Question 1

According to the AASB Framework an asset should have a number of characteristics,including:

Accepted Answer

A)  It must be owned by the entity. 
B)  It must be expected to provide future economic benefits to the entity. 
C)  The transaction giving rise to the ownership must have already occurred. 
D)  The future economic benefits must be very likely to eventuate. 
A)  It must be owned by the entity. 
B)  It must be expected to provide future economic benefits to the entity. 
C)  The transaction giving rise to the ownership must have already occurred. 
D)  The future economic benefits must be very likely to eventuate. B

Question 2

How should borrowing costs relating to an asset being constructed over a substantial period of time be treated in the accounts?

Accepted Answer

A)  expensed as incurred 
B)  capitalised and amortised over the period of the construction of the asset 
C)  accrued and amortised over the period of the loan 
D)  capitalised as part of the cost of the asset 
A)  expensed as incurred 
B)  capitalised and amortised over the period of the construction of the asset 
C)  accrued and amortised over the period of the loan 
D)  capitalised as part of the cost of the asset D

Question 3

Distinguish between ownership from control and discuss how this is may affect the definition of an asset.

Accepted Answer

Ownership refers to the legal right to possess, use, and dispose of an asset. Control, on the other hand, refers to the power to make decisions and direct the use of an asset. While ownership and control are often held by the same entity, they can also be separated. For example, in a corporation, shareholders may own the company but delegate control to a board of directors and management.

This distinction between ownership and control can affect the definition of an asset in several ways. From a legal perspective, an asset may be owned by one party but controlled by another, leading to potential conflicts and disputes. From a financial perspective, the separation of ownership and control can impact the valuation and accounting treatment of an asset. For example, if a company leases an asset instead of owning it outright, the asset may not be recognized on the balance sheet, affecting the company's financial position and performance metrics.

Furthermore, the separation of ownership and control can also impact the risk and return associated with an asset. For example, if an individual owns shares in a company but does not have control over its management decisions, they may be subject to the decisions and actions of the controlling party, potentially affecting the value and performance of their investment.

In conclusion, the distinction between ownership and control can have significant implications for the definition and treatment of an asset, impacting legal, financial, and risk considerations. It is important for individuals and organizations to understand and consider the implications of this distinction when evaluating and managing their assets.

Question 4

If it is not probable that expenditure will generate future benefits,the accounting treatment should be:

Accepted Answer

A)  to treat it as a deferred asset. 
B)  to amortise it over a period of no more than two operating cycles. 
C)  to expense it. 
D)  to treat it as unearned revenue. 
A)  to treat it as a deferred asset. 
B)  to amortise it over a period of no more than two operating cycles. 
C)  to expense it. 
D)  to treat it as unearned revenue.

Question 5

What should an entity do when a material prior period error in asset values is detected?

Accepted Answer

When an entity detects a material prior

Question 6

The treatment of repairs and additions to property,plant and equipment can be best described as:

Accepted Answer

A)  written off as incurred. 
B)  capitalised when it maintains a certain level of service. 
C)  capitalised when the asset's estimated useful life is extended. 
D)  none of the given answers. 
A)  written off as incurred. 
B)  capitalised when it maintains a certain level of service. 
C)  capitalised when the asset's estimated useful life is extended. 
D)  none of the given answers.

Question 7

Discuss the recognition rules of assets purchased in one lump-sum payment.

Accepted Answer

When assets are purchased in one lump-su

Question 8

Borrowing costs may include amortisations of discounts or premiums related to borrowings.

Accepted Answer

A) True 
 B)False

Question 9

Before an asset can be recognised,the framework requires that an asset satisfy the element that it has some future economic benefits.Discuss the ways wherein future economic benefits can be determined.

Accepted Answer

Future economic benefits can be determin

Question 10

Discuss the accounting treatment for restoration costs with respect to acquisition of assets.

Accepted Answer

Restoration costs with respect to the ac

Question 11

AASB 101 indicates that when presenting a statement of financial position,an entity should:

Accepted Answer

A)  present all assets and liabilities as two groups and disclose their specific classifications in notes as per paragraphs 57-67. 
B)  only present items on the basis of liquidity if that information is reliable and more relevant. If this is the case, assets should be discretely grouped into current and non-current classifications. 
C)  present items broadly in order of liquidity if that information is reliable and more relevant than following paragraphs 66-76. 
D)  always classify items as current and non-current. 
A)  present all assets and liabilities as two groups and disclose their specific classifications in notes as per paragraphs 57-67. 
B)  only present items on the basis of liquidity if that information is reliable and more relevant. If this is the case, assets should be discretely grouped into current and non-current classifications. 
C)  present items broadly in order of liquidity if that information is reliable and more relevant than following paragraphs 66-76. 
D)  always classify items as current and non-current.

Question 12

The cost of an asset will typically include the purchase price and:

Accepted Answer

A)  other expenditures on material and services to generate the asset. 
B)  depreciation costs of other assets used to generate the asset. 
C)  salaries and wages of the Chief Executive Officer. 
D)  other expenditures on material and services to generate the asset and depreciation costs of other assets used to generate the asset. 
A)  other expenditures on material and services to generate the asset. 
B)  depreciation costs of other assets used to generate the asset. 
C)  salaries and wages of the Chief Executive Officer. 
D)  other expenditures on material and services to generate the asset and depreciation costs of other assets used to generate the asset.

Question 13

AASB 101 Presentation of Financial Statements requires us to consider an entity's normal operating cycle.Explain what a normal operating cycle is.

Accepted Answer

A normal operating cycle refers to the t

Question 14

AASB 116 states that the cost of property,plant and equipment must include dismantling,removal and site restoration costs.

Accepted Answer

A) True 
 B)False

Question 15

In the case of classifying a liability as current or non-current,what approach does AASB 101 require if there is no clearly identifiable operating cycle?

Accepted Answer

A)  The most common length of operating cycle for other entities in a comparable industry must be used. 
B)  The operating cycle of the event that gave rise to the creation of the liability must be used as the basis for determining the liability's operating cycle. 
C)  The 12-month period from the reporting date must be used. 
D)  The average operating cycle length over all operations of the entity must be used. 
A)  The most common length of operating cycle for other entities in a comparable industry must be used. 
B)  The operating cycle of the event that gave rise to the creation of the liability must be used as the basis for determining the liability's operating cycle. 
C)  The 12-month period from the reporting date must be used. 
D)  The average operating cycle length over all operations of the entity must be used.

Question 16

If the entity received a donated asset the entity must:

Accepted Answer

A)  recognise an asset. 
B)  recognise a liability. 
C)  recognise an income. 
D)  recognises an asset and an income. 
A)  recognise an asset. 
B)  recognise a liability. 
C)  recognise an income. 
D)  recognises an asset and an income.

Question 17

Which of the following measurement bases are acceptable for property,plant and equipment?

Accepted Answer

A)  historical cost 
B)  revaluation model 
C)  fair value model 
D)  historical cost and revaluation model 
A)  historical cost 
B)  revaluation model 
C)  fair value model 
D)  historical cost and revaluation model

Question 18

Current generally accepted accounting practices require one approach to measurement to be applied to all classes of assets.

Accepted Answer

A) True 
 B)False

Question 19

If an asset's 'value in use' exceeds its market value then:

Accepted Answer

A)  An entity should adjust the current carrying amount of the asset to book value. 
B)  It would be expected that the entity would dispose of the asset immediately. 
C)  An impairment loss will need to be recorded. 
D)  It would be expected that the entity would retain the asset. 
A)  An entity should adjust the current carrying amount of the asset to book value. 
B)  It would be expected that the entity would dispose of the asset immediately. 
C)  An impairment loss will need to be recorded. 
D)  It would be expected that the entity would retain the asset.

Question 20

Applying the asset recognition criteria,which of the following accounting treatments are incorrect?

Accepted Answer

A)  Transfer duties were included in the cost of acquisition of the photocopier. 
B)  Monthly servicing of the photocopier was capitalised. 
C)  Monthly servicing of the photocopier was expensed. 
D)  Replacement of a minor component part of the photocopier was expensed. 
A)  Transfer duties were included in the cost of acquisition of the photocopier. 
B)  Monthly servicing of the photocopier was capitalised. 
C)  Monthly servicing of the photocopier was expensed. 
D)  Replacement of a minor component part of the photocopier was expensed.

Exam 4: An Overview of Accounting for Assets

According to the AASB Framework an asset should have a number of characteristics,including:

How should borrowing costs relating to an asset being constructed over a substantial period of time be treated in the accounts?

Distinguish between ownership from control and discuss how this is may affect the definition of an asset.

If it is not probable that expenditure will generate future benefits,the accounting treatment should be:

What should an entity do when a material prior period error in asset values is detected?

The treatment of repairs and additions to property,plant and equipment can be best described as:

Discuss the recognition rules of assets purchased in one lump-sum payment.

Borrowing costs may include amortisations of discounts or premiums related to borrowings.

Before an asset can be recognised,the framework requires that an asset satisfy the element that it has some future economic benefits.Discuss the ways wherein future economic benefits can be determined.

Discuss the accounting treatment for restoration costs with respect to acquisition of assets.

AASB 101 indicates that when presenting a statement of financial position,an entity should:

The cost of an asset will typically include the purchase price and:

AASB 101 Presentation of Financial Statements requires us to consider an entity's normal operating cycle.Explain what a normal operating cycle is.

AASB 116 states that the cost of property,plant and equipment must include dismantling,removal and site restoration costs.

In the case of classifying a liability as current or non-current,what approach does AASB 101 require if there is no clearly identifiable operating cycle?

If the entity received a donated asset the entity must:

Which of the following measurement bases are acceptable for property,plant and equipment?

Current generally accepted accounting practices require one approach to measurement to be applied to all classes of assets.

If an asset's 'value in use' exceeds its market value then:

Applying the asset recognition criteria,which of the following accounting treatments are incorrect?

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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