FR- Quiz

How does the Conceptual Framework define an asset?

• [a] A resource owned by an entity as a result of past events and from which future economic benefits are expected to flow to the entity.

• [b] A resource over which an entity has legal rights as a result of past events and from which economic benefits are expected to flow to the entity.

• [c] A resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity.

• [d] A resource to which an entity has a future commitment as a result of past events and from which future economic benefits are expected to flow from the entity

Which of the following would be classified as a liability?

• [a] Dexter’s business manufactures a product under licence. In 12 months’ time the licence expires and Dexter will have to pay $50,000 for it to be renewed.

• [b] Reckless purchased an investment 9 months ago for $120,000. The market for these investments has now fallen and Reckless’s investment is valued at $90,000.

• [c] Carter has estimated the tax charge on its profits for the year just ended as $165,000

• [d] IExpansion is planning to invest in new machinery and has been quoted a price of $570,000.

Which of the following would correctly describe the net realisable value of a two year old asset?

• [a] The original cost of the asset less two years’ depreciation.

• [b] The amount that could be obtained from selling the asset, less any costs of disposal.

• [c] The cost of an equivalent new asset less two years’ depreciation.

• [d] The present value of the future cash flows obtainable from continuing to use the asset.

Which of the following is the underlying assumption in preparing financial statements identified in the Conceptual Framework?

• [a] Going concern

• [b] Materiality

• [c] Substance over form

• [d] Accruals

The Conceptual Framework identifies four enhancing qualitative characteristics of financial information. For which of these characteristics is disclosure of accounting policies particularly important?

• [a] Verifiability

• [b] Timeliness

• [c] Comparability

• [d] Understandability

Which of the following is NOT a purpose of the IASB’s Conceptual Framework?

• To assist the IASB in the preparation and review of IFRS.

• To assist auditors in forming an opinion on whether financial statements comply with IFRS.

• To assist in determining the treatment of items not covered by an existing IFRS.

• To be authoritative where a specific IFRS conflicts with the Conceptual Framework.

Which of the following items should be recognised as an asset in the statement of financial position of a company?

• A skilled and efficient workforce which has been very expensive to train. Some of these staff are still in the employment of the company.

• A highly lucrative contract signed during the year which is due to commence shortly after the year end

• A government grant relating to the purchase of an item of plant several years ago, which has a remaining life of four years.

• A receivable from a customer which has been sold (factored) to a finance company. The finance company has full recourse to the company for any losses.

Comparability is identified as an enhancing qualitative characteristic in the IASB’s Conceptual Framework for Financial Reporting.

Which of the following does NOT improve comparability?

• Restating the financial statements of previous years when there has been a change of accounting policy

• Prohibiting changes of accounting policy unless required by an IFRS or to give more relevant and reliable information

• Disclosing discontinued operations in financial statements.

• Applying an entity’s current accounting policy to a transaction which an entity has not engaged in before.

The following Scenario Relates to Q.9-12

What is the net amount that will be charged to operating expenses in respect of the server for the year ended 31 March 20X3?

• $10,000

• $28,000

• $22,000

• $34,000

What amount will be presented under non-current liabilities at 31 March 20X3 in respect of the grant?

• $228,000

• $216,000

• $240,000

• $204,000