
a. Earnings per share
b. Interim and segment reporting
c. Asset held for sale and discontinued operation
d. All of these are not addressed in IFRS for SMEs
23. Which component of OCI of an SME is reclassified to profit or loss?
a. Translation gain or loss from foreign operation
b. Actuarial gain or loss
c. Revaluation surplus of property, plant and equipment
d. Change in fair value of hedging instrument
24. Which of the following can an SME elect as an accounting policy choice to recognize in other
comprehensive income or in profit or loss?
a. Revaluation surplus of property, plant and equipment
b. Gain and loss from translation a foreign operation
c. Actuarial gain and loss of defined benefit plan
d. Gain and loss on hedging instrument
25. The IFRS for SMEs mentions the following components of other comprehensive income, except
a. Gain and loss on hedging instrument
b. Revaluation surplus of property, plant and equipment
c. Actuarial gain and loss of defined benefit plan
d. Unrealized gain or loss on equity investment measured at FVOCI
26. Inventories of an SME shall be measured at
a. Cost
b. Lower of cost and estimated selling price less cost to complete and sell
c. Lower of fair value and estimated selling price less cost to complete and sell
d. Fair value
27. Under IFRS for SMEs, if the selling price less cost to complete and sell is lower than cost of inventory, the
writedown is recognized
a. As an impairment loss
b. As component of cost of goods sold
c. As other expense
d. Directly in retained earnings

28. All of the following are considered basic financial instruments, except
a. Cash and demand and fixed term bank deposit
b. Bonds payable and other similar debt investment
 c. Accounts and notes receivable
d. Investment in convertible preference shares
29. All of the following are considered basic financial instruments, except
a. Accounts payable in local and foreign currency
b. Derivative contract
c. Loans from subsidiaries or associates due on demand
d. Loans from bank and other third parties
30. All of the following financial instruments are basic financial instruments of an SME, except
a. Investments in nonconvertible nonputtable preference shares
b. Financial instruments that meet the definition of an entity’s own equity
c. A fixed-interest fixed-term loan from a bank
d. Investments in nonputtable ordinary shares
31. Which can be considered basic financial instruments?
a. Investments in subsidiaries, associates and joint ventures
b. Leases
c. Share-based compensation
d. Commercial papers unsecured and short-term
32. Which statement is true about subsequent measurement of basic financial instruments?
a. Basic debt instruments are measured at amortized cost using the effective interest method.
b. Investments in nonputtable ordinary shares are measured at FVPL if the shares are publicly traded or
if the fair value can be measured reliably.
c. Investments in nonconvertible and nonputtable preference shares which are not publicly traded or
whose fair value cannot be measured reliably are measured at cost less impairment.
d. All of these statements are true.
33. Which statement reflects the accounting for financial instruments under IFRS for SMEs?
a. All financial instruments must be measured at fair value
b. Reversal of an impairment loss is not allowed
c. All amortized cost instruments must be tested for impairment
d. All financial instruments must be measured at amortized cost
34. An SME shall account for investments in associates after initial recognition using
a. Cost model for all investments in associates.
b. Fair value model for all investments in associates.
c. Cost model, equity method or fair value model and using the same accounting policy for all investments
in associates.
d. Cost model, equity method or fair value model and the model can be elected on an investment by
investment basis.
35. Under the cost model, the investment in associate is subsequently measured at
a. Cost
b. Cost less accumulated impairment loss
c. Fair value
d. Fair value less accumulated impairment loss
36. Under the fair value model, the investment in associate is subsequently measured at
a. Equity
b. Cost
c. Fair value less cost of disposal
d. Fair value
37. Investments in associate must be tested for impairment under
a. Cost model, equity method and fair value model
b. Cost model and equity method
c. Cost model and fair value model
d. Equity method and fair value model
38. An SME must measure an investment property after initial recognition
a. At fair value or using the cost model and same accounting policy for all investment property
b. At fair value or using the cost model elected item by item
c. At fair value
 d. At fair value for property whose fair value can be measured reliably without undue cost or effort on an
ongoing basis and cost model for all other investment property
39. The investment property is measured under the cost model if fair value cannot be determined reliably
without undue cost and effort. In such a case, how is the investment property presented?
a. Property, plant and equipment
b. Separate class of property, plant and equipment
c. Investment property with no distinction
d. Separate line item as investment property at cost less accumulated depreciation and impairment.
40. An SME shall measure property, plant and equipment after initial recognition using
a. Cost model
b. Revaluation model
c. Either cost model or revaluation model
d. Either cost model or fair value model
41. Which statement is not true about government grant related to an SME?
a. A grant that does not impose conditions is recognized in income when the grant proceeds are receivable.
b. A grant that imposes conditions is recognized in income only when the conditions are met.
c. Grant received before the recognition criteria is satisfied is recognized as liability.
d. Unconditional and conditional grant should be recognized in income immediately.
42. Under the IFRS for SMEs, all borrowing costs must be
a. Expensed in the period incurred
b. Capitalized as part of the cost of the qualifying asset
c. Either expensed or capitalized
d. Neither expensed nor capitalized
43. An SME must measure intangible assets after initial recognition using
a. Cost model
b. Fair value model
c. Revaluation model
d. Either cost model or revaluation model
44. Which accounting treatment is not allowable under IFRS for SMEs?
a. Weighted average method for inventory
b. Equity method for associates
c. Revaluation model for intangible assets
d. Deferred tax asset and deferred tax liability
45. Under IFRS for SMEs, what is the treatment of goodwill?
a. Not amortized
b. Tested for impairment at least annually
c. Amortized over a maximum of 5 years
d. Amortized based on the best estimate of management not exceeding 10 years and tested for impairment
at least annually
46. Under IFRS for SMEs, past service costs are
a. Expensed immediately as component of employee benefit expense
b. Deferred and amortized over the service period
c. Expensed immediately as a separate line item
d. Not recognized
47. An SME shall measure equity shares issued at
a. Fair value of cash received or receivable
b. Fair value of cash or receivable plus direct issue cost
c. Fair value of cash received or receivable less direct issue cost
d. Fair value of equity shares less direct issue cost

48. Specialized activities of an SME include all of the following, except

a. Agriculture
b. Service concession
c. Exploration and evaluation of mineral resources
d. Insurance
49. Exploration expenditure incurred by an SME in exploration and evaluation activities is classified as
 a. Property, plant and equipment
b. Intangible asset
c. Either tangible asset or intangible asset
d. Investment
50. On the part of the private operator, the infrastructure asset in a service concession shall be recognized as
a. Property, plant and equipment
b. Financial asset
c. Either financial asset or intangible asset
d. Intangible asset
51. When the private operator in a service concession has a guaranteed or unconditional contractual right to
receive a specified amount of cash over the life of the arrangement, the infrastructure asset is recognized as
a. Financial asset
b. Intangible asset
c. Property, planted equipment
d. Investment
52. The infrastructure asset in a service concession recognized as financial asset shall be measured at
a. Amortized cost
b. Fair value through profit or loss
c. Fair value through other comprehensive income
d. Amortized cost, fair value through profit or loss, or fair value through other comprehensive income
53. When the private operator in a service concession has a right to charge fees for the use of the asset, the
infrastructure asset is recognized as
a. Financial asset
b. Intangible asset
c. Property, plant and equipment
d. Investment
54. The reconciliation of equity under the previous reporting framework to the equity under IFRS for SMEs
is made at
a. The date of transition to IFRS for SMEs.
b. The end of current reporting period.
c. The date of transition to IFRS for SMEs and at the end of latest reporting period.
d. The end of the preceding comparative period.
55. The reconciliation of profit or loss under the previous reporting framework to the profit or loss under IFRS
for SMEs is made at
a. The date of transition to IFRS for SMEs
b. The end of current reporting period
c. The end of the latest reporting period.
d. No reconciliation of profit or loss is made.

End