1.

1 Development of Standards and Conceptual Framework

• The Philippine Interpretations Committee (PIC) is the successor of the Accounting Standards Council
(ASC) whose main function is to establish GAAP in the Philippines. False
• PIC was formed by the FRSC to assist the FRSC in establishing and improving the financial reporting
standards of the Philippines. True
• The monetary board is a group of capital market authorities and provides formal link between the
Trustees and public authorities in order to enhance the public accountability of the IFRS Foundation.
False (Monitoring board; not monetary board)
• Certified Public Accountants are required to earn 40 Continuing Professional Development units in a
span of 3 years. False
• The IFRS Advisory council provides an advisory forum in which members can constructively contribute
towards the achievement of the IASB’s goal of developing globally accepted high-quality accounting
standards. False (Accounting Standards Advisory Forum (ASAF)
• The AASC was created by PRC upon recommendation of the BOA to assist the BOA in establishing and
promulgating accounting standards in the Philippines. False
• In order for the IFRS Foundation to carry its mission as the standard setting body, the IASB was
created. IASB stands for International Accounting Standards Bureau. False
• Generally, both quantitative and qualitative bases will be used in assessing the cost and benefit whether
a certain information will be provided, use and reported. True
• One of the purpose of the Conceptual Framework is to assist the preparers of financial statements in
interpreting the information contained in financial statements prepared in compliance with IFRS. False
• An obligation is a duty or responsibility that an entity has a practical ability to avoid. False
• An obligation can meet the definition of a liability even if the probability of a transfer of an economic
resource is low. True
• A reporting entity can be a single entity or can comprise more than one entity but not a portion of an
entity. False
• An entity cannot have a right to obtain economic benefits from itself. True
• Expenses are increases in assets, or decreases in liabilities, that result in increases in equity, other than
those relating to contributions from holders of equity claims. False
• A consummated contract is a contract, or a portion of a contract, that is equally unperformed. False
• The general purpose financial reports are not designed to show the value of a reporting entity but they
provide information that help estimate the value of the reporting entity. True
• If there is a conflict between the requirements of the IFRS over those of Conceptual Framework, the
latter will prevail as future IFRS and the review of existing IFRS are guided by the Conceptual Framework
not the other way around. False
• An asset or liability can exist even if the probability of an inflow or outflow of economic benefits is low.
True
• The unit of account is the right or the group of rights, the obligation or the group of obligations, or the
group of rights and obligations, to which recognition criteria and measurement concepts are applied.
True
• An economic resource is considered to have potential if it is likely that the it will produce economic
benefits. False
• Generally, the older the information is the less useful it is however, some information may continue to
be timely long after the end of a reporting period. True
• There is an income or expense the moment there is a change in an entity’s economic resources and
claims. False
• Income and expenses relate to an entity’s financial position while assets, liabilities, and equity relate to
financial performance. False
• The Conceptual Framework is not an IFRS and hence does not define standards for any particular
measurement or disclosure issue. True
• It is a not-for-profit international organization responsible for overseeing the work of the IASB, the
structure and strategy. IFRS Foundation
• Current value measurement bases include fair value, value in use for assets and fulfillment value for
liabilities and current cost. True
• Recognition is the removal of all or part of a recognized asset or liability from an entity’s statement of
financial position. False
• Control of an economic resource only arises when there is an ability to enforce legal rights. False
• In case of conflict between the substance and form of a transaction or economic phenomenon, the entity
shall follow the form of the transaction in order to achieve faithful representation. False
• What is usually the output of Research Program Stage in the development of Standard? Discussion Paper
• The following are measurement bases of current value, EXCEPT Historical Cost, Value in Use/ Fulfillment
Value, Fair Value, Current Cost
• Which of the following is the foundation of Conceptual Framework? The objective of financial reporting
• According to the IASB Conceptual Framework, the objective of general purpose financial reporting is to
Provide financial information that is useful to users
• Which of the following is an enhancing qualitative characteristic’ according to the IASB Conceptual
Framework? Timeliness
• Which of the following is not represented in the FRSC? Department of Budget and Management
• The objective of general purpose financial statement is the foundation of the Conceptual Framework,
the other aspects will flow logically from the objective. True
• The Conceptual Framework defines an asset as: A present economic resource controlled by the entity
as a result of past events
• Based on the latest Framework, what are the fundamental qualitative characteristics of financial
information? Relevance and Faithful representation
• Which of the following is an enhancing qualitative characteristic? Comparability
• It is the qualitative characteristic that enables users to identify and understand similarities in, and
differences among, items. Comparability
• It is an entity-specific aspect of relevance based on the nature or magnitude, or both, of the items to
which the information relates in the context of an individual entity’s financial report. Materiality
• It means checking the inputs to a model, formula or other technique and recalculating the outputs using
the same methodology. Indirect verification
• What are the elements of faithful representation? Completeness, neutrality, and freedom from error
• It means having information available to decision-makers in time to be capable of influencing their
decisions. Timeliness
• It means that different knowledgeable and independent observers could reach consensus, although not
necessarily complete agreement, that a particular depiction is a faithful representation. Verifiability
• It describes the objective of, and the concepts for, general purpose financial reporting. Conceptual
Framework for Financial Reporting
• Which of the following statements concerning neutrality is false? Neutral information means
information with no influence on behavior.
• Which is not a purpose of the Conceptual Framework? prescribe the basis for presentation of general
purpose financial reports to ensure comparability both with the entity’s financial reports of previous
periods and with the financial reports of other entities.
• It refers to the use of the same methods for the same items, either from period to period within a
reporting entity or in a single period across entities. Consistency
• It is the exercise of caution when making judgements under conditions of uncertainty. Prudence
• Which of the following is not always needed in order for there to be a complete depiction of a group of
assets? explanations of significant facts about the quality and nature of the items

1.2 Quiz PAS 1

• Since PAS 1 is designed for profit-oriented entities, it cannot be applied to non-profit-oriented
organizations or entities. False
• The title of PAS 1 is "Preparation and Presentation of Financial Reports." False
• It is the functional presentation that is used when expenses are classified as cost of sales, distribution
cost, administrative cost and other expense. True
• PAS 1 provides for an elaborate definition of non-current assets and liabilities. False
• An entity need not provide a specific disclosure required by an IFRS if the information is not material.
True
• An entity classifying expenses by function shall disclose additional information on the nature of
expenses. True
• An entity shall classify an asset as current when it expects to realize the asset, or intends to sell or
consume it, in its normal operating cycle. True
• An entity shall at all times not offset assets and liabilities or income and expenses. False
• Out of the basic financial statements, the notes to the financial statements is presented with the least
prominence. False
• The days sales outstanding (DSO) of an entity is the time between the acquisition of assets for processing
and their realization in cash or cash equivalents. False
• An entity is precluded from presenting additional line items, headings and subtotals in the statement of
comprehensive income and the separate income statement (if presented). False
• Employment of inappropriate accounting policies can be rectified by sufficient disclosure and
explanation of such policies. False
• When the entity’s normal operating cycle is not clearly identifiable, it is assumed to be twelve months.
True
• An entity shall classify a liability as current when the entity does not have an unconditional right to defer
settlement of the liability for at least twelve months after the reporting period. True
• An entity shall prepare all its financial statements using the accrual basis of accounting. False
• Retrospective adjustments and retrospective restatements are changes in equity False
• PAS 1 prohibits the practice of preparing financial statements for periods other than a one-year period.
False
• An entity shall not present any items of income or expense as extraordinary items anywhere in the
financial statements. True
• An entity shall disclose comparative information in respect of the previous period for all amounts
reported in the current period’s financial statements. True
• When an entity presents current and non-current assets, and current and non-current liabilities, as
separate classifications in its statement of financial position, it shall classify deferred tax assets
(liabilities) as non-current assets (liabilities). True
• PFRSs apply only to financial statements, and not necessarily to other information presented in an annual
report, a regulatory filing, or another document. True
• It is the natural presentation that is used when expenses are presented as depreciation, purchases of
materials, transport costs, employee benefits and advertising costs True
• Entities are precluded from using terminologies that are different from the terminologies used in PAS 1.
False
• As a general rule, offsetting an asset with a liability, and income with an expense is not allowed by PAS
1. True
• An entity shall present, either in the statement of changes in equity or in the notes, the amount of
dividends recognized as distributions to owners during the period, and the related amount per share
True
• Which of the following is not a component of other comprehensive income? net interest cost of defined
benefit plan
• Which of the following is not an objective of PAS 1? Sets out the recognition, measurement and
disclosure requirements for all transactions and events
• It is the presentation and classification of financial statement items on a uniform basis from one
accounting period to the next. Consistency of Presentation

• International Financial Reporting Standards (IFRSs), as referred to in the Standards, pertain to:

1. IFRS 1 to IFRS 17
2. IAS 1 to IAS 41
3. IFRIC and SIC Interpretations 1, 2 and 3
• A complete set of financial statements includes the following components, except: Reports and
statements such as environmental reports and value added statements
• In analyzing a company’s financial statements, which financial statement would a potential investor
primarily use to assess the company’s liquidity and financial flexibility? Balance sheet
• An entity shall classify a liability as non-current when the entity has an unconditional right to defer
settlement of the liability for at least twelve months after the reporting period.
• The following are components of expenses, except Prepaid Expenses
• Which of the following should be classified as noncurrent? A liability with an acceleration clause and
the entity violated a contract provision but the lender agreed by the end of the reporting period to
provide a period of grace ending at least twelve months after the reporting period.
• Financial statements must be prepared at least Annually
• To achieve fair presentation in the financial statements, an entity is required to: (choose the incorrect
one) comply with majority of the applicable PFRSs
• Which of the following are acceptable methods for reporting comprehensive income under IFRS? Either
1 or 2

1. One comprehensive income statement.

2. Two statements: an income statement and a comprehensive income statement.
3. In the statement of owner’s equity.

• If management concludes that compliance with a requirement in an IFRS would be so misleading that it
would conflict with the objective of financial statements set out in the Framework, but the relevant
regulatory framework prohibits departure from the requirement, the entity shall do the following,
except: Make no changes and continue complying with the standard
• All of the items below, except one, give rise to reclassification adjustment. Which is the exception?
Changes in revaluation surplus
• Which of the following is required to be disclosed regarding the risks and uncertainties that exist? The
potential impact of estimates about values of assets and liabilities when it is reasonably possible that
the estimate will change in the near future.
• How many of the following statements is/are true? 2
o An entity may use titles for the statements other than those used in PAS 1
o An entity shall present the components of profit or loss in a separate statement of
comprehensive income.
o Reports and statements presented outside the financial statements, such as environmental
reports and value-added statements are outside the scope of IFRSs.
• An entity shall no longer prepare financial statements on a going concern basis if: The entity intends to
liquidate

1.3 Post-Test PAS 7, PAS 8, Pre-Test PAS 2

• An entity shall use the same cost formula for all inventories having a similar nature and use to the entity.
True
• When inventories are sold, the carrying amount of those inventories shall be recognized as an expense
(cost of sales) in the period in which the related revenue is recognized. True
• Fair value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale. False
• The amount of any reversal of any write-down of inventories, arising from an increase in net realizable
value, shall be recognized as an income in the period in which the reversal occurs. False
• Materials and other supplies held for use in the production of inventories are not written down below
cost if the finished products in which they will be incorporated are expected to be sold at or above cost.
True
• Inventories are assets held for sale in the ordinary course of business, in the process of production for
such sale or in the form of materials or supplies to be consumed in the production process or in the
rendering of services. True
• The costs of purchase of inventories comprise the purchase price, import duties and other taxes,
including those subsequently recoverable by the entity from the taxing authorities, and transport,
 handling and other costs directly attributable to the acquisition of finished goods, materials and services.
False
• PAS 2 applies to financial instruments, biological assets related to agricultural activity and, agricultural
produce at the point of harvest. False
• PAS 2 applies to the measurement of inventories held by commodity broker-traders who measure their
inventories at fair value less costs to sell. False
• This means that specific costs are attributed to identified items of inventory. Specific identification of
cost
• Which of the following will form part of the cost of inventory? normal amounts of wasted materials,
labour or other production costs
• PAS 2 applies to the measurement of inventories held by producers of agricultural and forest products,
agricultural produce after harvest. False
• Which of the following will not form part of the cost of an inventory? Recoverable purchase taxes
• Specific identification of costs is inappropriate and impractical when there are large numbers of items of
inventory that are ordinarily interchangeable. True
• The cost of inventories shall be assigned by using the first-in, first-out (FIFO), last-in, first out (LIFO) or
weighted average cost formula. False
• Indirect materials and indirect labour are examples of fixed production overheads. False
• When a decline in the price of materials indicates that the cost of the finished products exceeds net
realizable value, the materials are written down to net realizable value True
• It is the production capacity expected to be achieved on average over a number of periods or seasons
under normal circumstances, taking into account the loss of capacity resulting from planned
maintenance. Normal capacity
• The amount of any write-down of inventories to net realizable value and all losses of inventories shall be
recognized as an expense in the period the write-down or loss occurs. True
• The practice of writing inventories down below cost to net realizable value is consistent with the view
that assets should not be carried in excess of amounts expected to be realized from their sale or use.
True
• Which of the following will form part of the cost of inventory? storage costs necessary in the production
process before a further production stage
• Depreciation and maintenance of factory buildings, equipment and right-of-use assets used in the
production process, and the cost of factory management and administration are examples of variable
production overheads. False
• It is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale. Net realizable value
• Broker-traders are those who buy or sell commodities for others or on their own account. True
• Full or maximum capacity is the production expected to be achieved on average over a number of
periods or seasons under normal circumstances, taking into account the loss of capacity resulting from
planned maintenance. False
• Inventories are usually written down to net realizable value item by item. True
• An entity purchases a building and the seller accepts payment partly in equity shares and partly in
debentures of the entity. This transaction should be treated in the statement of cash flows as follows:
The purchase of the building should be investing cash outflow and the issuance of shares and the
debentures as financing cash outflows.
• For entities other than financial institutions, how are 'interest received' classified in the statement of
cash flows? Either operating or investing cash flow
• For financial institutions, how are interest paid usually classified in the statement of cash flows?
Operating cash flow
• For financial institutions, how are dividends received usually classified in the statement of cash flows?
Operating cash flow
• An entity (other than a financial institution) receives dividends from its investment in shares. How should
it disclose the dividends received in the statement of cash flows prepared under PAS 7? Either as
operating cash inflow or as investing cash inflow
• For entities other than financial institutions, how are 'dividends paid' classified in the statement of cash
flows? Either operating or financing cash flow
• It is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic
consumption of an asset, that results from the assessment of the present status of, and expected future
benefits and obligations associated with, assets and liabilities. change in accounting estimate
• In using judgement to develop and apply an accounting policy for a transaction or event where no
specific standard applies, which of the following should management give foremost consideration? the
requirements in PFRSs dealing with similar and related issues
• Application guidances that accompany the PFRSs are mandatory requirements for financial reporting
whether or not they are considered as an integral part of the related Standard. False
• They are the specific principles, bases, conventions, rules and practices applied by an entity in preparing
and presenting financial statements. Accounting policies

2.2 Post Test Pas 16, PAS 23, PAS 38 and PAS 40

• Recoverable amount is the lower of an asset’s fair value less costs to sell and its value in use. False
• If an asset’s carrying amount is decreased as a result of a revaluation, the decrease shall be recognized
in profit or loss. True
• A biological asset is a living plant that is used in the production or supply of agricultural produce, is
expected to bear produce for more than one period and has a remote likelihood of being sold as
agricultural produce, except for incidental scrap sales. False
• PAS 16 applies to the produce on bearer plants. False
• The replacement cost of an asset is the estimated amount that an entity would currently obtain from
disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age
and in the condition expected at the end of its useful life. False
• PAS 16 applies to property, plant and equipment used to develop or maintain exploration and evaluation
assets. True
• Under the cost model, PPE are to be subsequently measured at their fair value less any subsequent
accumulated depreciation and subsequent accumulated impairment losses. False
• Depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value.
True
• The depreciation charge for each period shall be recognized in the other comprehensive income unless
it is included in the carrying amount of another asset. False
• An item of property, plant and equipment that qualifies for recognition as an asset shall be initially
measured at its cost. True
• An entity shall assess at the end of each reporting period whether there is any indication that an asset
may be impaired. True
• Income earned through the use of a building site as a car park until construction starts will be treated as
a reduction to the cost of the to-be-constructed building. False
• PAS 16 applies to mineral rights and mineral reserves such as oil and natural gas. False
• Fair value is the amount at which an asset is recognized after deducting any accumulated depreciation
and accumulated impairment losses. False
• PAS 16 applies to bearer plants. True
• Depreciation is recognized even if the fair value of the asset exceeds its carrying amount, as long as the
asset’s residual value does not exceed its carrying amount. True
• Revaluation of PPE shall be done annually. False
• An impairment loss shall be recognized immediately in profit or loss, unless the asset is carried at
revalued amount in accordance with another standard. True
• Compensation from third parties for items of property, plant and equipment that were impaired, lost or
given up shall be included in profit or loss only when the compensation is already received. False
• An entity shall choose either the cost model or the fair value model as its accounting policy and shall
apply that policy to an entire class of property, plant and equipment. False
• Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. True
• An entity does not recognize in the carrying amount of an item of property, plant and equipment the
costs of the day-to-day servicing of the item and instead recognize them as expenses. True
• The cost of an item of property, plant and equipment can include the initial estimate of the costs of
dismantling and removing the item and restoring the site on which it is located. True
• If an asset’s carrying amount is increased as a result of a revaluation, the increase shall be recognized in
profit or loss and accumulated in equity under the heading of revaluation surplus. False
• Repair and maintenance of an asset negates the need to depreciate the asset. False
• An entity shall cease capitalizing borrowing costs when substantially all the activities necessary to
prepare the qualifying asset for its intended use or sale are complete. True
• Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of
funds. True
• Borrowing costs incurred while land acquired for building purposes is held without any associated
development activity do not qualify for capitalization. True
• A PPE is an asset that necessarily takes a substantial period of time to get ready for its intended use or
sale. False
• An entity shall continue capitalization of borrowing costs during extended periods in which it suspends
active development of a qualifying asset. False
• Borrowing costs must be recognized as an expense. False
• Borrowing costs incurred while land is under development are capitalized during the period in which
activities related to the development are being undertaken. True
• When an entity completes the construction of a qualifying asset in parts and each part is capable of being
used while construction continues on other parts, the entity shall cease capitalizing borrowing costs
when it completes substantially all the activities necessary to prepare that part for its intended use or
sale. True
• An entity normally suspends capitalizing borrowing costs during a period when it carries out substantial
technical and administrative work. False
• Capitalizable borrowing costs from a specific-type of borrowing shall be the actual borrowing costs less
any investment income on the temporary investment of the specific-type borrowings. True
• PAS 23 deals with the actual or imputed cost of equity, including preferred capital not classified as a
liability. False
• When the carrying amount or the expected ultimate cost of the qualifying asset exceeds its recoverable
amount or net realizable value, the carrying amount is written down or written off in accordance with
the requirements of other Standards. True
• An entity also suspends capitalizing borrowing costs when a temporary delay is a necessary part of the
process of getting an asset ready for its intended use or sale. False
• An asset is considered not yet ready for its intended use or sale when routine administrative work might
still continue even when the physical construction of the asset is complete False
• An entity shall begin capitalizing borrowing costs as part of the cost of a qualifying asset on the
completion date. False
• The income and related expenses of incidental operations of the development of an intangible asset are
usually recognized as part of the cost of the intangible asset. False
• The amortization method used for intangible assets shall reflect the pattern in which the asset’s future
economic benefits are expected to be consumed by the entity, however, that pattern cannot be
determined reliably, the straight-line method shall be used. True
• Specific management or technical talent of employees is likely to meet the definition of an intangible
asset. False
• Customer relationships and customer loyalty usually meets the definition of an intangible asset. False
• An intangible asset with an indefinite useful life shall be amortized on a straight-line basis. False
• If an item within the scope of PAS 38 does not meet the definition of an intangible asset, expenditure to
acquire it or generate it internally is recognized as an expense when it is incurred. True
• No intangible asset arising from development or from the development phase of an internal project shall
be recognized. False
• Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance
shall not be recognized as intangible assets. True
• The useful life of an intangible asset that is not being amortized shall be reviewed each period to
determine whether events and circumstances continue to support an indefinite useful life assessment
for that asset. True
• An intangible asset shall be measured initially at cost. True
• Development is original and planned investigation undertaken with the prospect of gaining new scientific
or technical knowledge and understanding. False
• An intangible asset shall be regarded by the entity as having a finite useful life when, based on an analysis
of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected
to generate net cash inflows for the entity. False
• Monetary assets are money held and assets to be received in fixed or determinable amounts of money.
True
• An entity controls an asset if the entity has the power to obtain the future economic benefits flowing
from the underlying resource and to restrict the access of others to those benefits. True
• Expenditure on an intangible item that was initially recognized as an expense shall not be recognized as
part of the cost of an intangible asset at a later date. True
• The amortization charge for each period for an intangible asset shall be recognized in profit or loss unless
this or another Standard permits or requires it to be included in the carrying amount of another asset.
True
• An intangible asset is to be measured subsequently using either the cost model or the revaluation model.
True
• The amortization period and the amortization method for an intangible asset with a finite useful life shall
be reviewed at least at each financial year-end. True
• PAS 38 shall apply to all intangible assets. False
• An intangible asset is an identifiable non-monetary asset without physical substance. True
• If an entity has previously measured an investment property at fair value, it shall continue to measure
the property at fair value until disposal even if comparable market transactions become less frequent or
market prices become less readily available. True

PFRS 5, PAS 41, PAS 28, PAS 24, and PFRS 11

• Which of the following is not true regarding discontinued operation? A component of an entity which
qualifies to the 10% quantitative thresholds.
• Which of the following choices best describes the following statements? Only one of the statements is
true
o A non-current asset to be classified as held for sale it must be available for immediate sale in its
present conditions and the sale must be highly probable.
o Non-current assets which are temporarily abandoned (idle assets) are not to be classified as non-
current asset held for sale and is depreciated.
o Non-current assets which are permanently abandoned are to be classified as non-current asset
held for sale, thus, depreciation shall be discontinued
• The assets and liabilities of a disposal group classified as held for sale shall be offset and presented as a
single amount. False
• Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for
sale that does not meet the definition of a discontinued operation shall be included in profit or loss from
continuing operations. True
• When shall an entity classify a non-current asset as held for sale in accordance with PFRS 5? When the
carrying amount of the non-current asset will be recovered principally through sale transaction
rather than through continuing use.
• Reclassifying assets from held for sale to held for distribution shall change the date of classification as
the reckoning point of the one-year period. False
• Where shall an equipment classified as held for distribution to owners be presented? As part of the
balance sheet as current assets
• Which of the following is not one of the indications that the sale is highly probable? The sale must be
completed within one year from classification
• The liabilities of a disposal group classified as held for sale shall be presented separately from other
liabilities in the statement of financial position. True
• An entity shall present a non-current asset classified as held for sale and the assets of a disposal group
classified as held for sale separately from other assets in the statement of financial position. True
• Which of the following statements is false in relation to PFRS 5? The entity shall provide, in detail, the
total revenue, cost of sales, and other income statement items of a discontinued operation in the
Statement of Comprehensive Income
• At what amount will an entity record the non-current asset held for sale? Lower of carrying amount
and fair value less costs to sell
• An entity shall disclose the aggregate gain or loss arising during the current period on initial recognition
of biological assets and agricultural produce and from the change in fair value less costs to sell of
biological assets. True
• A loss may arise on initial recognition of a biological asset, because costs to sell are deducted in
determining fair value less costs to sell of a biological asset. True
• Biological transformation comprises the processes of growth, degeneration, production, and procreation
that cause qualitative or quantitative changes in a biological asset. True
• Agricultural produce harvested from an entity’s biological assets shall be measured at its fair value less
costs to sell at the point of sale. False
• An unconditional government grant related to a biological asset measured at its fair value less costs to
sell shall be recognized in profit or loss when, and only when, the government grant is already received.
False
• A gain or loss may arise on initial recognition of agricultural produce as a result of harvesting. True
• Harvest is the management by an entity of the biological transformation and harvest of biological assets
for sale or for conversion into agricultural produce or into additional biological assets. False
• There is a conclusive presumption that fair value can be measured reliably for a biological asset at initial
recognition. False
• A gain or loss arising on initial recognition of a biological asset at fair value less costs to sell and from a
change in fair value less costs to sell of a biological asset shall be included in other comprehensive income
for the period in which it arises. False
• A biological asset shall be measured on initial recognition and at the end of each reporting period at its
fair value less costs to sell, except for the case where the fair value cannot be measured reliably. True
• Agricultural produce is the harvested produce of the entity’s biological assets. True
• On acquisition of the investment, any difference between the cost of the investment and the entity’s
share of the net fair value of the investee’s identifiable assets and liabilities is accounted for as goodwill
or income. True
• An entity with joint control of, or significant influence over, an investee shall account for its investment
in an associate or a joint venture using the equity method True
• The equity method is a method of accounting whereby the investment is initially recognized at fair value
and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets.
False
• If an entity holds, directly or indirectly, 20% or more of the voting power of the investee, it is presumed
that the entity has no significant influence, unless it can be clearly demonstrated that this is not the case.
False
• After the entity’s interest is reduced to zero (after recognizing losses), additional losses are provided for
and a liability is recognized in all circumstances. False
• If an investment in an associate becomes an investment in a joint venture or an investment in a joint
venture becomes an investment in an associate, the entity continues to apply the equity method and
does not remeasure the retained interest. True
• It is an entity over which the investor has significant influence. Associate
• Significant influence is the power to control or joint control of the financial and operating policy decision
of the investee. False
• An entity shall discontinue the use of the equity method from the date when its investment ceases to be
an associate or a joint venture True
• A sale of equipment from a parent to its subsidiary is an example of an upstream transaction False
• After the disposal takes place, an entity shall account for any retained interest in the associate or joint
venture in accordance with PFRS 9 unless the retained interest continues to be an associate or a joint
venture, in which case the entity uses the equity method True
• Gains and losses resulting from ‘upstream’ and ‘downstream’ transactions between an entity and its
associate or joint venture are recognized in the entity’s financial statements only to the extent of
unrelated investors’ interests in the associate or joint venture. True
• One evidence of the existence of significant influence is a representation on the board of directors or
equivalent governing body of the investee. True
• An entity shall apply PAS 28 to an investment, or a portion of an investment, in an associate or a joint
venture that meets the criteria to be classified as held for sale False
• An entity loses significant influence over an investee when it loses the power to participate in the
financial and operating policy decisions of that investee. True

• If the associate or joint venture that was reduced to zero subsequently reports profits, the entity
resumes recognizing its share of the profits only after its share of the profits equals the share of losses
not recognized. True

• When an investor uses the equity method to account for investment in ordinary shares, cash dividends
received by the investor from the investee shall be recorded as A deduction from the investment
account

• If the associate becomes a subsidiary PAS 28 still applies. False

• When an entity holds between 20% and 50% of the voting power of an investee, which statement is
true? The investor should use the equity method unless circumstances indicate that it is unable to
exercise significant influence over the investee.

• When the end of the reporting period of the entity is different from that of the associate or joint
venture, the associate or joint venture prepares, for the use of the entity, financial statements as of the
same date as the financial statements of the entity unless it is impracticable to do so. True

• The difference between the end of the reporting period of the associate or joint venture and that of
the entity shall be no more than three months. True

• An associate’s subsidiary and the investor that has significant influence over the associate are related
to each other. True

• The profit or loss and financial position of an entity may be affected by a related party relationship
even if related party transactions do not occur. True

• Disclosure of transactions between related parties is only required if the transaction between the
parties are not at arms-length. False

• Related party transactions and outstanding balances with other entities in a group are not disclosed in
an entity’s financial statements. False

• Which of the following are related parties? The entity and the reporting entity are members of the
same group
• Relationships between a parent and its subsidiaries shall be disclosed only if there have been
transactions between them. False

• Amounts incurred by the entity for the provision of key management personnel services that are
provided by a separate management entity shall be disclosed. True

• A transfer of resources, services, or obligations between a reporting entity and a related party is a
related party transaction only if there is no price charged or it is less than the FMV False

• The following are among the minimum disclosures required if an entity has had related party
transactions during the periods covered by the financial statements, except: the frequency of
transactions between the related parties
• Which of the following is not necessarily a related party? A major supplier of an entity
• A person or a close member of that person's family is related to a reporting entity if that person:
(choose the incorrect one) Is the only supplier of the reporting entity

• Close members of the family of a person includes that person’s children and spouse or domestic
partner. True

• Items of a similar nature may be disclosed in aggregate except when separate disclosure is necessary
for an understanding of the effects of related party transactions on the financial statements of the
entity. True

• A related party transaction is a transfer of resources, services or obligations between a reporting entity
and a related party, regardless of whether a price is charged. True

• A reporting entity is not exempt from the disclosure requirements in relation to related party
transactions and outstanding balances with a government that has control, joint control or a significant
influence, over the reporting entity. False

• Rank-and-file employees are those persons having authority and responsibility for planning, directing
and controlling the activities of the entity, directly or indirectly, including any director of that entity.
False

• Generally, intragroup related party transactions and outstanding balances are eliminated in the
preparation of consolidated financial statements of the group. True

• A person or a close member of that person’s family is related to reporting entity if that person has less
than significant influence of the reporting entity False

• A joint venture can either be a joint operation or a joint arrangement. False

• An arrangement can be a joint arrangement even though not all of its parties have joint control of the
arrangement. True

• In a joint arrangement, a single party can control the arrangement on its own. False

• A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the arrangement. True

• joint operations and joint ventures can coexist when the parties undertake different activities that
form part of the same framework agreement. True
• A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the assets, and obligations for the liabilities, relating to the arrangement. True

• The phrase "party to a joint arrangement" is limited to those that have joint control over the joint
arrangement. False

• Joint control is the contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require the unanimous consent of the parties sharing control.
True

• A subsidiary is a separately identifiable financial structure, including separate legal entities or entities
recognized by statute, regardless of whether those entities have a legal personality. False

• A joint operator shall recognize its interest in a joint operation as an investment and shall account for
that investment using the equity method. False