1.

Which statement is incorrect regarding property, plant

and equipment (PPE)?
a. PPE are tangible items that are held for use in the
production or supply of goods or services, for
rental to others, or for administrative purposes;
and are expected to be used during more than one
period.
b. The cost of an item of PPE shall be recognized as
an asset if, and only if, it is probable that future
economic benefits associated with the item will
flow to the entity and the cost of the item can be
measured reliably.
c. An item of PPE should be measured on initial
recognition at its cost.
d. PPE are presented in the statement of financial
position either as current or noncurrent.

2. Which of the following will be most likely included in

the line item property, plant and equipment in an
entity’s statement of financial position?
a. Bearer animals
b. Land held for sale in the ordinary course of
business
c. Land and building for rental to others
d. Equipment for rental to others

3. Which of the following will be least likely included in

the line item property, plant and equipment in an
entity’s statement of financial position?
a. Spare parts, stand-by equipment and servicing
equipment
b. Equipment acquired for safety or environmental
reasons
c. Moulds, tools and dies
d. Production supplies

5. The cost of an item of property, plant and equipment

comprises:
I. Its purchase price, including import duties and
non-refundable purchase taxes, after deducting
trade discounts and rebates.
II. Any costs directly attributable to bringing the asset
to the location and condition necessary for it to be
capable of operating in the manner intended by
management.
III. The initial estimate of the costs of dismantling and
removing the item and restoring the site on which
it is located, the obligation for which an entity

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incurs either when the item is acquired or as a
consequence of having used the item during a
particular period for purposes other than to
produce inventories during that period.
a. I, II, and III c. I and III only
b. I and II only d. I only

6. Costs directly attributable to bringing the asset to the

location and condition necessary for it to be capable of
operating in the manner intended by management
exclude
a. Costs of employee benefits arising directly from
the construction or acquisition of the item of
property, plant and equipment.
b. Costs of site preparation.
c. Initial delivery and handling costs
d. Administration and other general overhead costs.

7. Costs directly attributable to bringing the asset to the

location and condition necessary for it to be capable of
operating in the manner intended by management
exclude
a. Installation and assembly costs.
b. Costs of testing whether the asset is functioning
properly.
c. Professional fees.
d. Costs of opening a new facility.

8. The cost of an item of property, plant and equipment

may include
a. Costs of introducing a new product or service.
b. Costs of advertising and promotional activities.
c. Costs of conducting business in a new location or
with a new class of customer.
d. Costs incurred relating to leases of assets that are
used to construct an item of property, plant and
equipment, such as depreciation of right-of-use
assets.

19. Which statement is incorrect regarding the cost of a

self-constructed asset?
a. If an entity makes similar assets for sale in the
normal course of business, the cost of the asset is
usually the same as the cost of constructing an
asset for sale.
b. Any internal profits are eliminated in arriving at
such costs.
c. The cost of abnormal amounts of wasted material,

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labor, or other resources incurred in selfconstructing
an asset is included in the cost of the
asset.
d. None, all the statements are correct.

21. Bearer plants are accounted for in the same way as

a. Self-constructed items of PPE
b. Acquired items of PPE
c. Donated items of PPE
d. Any of these

22. Which statement is incorrect regarding land and

buildings?
a. Land and buildings are separable assets and are
accounted for separately, even when they are
acquired together.
b. Land normally has an unlimited useful life and
therefore is not depreciated.
c. Buildings have a limited useful life and therefore
are depreciable assets.
d. An increase in the value of the land on which a
building stands affects the determination of the
depreciable amount of the building.

23. An entity acquired a piece of land with existing building

with the intention to demolish the old building right
away in order to construct a new building on its site as
part of its planned redevelopment. In accordance with
PIC Q&A No. 2012-02, it is appropriate for the entity to
account for the carrying value of the old building as
part of the cost of the new building
a. That will be used as an owner-occupied property
b. That will be held as an investment property
c. That will be sold as an inventory
d. None of the above.

24. An entity acquired a piece of land with existing building

with the intention to initially use the old building as an
owner-occupied property and then demolish it in a
future period and replace it with a new building. In
accordance with PIC Q&A No. 2012-02, it is
appropriate for the entity to account for the carrying
value of the old building as part of the cost of the new
building
a. That will be used as an owner-occupied property
b. That will be held as an investment property
c. That will be sold as an inventory
d. None of the above.

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25. In accordance with PIC Q&A No. 2012-02, the costs
incurred in relation to demolition (or the physical
tearing down) of the old building to give way for the
construction of the replacement building should
preferably be
a. Expensed.
b. Capitalized as part of the cost of land.
c. Capitalized as land improvements.
d. Capitalized as part of the cost of the new building.

30. Subsequent expenditures on property, plant and

equipment are normally capitalized when they result in
a. Extension of useful life
b. Increase in productive capacity
c. Improvement in efficiency
d. Any of these

31. Which of the following are least likely to be recognized

in the carrying amount of an item of PPE?
a. Costs of regular major inspection, which is a
condition to continue to operate an item of PPE.
b. Costs of replacing parts of an item of PPE at
regular intervals.
c. Costs of replacing parts of an item of PPE at
irregular intervals.
d. Costs of the day-to-day servicing of the item.

33. The financial statements shall disclose, for each class

of property, plant and equipment
I. The measurement bases used for determining the
gross carrying amount
II. The depreciation methods used
III. The useful lives or the depreciation rates used
IV. The gross carrying amount and the accumulated
depreciation (aggregated with accumulated
impairment losses) at the beginning and end of the
period
V. A reconciliation of the carrying amount at the
beginning and end of the period
a. I, II, III IV and V c. I, II and III only
b. I, II, III and IV only d. II, III, IV and V only

34. Which of the following additions should be disclosed

separately?
a. Acquisitions where payment is deferred beyond
normal credit terms
b. Acquisitions by way of government grant
c. Acquisitions through business combinations

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d. All of these

35. The financial statements shall disclose, for each class

of property, plant and equipment
I. The carrying amount of temporarily idle property,
plant and equipment.
II. The gross carrying amount of any fully depreciated
property, plant and equipment that is still in use.
III. The carrying amount of property, plant and
equipment retired from active use and not
classified as held for sale in accordance with PFRS
5.
IV. When the cost model is used, the fair value of
property, plant and equipment when this is
materially different from the carrying amount.
a. I, II, III and IV c. I and III only
b. I, II and III only d. None of these

1. PAS 16 applies to
a. Property, plant and equipment classified as held
for sale in accordance with PFRS 5
b. Biological assets related to agricultural activity
c. Mineral rights and mineral reserves such as oil,
natural gas and similar non-regenerative
resources.
d. Property, plant and equipment used to develop or
maintain biological assets and mineral rights and
mineral resources

2. PAS 16 does not apply to

a. An entity using the cost model for investment
property.
b. Depreciation of leased assets.
c. Recognition and measurement of exploration and
evaluation assets.
d. All of these.

What is depreciation?
a. The systematic allocation of the depreciable
amount of an asset over its useful life.
b. The cost of an asset, or other amount substituted
for cost, less its residual value.
c. The removal of a previously recognized asset from
an entity’s statement of financial position.
d. Price that would be received to sell an asset in an
orderly transaction between market participants at
the measurement date.

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2. Depreciation of an asset begins
a. When it is available for use.
b. When it is actually used.
c. When it is retired from active use.
d. When it is derecognized.

3. Depreciation of an asset ceases

a. At the date that the asset is derecognized.
b. At the date that the asset is classified as held for
sale in accordance with PFRS 5
c. At the earlier of a or b.
d. At the later of or b.

4. Depreciation is not recognized if

a. The fair value of the asset exceeds its carrying
amount.
b. The asset becomes idle.
c. The asset is retired from active use.
d. The asset’s residual value exceeds its carrying
amount.

6. The depreciation method used shall reflect the pattern

in which the asset’s future economic benefits are
expected to be consumed by the entity. Which
statement is incorrect regarding depreciation methods?
a. Straight-line depreciation results in a constant
charge over the useful life if the asset’s residual
value does not change.
b. The diminishing balance method results in a
decreasing charge over the useful life.
c. The units of production method results in a charge
based on the expected use or output.
d. A depreciation method that is based on revenue
that is generated by an activity that includes the
use of an asset is appropriate.

14. The residual value, the useful life of an asset and the
depreciation method applied to an asset shall be
reviewed
a. At least at each financial year-end.
b. At least every two years.
c. At least every three years.
d. Only if there is an indication they may have
changed since the most recent annual reporting
date.

16. Useful life of Property, Plant and Equipment is:

a. The period over which an asset is expected to be

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available for use by an entity.
b. The number of production or similar units expected
to be obtained from the asset by an entity.
c. Either a or b.
d. Neither a nor b.

17. Which of the following factors are considered in

determining the useful life of an asset?
I. Expected usage of the asset
II. Expected physical wear and tear
III. Technical or commercial obsolescence
IV. Legal or similar limits on the use of the asset
a. I, II, III and IV
b. I, II and III only
c. I, II and IV only
d. I and II only

19. Which statement is incorrect regarding derecognition

of property, plant and equipment?
a. Derecognition is the removal of a previously
recognized asset from an entity’s statement of
financial position.
b. An asset should be removed from the statement of
financial position on disposal or when it is
withdrawn from use and no future economic
benefits are expected from its disposal.
c. The gain or loss on disposal is the difference
between the net disposal proceeds and the
carrying amount and should be recognized in the
income statement.
d. Gains on disposal of property, plant and equipment
may be classified as revenue.

22. If an entity recognizes in the carrying amount of an

item of property, plant and equipment the cost of a
replacement for part of the item, then it derecognizes
the carrying amount of the replaced part
a. If the replaced part had been depreciated
separately.
b. If the asset is depreciated using components
depreciation.
c. If it is practicable for an entity to determine the
carrying amount of the replaced part.
d. Regardless of whether the replaced part had been
depreciated separately.

24. When an entity allocates depreciation to the separate

parts of an asset and each part is accounted for

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separately, the entity is using which of the following
approaches to depreciation?
a. Periodic depreciation
b. Segment depreciation
c. Replacement cost depreciation
d. Components depreciation

25. Which statement is incorrect regarding ‘components

depreciation’?
a. Each part of an item of property, plant and
equipment with a cost that is significant in relation
to the total cost of the item shall be depreciated
separately.
b. An entity allocates the amount initially recognized
in respect of an item of property, plant and
equipment to its significant parts and depreciates
separately each such part.
c. It may be appropriate to depreciate separately the
airframe and engines of an aircraft, whether owned
or subject to a finance lease.
d. An entity may not depreciate separately the parts
of an item that do not have a cost that is
significant in relation to the total cost of the item.

27. In relation to depreciation, an entity’s financial

statements shall disclose
I. The depreciation methods used
II. The useful lives or the depreciation rates used
III. A reconciliation of the carrying amount at the
beginning and end of the period showing
depreciation
IV. Whether depreciation during the period is
recognized in profit or loss or as a part of the cost
of other assets
V. Accumulated depreciation at the end of the
period.
a. I, II, III IV and V c. I, II and III only
b. I, II, III and IV only d. I, II and IV only

1. Under the revaluation model, an item of property,

plant and equipment whose fair value can be
measured reliably shall be carried at a revalued
amount. Revalued amount means
a. Fair value at the date of the revaluation.
b. Fair value at the date of the revaluation less any
accumulated depreciation and any accumulated
impairment losses.
c. Fair value at the date of the revaluation less any

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subsequent accumulated depreciation and
subsequent accumulated impairment losses.
d. Cost less any accumulated depreciation and
accumulated impairment losses.

2. Which statement is correct regarding the revaluation

model?
a. Revaluations shall be made with sufficient
regularity to ensure that the carrying amount does
not differ materially from that which would be
determined using fair value at the end of the
reporting period.
b. The frequency of revaluations depends upon the
changes in fair values of the items of property,
plant and equipment being revalued.
c. If an item of property, plant and equipment is
revalued, the entire class of property, plant and
equipment to which that asset belongs shall be
revalued.
d. All of the above.

3. XYZ Inc. owns a fleet of over 100 cars and 20 ships. It

operates in a capital-intensive industry and thus has
significant other property, plant, and equipment that it
carries in its books. It decided to revalue its property,
plant, and equipment. The company's accountant has
suggested the alternatives that follow. Which one of
the options should XYZ Inc. select in order to be in line
with the provisions of PAS 16?
a. Revalue only one-half of each class of property,
plant, and equipment, as that method is less
cumbersome and easy compared to revaluing all
assets together.
b. Revalue one ship at a time, as it is easier than
revaluing all ships together.
c. Revalue an entire class of property, plant, and
equipment.
d. Since assets are being revalued regularly, there is
no need to depreciate.

4. Annual revaluation is required for items of property,

plant and equipment
a. That experience significant and volatile changes in
fair value.
b. When fair value differs materially from its carrying
amount.
c. With only insignificant changes in fair value.
d. In all cases.

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7. Which statement is incorrect regarding ‘realized’
revaluation surplus?
a. It may be transferred directly to retained earnings.
b. It may be left in equity under the heading
revaluation surplus.
c. The transfer to retained earnings should not be
made through profit or loss.
d. None, all the statements are correct.

11. PFRS 13 defines fair value as current exit price,

whereas depreciated replacement cost measures the
entry price for an asset. In accordance with PIC Q&A
No. 2018-3, when can depreciated replacement cost be
used to measure the fair value of an item of property,
plant and equipment?
a. Only when the entry price equals a current exit
price.
b. Only when the entry price is lower than a current
exit price.
c. Under no circumstances.
d. In all circumstances.

18. If items of property, plant and equipment are stated at

revalued amounts, the following shall be disclosed
except
a. Whether an independent valuer was involved.
b. For each revalued class of property, plant and
equipment, the carrying amount that would have
been recognized had the assets been carried under
the cost model.
c. The revaluation surplus, indicating the change for
the period and any restrictions on the distribution
of the balance to shareholders.
d. The expected date of the next revaluation.

2. The initial application of a policy to revalue assets in

accordance with PAS 16, Property, Plant & Equipment
a. Must be treated as an extraordinary event.
b. Must be accounted for as a change in accounting
policy.
c. Must not be accounted for as a change in
accounting policy.
d. May be accounted for in accordance with the
requirements of the Conceptual Framework.

3. If a reporting entity chooses to switch from the cost

model to the revaluation model for property, plant and
equipment, the periodic depreciation charge usually

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will
a. Decrease.
b. Increase.
c. No longer be required.
d. Not be affected

8. When an entity chooses the revaluation model as its

accounting policy for measuring property, plant and
equipment, which of the following statements is
correct?
a. Revaluation of property, plant and equipment must
be made at least every three years.
b. When an asset is revalued, the entire class of
property, plant and equipment to which that asset
belongs must be revalued.
c. Increases in an asset’s carrying value as a result of
the first revaluation must be recognized as a
component of profit or loss.
d. When an asset is revalued, individual assets within
a class of property, plant and equipment to which
that asset belongs can be revalued.

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