Question 1

Which of the following items is not an example of items reportable under other comprehensive income?

Accepted Answer

A)  Changes in revaluation surplus; 
B)  Actuarial gains and losses on defined contribution plans; 
C)  Gains and losses arising from translating the financial statements of a foreign operation; 
D)  The effective portion of gains and losses on hedging instruments in a cash flow hedge; 
E)  All of the given answers. 
A)  Changes in revaluation surplus; 
B)  Actuarial gains and losses on defined contribution plans; 
C)  Gains and losses arising from translating the financial statements of a foreign operation; 
D)  The effective portion of gains and losses on hedging instruments in a cash flow hedge; 
E)  All of the given answers.

Question 2

Traditional financial accounting calculations of profit ignore the cost of externalities.One reason for this is:

Accepted Answer

A)  Negative impacts on environmental resources not controlled by an entity (e.g. air and oceans) are not considered impacts on assets of the entity. 
B)  Negative impacts on environmental resources not controlled by an entity do not fall into the definition of extraordinary items. 
C)  Negative impacts on environmental resources not controlled by an entity may cover more than one future accounting period. 
D)  Negative impacts on environmental resources not controlled by an entity are by-products of ordinary activities and are not therefore disclosed in the income statement. 
E)  None of the given answers. 
A)  Negative impacts on environmental resources not controlled by an entity (e.g. air and oceans) are not considered impacts on assets of the entity. 
B)  Negative impacts on environmental resources not controlled by an entity do not fall into the definition of extraordinary items. 
C)  Negative impacts on environmental resources not controlled by an entity may cover more than one future accounting period. 
D)  Negative impacts on environmental resources not controlled by an entity are by-products of ordinary activities and are not therefore disclosed in the income statement. 
E)  None of the given answers.

Question 3

Profit is a measure of financial performance and therefore may not truly reflect the success or otherwise of an organisation:

Accepted Answer

A) True 
 B)False

Question 4

The income statement under AASB 101 is designed to report all revenues and expenses to determine profit or loss.

Accepted Answer

A) True 
 B)False

Question 5

An entity is required in AASB 101 to produce:

Accepted Answer

A)  A statement of changes in equity. 
B)  A balance sheet. 
C)  An income statement. 
D)  A statement beginning with profit or loss and displaying components of other comprehensive income. 
E)  All of the given answers. 
A)  A statement of changes in equity. 
B)  A balance sheet. 
C)  An income statement. 
D)  A statement beginning with profit or loss and displaying components of other comprehensive income. 
E)  All of the given answers.

Question 6

Which of the following is not a required disclosure pertaining to payments made to auditors?

Accepted Answer

A)  The amounts paid to an auditor for an audit of financial reports. 
B)  The amounts payable to an auditor for a review of financial reports. 
C)  The amounts paid to assurors of corporate sustainability reports. 
D)  The nature of each of the non-audit services provided by the auditor. 
E)  The amount of each of the non-audit services provided by the auditor. 
A)  The amounts paid to an auditor for an audit of financial reports. 
B)  The amounts payable to an auditor for a review of financial reports. 
C)  The amounts paid to assurors of corporate sustainability reports. 
D)  The nature of each of the non-audit services provided by the auditor. 
E)  The amount of each of the non-audit services provided by the auditor.

Question 7

An item must be outside the ordinary operations of the business or be of a non-recurring nature to be classified as an extraordinary item under AASB 101:

Accepted Answer

A) True 
 B)False

Question 8

An implication of the fact that traditional financial accounting is based on a model that emphasises property rights is:

Accepted Answer

A)  fair values become of critical importance. 
B)  that such rights are recognised as intangible assets. 
C)  many social costs are ignored. 
D)  that these financial reports are always prepared on a 'true and fair' basis. 
E)  that auditors have an easier job in verifying financial statements. 
A)  fair values become of critical importance. 
B)  that such rights are recognised as intangible assets. 
C)  many social costs are ignored. 
D)  that these financial reports are always prepared on a 'true and fair' basis. 
E)  that auditors have an easier job in verifying financial statements.

Question 9

When items of income and expense are material,and their nature and amount are separately disclosed,this could indicate the existence of:

Accepted Answer

A)  An extraordinary item. 
B)  An abnormal item. 
C)  An adjusting item. 
D)  An unusual item. 
E)  A major item. 
A)  An extraordinary item. 
B)  An abnormal item. 
C)  An adjusting item. 
D)  An unusual item. 
E)  A major item.

Question 10

In establishing the classification of items in the income statement,the size of an item is an appropriate basis for establishing a separate classification (by nature or function)for it:

Accepted Answer

A) True 
 B)False

Question 11

By focusing only on the income statement,we do not obtain a full picture of all the gains and losses that may have occurred for an entity during the perioD.

Accepted Answer

A) True 
 B)False

Question 12

A statement displaying components of profit or loss is referred to in AASB 101 as a(n):

Accepted Answer

A)  Profit and loss statement. 
B)  Statement of income. 
C)  Statement of financial performance. 
D)  Income statement. 
E)  None of the given answers. 
A)  Profit and loss statement. 
B)  Statement of income. 
C)  Statement of financial performance. 
D)  Income statement. 
E)  None of the given answers.

Question 13

Examples of classification of expenses by their nature are:

Accepted Answer

A)  Employee expenses and distribution expenses. 
B)  Depreciation and marketing expenses. 
C)  Borrowing costs and distribution expenses. 
D)  Employee expenses and depreciation expenses. 
E)  None of the given answers. 
A)  Employee expenses and distribution expenses. 
B)  Depreciation and marketing expenses. 
C)  Borrowing costs and distribution expenses. 
D)  Employee expenses and depreciation expenses. 
E)  None of the given answers.

Question 14

The notes to the accounts that relate to income and expense should include:

Accepted Answer

A)  Only commentary on issues covered by AASB 101. 
B)  A variety of information that incorporates the disclosures required in all standards related to income and expenses. 
C)  Only information that would have resulted in a different profit or loss figure if it had been included on the face of the statement. 
D)  Only items that were deemed non-material when selecting items to place on the face of the accounts. 
E)  None of the given answers. 
A)  Only commentary on issues covered by AASB 101. 
B)  A variety of information that incorporates the disclosures required in all standards related to income and expenses. 
C)  Only information that would have resulted in a different profit or loss figure if it had been included on the face of the statement. 
D)  Only items that were deemed non-material when selecting items to place on the face of the accounts. 
E)  None of the given answers.

Question 15

When there is a change made to the useful life of an asset:

Accepted Answer

A)  it must be recognised as a change in an accounting estimate and the impact of the reported change must be disclosed in the notes to the accounts. 
B)  it must be recognised as an error and all previous financial statements must be restated. 
C)  it must be recognised as an error and opening retained earnings and opening balances of the asset must be restated. 
D)  it is recognised as a change in an accounting estimate and the opening retained earnings and opening balances of the asset must be restated. 
E)  it is ignored. 
A)  it must be recognised as a change in an accounting estimate and the impact of the reported change must be disclosed in the notes to the accounts. 
B)  it must be recognised as an error and all previous financial statements must be restated. 
C)  it must be recognised as an error and opening retained earnings and opening balances of the asset must be restated. 
D)  it is recognised as a change in an accounting estimate and the opening retained earnings and opening balances of the asset must be restated. 
E)  it is ignored.

Question 16

The statement of changes in equity is required.

Accepted Answer

A)  Because AASB 101 deals with income and does not define profit. 
B)  To show profit and loss for the period. 
C)  To summarise the large number of transactions that take place on the income statement. 
D)  To show each item of income and expense for the period that is recognised directly in equity as required by other AASB standards. 
E)  To provide a reconciliation of opening and closing equity, and also to provide details of the various equity accounts that are impacted by the period's total comprehensive income. 
A)  Because AASB 101 deals with income and does not define profit. 
B)  To show profit and loss for the period. 
C)  To summarise the large number of transactions that take place on the income statement. 
D)  To show each item of income and expense for the period that is recognised directly in equity as required by other AASB standards. 
E)  To provide a reconciliation of opening and closing equity, and also to provide details of the various equity accounts that are impacted by the period's total comprehensive income.

Question 17

Extraordinary items will be included in the income statement:

Accepted Answer

A)  When they are material and need to be disclosed separately. 
B)  When an item of revenue or expense is attributable to an event outside the ordinary course of business. 
C)  When an expense or a revenue is of a non-recurring nature. 
D)  When an item of revenue or expense is attributable to an event outside the ordinary course of business and when an expense or a revenue is of a non-recurring nature. 
E)  None of the given answers. 
A)  When they are material and need to be disclosed separately. 
B)  When an item of revenue or expense is attributable to an event outside the ordinary course of business. 
C)  When an expense or a revenue is of a non-recurring nature. 
D)  When an item of revenue or expense is attributable to an event outside the ordinary course of business and when an expense or a revenue is of a non-recurring nature. 
E)  None of the given answers.

Question 18

When selecting a presentation format management must select the one that is:

Accepted Answer

A)  The most relevant. 
B)  The most reliable. 
C)  The most consistent. 
D)  The most useful to management. 
E)  The most relevant and the most reliable. 
A)  The most relevant. 
B)  The most reliable. 
C)  The most consistent. 
D)  The most useful to management. 
E)  The most relevant and the most reliable.

Question 19

Estimations are frequently made in the income statement in relation to items such as bad debts,inventory obsolescence,an asset's useful life,and the expected pattern of consumption of economic benefits of depreciable assets.The effect of these estimations on the income statement is to:

Accepted Answer

A)  Increase the variability of profits. 
B)  Make the statement unreliable. 
C)  Reduce the relevance of the profit figures reported. 
D)  All of the given answers. 
E)  None of the given answers. 
A)  Increase the variability of profits. 
B)  Make the statement unreliable. 
C)  Reduce the relevance of the profit figures reported. 
D)  All of the given answers. 
E)  None of the given answers.

Question 20

Under AASB 101 additional line items,headings and subtotals:

Accepted Answer

A)  Are precluded as they provide unnecessary information that may confuse the user. 
B)  Shall be presented on the face of the statement when such presentation is relevant to an understanding of the entity's financial performance. 
C)  Shall be presented on the face of the statement when such items can be measured reliably and it is probable these events will occur. 
D)  Will only be included in the notes to the income statement if they are relevant to an understanding of the entity's financial performance. 
E)  None of the given answers. 
A)  Are precluded as they provide unnecessary information that may confuse the user. 
B)  Shall be presented on the face of the statement when such presentation is relevant to an understanding of the entity's financial performance. 
C)  Shall be presented on the face of the statement when such items can be measured reliably and it is probable these events will occur. 
D)  Will only be included in the notes to the income statement if they are relevant to an understanding of the entity's financial performance. 
E)  None of the given answers.

Exam 17: The Statement of Comprehensive Income and Statement of Changes in E

Which of the following items is not an example of items reportable under other comprehensive income?

Traditional financial accounting calculations of profit ignore the cost of externalities.One reason for this is:

Profit is a measure of financial performance and therefore may not truly reflect the success or otherwise of an organisation:

The income statement under AASB 101 is designed to report all revenues and expenses to determine profit or loss.

An entity is required in AASB 101 to produce:

Which of the following is not a required disclosure pertaining to payments made to auditors?

An item must be outside the ordinary operations of the business or be of a non-recurring nature to be classified as an extraordinary item under AASB 101:

An implication of the fact that traditional financial accounting is based on a model that emphasises property rights is:

When items of income and expense are material,and their nature and amount are separately disclosed,this could indicate the existence of:

In establishing the classification of items in the income statement,the size of an item is an appropriate basis for establishing a separate classification (by nature or function)for it:

By focusing only on the income statement,we do not obtain a full picture of all the gains and losses that may have occurred for an entity during the perioD.

A statement displaying components of profit or loss is referred to in AASB 101 as a(n):

Examples of classification of expenses by their nature are:

The notes to the accounts that relate to income and expense should include:

When there is a change made to the useful life of an asset:

The statement of changes in equity is required.

Extraordinary items will be included in the income statement:

When selecting a presentation format management must select the one that is:

Estimations are frequently made in the income statement in relation to items such as bad debts,inventory obsolescence,an asset's useful life,and the expected pattern of consumption of economic benefits of depreciable assets.The effect of these estimations on the income statement is to:

Under AASB 101 additional line items,headings and subtotals:

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financ

Theories of Financial Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluation 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 Lease

Set-Off and Extinguishment of Debt

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

Accounting for Share-Based Payments

Accounting for Income Taxes

Cash-Flow Statements

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After Balance Sheet Date

Segment Reporting

Related-Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transact

Further Consolidation Issues II: Accounting for Minority Interests

Further Consolidation Issues III: Accounting for Indirect Ownershi

Further Consolidation Issues Iv: Accounting for Changes in the Deg

Accounting for Equity Investments

Accounting for Equity Investments

Accounting for Foreign Currency Transactions

Translation of the Accounts of Foreign Operations

Accounting for Corporate Social Responsibility

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