IFRS related questions

Q1) The sources of regulation which comprise the regulatory framework for financial reporting include:
A. Legislation
B. Stock exchange regulations
C. Accounting standards
D. All of the above
Q2) "Accounting standards set out the broad rules which govern financial reporting but do not lay down the detailed
accounting treatments of transactions and other items". True or False?
E.True
F. False
Q3) The abbreviation "GAAP" stands for:
G. Globally accepted accounting practice
H. Globally accepted accounting principles
I. Generally accepted accounting practice
J. Generally accepted accounting principles
Q4) Standards issued by the International Accounting Standards Board (IASB) are known as:
A. International Accounting Standards (IASs)
B. International Financial Reporting Standards (IFRSs)
C. Financial Reporting Standards (FRSs)
D. International Financial Standards (IFSs)
Q5) The body to which the International Accounting Standards Board is responsible is:
E. The IFRS Foundation
F. The IFRS Interpretations Committee
G. The Monitoring Board
H. The IFRS Advisory Council
Q6) One of the main advantages of standardization in financial reporting is:
I. The use of creative accounting practices
J. Increased flexibility in financial reporting
K. The production of prudent financial statements
L. Comparability between accounting periods and between entities
Q7) IFRS1 First-time Adoption of International Financial Reporting Standards defines the date of transition to IFRS as:
A. The date at the end of the first IFRS reporting period
B. The date at the start of the first IFRS reporting period
C. The date at the end of the earliest period for which comparatives are provided in the first IFRS financial statements
D. The date at the start of the earliest period for which comparatives are provided in the first IFRS financial statements
Q8) "An entity which adopts international financial reporting standards must always adhere to the requirements of
every standard, no matter what the circumstances". True or False?
E.True
F. False
Q9) The role of the IFRS Advisory Council is to:
G. Interpret the application of international standards
H. Supervise the work of the IASB
I. Appoint members to the IASB
J. Inform the IASB of the Council's views on standard-setting projects
Q10) The word "entity" as used by the IASB refers to:
A. Corporations only
B. Profit-oriented organizations only
C. Companies only
D. Not-for-profit organizations only
Q11) An entity prepares its first IFRS financial statements for the year to 30 September 2016. These financial statements
provide comparative figures for the previous year. The date of transition to IFRS is:
E. 1 October 2015
F. 30 September 2016
G. 1 October 2014
H. 30 September 2015
Q12) An entity prepares its first IFRS financial statements for the year to 30 September 2016. These financial statements
provide comparative figures for the previous year. The accounting policies used when preparing the comparative information
for the year to 30 September 2015 must comply with IFRS as at:
I. 30 September 2016
J. 1 October 2015
K. 30 September 2015
Q13) A conceptual framework for financial reporting is:
A. A set of principles which underpin financial reporting
B. A set of regulations which govern financial reporting
C. A set of financial reporting standards
D. A set of items which make up an entity's financial statements
Q14) The 2010 version of the IASB Conceptual Framework was developed jointly with:
E. The European Union
F. The UK Financial Reporting Council
G. The US Financial Accounting Standards Board
H. Accounting standards boards throughout the world
Q15) The primary users of general purpose financial reports are:
I. Investors and employees
J. Investors and customers
K. Investors and lenders
L. Employees and lenders
Q16) The fundamental qualitative characteristics of financial information are:
A. Relevance and comparability
B. Verifiability and understandability
C. Relevance and faithful representation
D. Faithful representation and comparability
Q17) The enhancing qualitative characteristics of financial information include:
E. Comparability and understandability
F. Relevance and timeliness
G. Understandability and faithful representation
H. Relevance and faithful representation
Q18) Which of the following is not a contributory factor towards faithful representation?
I. Neutrality
J. Consistency
K. Freedom from error
L. Completeness
Q19) Allowing a choice of alternative accounting treatments improves the consistency and comparability of financial
statements. True or False?
A.True
B. False
Q20) The elements of financial statements which relate to financial position are:
C. Assets, liabilities and equity
D. Income, expenses and equity
E. Income and expenses
F. Assets, liabilities, income and expenses
Q21) If the current cost measurement basis is used, assets are measured at:
G. The amount paid to acquire them
H. Present value
I. Replacement cost
J. The amount which could be obtained by selling them
Q22) Under the concept of physical capital maintenance, profit is defined in terms of the increase in an entity's
operating capability during an accounting period. True or False?
A. True
B. False
Q23) Recognition is the process of:
C. Incorporating an item in the financial statements
D. Disclosing information in the notes to the financial statements
E. Determining the amount at which an item should be shown in the financial statements
F. Determining where an item should be presented in the financial statements
Q24) The underlying assumption that is identified in the 2010 version of the IASB Conceptual Framework is:
G. Substance over form
H. The accruals basis
I. The going concern basis
J. Prudence
Q25) Which of the following is not a component of a complete set of financial statements?
A. A statement of cash flows
B. A statement of changes in equity
C. A set of notes
D. A management commentary
Q26) The IASB requires all entities which comply with IFRS to produce interim financial statements. True or False?
E.True
F. False
Q27) An entity which complies with IFRS may depart from the requirements of an international standard:
G. If compliance would produce misleading information
H. If compliance costs would be excessive
I. Whenever it wishes to do so
J. Never
Q28) Items of financial information are material if:
A. They could not influence the economic decisions made by the users of financial statements
B. They could influence the economic decisions made by the users of financial statements
C. They are insignificant
D. They are aggregated with other items
Q29) The information which must be provided so as to properly identify each component of a set of financial
statements does not include:
E. The presentation currency used
F. The country in which the entity operates
G. The level of rounding used
H. The name of the reporting entity
Q30) Which of the following would generally not be classified as a current asset?
I. An asset held for the purpose of being traded
J. An asset intended for consumption within the entity's normal operating cycle
K. A cash equivalent
L. An asset held for long-term use within the entity
Q31) Standard IAS1 does not prescribe a format for each of the primary financial statements. True or False?
A.True
B. False
Q32) The main financial performance statement is:
C. The statement of cash flows
D. The statement of profit or loss and other comprehensive income
E. The statement of changes in equity
F. The statement of financial position
Q33) The main purpose of the statement of changes in equity is:
G. To show an entity's total equity at the end of an accounting period
H. To show how each component of an entity's equity has altered during an accounting period
I. To show an entity's assets, liabilities and equity at the end of an accounting period
J. To show an entity's income, expenses and profit for an accounting period
Q34) The notes to the financial statements should provide information:
A. About the entity's accounting policies
B. As required by international standards, if not presented elsewhere in the financial statements
C. Which is relevant to an understanding of the financial statements
D. All of the above
Q35) Certain items of income and expense must be excluded when calculating an entity's profit or loss. True or False?
E.True
F.False
Q36) An entity must present an analysis of expenses by function (e.g. cost of sales, distribution costs and
administrative expenses). True or False?
G. True
H. False
Q37) the term "accounting policies" refers to:
A. The measurement bases used by an entity
B. The accounting principles applied by an entity
C. The accounting concepts and conventions adopted by an entity
D. All of the above
Q38) If an accounting standard applies specifically to a certain item, an entity's accounting policy in relation to that
item must normally be determined by applying the relevant standard. True or False?
E. True
F. False
Q39) An entity may change one of its accounting policies:
G. Whenever it wishes to do so
H. If this would result in the provision of reliable and more relevant information
I. Never
J. If this would reduce the cost of preparing the financial statements
Q40) A change in accounting policy which does not result from the initial application of an international standard must
normally be accounted for:
A. Either retrospectively or prospectively
B. Retrospectively
C. Prospectively
D. Prospectively unless it is impracticable to do so
Q41) For all changes in accounting policy, the entity concerned must disclose:
E. The fact that the change has been accounted for in accordance with transitional provisions specified in the applicable
standard
F. The nature of the change
G. The title of the international standard that has caused the change to occur
H. The reasons which suggest that the change will provide reliable and more relevant information
Q42) A change in an accounting estimate should be accounted for:
I. Prospectively
J. Retrospectively unless it is impracticable to do so
K. Either retrospectively or prospectively
L. Retrospectively
Q43) The use of estimates always undermines the reliability of financial statements. True or False?
A.True
B. False
Q44) Prior period errors could be caused by:
C. Fraud
D. Mathematical errors
E. Mistakes in applying accounting policies
F. Any of the above
Q45) A material prior period error should be corrected:
G. Either retrospectively or prospectively
H. Prospectively
I. Retrospectively
J. Prospectively unless it is impracticable to do so
Q46) An entity's financial statements provide comparative figures for the previous five accounting periods. If the entity
accounts for an item retrospectively, then:
A. Comparative figures for all of the previous five accounting periods may need to be restated
B. The entity may choose whether or not to restate comparative figures
C. Comparative figures for the previous five accounting periods are not restated in any circumstances
D. Comparative figures are restated for the prior accounting period but never for the four previous accounting periods
Q47) Which of the following is a change of accounting policy?
E. Changing from the cost model to the revaluation model when measuring items of property, plant and equipment
F. Changing the depreciation method used in relation to a depreciable non-current asset
G. Revising the residual value of a depreciable non-current asset
H. Correcting an error found in the previous year's financial statements
Q48) When preparing its financial statements for 2016, a company discovers an error in the 2015 financial statements. The
2015 revenue figure should have been £102m but was erroneously reported as £100m. This difference is regarded as
material. The comparative figure for revenue shown in the 2016 financial statements should be:
I. Either £100m or £102m as the company sees fit
J. £102m
K. £100m
Q49) Which of the following items qualifies as property, plant and equipment?
A. A machine bought for use during a single accounting period
B. A machine bought for use in more than one accounting period
C. Computer software bought for use in more than one accounting period
D. A machine bought for resale to a customer
Q50) The "carrying amount" of an item of property, plant and equipment generally refers to:
E. The depreciable amount of the item
F. The amount at which the item is recognized in the financial statements
G. The cost of the item
H. The replacement cost of the item
Q51) Which of the following would not be included in the cost of an item of property, plant and equipment?
I.Refundable value added tax
J. Site preparation costs
K. Testing costs
L. Delivery and installation charges
Q52) A company pays £40,000 to replace a major component of a factory machine. The faulty component that is
replaced is sold for £2,000. The carrying amount of the machine just before this replacement occurs is £450,000,
of which £10,000 relates to the faulty component that is being replaced. The revised carrying amount of the
machine after the replacement occurs and the profit or loss on disposal of the faulty component are:
A. Carrying amount £490,000, Loss £8,000
B. Carrying amount £480,000, Loss £8,000
C. Carrying amount £480,000, Loss £10,000
D. Carrying amount £490,000, Profit £2,000
Q53) Which of the following would not be included in the cost of an item of property, plant and equipment?
E. Refundable value added tax
F. Site preparation costs
G. Testing costs
H. Delivery and installation charges
Q54) Depreciation is defined as the fall in value of an asset during an accounting period. True or False?
I.True
J. False
Q55) On 1 January 2015, a company which prepares financial statements to 31 December each year buys an item of equipment for
£20,000. Useful life is estimated to be six years and residual value is expected to be approximately £1,500. The company uses the
diminishing balance method of depreciation at a rate of 35% per annum.
•To the nearest pound, the depreciation of this item for the year to 31 December 2016 would be:
A. £4,550
B. £3,083
C. £4,209
D. £7,000
Q56) Borrowing costs that are directly attributable to the acquisition of a qualifying asset must be capitalised as part of the cost of that
asset. True or False?
E.True
F. False
Q57) A company has the following general borrowings outstanding throughout the whole of an accounting year:
•6.5% Bank loan of £400,000
•8% Bank loan of £800,000
•If a qualifying asset costing £50,000 is funded out of these general borrowings, the capitalisation rate that should be used is:
A. 6.5%
B. 8%
C. 7.5%
Q58) If investment property is measured using the fair value model, a gain arising from a change in the fair value of an
investment property must be:
A. Ignored
B. Recognized as other comprehensive income
C. Recognized in the calculation of profit or loss
D. Credited to a revaluation reserve
Q59) If a company adopts the revaluation method in relation to an item of property, plant and equipment, it is no longer
necessary to charge depreciation in relation to that item. True or False?
E. True
F. False
Q60) On 1 January 2015, a company which prepares financial statements to 31 December acquires an item of equipment
and receives a government grant of 20% of the item's cost. The item cost £30,000 and has an expected useful life of seven
years with a residual value of approximately £4,000.
•The item is depreciated on the diminishing balance basis at a rate of 25% per annum.
•The amount of the grant that should be recognised as income in the year to 31 December 2016 is:
A. £6,000
B. £1,298
C. £857
D. £1,500
Q61) Goodwill does not fall within the IAS38 definition of an intangible asset because:
A. It may not generate future economic benefits
B. It is not separable
C. It is a monetary asset
D. None of the above
Q62) Which of the following would not be included in the cost of a separately acquired
intangible asset?
E. Employee costs incurred in preparing the asset for its intended use
F. Non-refundable value added tax
G. Costs incurred in using the asset

H. Testing costs

Q63) How should research and development expenditure be dealt with in an entity's financial
statements?
I. Research expenditure should always be written off as an expense but development expenditure
should be capitalized as an intangible asset if it satisfies certain conditions
J. Research expenditure should always be written off as an expense but development expenditure should
always be capitalized as an intangible asset
K. Research and development expenditure should always be capitalized as an intangible asset
L. Research and development expenditure should always be written off as an expense
Q64) Expenditure on advertising and promotion never gives rise to the acquisition of an intangible asset. True or False?
A. True
B. False
Q65) The revaluation model cannot be used for the measurement of an intangible asset unless:
C. There is an active market in that type of asset
D. The revaluation model is also used for tangible assets
E. The asset is revalued every year
F. The fair value of the asset is determined by a professional valuer
Q66) The amortization method used in relation to an intangible asset should be chosen so as
to:
G. Evenly spread the cost of the asset over its useful life
H. Maximize the amortization charge in the early years of the asset's useful life
I. Reflect the usage pattern of the asset
J. Write off the asset as soon as possible

Q67) International standard IFRS3 states that goodwill acquired in a business combination is:
K. An asset which arises from the acquired entity's good reputation
L. An asset which arises from the acquired entity's strong customer relationships
M. An asset which arises from assets acquired in the business combination that are not individually identified
N. An asset which arises from assets acquired in the business combination that are individually identified
Q68) Negative goodwill arising on a business combination should be shown as a negative
asset in the statement of financial position. True or False?
A. True
B. False
Q69) Goodwill acquired in a business combination should subsequently be measured:
C. At cost less accumulated amortization
D. At cost less accumulated amortization and less accumulated impairment losses
E. At cost
F. At cost less accumulated impairment losses
Q70) During the year to 31 March 2016, a company spent £120,000 on research and £80,000
on development. The development costs meet the criteria for recognition as an intangible
asset and are to be amortized over five years on the straight line basis. Their residual value
is estimated to be £nil. A full year's amortization charge is made in the year of the
expenditure.
•The total research and development costs recognized as an expense in the year to 31 March 2016 are:
A. £200,000
B. £16,000
C. £136,000
D. £40,000
Q71) A company acquires all the assets and liabilities of an unincorporated
business for £1m. The net fair value of the identifiable assets and liabilities
acquired is £1.2m. The assets acquired include patents with a fair value of
£300,000. How should this acquisition be accounted for in the company's financial
statements?
A. Recognize the identifiable assets and liabilities at their fair values and recognize revenue
of £200,000.
B. Recognize the patents at £100,000 and recognize all of the other assets and liabilities at
their fair values
C. Recognize the identifiable assets and liabilities at their fair values and recognize a
negative asset of £200,000 in relation to goodwill
D. Recognize the identifiable assets and liabilities at their fair values and recognize goodwill
of £200,000
Q72) An impairment loss is:
E. The amount by which the carrying amount of an asset exceeds its market value
F. The amount by which the recoverable amount of an asset exceeds its written down value
G. The amount by which the recoverable amount of an asset exceeds its carrying amount
H. The amount by which the carrying amount of an asset exceeds its recoverable amount
Q73) Which of the following is not an external indication of impairment?
A. An adverse technological change
B. An unexpected decline in the asset's market value
C. An adverse change in the market in which the entity operates
D. The asset becoming idle
Q74) An asset's recoverable amount is equal to:
E. The higher of the asset's value in use and its carrying amount
F. The higher of the asset's fair value less costs of disposal and its value in use
G. The lower of the asset's value in use and its carrying amount
H. The lower of the asset's fair value less costs of disposal and its value in use
Q75) An asset's carrying amount is £25,000. Its fair value less costs of disposal is
£15,000 and its value in use is £19,000. There is an impairment loss of:
I. £4,000
J. £10,000
K. £6,000
L. £nil
Q76) How often should goodwill acquired in a business combination be tested for impairment?
A. Never
B. Every year
C. Whenever there are internal indications of impairment
D. Whenever there are external indications of impairment
Q77) The IAS36 definition of "corporate assets" specifically excludes goodwill. True or False?
E. True
F. False
Q78) The carrying amount of a CGU is £900,000. This consists of goodwill £250,000 and property, plant and
equipment £650,000. The CGU has a recoverable amount of only £520,000. How is the impairment loss
allocated between the assets of the CGU?
G. Goodwill £250,000, PPE £130,000
H. Goodwill £190,000, PPE £190,000
I. Goodwill £130,000, PPE £250,000

J. Goodwill £nil, PPE £380,000

Q79) An asset is expected to generate cash inflows of £20,000 per annum for each of the next three years
and then to be scrapped. These cash inflows will occur at the end of each year. The asset will generate no
cash outflows. Using a discounting rate of 10% per annum, what is the asset's value in use?
K. £54,540
L. £49,720
M. £60,000
Q80) Which of the following is not an internal indication of the fact that an impairment
loss has now decreased or no longer exists?
A. A favorable change has occurred to the manner in which the asset will be used
B. The asset's market value has increased significantly
C. There is evidence that the economic performance of the asset will be better than expected
D. A favorable change has occurred to the extent to which the asset will be used
Q81) A previously-recognised impairment loss relating to goodwill should be reversed
if there is evidence that the loss no longer exists. True or False?
E. True
F. False
Q82) The carrying amount of a CGU is £525,000. This consists of goodwill £75,000,
development costs £150,000 and property, plant and equipment £300,000. The CGU
has a recoverable amount of £330,000. What is the carrying amount of the property,
plant and equipment after the impairment loss has been allocated?
• £180,000
• £240,000
• £300,000
• £220,000
Q83) Assuming that all cash flows occur at the end of the year concerned and that the appropriate
discount rate is 7%, the amount of the impairment loss is:
A. £5,300
B. £1,508
C. £nil
D. £1,500
Q84) A non-current asset should be classified as held for sale only if:
E. Its carrying amount will be recovered wholly through a sale transaction rather than through continuing use
F. Its carrying amount will be recovered wholly through continuing use rather than through a sale transaction
G. Its carrying amount will be recovered principally through a sale transaction rather than through continuing
use
H. Its carrying amount will be recovered principally through continuing use rather than through a sale
transaction
Q85) The conditions which must be satisfied in order for the sale of an asset to be deemed "highly
probable" include:
I. The asset is being marketed at a price which greatly exceeds its fair value
J. A completed sale is expected within five years
K. Management is considering a plan to sell the asset
L. None of the above
Q86) A disposal group always consists of a number of cash-generating units. True or
False?
A. True
B. False
Q87) A non-current asset held for sale should be measured at:
C. The higher of the asset's carrying amount when originally classified as held for sale and its
fair value less costs to sell
D. The asset's carrying amount when originally classified as held for sale, less any accumulated
depreciation since that date
E. The lower of the asset's carrying amount when originally classified as held for sale and its
fair value less costs to sell
F.Fair value less costs to sell
Q88) If certain types of asset are classified as held for sale, they should continue to be
measured in accordance with the standard that normally applies to that type of asset
rather than being measured in accordance with the requirements of standard IFRS5.
True or False?
G. True
H. False
Q89) An asset which ceases to be classified as held for sale should be measured at the
lower of its carrying amount before being classified as held for sale (less any
depreciation that would normally have been charged in the meantime) and:
A. The higher of fair value less costs to sell and value in use at the date of the decision not to sell
B. The lower of fair value less costs to sell and value in use at the date of the decision not to sell
C. Value in use at the date of the decision not to sell
D. Fair value less costs to sell at the date of the decision not to sell
Q90) Non-current assets held for sale should be presented separately from other assets
in the statement of financial position. True or False?
E. True
F. False
Q91) A discontinued operation is defined as a component of an entity which:
G. Has been disposed of or is classified as held for sale
H. Has been disposed of
I. Is expected to be disposed of within the next 12 months
J. Is classified as held for sale
Q92) With regard to discontinued operations, an entity's statement of
comprehensive income should show a single amount comprising:
A. The post-tax profit or loss of discontinued operations
B. The post-tax profit or loss of discontinued operations and the post-tax gain or loss on the
remeasurement or disposal of the assets of discontinued operations
C. The pre-tax profit or loss of discontinued operations
D. The pre-tax profit or loss of discontinued operations and the pre-tax gain or loss on the
remeasurement or disposal of the assets of discontinued operations
Q93) On 30 April 2016, a company classified a freehold building as held for sale. The
building had a carrying amount on that date of £5m. The building has been valued by
an estate agent at £6m and selling costs are expected to absorb 5% of this amount.
In the company's statement of financial position at 30 April 2016, the building
should be shown at:
E. £4.75m
F. £5m
G. £5.7m
H. £6m
Q94) IFRS5 requires entities to present and disclose information which enables
users to evaluate the effects of discontinued operations. This improves:
A. Neutrality
B. Verifiability
C. Timeliness
D. Comparability
Q95) Which of the following situations would normally lead to a lease being
classified as a finance lease?
E. At the inception of the lease, the present value of the minimum lease payments does
not amount to substantially all of the fair value of the asset
F. The lease term is not for the major part of the asset's economic life
G. The lessee has the option to purchase the asset at a price which makes it reasonably
certain that this option will be exercised
H. The lease does not transfer ownership of the leased asset to the lessee by the end of
the lease term
Q96) A lease of land which does not transfer legal title to the lessee by the end of the lease term
cannot be a finance lease. True or False?
A. True
B. False
Q97) In relation to operating leases, which of the following statements is not true?
C. The leased item is not shown as an asset in the lessee's financial statements
D. The leased item is not shown as an asset in the lessor's financial statements
E. The lease payments are recognized as an expense in the lessee's financial statements
F. The lessee has not taken on the risks and rewards incidental to ownership
Q98) At the commencement of a finance lease, IAS17 requires that the lessee should recognise
both an asset and a liability to the lessor. These should be measured at:
G. The lower of the fair value of the leased item and the present value of the minimum lease payments
H. The fair value of the leased item
I. The present value of the minimum lease payments
J. The higher of the fair value of the leased item and the present value of the minimum lease payments
Q99) The total finance charge arising in relation to a finance lease is equal to:
K. The initial liability to the lessor
L. The excess of the total of the minimum lease payments over the initial liability to the lessor
M. The total of the minimum lease payments
N. The excess of the initial liability to the lessor over the total of the minimum lease payments
Q100) On 1 January 2015, a company which prepares financial statements to 31 December each year
acquires a machine on a finance lease. The fair value of the machine on 1 January 2015 is £50,000 and the
company is required to make three lease payments of £19,753 each. These payments fall due on 31
December 2015, 2016 and 2017. The rate of interest implicit in the lease is 9% per annum.
•Calculate the finance charge which should be shown in the company's financial statements for the year to
31 December 2015 if the total finance charge is allocated to accounting periods using the level spread
method.
A. £19,753
B. £3,086
C. £4,500
D. £9,259
Q101) On 1 January 2015, a company which prepares financial statements to 31 December each year
acquires a machine on a finance lease. The fair value of the machine on 1 January 2015 is £50,000 and the
company is required to make three lease payments of £19,753 each. These payments fall due on 31
December 2015, 2016 and 2017. The rate of interest implicit in the lease is 9% per annum.
•Calculate the finance charge which should be shown in the company's financial statements for the year to
31 December 2015 if the total finance charge is allocated to accounting periods using the sum of digits
method.
A. £9,259
B. £4,500
C. £4,629
D. £3,086
Q102) On 1 January 2015, a company which prepares financial statements to 31 December each year
acquires a machine on a finance lease. The fair value of the machine on 1 January 2015 is £50,000
and the company is required to make three lease payments of £19,753 each. These payments fall due
on 31 December 2015, 2016 and 2017. The rate of interest implicit in the lease is 9% per annum.
•Calculate the finance charge which should be shown in the company's financial statements for the year to 31
December 2015 if the total finance charge is allocated to accounting periods using the actuarial method.
A. £9,259
B. £4,500
C. £3,086
D. £4,629
Q103) On 1 January 2015, a company which prepares financial statements to 31 December each year
acquires a machine on a finance lease. The fair value of the machine on 1 January 2015 is £50,000
and the company is required to make three lease payments of £19,753 each. These payments fall due
on 31 December 2015, 2016 and 2017. The rate of interest implicit in the lease is 9% per annum.
•Assuming that the total finance charge is allocated to accounting periods using the actuarial method, calculate
the liability to the lessor at 31 December 2015 and show how this should be split between current and non-
current liabilities.
A. Total £32,970, Non-current £16,485, Current £16,485
B. Total £34,747, Non-current £14,994, Current £19,753
C. Total £34,747, Non-current £16,626, Current £18,121
D. Total £34,747, Non-current £18,121, Current £16,626
Q104) On 1 January 2016, a company entered into a finance lease to acquire an item of
equipment and made its first annual payment of £50,000. The fair value of the item on 1 January
2016 was £215,000 and the interest rate implicit in the lease was 8% per annum.
•On 1 July 2016, the company also made a payment of £12,000 for a one-year lease of a machine,
starting on that date. This lease is an operating lease. Ignoring depreciation, calculate the amount
that should be recognised as an expense in the year to 31 December 2016 in relation to these two
leases.
A. £10,000
B. £19,200
C. £23,200
D. £29,200
Q105) On 1 November 2015, a company entered into a finance lease to acquire a machine and
made its first annual payment of £30,000. Three further payments of £30,000 are due on 1
November 2016, 2017 and 2018. The fair value of the machine on 1 November 2015 was
£110,000 and the interest rate implicit in the lease is 6% per annum.
•Calculate the current liability relating to this lease that should be recognised in the company's
financial statements for the year to 31 October 2016.
A. £84,800
B. £54,800
C. £26,712
D. £30,000
Q106) In the case of a finance lease, the statement of financial position of the lessor
shows the leased item as an asset so long as legal title to the item is not transferred
to the lessee. True or False?
A. True
B. False
Q107) The definition of "inventories" given by international standard IAS2 states that
items qualify as inventories only if they are assets held for sale in the ordinary course
of business or assets in the process of production for such sale. True or False?
C. True

D. False

Q108) The cost formulas permitted by IAS2 are:

E. FIFO, LIFO and AVCO
F. FIFO and AVCO
G. FIFO and LIFO
H. LIFO and AVCO
Q109) Which of the following items cannot be included in the cost of inventories?
A. The cost of abnormal wastage of materials and labor
B. Fixed production overheads
C. Irrecoverable import duties payable on the acquisition of inventories
D. Variable production overheads
Q110) Which of the following items should be included in the cost of inventories?
E. Conversion costs
F. Selling costs
G. The cost of abnormal wastage of materials and labor
H. The cost of storing finished goods
Q111) The FIFO cost formula assumes that:
I. The inventory items which are sold or consumed are those acquired longest ago
J. The inventory items which are sold or consumed are those acquired most recently
K. Newer inventory items are sold or consumed before older inventory items
L. The inventory items which are sold or consumed are a mixture of those acquired
previously
Q112) The net realizable value of inventories is defined by IAS2 as:
A. Selling price less costs of completion
B. Cost price
C. Selling price less costs of completion and selling costs

D. Selling price
Q113) On 31 December 2015, a company has partly-completed inventory with a cost to date
of £26,300. It is expected that further costs of £8,900 will be incurred in order to complete
the inventory. It will then be sold for £47,500. Selling costs will be £2,000.
•The cost and the net realizable value of this inventory at 31 December 2015 are:
A. £35,200 and £45,500
B. £35,200 and £47,500
C. £26,300 and £38,600
D. £26,300 and £36,600
Q114) IAS2 states that inventories should be measured at:
E. The lower of cost and net realizable value
F. Net realizable value
G. The higher of cost and net realizable value
H. Cost
Q115) If production is abnormally low, the amount of fixed overheads allocated to each
unit of production should be calculated by dividing total fixed overheads by the number
of units produced.
A. True
B. False
Q116) At the end of an accounting period, the cost of a company's inventory is £450,000.
This includes damaged items with a cost of £25,000 which are expected to be sold for
only £10,000 (less selling expenses of 5%). All other items of inventory have a net
realizable value which exceeds cost.
•The amount at which the company's inventory should be recognized at the end of the
period is:
A. £435,000
B. £434,500
C. £425,000

D. £450,000
Q117) A company's inventories should be measured at the lower of total cost and total
net realizable value. True or False?
E. True
F. False
Q118) A company which makes only one type of product incurs fixed production
overheads of £180,000 for an accounting year. Actual production during the year was
30,000 units. Normal production is 24,000 units per annum.
•The amount of fixed production overheads that should be allocated to each unit of production is:
A. £nil
B. £6
C. £30
D. £7.50
Q119) A financial instrument is:
E. A type of asset or liability
F. A type of asset
G. A type of liability
H. A type of contract
Q120) The accounting principle applied by standard IAS32 when distinguishing between liabilities and equity is:
I. Consistency
J. Neutrality
K. Prudence
L. Substance over form
Q121) Redeemable preference shares should be classified (from the issuing company's point of view) as:
A. A financial asset
B. An equity instrument
C. A compound financial instrument
D. A financial liability
Q122) A company which complies with IFRS9 holds a financial asset which gives rise on specified dates to cash flows that are
solely payments of principal and interest. The company's only objective in holding this asset is to collect these cash flows.
•This financial asset should be measured at:
A. Fair value or amortized cost
B. Amortized cost
C. Original cost
D. Fair value
Q123) The amortized cost of a financial asset is equal to:
E. The amount at which the asset was originally recognized
F. The fair value of the asset
G. The amount at which the asset was originally recognized, plus interest earned to date, less repayments received to date

H. The amount at which the asset was originally recognized, plus interest earned to date
Q124) On 1 January 2016, a company buys £50,000 of 7% loan stock for £47,865. Interest is received on 31
December each year and the stock will be redeemed at a premium of 10% on 31 December 2019. The effective
interest rate is 10.5% per annum.
•Calculate the amortized cost of the loan stock at 31 December 2016.
A. £49,391
B. £50,000
C. £51,526

D. £51,750
Q125) An impairment loss should be recognized if a trade receivable becomes wholly or partly uncollectible.
True or False?
E. True
F. False
Q126) Trade payables must always be measured at amortized cost using the effective interest method. True or
False?
G.True
H. False
Q127) Credit risk is the risk that:
A.One party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation
B. An entity will encounter difficulty in meeting its obligations associated with financial liabilities
C. The fair value of a financial asset or liability will fluctuate because of changes in exchange rates
D. The fair value of a financial asset or liability will fluctuate because of changes in interest rates

Q128) The Basis for Conclusions which accompanies the IASB Conceptual Framework states that financial information
which faithfully represents transactions and other events will represent their economic substance rather than their
legal form. This is known as the "substance over form" concept. An example of the application of this concept is:
E. Recognizing redeemable preference shares as a financial liability
F. Recognizing an item as an asset in the financial statements of a lessee who leases the item under the terms of a
finance lease
G. Recognizing dividends payable to the holders of redeemable preference shares as an expense

H. All of the above

Q129) On 1 May 2015, a company issues £400,000 of 6% convertible loan stock at par. Interest is payable on 30
April each year. The stock is due for redemption at par on 30 April 2018 but may be converted into ordinary shares
on that date instead. If the company had issued the loan stock without the conversion option, it would have had to
pay interest at 8% rather than 6%.
•The equity component of this loan stock is:
A. £20,617
B. £379,383
C. £24,000
D.£nil
Q130) A company issues £500,000 of 6.5% loan stock at a discount of 8%. Issue costs of £25,000 are incurred. The
loan stock should be measured initially at:
E. £475,000
F. £435,000
G. £460,000
H. £500,000
Q131) International standard IAS37 defines a provision as:
A. A liability which is not legally enforceable
B. A liability which is legally enforceable
C. A reduction in the carrying amount of an asset
D. A liability of uncertain timing or amount
Q132) In order that a provision should be recognized in an entity's financial statements, it is necessary that:
E. The entity has a present obligation
F. It is possible that an outflow of economic benefits will be required
G. The entity has a legally enforceable obligation
H. The entity has a constructive obligation

Q133) A past event is an obligating event only if it gives rise to a legally enforceable obligation. True or False?
I. True
J. False
Q134) The amount of a provision should be the "best estimate" of the expenditure required to settle the obligation concerned.
This estimate:
A. Should not be adjusted to reflect future events that may affect the amount of the required expenditure, whether or not those
events are likely to occur
B. Should be the amount that would rationally be paid to settle or transfer the obligation
C. Must always be made on the basis of advice from independent experts
D. Should always be discounted to present value
Q135) If a provision relates to a large population of items, the amount of the provision should be calculated as:
E. The minimum expenditure that could possibly be required to settle the obligation
F. The present value of the maximum expenditure that could possibly be required to settle the obligation
G. The maximum expenditure that could possibly be required to settle the obligation
H. The expected value of the expenditure that will be required to settle the obligation
Q136) Should a provision be recognized in relation to:
•(a) future operating losses?
•(b) onerous contracts?
A. (a) Yes (b) Yes
B. (a) Yes (b) No
C. (a) No (b) No
D. (a) No (b) Yes
Q137) In general terms, a contingent liability is a possible obligation that depends upon the outcome of a future
event that is within the control of the entity. True or False?
A.True
B. False
Q138) Contingent liabilities are:
C. Disclosed in the notes unless the possibility of an outflow of economic benefits is remote
D. Always disclosed in the notes to the financial statements
E. Always recognized in the statement of financial position
F. Recognized in the statement of financial position unless the possibility of an outflow of economic benefits is remote
Q139) Contingent assets are:
G. Always disclosed in the notes to the financial statements
H. Disclosed in the notes unless an inflow of economic benefits is only remotely possible
I. Disclosed in the notes if an inflow of economic benefits is probable
J. Always recognized in the statement of financial position
Q140) International standard IAS10 requires that financial statements should be adjusted to take account of any events
occurring between the end of the reporting period and the date when the financial statements are authorized for issue.
True or False?
A.True
B. False
Q141) A company is preparing its financial statements for the year to 31 March 2016. Assuming that each of the
following events occurs after 31 March 2016 but before the financial statements are authorized for issue, which one of
them should be classified as a NON-ADJUSTING event?
C. The sale of inventories which were held on 31 March 2016
D. A change in tax rates that is announced in April 2016 and which has a material impact on the tax liability for the year to
31 March 2016
E. The discovery of a major fraud that had occurred in January 2016
F. The bankruptcy of a customer who owed a substantial amount to the company at 31 March 2016
Q142) Although the accounting treatment of inventories is prescribed by IAS2 Inventories, a company may also need to
apply IAS10 Events After the Reporting Period when determining the inventories figure which should be shown in its
financial statements. True or False?
G. True
H. False
Q143) With regard to the definition of revenue given by IFRS15, which of the following statements is true?
A. Revenue may arise from either ordinary activities or extraordinary activities
B. Revenue includes cash received from borrowings
C. Revenue includes cash received from share issues
D. Revenue arises from ordinary activities only
Q144) If the agreed date of payment by a customer is later than the date on which goods or services are transferred
to that customer, part of the consideration should always be treated as finance income (not revenue). True or False?
E. True
F. False
Q145) Step 1 of the "five-step model" states that certain conditions must be satisfied before an entity can account for
a contract with a customer. Which of the following is not one of these conditions?
G. Each party's rights with regard to the goods or services concerned can be identified
H. The payment terms can be identified
I. It is certain that the entity will collect the consideration to which it is entitled
J. The entity and the customer have approved the contract and are committed to perform their contractual obligations
Q146) A contract modification is always treated as a separate contract for the purposes of IFRS15. True or False?
A.True
B. False
Q147) A single contract with a customer could include more than one performance obligation and it is necessary to identify each
performance obligation in the contract. True or False?
C. True
D. False
Q148) The accounting principle applied by IFRS15 when determining whether or not revenue should be recognized in respect of a
repurchase agreement is:
E. Relevance
F. Prudence
G. Verifiability
H. Substance over form
Q149) A performance obligation is satisfied over time if:
I. The customer does not receive or consume the benefits provided by the entity's performance until the obligation is completely
satisfied
J. The entity's performance creates an asset that the customer controls as it is created
K. The entity's performance creates an asset which has an alternative use to the entity
L. The entity does not have an enforceable right to payment for the performance that has been completed to date
Q150) A company enters into a contract to build a factory for a customer. The agreed price is £2m and the specified
completion date is 31 October 2016. However, the contract provides that the company should receive an incentive
payment of a further £250,000 if the factory is completed by 30 September 2016. Similarly, the price will be reduced by
£250,000 if the factory is not completed until after 30 November 2016.
•The company estimates that there is a 15% probability that the factory will be completed by 30 September 2016, an 80%
probability that it will be completed in October 2016 or November 2016 and a 5% probability that it will not be completed
until after 30 November 2016.
•What is the expected value of the transaction price for this contract?
A. £2.025m
B. £2.125m
C. £1.975m
D. £2m
Q151) If a contract with a customer provides a warranty, then the warranty always represents a separate performance
obligation and part of the transaction price must be allocated to it. True or False?
E.True
F. False
Q152) In general, contract costs incurred in relation to a contract with a customer must be:
A. Recognized as an asset if they relate to a performance obligation which has been satisfied
B. Recognized as an asset if they are not expected to be recovered
C. Recognized as an asset if they relate to a performance obligation which has not yet been satisfied
D. Recognized as an expense when incurred
Q153) The carrying amount of contract costs relating to a performance obligation and recognized as an asset is
£120,000. Further costs required in order to satisfy the obligation are estimated to be £30,000. The consideration
receivable by the company when the obligation is satisfied is £132,000.
•Calculate the amount of the impairment loss (if any) which should be deducted from the contract asset and recognized
as an expense.
A. £nil
B. £18,000
C. £30,000
D. £42,000
Q154) Short-term employee benefits do not include:
A. Bonuses payable more than 12 months after the end of the period in which the related employee services are
performed
B. Short-term sick pay
C. Employer's social security contributions
D. Benefits in kind
Q155) Bonuses payable in the following 12 months as a result of unused entitlement to non-accumulating short-
term paid absences. True or False?
E. True
F. False
Q156) Defined benefit plans are post-retirement benefit plans where:
G. The employer is legally obliged to provide an agreed level of post-employment benefits
H. The employer pays an agreed level of contributions into the pension fund each year and is not obliged to make any
further contributions
I. The employer is legally or constructively obliged to provide an agreed level of post-employment benefits
J.The risk that benefits will be less than expected falls upon the employees
Q157) The risk that benefits will be less than expected falls upon the employees. In the case of a defined benefit plan, the
employer's statement of financial position should show:
A. A liability equal to the undiscounted defined benefit obligation at the end of the reporting period
B. An asset equal to the cost of the plan assets at the end of the reporting period
C. An asset or liability equal to the difference between the present value of the defined benefit obligation at the end of the
reporting period and the cost of the plan assets at the end of the reporting period
D. An asset or liability equal to the difference between the present value of the defined benefit obligation at the end of the
reporting period and the fair value of the plan assets at the end of the reporting period
Q158) In the case of a defined benefit plan, the expense shown in the employer's statement of comprehensive income
should normally include:
E. The interest income for the period
F. The interest cost for the period
G. The present value of the current service cost for the reporting period

H. All of the above

Q159) The interest cost in relation to a defined benefit plan arises because the accumulated benefits which employees
had earned at the end of the previous period are now one period closer to being paid. True or False?
I. True
J. False
Q160) In the case of a defined benefit plan, actuarial gains may arise because:
A. There are favorable differences between actuarial assumptions made at the end of the previous period and actual events which have
occurred in the current period
B. There are adverse differences between actuarial assumptions made at the end of the previous period and actual events which have
occurred in the current period
C. Benefits paid during the period are less than employee contributions.
D. Benefits paid during the period are less than employer contributions.
Q161) In the case of a defined benefit scheme, the items which must be shown in other comprehensive income in the statement of
comprehensive income are:
E. Interest cost and interest income
F. Actuarial gains or losses only
G. Actuarial gains or losses and the return on plan assets (less interest income)
H. Return on plan assets only
Q162) Which of the following items is always treated as a long-term employee benefit?
I. A company car provided for an employee's use
J. Employee wages and salaries
K. A bonus payable wholly before 12 months after the end of the period in which the related employee services are performed
L. A bonus which is not payable wholly before 12 months after the end of the period in which the related employee services are performed
Q163) Redundancy payments to employees should be recognised as an expense in the employer's statement of
comprehensive income as soon as the employer is considering making those employees redundant. True or False?
A. True
B. False

Q164) Current tax should be measured using tax rates and tax laws that:
C. Have been enacted by the end of the reporting period
D. Have been enacted or substantively enacted by the date that the financial statements are authorized for issue
E. Have been enacted by the date that the financial statements are authorized for issue
F. Have been enacted or substantively enacted by the end of the reporting period
Q165) A company's estimate of its current tax liability for the year to 31 December 2014 differed from the actual tax
liability by £10,000. This resulted in a credit balance of £10,000 being shown in the company's trial balance as at 31
December 2015.
•The current tax liability for the year to 31 December 2015 is estimated to be £340,000.
•The current tax expense which should be shown in the statement of comprehensive income for the year to 31
December 2015 is:
A. £10,000
B. £350,000
C. £340,000
D. £330,000
Q 166) Deferred tax should be accounted for in relation to certain differences between taxable profit and accounting
profit. The differences which require an entity to account for deferred tax are:
E. Neither temporary differences nor permanent differences
F. Permanent differences
G. Temporary differences
H. Both temporary differences and permanent differences
Q167) A company's financial statements for the year to 30 June 2016 show a pre-tax profit of £500,000. This is after charging
depreciation of £100,000. Depreciation for the year for tax purposes is £160,000. Assuming that the rate of tax paid by the
company is 20%, the required transfer to or from the company's deferred tax account is:
A. A transfer of £32,000 from the deferred tax account
B. A transfer of £12,000 to the deferred tax account
C. A transfer of £32,000 to the deferred tax account
D. A transfer of £12,000 from the deferred tax account
Q168) A company's financial statements for the year to 31 March 2016 show a pre-tax profit of £2,700,000. This is after
charging depreciation of £320,000. Depreciation for the year for tax purposes is £150,000. Assuming that the rate of tax paid
by the company is 23%, the required transfer to or from the company's deferred tax account is:
E. A transfer of £34,500 from the deferred tax account
F. A transfer of £39,100 from the deferred tax account
G. A transfer of £39,100 to the deferred tax account
H. A transfer of £34,500 to the deferred tax account
Q169) The tax base of an asset is defined by international standard IAS12 as the amount which is attributable to that asset for
tax purposes. If the tax base of an asset is less than its carrying amount, this is evidence of:
I. A taxable temporary difference
J. A taxable permanent difference
K. A deductible temporary difference
L. A deductible permanent difference
Q170) An item of property, plant and equipment is shown in a company's statement of financial position at its written down
value of £420,000. For tax purposes, the item's written down value is £610,000. The residual value of the item at the end of
its useful life is expected to be £nil. Assuming that the company pays tax at 23%, the resulting deferred tax asset or liability is:
A. Deferred tax asset of £43,700
B. £nil
C. Deferred tax liability of £43,700
D.Deferred tax asset of £190,000
Q171) Unpaid expenses are shown in a company's statement of financial position as a current liability of £30,000. These
expenses have already been deducted when computing accounting profit but will not be deducted for tax purposes until
they are paid. Assuming that the company pays tax at 20%, the resulting deferred tax asset or liability is:
E. Deferred tax asset of £30,000
F. Deferred tax liability of £6,000
G. Deferred tax asset of £6,000
H. £nil
Q 172) A deferred tax asset should never be recognized in relation to unused tax losses carried forward for deduction
against future taxable profits. True or False?
I. True
J. False
Q173) A deferred tax liability must be recognized for all taxable temporary differences. True or False?
A. True
B. False

Q174) Which of the following is not a characteristic of an entity's cash equivalents, as defined by international
standard IAS7?
C. A short-term investment
D. An investment which is readily convertible into known amounts of cash
E. An investment which is subject to significant risk of changes in value
F. A highly liquid investment

Q175) Bank overdrafts are generally regarded as a component of an entity's cash and cash equivalents. True or
False?
G. True
H. False
Q176) Cash inflows and outflows arising from operating activities do not include:
A. Cash receipts from the sale of goods and services
B. Cash payments to employees
C. Cash payments to suppliers for goods and services
D. Cash receipts from the sale of property, plant and equipment
Q177) Which of the following is a cash inflow or outflow arising from investing activities?
E. Royalties received
F. Cash repaid to lenders
G. Cash received on the issue of loan stock
H. Cash received from the repayment of loans made to other parties
Q178) Which of the following is not a cash inflow or outflow arising from financing activities?
I. Cash proceeds from issuing debentures
J. Cash repayments of amounts borrowed
K. Cash proceeds of a share issue
L. Cash payments to acquire equity of other entities
Q179) If cash flows from operating activities are reported using the direct method, the statement of cash flows does not
show:
A. Cash received from customers
B. Depreciation charges
C. Cash paid to employees
D. Cash paid to suppliers
Q180) A company uses the indirect method for reporting cash flows from operating activities. During an accounting
period, inventories have risen by £5,000, trade receivables have fallen by £4,000 and trade payables have risen by
£3,000. When calculating the net cash inflow or outflow from operating activities, the required adjustments are as
follows:
E. Add £5,000, Subtract £4,000, Subtract £3,000
F. Subtract £5,000, Add £4,000, Add £3,000
G. Subtract £5,000, Add £4,000, Subtract £3,000
H. Add £5,000, Subtract £4,000, Add £3,000
Q181) The sale of an investment which ranks as a cash equivalent is treated as a cash inflow from investing activities.
True or False?
I. True
J. False
Q182) A company uses the indirect method for reporting cash flows from operating activities. During an accounting period, plant
which had cost £30,000 some years ago was sold for £3,000. The accumulated depreciation on this plant at the time of disposal was
£25,000. The effects of this transaction on the statement of cash flows are as follows:
A) Operating activities:
•Add back loss on disposal £2,000
•Investing activities:
•Cash received on disposal of plant £3,000
B) Operating activities:
•Add back loss on disposal £5,000
•Investing activities:
•Cash received on disposal of plant £3,000
C) Operating activities:
•Subtract loss on disposal £2,000
•Investing activities:
•Cash received on disposal of plant £3,000
D) Operating activities:
•Add disposal proceeds £3,000
•Investing activities:
Q183) IAS7 requires that all entities which comply with international standards should present a statement of cash flows. True or
False?
A. True
B. False
Q184) The carrying amount of a company's property, plant and equipment was £740,000 at the beginning of an accounting year and
£835,000 at the end of the year. The depreciation charge for the year was £100,000.
•Plant with a carrying amount of £25,000 was sold during the year for £10,000 and a property was revalued upwards by £50,000.
•The cash outflow caused by the acquisition of property, plant and equipment during the year was:
A. £155,000
B. £205,000
C. £170,000
D. £220,000
Q185) The current tax liability shown in a company's statement of financial position at 31 December 2016 is £392,000. The
comparative figure at 31 December 2015 was £355,000. The tax expense shown in the statement of comprehensive income for the
year to 31 December 2016 is £410,000. A transfer of £5,000 was made to the deferred tax account during the year.
•The amount of tax paid during the year to 31 December 2016 was:
A. £410,000
B. £355,000
C. £342,000
Q186) One of the perceived weaknesses of historical cost accounting in times of inflation is that:
A. Depreciation charges are overstated
B. Profits are understated
C. Holding gains on inventories are not identified
D. Monetary assets are not shown in the statement of financial position
Q187) At the start of an accounting period, a company has a long-term liability of £100,000 on which interest is payable
at 6% per annum. The full £100,000 is still owing at the end of the period, during which the index of general prices
increased by 7.5%.
•What is the real cost of this debt for the period in terms of general purchasing power?
A. Gain £1,500
B. Cost £1,500
C. Cost £13,500
D. Cost £6,000
Q188) If financial statements are drawn up on the historical cost basis, holding gains on inventories are shown separately
in the statement of comprehensive income. True or False?
E. True
F. False
Q189) A company's only asset on 1 January is cash of £50,000. All of this cash is immediately spent on inventories, 60%
of which are sold for £42,000 on 31 January. There are no other transactions during the month of January. The index of
general prices rose by 2% during the month.
•Calculate the company's profit for the month:
•(a) in nominal capital terms, and
•(b) in terms of general purchasing power.
A. (a) £11,400 (b) £12,000
B. (a) £12,000 (b) £11,400
C. (a) £12,000 (b) £12,000
D. (a) £12,000 (b) £11,000
Q190) The basic principle of current purchasing power (CPP) accounting is that each transaction is adjusted to reflect
the change in the general purchasing power of money since the transaction occurred. True or False?
E. True
F. False
Q191) The basic principle of current cost accounting (CCA) is that assets consumed during an accounting period are
shown at their current values at the time of consumption and that assets remaining at the end of the period are shown
at their original cost. True or False?
A. True
B. False
Q192) Which of the following is not regarded as an indicator of hyperinflation?
C. The cumulative rate of inflation over a five-year period is approaching 100%
D. The general population prefers to keep its wealth in non-monetary assets
E. Credit sales take place at prices which compensate for the expected loss in purchasing power during the credit period
F. Wages are index-linked
Q193) International standard IAS29 adopts a current purchasing power approach to the restatement of financial
statements. True or False?
G. True
H. False
Q194) The main steps required in the preparation of a restated statement of financial position (in accordance with
the requirements of IAS29) do not include:
A. The restatement of monetary items
B. The restatement of non-monetary items carried at historical cost
C. The restatement of non-monetary items carried at a valuation
D. The restatement of each component of equity
Q195) If an entity prepares restated financial statements in accordance with the requirements of IAS29, the gain or
loss on the entity's net monetary position is shown in other comprehensive income. True or False?
E. True
F. False
Q196) The only way in which a parent-subsidiary relationship can be established is for the parent company to acquire
more than 50% of the ordinary shares of the subsidiary company. True or False?
G. True
H. False
Q197) The only way in which a parent-subsidiary relationship can be established is for the parent company to acquire
more than 50% of the ordinary shares of the subsidiary company. True or False?
A. True
B. False
Q198) When a parent company acquires a subsidiary, the amount paid for goodwill is equal to the amount paid by the
parent company for its shares in the subsidiary company, less:
C. The market value of those shares
D. The nominal value of those shares
E. The nominal value of those shares plus the parent's stake in the subsidiary's reserves
F. The market value of those shares plus the parent's stake in the subsidiary's reserves
Q199) On 1 July 2016, A Ltd pays £870,000 to acquire the entire share capital of B Ltd. The equity of B Ltd on that date
consists of ordinary share capital of £400,000 and retained earnings of £210,000. The fair value of the non-current assets
of B Ltd on 1 July 2016 exceeds their carrying amount by £35,000. The amount paid for goodwill by A Ltd is:
G. £260,000
H. £225,000
I. £295,000
J. £470,000
Q200) On 1 May 2014, C Ltd paid £430,000 to acquire the entire share capital of D Ltd. The equity of D Ltd on that
date consisted of ordinary share capital of £200,000 and retained earnings of £90,000. All of its assets and liabilities
were carried at fair value. On 30 April 2016, the retained earnings of C Ltd and D Ltd are £970,000 and £115,000
respectively. Goodwill arising on consolidation has suffered an impairment loss of 25% since 1 May 2014.
•Group retained earnings at 30 April 2016 are:
A. £960,000
B. £1,050,000
C. £1,085,000
D. £980,000
Q201) On 1 January 2009, P Ltd paid £480,000 to acquire 65% of the ordinary share capital of Q Ltd. The equity of Q
Ltd on that date consisted of ordinary share capital of £200,000 and retained earnings of £150,000. The fair value of
the non-current assets of Q Ltd on 1 January 2009 exceeded their carrying amount by £250,000. Goodwill arising on
consolidation has suffered an impairment loss of 40% between 1 January 2009 and 31 December 2016.
•The goodwill figure which should be shown in the consolidated statement of financial position at 31 December 2016
is:
A. £36,000
B. £78,000
C. £151,500
D. £54,000
Q202) On 1 January 2013, E Ltd paid £560,000 to acquire 80% of the ordinary share capital of F Ltd. The equity of F Ltd
on that date consisted of ordinary share capital of £300,000 and retained earnings of £150,000. All of its assets and
liabilities were carried at fair value. On 31 December 2016, the retained earnings of E Ltd and F Ltd are £1,870,000 and
£65,000 respectively. Goodwill arising on consolidation has suffered an impairment loss of 70% since 1 January 2013.
•The retained earnings figure which should be shown in the consolidated statement of financial position at 31 December
2016 is:
A. £1,708,000
B. £1,662,000
C. £1,645,000
D. £1,725,000
Q203) A company's preference shareholders are not entitled to a share of the company's reserves. True or false?
E. True
F. False
Q204) Which of the following is not an example of an intra-group balance?
A. A trade payable owing to a subsidiary by its parent company
B. A trade receivable owing to a subsidiary by an individual who is one of its customers
C. A loan made by a parent company to a subsidiary
D. A loan made by one subsidiary to another
Q205) G Ltd owns 90% of the ordinary share capital of H Ltd. The inventories of H Ltd on 30 November 2015 include
goods purchased from G Ltd for £300,000. These goods had been sold to H Ltd by G Ltd at a markup of 50%. The
amount of unrealized profit which should be subtracted from group inventories and from group retained earnings is:
E. £100,000
F. £150,000
G. £90,000
H. £135,000
Q206) The difference between the end of the reporting period of a subsidiary and that of its parent should not
exceed six months. True or False?
I. True
J. False
Q207) During an accounting period, a parent company sells goods to one of its subsidiaries for £10,000. These goods
cost the parent company £6,000. At the end of the accounting period, three-quarters of the goods have been sold by the
subsidiary to customers outside the group but the remaining one-quarter of the goods are still held in inventories. The
adjustments required when preparing the group statement of comprehensive income are:
A. Subtract £10,000 from group sales revenue and subtract £10,000 from group cost of sales
B. Subtract £10,000 from group sales revenue and subtract £6,000 from group cost of sales
C. Subtract £10,000 from group sales revenue and subtract £9,000 from group cost of sales
D. Subtract £10,000 from group sales revenue and subtract £11,000 from group cost of sales
Q208) During an accounting period, a parent company sells goods to one of its subsidiaries for £200,000. This represents
cost plus 25%. At the end of the accounting period, one-fifth of these goods are still held in the subsidiary's inventories.
The cost of sales figures reported in the parent's and the subsidiary's financial statements are £890,000 and £530,000
respectively.
•The parent company has a 60% interest in the subsidiary's ordinary shares. The cost of sales figure that should appear in
the consolidated statement of comprehensive income for the year is:
A. £1,228,000
B. £1,096,000
C. £1,260,000
D. £1,212,000
Q209) A parent company owns 73% of a subsidiary's ordinary shares. The non-controlling interest in the group statement of
financial position is measured at the appropriate proportion of the subsidiary's identifiable net assets.
•An impairment loss in relation to goodwill arising on consolidation should be accounted for in the group statement of
comprehensive income as follows:
A. Do nothing
B. Recognize 73% of the impairment loss as a group expense and subtract the remaining 27% from the profit attributable to the
non-controlling interest
C. Recognize 100% of the impairment loss as a group expense
D. Recognize 73% of the impairment loss as a group expense but make no further adjustments
Q210) The amount of profit attributable to the non-controlling interest in a 90% subsidiary is generally equal to:
E. 10% of the subsidiary's profit after tax
F. 10% of the group profit before tax
G. 10% of the subsidiary's profit before tax
H. 10% of the group profit after tax
Q211) If a subsidiary company is acquired part of the way through an accounting period, the group's share of the subsidiary's
pre-acquisition profit is included in the statement of comprehensive income for the period. True or False?
I. True
J. False
Q212) In an accounting period, a parent company has sales of £867,000 and its 80% subsidiary has sales of £121,000.
The group sales figure for the period is £963,800. True or False?
A. True
B. False
Q213) In an accounting period, a parent company has pre-tax profits of £5m. Its 75% subsidiary has pre-tax profits of
£2m. The tax expense for both companies is equal to 30% of profit before tax. The profit attributable to the non-
controlling interest is:
C. £1,225,000
D. £1,750,000
E. £350,000
F. £500,000
Q214) When preparing a set of group financial statements, the correct treatment of dividends paid by a subsidiary
company to its non-controlling shareholders is to:
G. Ignore them completely
H. Cancel them against dividends received by the parent company
I. Deduct them in the non-controlling interest column in the group statement of changes in equity
J. Add them in the non-controlling interest column in the group statement of changes in equity
Q215) Which of the following is an example of an intra-group item which is cancelled out when preparing the group
statement of comprehensive income?
A. Interest payable by a subsidiary to its parent
B. Administrative fees charged by a parent to a subsidiary
C. Management expenses charged by one subsidiary to another
D. All of the above
Q216) A parent company and its subsidiaries form a single entity for legal purposes. True or False?
E. True
F. False
Q217) An associate is an entity over which the investor has:
G. Control
H. Joint control
I. Significant influence
J. Some influence
Q218) Which of the following would normally indicate that an investor has significant influence over an investee?
A. The investor owns 55% of the investee's ordinary shares
B. The investor has the right to appoint or remove members of the investee's key management personnel
C. The investor has the right to direct the investee to enter into transactions for the investor's benefit
D. The investor owns 21% of the investee's ordinary shares
Q219) An investment in an associate is normally accounted for using the equity method. This method requires that the
investment in the associate is:
E. Recognized at fair value
F. Initially recognized at cost and then adjusted in each subsequent accounting period to reflect the investor's share of the
associate's profit or loss for the period
G. Initially recognized at cost and not adjusted thereafter

H. Initially recognized at cost and then adjusted to fair value in subsequent accounting periods
Q220) Any positive goodwill which is included in the carrying amount of an investment in an associate is not separately
recognized and is not separately tested for impairment. True or False?
I.True
J. False
Q221) On 1 May 2015, V Ltd acquired 35% of the ordinary share capital of W Ltd at a cost of £472,500. It was agreed that this
amount was equal to 35% of the fair value of the net assets of W Ltd on that date. In the year to 30 April 2016, W Ltd made a
profit after tax of £80,000 and paid an ordinary dividend of £32,000. In the financial statements of V Ltd, the carrying amount
of the investment in W Ltd as at 30 April 2016 should be:
A. £472,500
B. £520,500
C. £500,500
D. £489,300
Q222) An investor company has a 22% interest in an associate. During an accounting period, the investor bought goods from
the associate for £70,000. These goods had cost the associate £50,000. One-quarter of the goods remained in the investor's
inventories at the end of the period. The unrealized profit is:
E. £5,000
F. £1,100
G. £4,400
H. £20,000
Q223) If an investor company owns less than 20% of an investee’s voting power, the investor cannot have significant influence
over the investee and therefore the investee cannot be the investor’s associate. True or False?
I. True
J. False
Q224) The two categories of joint arrangement recognized by international standard IFRS11 are:
A. Joint ventures and joint contracts
B. Joint ventures and joint enterprises
C. Joint operations and joint enterprises
D. Joint operations and joint ventures
Q225) An interest in a joint operation must be accounted for by the equity method. True or False?
E. True
F. False
Q226) The fact that an entity has related parties cannot have any effect on the entity's financial performance unless
there are transactions between the entity and those parties. True or False?
G. True
H. False
Q227) With the equity method of accounting, the investor’s share of the investee’s revenue is added to the
investor’s own revenue in the investor’s statement of comprehensive income. True or False?
I. True

J. False
Q228) International standard IAS24 requires an entity's financial statements to be restated so that transactions with
related parties are reported at the prices that would have applied if the transactions had been carried out at arm's
length. True or False?
A. True
B. False
Q229) A person (P) is necessarily related to a reporting entity (R) if:
C.P owns ordinary shares in R
D.P's grandfather has control over R
E.P is an employee of R
F.P is the domestic partner of a director of R
Q230) A person (P) is not necessarily related to a reporting entity (R) if:
G.P is a major customer of R
H.P is a director of R
I.P is a director of R's parent company
J.P's father has significant influence over R
Q231) An entity (E) is necessarily related to a reporting entity (R) if:
A.E owns ordinary shares in R
B.E is a major supplier of R
C.E and R are both subsidiaries of the same parent
D.E is a bank which lends money to R
Q232) An entity (E) is not necessarily related to a reporting entity (R) if:
E.E is an associate of R
F.E has significant influence over R
G.E is a subsidiary of a subsidiary of R
H.E and R have a director in common
Q233) Factors which might help to determine an entity's functional currency include:
I.The currency that mainly influences sales prices for the entity's goods and services
J.The currency that mainly influences the costs of providing goods and services
K.The currency in which funds from financing activities are generated
L.All of the above
Q234) A company prepares financial statements to 31 December each year and has the pound sterling as its functional
currency. On 29 October 2015, the company buys inventory for $28,380. This amount is still unpaid at 31 December 2015. The
inventory is all sold during the month of December. Exchange rates are £1 = $1.65 on 29 October 2015 and £1 = $1.72 on 31
December 2015. Calculate: (a) the amount in £ at which the purchase and the trade payable should be recorded on 29 October
2015 (b) the amount in £ at which the trade payable should be shown in the statement of financial position at 31 December
2015 (c) the exchange difference which arises.
A.(a) £17,200 (b) £17,200 (c) £nil
B.(a) £17,200 (b) £16,500 (c) £700 (favorable)
C.(a) £16,500 (b) £16,500 (c) £nil
D.(a) £17,200 (b) £16,500 (c) £700 (adverse)
Q235) When translating from an entity's functional currency to a presentation currency, any resulting exchange differences
are recognized in other comprehensive income. True or False?
E. True
F. False
Q236) An entity's functional currency is defined by international standard IAS21 as the currency in which the entity's financial
statements are presented. True or False?
G. True
H. False
Q237) A company's figures for an accounting period include sales £56m, PBIT £1.4m, equity £16m and non-current liabilities
£4m. The company's return on capital employed for the period is:
A.2.5%
B.8.75%
C.35%
D.7%
Q238) A company's figures for an accounting period include profit after tax £3m, ordinary share capital and reserves £8m and
preference share capital £2m. The preference dividend was £200,000. The company's return on equity for the period is:
E.35%
F.37.5%
G.30%
H.28%
Q239) A company's figures for an accounting period include sales £25m, cost of sales £15m and equity £5m. The gross profit
margin for the period is:
I. 60%
J.50%
K.40%
L.30%
Q240) A company's current assets and current liabilities at the end of an accounting period are £6m and £2.4m respectively.
Current assets include inventories of £1.8m. The current ratio and the quick assets ratio at the end of the period are:
A.2.5 and 0.75
B.2.5 and 1.75
C.1.75 and 2.5
D.2.5 and 0.7
Q241) A company has inventory of £7m at the start of an accounting period and £8m at the end of the period. Sales for the
period are £60m and the gross profit is £15m. The inventory holding period is:
E.46 days
F.61 days
G.49 days
H.65 days
Q242) A company's average trade receivables and trade payables for an accounting period are £12.5m and £18m respectively.
Credit sales and credit purchases for the period are £210m and £78m respectively. The trade receivables collection period and
the trade payables collection period are:
I.59 days and 31 days
J.16.8 days and 4.3 days
K.6.2 days and 11.7 days
L.22 days and 84 days
Q243) A company's profit after tax for an accounting period is £12m. The company's issued share capital consists of
50m ordinary shares of 50p each and 10m preference shares of £1 each. The preference dividend is £1m. Earnings per
share for the period are:
A.22p
B.20p
C.34.3p
D.44p
Q244) In general, a low price/earnings ratio is viewed more favorably than a high price/earnings ratio. True or False?
E. True
F. False
Q245) A company's profit after tax for an accounting period is £27.5m. Issued share capital consists of 50m ordinary
shares of £1. There are no preference shares. A dividend of 22p per share is paid for the period and the market price
per ordinary share is £3.90. Dividend cover and dividend yield for the period are:
G.0.4 and 17.7%
H.0.4 and 5.64%
I.2.5 and 22%
J.2.5 and 5.64%
Q246) The capital gearing ratio measures the extent to which a company's long-term finance has been provided by
shareholders rather than lenders. True or False?
A. True
B. False
Q247) A company's issued share capital consists of 10m ordinary shares and 2m preference shares. All shares have a
nominal value of £1. The company's reserves consist entirely of retained earnings of £8m. The company's non-
current liabilities comprise long-term loans of £5m. The capital gearing ratio is:
C.20%
D.35%
E.28%
F.25%
Q248) A ratio analysis of the financial statements of two companies shows that one of the companies has a much
better ROCE than the other. However, this comparison could be misleading. True or False?
G. True
H. False
Q249) All companies which comply with international standards must present EPS figures in the statement of comprehensive
income. True or False?
A. True

B. False
Q250) A company's issued share capital throughout an accounting period consists of 500,000 ordinary shares of 20p and
80,000 preference shares of £1. Profit after tax for the period is £320,000 and the preference dividend is £8,000. Basic EPS for
the period is:
C.64p
D.62.4p
E.55.2p

F. £3.12
Q251) On 1 January 2015, a company's issued share capital consisted of 120,000 ordinary shares of £1. On 1 May 2015, the
company issued another 30,000 ordinary shares and on 1 July 2015 the company issued a further 50,000 shares. Both issues
were made at full market price. The weighted average number of shares outstanding during the year to 31 December 2015
was:
G.165,000
H.160,000
I. 156,667

J. 175,000
Q252) A company's profit after tax for the year to 30 June 2016 was £1m. The company's issued share capital at 1 July 2015 consisted
of 2,400,000 ordinary shares of 50p each. A further 300,000 shares were issued at full market price on 1 September 2015. Basic EPS
for the year is:
•Open Hint for Question 251 in a new window.
A.75.5p
B.39.2p
C.78.4p
D.37.7p
Q253) When calculating earnings per share, a bonus issue made during the current accounting period is treated as if it had been
made at the beginning of the earliest period for which comparative figures are presented. True or False?
E. True
F. False
Q254) A company's profit after tax for the year to 31 December 2015 was £150,000. The comparative figure for 2014 was £135,000.
The company's issued share capital at 1 January 2014 consisted of 240,000 ordinary shares. A 1 for 4 bonus issue was made on 1 July
2015. There were no other share issues in either year. Basic EPS for 2015 and restated basic EPS for 2014 are:
G.55.6p and 50p
H.50p and 45p
I. 50p and 56.25p
J.55.6p and 56.25p
Q255) In February 2016, a company makes a 1 for 10 rights issue at 70p per share. The market value of the company's
shares just before this rights issue was £1.25 per share. The theoretical market value per share after the rights issue has
been made is:
A. 70p
B. £1.32
C. £1.20
D. £1.14
Q256) A company's profit after tax for the year to 31 December 2015 was £275,000. The company's issued share capital
on 1 January 2015 consisted of 350,000 ordinary shares. On 1 April 2015, the company made a 1 for 7 rights issue at £1
per share. The market value of the company's shares just before this rights issue was £1.40 per share. Basic EPS for 2015
is:
E.70.1p
F.75.8p
G.68.75p

H. 70.4p
Q257) Diluted EPS can never exceed basic EPS. True or False?
I. True
J. False
Q258) In most cases, share options will not have a dilutive effect on EPS when they are exercised. True or False?
A. True
B. False
Q259) Every operating segment of an entity is also a reportable segment. True or False?
C. True
D. False
Q260) IFRS8 specifically identifies certain similarities which must exist between operating segments in order for them to be
combined into one segment for financial reporting purposes. These similarities do not include:
E.Similar products and services
F.Similar types of customer
G.Similar types of supplier
H.A similar regulatory environment
Q261) A reportable segment is an operating segment which meets any of several 10% thresholds. Which of the following is not
one of these thresholds?
I. Segment assets are at least 10% of the total assets of all operating segments
J.Segment liabilities are at least 10% of the total liabilities of all operating segments
K.Segment revenue is at least 10% of the total revenue of all operating segments
L.Segment profit or loss is at least 10% of the greater of the total profit of all profitable operating segments and the total loss of all
loss-making operating segments
Q262) A company's total external revenue for an accounting period is £15m. There is no inter-segment revenue. The
company's total assets are £43m. The total profit or all profitable segments for the period is £2.6m and the total
losses of all loss-making segments are £1.9m. Operating segment X has external revenue of £1.3m, total assets of
£3.7m and a loss of £220,000. Which of the following statements is true?
A.Segment X is a reportable segment because it has revenue of £1.3m
B.Segment X is a reportable segment because it has assets of £3.7m
C.Segment X is a reportable segment because it has a loss of £220,000
D.Segment X is not a reportable segment
Q263) In general, a major customer is one that accounts for at least 5% of an entity's external revenues. True or
False?
E. True
F. False
Q264) IFRS8 requires an entity to disclose the identity of its major customers. True or False?
G. True
H. False
Q265) IFRS8 requires that entities should disclose certain information about reportable segments (if regularly
provided to the chief operating decision maker). This information does not include:
A.Segment revenue
B.Segment cost of sales
C.Segment depreciation
D.Segment interest expense
Q266) An entity must provide a reconciliation between the total revenue of reportable segments and the
entity's total revenue. True or False?
E. True
F. False
Q267) The classes of "entity-wide" disclosures required by IFRS8 do not include information about:
G.The entity's management structure
H.The entity's products and services
I.The geographical areas in which the entity operates
J.The entity's major customers
Q268) Which of the following would qualify as a small or medium-sized entity in accordance with the criteria
specified in the IFRS for SMEs?
A.A company which is listed on the Stock Exchange
B.An unlisted manufacturing company which is not managed by its shareholders
C.An insurance company
D.A small owner-managed business
Q269) The IFRS for SMEs states that the qualitative characteristics of financial information are:
E.Materiality, faithful representation, consistency and prudence
F.Assets, liabilities, equity, income and expenses
G.Understandability, relevance, reliability and comparability
H.Comparability, verifiability, timeliness and understandability
Q270) The measurement bases specified in the IFRS for SMEs are:
I.Historical cost and fair value
J.Historical cost, current cost, realizable value and present value
K.Historical cost and realizable value
L.Historical cost and present value
Q271) A small or medium-sized entity which has no other comprehensive income may dispense with the statement of
comprehensive income and present an income statement. True or False?
A. True
B. False
Q272) All small and medium-sized entities must present a statement of changes in equity. True or False?
C. True
D. False
Q273) The IFRS for SMEs requires that (in most cases) investment property should be measured initially at cost but at
fair value thereafter. True or False?
E. True
F. False
Q274) In common with IAS16, the IFRS for SMEs allows property, plant and equipment to be measured at a revalued
amount. True or False?
G. True
H. False
Q275) The IFRS for SMEs requires that an intangible asset may be recognized only if the asset results from expenditure
incurred internally. True or False?
A. True
B. False
Q276) In common with IFRS3, the IFRS for SMEs does not allow goodwill to be amortized. True or False?
C. True
D. False
Q278) Certain topics are not dealt with in the IFRS for SMEs. These topics include:
E.Hyperinflation
F.Foreign currency translation
G.Related party disclosures
H.Earnings per share
Q279) Which of the following is a characteristic of an operating segment, as defined by
international standard IFRS8?
I. It engages in business activities from which it may earn revenues and incur expenses
J.Its operating results are regularly reviewed by the chief operating decision maker
K.Discrete financial information is available

L. All of the above