IAS 40

1. Which of the following terms does this statement define: “the amount of cash
or cash equivalents paid or the fair value of other consideration given to
acquire an asset at the time of its acquisition or construction”?
o Cost
o Deemed cost
o Fair value
o Present value
Incorrect
Cost is the amount of cash or cash equivalents paid or the fair value of other
consideration given to acquire an asset at the time of its acquisition or
construction or, where applicable, the amount attributed to that asset when
initially recognised in accordance with the specific requirements of other
IFRSs, eg IFRS 2 Share-based Payment. [IAS 40.5]
2. Which of the following does not define investment property?
o A) Property held to earn rentals
o B) Property held for capital appreciation
o C) Property used in the production or supply of goods or services
o D) A and C
Incorrect
Investment property is property (land or a building—or part of a building—or
both) held (by the owner or by the lessee as a right-of-use asset) to earn
rentals or for capital appreciation or both, rather than for:
(a) use in the production or supply of goods or services or for administrative
purposes; or
(b) sale in the ordinary course of business.
[IAS 40.5]
3. Which of the following statements is true with regards to an investment
property?
o An investment property generates cash flows largely independently of
the other assets held by an entity
o The value in use of investment property is significantly higher than of
owner-occupied property
o An investment property unlike owner-occupied property shall not be
depreciated over its useful life
o An investment property unlike owner-occupied property shall always be
measured at its historical cost
 Incorrect
Investment property is held to earn rentals or for capital appreciation or both.
Therefore, an investment property generates cash flows largely independently
of the other assets held by an entity. [IAS 40.7]
4. An investment property shall be measured initially at its __________.
o Cost
o Fair value
o Deemed cost
o Value in use

IAS 2
1. Which of the following statements define the term ‘net realisable value’?
o The estimated selling price in the ordinary course of business plus the
estimated costs of completion less the estimated costs necessary to make the
sale
o 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
o The estimated cost of completion less selling price in the ordinary course of
business
o The estimated costs necessary to make the sale plus selling price in the
ordinary course of business less the estimated costs of completion
Incorrect
NRV is the estimated selling price in the ordinary course of business, less the
estimated cost of completion and the estimated costs necessary to make the
sale. [IAS 2.6]
2. Which of the following does the cost of inventories comprise?
o A. Costs of purchase
o B. Costs of conversion
o C. Costs incurred in bringing the inventories to their present location
o D. Costs incurred in bringing the inventories to their present condition
o E. A and C
o F. All of the above
Incorrect
[IAS 2.10] Cost should include all:
• costs of purchase (including taxes, transport, and handling) net of trade
discounts received
 • costs of conversion (including fixed and variable manufacturing overheads)
and
• other costs incurred in bringing the inventories to their present location and
condition
3. Normal 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.
o True
o False
4. The actual level of production may be used if it __________ normal capacity.
o equals
o approximates
o exceeds
o is less than