DE LA SALLE LIPA

College of Business, Economics, Accountancy and Management

Accountancy Department
Theory of Accounts – Reviewer
____________________________________________________________________________________________________________

COVERAGE:
PFRS 11: Joint Arrangements
PFRS 12: Disclosure of Interests in Other Entities
PFRS 13: Fair Value Measurements
Direction: Read and select the best answer for the following questions.

1. PFRS 11 shall be applicable in which entities?

a. All public entities only.
b. All private entities only.
c. All entities that are a party to a joint arrangement.
d. All entities that are a party to a contract.
2. It is an arrangement of which two or more parties have joint control.
a. Joint venture
b. Joint operation
c. Joint arrangements
d. Joint entity
3. Joint arrangement has which of the following characteristics?
a. The parties are bound by a contractual arrangement.
b. The contractual arrangement gives two or more of those parties joint control of the arrangement.
c. Both A and B.
d. Neither A nor B.
4. What are the classes of joint arrangement?
a. Jointly controlled asset or jointly controlled entity
b. Joint operation or joint venture
c. Joint liability or joint equity
d. Joint business or joint enterprise
5. It 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.
a. Joint control
b. Joint influence
c. Joint assistance
d. Joint operation
6. It is a joint arrangement whereby the parties that have joint control of the arrangement have the rights to the assets, and obligations for the
liabilities, relating to the arrangement.
a. Jointly controlled asset
b. Joint operation
c. Jointly controlled entity
d. Joint venture
7. It is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
a. Jointly controlled asset
b. Joint operation
c. Jointly controlled entity
d. Joint venture
8. The following are the accounting procedures to be done by joint operator in a joint operation, except
a. It shall recognize its assets, including its share of any assets held jointly.
b. It shall recognize its liabilities, including its share of any liabilities incurred jointly.
c. It shall account for the joint operation using equity method.
d. It shall recognize its revenue from the sale of its share of the output arising from the joint operation.
e. It shall recognize its share of the revenue from the sale of the output by the joint operation.
f. It shall recognize its expenses, including its share of any expenses incurred jointly.

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 9. How shall a joint venturer account its interest in a joint venture?
a. Use the cost method
b. Use the proportionate consolidation method
c. Use the equity method in accordance with PAS 28 unless exempted from applying the equity method
d. Use PFRS 10
10. When a party participates in a joint venture, but does not have joint control, and no significant influence, a joint venture shall account for its
interest in the arrangement in accordance with
a. PFRS 9 (Financial Asset at Fair value through Profit or Loss)
b. PFRS 10 (Consolidation)
c. PAS 39 (Cost Method)
d. PAS 28 (Equity Method:Investment in Associate)
11. When a party participates in a joint venture, but does not have joint control, and with significant influence, a joint venture shall account for
its interest in the arrangement in accordance with
a. PFRS 9 (Financial Asset at Fair value through Profit or Loss)
b. PFRS 10 (Consolidation)
c. PAS 39 (Cost Method)
d. PAS 28 (Equity Method:Investment in Associate)
12. It refers to a joint venture that has joint control of that joint venture.
a. Investor
b. Joint venturer
c. Parent company
d. Controller
13. It refers to an entity that participates in a joint arrangement, regardless of whether that entity has joint control of the arrangement.
a. Joint venturer
b. Party to a joint arrangement
c. Investor
d. Joint operator
14. It refers to a separately identifiable financial structure, including separate legal entities or entities recognized by statute, regardless of
whether those entity have a legal personality.
a. Joint venture
b. Joint arrangement
c. Joint operation
d. Separate vehicle
15. What is the objective of PFRS 12?
a. To require disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated
with, its interests in other entities and the effects of those interests on its financial position, financial performance and cash flows.
b. To require disclosure of all types of information.
c. To require disclosure of information affecting public interests and those which are considered public matters.
d. To require disclosure of privileged and confidential information.
16. PFRS 12 is required to be applied by an entity that has an interest in any of the following, except
a. Subsidiaries
b. Sole Proprietorship
c. Joint arrangements whether joint venture or joint operation
d. Associates
17. PFRS 12 does not apply to the following, except
a. Certain employee benefit plan
b. Separate financial statements to which PAS 27 applies
c. Certain interests in joint ventures held by an entity that does not share in joint control
d. Majority of interests accounted for under PFRS 9 such as Financial asset at fair value or at amortized cost
e. Unconsolidated structured entities
18. It refers to contractual or noncontractual involvement that exposes an entity to variability of returns from the performance of an entity.
a. Interest in another entity
b. Control in another entity
c. Significant influence in another entity
d. Joint control in another entity
19. The following are evidences of an interest in another entity, except
a. Holding of equity or debt instruments in another entity
b. Provision of funding, liquidity, support, credit enhancement and guarantees
c. Control, joint control or significant influence over an entity
d. Typical customer supplier relationship

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 20. Which of the following shall be disclosed by an entity under PFRS 12?
a. Significant assumptions in determining the presence of control, joint control or significant influence over another entity.
b. Significant judgments in determining the presence of control, joint control or significant influence over another entity.
c. Both A and B
d. Neither A nor B
21. Which of the following statements regarding PFRS 12 is correct?
a. Where the disclosures required by IFRS 12, together with the disclosures required by other IFRSs, do not meet the objective of
PFRS 12, an entity is not required to disclose whatever additional information is necessary to meet the objective.
b. Where the disclosures required by IFRS 12, together with the disclosures required by other IFRSs, do not meet the objective of
PFRS 12, an entity is not required to disclose whatever additional information is necessary to meet the objective.
c. Where the disclosures required by IFRS 12, together with the disclosures required by other IFRSs, do not meet the objective of
PFRS 12, an entity is given the option to refuse to disclose any additional information.
d. Where the disclosures required by IFRS 12, together with the disclosures required by other IFRSs, do not meet the objective of
PFRS 12, an entity is allowed to just disclose its noncompliance in the notes to financial statements.
22. PFRS 12 provides that with respects to its interests in subsidiaries, an entity shall disclose information that enables users of its
consolidated financial statements to, except:
a. Understand the composition of the group
b. Understand the interest that non-controlling interests have in the group’s activities and cash flows
c. Evaluate the nature and extent of significant restrictions on its ability to access or use assets, and settle liabilities of the group
d. Evaluate the nature of, and changes in, the risks associated with its interests in consolidated structured entities
e. Evaluate the consequences of changes in its ownership interest in a subsidiary that do not loss in a loss of control
f. Evaluate the consequences of its significant influence in the investee
g. Evaluate the consequences of losing of a control of a subsidiary during the reporting period
23. In accordance with IFRS 10 Consolidated Financial Statements, an investment entity is required to apply the exception to consolidation
and instead account for its investment in a subsidiary at fair value through profit or loss. PFRS 12 provides that with respects to its
interests in unconsolidated subsidiaries, the following are required disclosures, except:
a. The fact that the entity is an investment entity.
b. Information about significant judgments and assumptions it has made in determining that it is an investment entity.
c. Details of the subsidiary that has not been consolidated
d. Details of the relationship and certain transactions between the investment entity and the subsidiary
e. Intercompany transactions which are eliminated in consolidation
f. Information where an entity becomes or ceases to be an investment entity
24. PFRS 12 provides that with respects to its interests in joint arrangements and associates, an entity shall disclose information that enables
users of its financial statements to:
a. The nature, extent and financial effects of its interests in joint arrangements and associates, including the nature and effects of
its contractual relationship with the other investors with joint control of, or significant influence over, joint arrangements and
associates.
b. The nature of, and changes in, the risks associated with its interests in joint ventures and associates.
c. Both A and B.
d. Neither A nor B.
25. PFRS 12 provides that with respects to its interests in unconsolidated structured entities, an entity shall disclose information that enables
users of its financial statements to:
a. Understand the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities.
b. Evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities.
c. Both A and B.
d. Neither A nor B.
26. The following are the objectives of PFRS 13, except
a. It defines fair value.
b. It sets out single PFRS as a framework for measuring fair value.
c. It requires disclosures about fair value measurements.
d. It mandates that fair value be considered the main measurement in financial statements.
27. When does PFRS 13 apply?
a. It applies to all types of assets regardless of measurement.
b. It applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and
measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements).
c. It applies to all types of liabilities.
d. It applies only to financial assets measured at fair value.

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 28. The following are not covered by PFRS 13, except
a. Share-based payment transactions within the scope of PFRS 2
b. Leasing transactions within the scope of PAS 17
c. Measurements that have some similarities with fair value but that are not fair value, such as net realizable value in PAS 2 or
Value in use in PAS 36
d. Biological assets and agricultural produce under PAS 41
29. What is the definition of fair value under PFRS 13?
a. It is the amount of exchange between knowledgeable willing parties in an arm’s length transaction.
b. It is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
c. It is the cash or cash equivalent paid at the date of acquisition of asset.
d. It is the amount to be received if the asset is sold at an early disposal.
30. It is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on
an ongoing basis.
a. Night market
b. Slow market
c. Stock market
d. Active market
31. It is the price that would be received to sell an asset or paid to transfer a liability.
a. Exit price
b. Entry price
c. Exhibit price
d. Exotic price
32. It is the use of a non-financial asset by market participants that would maximize the value of the asset or the group of assets and liabilities
(e.g. a business) within which the asset would be used.
a. Lowest and worst use
b. Highest and best use
c. Mid-range use
d. Average use
33. It is the market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer
the liability, after taking into account transaction costs and transport costs.
a. Principal market
b. Secondary market
c. Most advantageous market
d. Least advantageous market
34. It is the market with the greatest volume and level of activity for the asset or liability.
a. Principal market
b. Secondary market
c. Most advantageous market
d. Least advantageous market
35. How does PFRS 13 define fair value?
a. It uses exit price notion.
b. It uses entry price notion.
c. It uses average price notion.
d. It uses normal price notion.
36. Which of the following statements is true about PFRS 13?
a. It uses a fair value hierarchy which results in a market-based rather than an entity-specific measurement.
b. It uses a fair value hierarchy which results in a entity specific rather than market-based measurement.
c. It uses a fair value hierarchy which results in neither market nor entity-specific measurement.
d. It uses a fair value hierarchy which results in either a market-based or an entity-specific measurement.

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 37. In determining fair value under PFRS 13, arrange the following in order of priority:
I. A quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.
II. Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in markets that
are not active; Inputs other than quoted prices that are observable for the asset or liability such as interest rates, yield curves, implied
volatilities or credit spreads; or Inputs that are derived principally from or corroborated by observable market data by correlation or other
means.
III. Unobservable inputs for the asset or liability. An entity develops unobservable inputs using the best information available in the
circumstances, which might include the entity's own data, taking into account all information about market participant assumptions that is
reasonably available.
a. I-II-III
b. II-III-I
c. III-II-I
d. I-III-II
38. The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability
would take place between market participants at the measurement date under current market conditions. A fair value measurement
requires an entity to determine all of the following, except:
a. The particular asset or liability that is the subject of the measurement (consistently with its unit of account).
b. For a non-financial asset, the valuation premise that is appropriate for the measurement (consistently with its highest and best
use)
c. The principal (or most advantageous) market for the asset or liability.
d. The applicable discount rate and cash flows for present value.
e. The valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that
represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair value
hierarchy within which the inputs are categorised.
39. The following statements are true concerning the guidance for measurement of fair value, except
a. An entity takes into account the characteristics of the asset or liability being measured that a market participant would take into
account when pricing the asset or liability at measurement date.
b. Fair value measurement assumes an orderly transaction between market participants at the measurement date under current
market conditions.
c. Fair value measurement assumes a transaction taking place in the principal market for the asset or liability, or in the absence of
a principal market, the most advantageous market for the asset or liability.
d. A fair value measurement of a non-financial asset takes into account its lowest and worst use.
e. A fair value measurement of a financial or non-financial liability or an entity's own equity instruments assumes it is transferred to
a market participant at the measurement date, without settlement, extinguishment, or cancellation at the measurement date.
f. A fair value of a liability reflects non-performance risk (the risk the entity will not fulfill an obligation), including an entity's own
credit risk and assuming the same non-performance risk before and after the transfer of the liability.
g. An optional exception applies for certain financial assets and financial liabilities with offsetting positions in market risks or
counterparty credit risk, provided conditions are met (additional disclosure is required.
40. An entity uses valuation techniques appropriate in the circumstances and for which sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs. The objective of using a valuation
technique is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between
market participants and the measurement date under current market conditions. Three widely used valuation techniques are, except
a. Market approach
b. Cost approach
c. Income approach
d. Expense approach
41. It uses prices and other relevant information generated by market transactions involving identical or comparable (similar) assets, liabilities,
or a group of assets and liabilities (e.g. a business).
a. Market approach
b. Cost approach
c. Income approach
d. Expense approach
42. It reflects the amount that would be required currently to replace the service capacity of an asset (current replacement cost)
a. Market approach
b. Cost approach
c. Income approach
d. Expense approach

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 43. It converts future amounts (cash flows or income and expenses) to a single current (discounted) amount, reflecting current market
expectations about those future amounts.
a. Market approach
b. Cost approach
c. Income approach
d. Expense approach
44. PFRS 13 requires which of the following disclosures
a. For assets and liabilities that are measured at fair value on a recurring or non-recurring basis in the statement of financial
position after initial recognition, the valuation techniques and inputs used to develop those measurements.
b. For fair value measurements using significant unobservable inputs (Level 3), the effect of the measurements on profit or loss or
other comprehensive income for the period.
c. Both A and B
d. Neither A nor B
45. The required disclosures under PFRS 13 as provided in number 44 are not applicable to the following, except
a. Plan assets measured at fair value in accordance with IAS 19 Employee Benefits.
b. Retirement benefit plan investments measured at fair value in accordance with IAS 26 Accounting and Reporting by Retirement
Benefit Plans
c. Assets for which recoverable amount is fair value less costs of disposal in accordance with IAS 36 Impairment of Assets.
d. Investment Property under fair value model covered by PAS 40

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