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Presentation of Financial Statements (IAS 1/IFRS 1) ACCOUNTING - CFAB

- Presentation of Financial Statements - IAS 1
1. Which of the following best explains what is meant by
- First Time Adoption of IFRS - IFRS 1
'capital expenditure’?

Capital expenditure is expenditure:

A. on non-current assets, including repairs and maintenance

B. on expensive items over £10,000

C. on the acquisition of non-current assets, or improvement in

their earning capacity

D. on items relating to owners' capital

2 Which of the following should be accounted for as 3 Which of the following items should be treated as capital

capital expenditure? expenditure in the financial statements of a sole trader?

A The annual cost of painting a factory floor A. £500 taken by the proprietor to buy himself a music system

B The repair of a window in a building
C The purchase of a vehicle by a garage for re-sale
D Legal fees incurred on the purchase of a building
B. £800 spent on purchasing a new PC to replace his secretary's
old one
C. £2,000 on purchasing a machine for resale
D. £150 paid to a painter for redecorating his office

5 According to the IASB's Conceptual Framework, which

4. Which of the following is an aspect of relevance, of the following are enhancing qualitative
according to the IASB's Conceptual Framework? characteristics?

A. Neutrality A.Comparability, understandability, timeliness,

verifiability
B. Free from error
B. Consistency, prudence, measurability, verifiability
C. Completeness
C. Consistency, reliability, measurability, timeliness
D. Materiality
D. Materiality, understandability, measurability, reliability

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6. In relation to the business of a sole trader, which two

of the following does the government and its agencies
need to be able to do? 7. Information about an entity's financial position is
primarily provided in:
A. Establish levels of tax revenue
A. the statement of profit or loss
B Assess whether the business will continue in existence
B. the statement of financial position
C Produce national statistics
C. retained earnings
D. Assess the owner's stewardship
D. the statement of cash flows
E. Take decisions about their investment

9. According to IAS 1, Presentation of Financial Statements which two of the

8. According to the IASB's Conceptual Framework,
information on which two of the following areas
can help users identify the reporting entity's
financial strengths and weaknesses?
A. The economic resources it controls
B. Its financial performance in the past
C. The demographic structure of the local economy
D. The entity's claims (the entity's liabilities)
E. Its management structure
following are objectives of financial statements?
A. To show the results of management's stewardship of the resources
entrusted to it
B. To provide a basis for valuing the entity
C. To provide information about the financial position, financial performance
and cash flows of an entity that is useful to a wide range of users in making
economic decisions
D. To facilitate comparison of financial performance between entities
operating in different industries
E. To assist management and those charged with governance in making timely
economic decisions about deployment of the entity's resources

10 Information is relevant if it is capable of making a difference in 11 The accounting principle which, in times of rising
the decisions made by users. According to the IASB's Conceptual prices, tends to understate asset values and
Framework, financial information is capable of making a overstate profits, is:
difference in decisions if it has which of the following? A. going concern
1 Predictive value
B. accruals
2 Comparative value
3 Historic value C. consistency
4 Confirmatory value D. historical cost
A. 1 and 3 only
B. 2 and 4 only
C. 1 and 4 only
D. 2 and 3 only

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12 Which of the following statements about accounting concepts and the
characteristics of financial information is correct?
A. Financial statements are required to give a true and fair view. These
terms have clear definitions which are included in IAS 1, Presentation of
Financial Statements.
B. The historical cost concept means that only items capable of being
measured in monetary terms can be recognised in financial statements.
C. It may sometimes be necessary to exclude information that is relevant
and reliable from financial statements because it is too difficult for some
users to understand.
D. A specific disclosure requirement of an IFRS Standard need not be
satisfied if the information is immaterial.
14. Which of the following is the best description of fair
presentation in accordance with IAS 1, Presentation of
Financial Statements?
A. The financial statements are accurate.
B. The financial statements are as accurate as possible given
the accounting systems of the organisation.
C. The directors of the company have stated that the financial
statements are accurate and correctly prepared.
D. The financial statements are reliable in that they reflect the
effects of transactions, other events and conditions.
16 According to IAS 1, Presentation of Financial
Statements, compliance with IFRS Standards will
normally ensure that:
A. the entity's inventory is valued at net realisable value
B. the entity's assets are valued at their break-up value
C. the entity's financial statements are prepared on the
assumption that it is a going concern
D. the entity's financial position, financial performance
and cash flows are presented fairly
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13 Listed below are two comments on accounting conventions.
1. According to the IASB's Conceptual Framework, financial
information must be either relevant or faithfully represented if it is
to be useful.
2. Materiality means that only items having a physical existence
may be recognised as assets.
Which, if either, of these comments is correct?
A. 1 only
B. 2 only
C. Both of them
D. Neither of them
15 Which of the following definitions for the going concern
concept in accounting is the closest to the definition given in
IAS 1, Presentation of Financial Statements?
A. The directors do not intend to liquidate the entity or to
cease trading in the foreseeable future.
B. The entity is able to pay its debts as and when they fall due.
C. The directors expect the entity's assets to yield future
economic benefits.
D. Financial statements have been prepared on the
assumption that the entity is solvent and would be able to pay
all creditors in full in the event of being wound up.
17. The directors of Lagon plc wish to omit an item from the
company's financial statements on the grounds that it is
commercially sensitive. Information on the item would
influence the users of the information when making
economic decisions. According to IAS 1, Presentation of
Financial Statements the item is said to be:
A. neutral
B. prudent
C. material
D. understandable
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18. Which three of the following are fundamental
principles of the IESBA Code of Ethics for
Professional Accountants?
A. Integrity
B. Objectivity
C. Independence
D. Confidentiality
E. Courtesy
20. Which of the following statements best describes ethical
guidance in the UK?
A. Ethical guidance provides a set of rules which must be
followed in all circumstances.
B. Ethical guidance is a framework containing a combination
of rules and principles, the application of which is dependent
on the professional judgement of the accountant based on
the specific circumstances.
C. Ethical guidance provides a set of principles which can be
applied at the discretion of the accountant.
D. Ethical guidance is a series of legal requirements.
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19. Which of the following statements is correct?
A The ICAEW Code of Ethics applies to its members only.
B The ICAEW Code of Ethics applies to its members and
employees of member firms only.
C. The ICAEW Code of Ethics applies to its members,
employees of member firms and ICAEW students.
D. The ICAEW Code of Ethics applies to its members,
employees of member firms, ICAEW students and all
other members of UK accountancy bodies.
21. There are two main approaches to a code of professional ethics: a rules-
based ethical code and a code based upon a set of principles. Indicate
whether the following statements are true or false.
• A code based upon a set of principles requires a professional accountant to
comply with a set of specific rules.
A True
B False
• A rules-based code requires a professional accountant to identify, evaluate and
address threats to compliance with fundamental ethical principles.
C True
D False
• The ICAEW uses a rules-based approach.
E True
F False