Question 1

The effect of a revision of an accounting estimate must be recognised in profit and loss in which reporting periods?

Accepted Answer

A)  In the present, prior (by adjusting retained earnings) and future periods affected. 
B)  In the present and future periods affected. 
C)  In the present and prior reporting periods (by adjusting retained earnings). 
D)  Revisions to accounting estimates should not be recognised in any period. 
E)  None of the given answers. 
A)  In the present, prior (by adjusting retained earnings) and future periods affected. 
B)  In the present and future periods affected. 
C)  In the present and prior reporting periods (by adjusting retained earnings). 
D)  Revisions to accounting estimates should not be recognised in any period. 
E)  None of the given answers.

Question 2

AASB 101 permits an entity to present all items of income and expense recognised in a period to be presented in either the statement of comprehensive income or the income statement.

Accepted Answer

A) True 
 B)False

Question 3

All disclosure requirements that relate to an entity's profit or loss are included in AASB 101:

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would not be considered a 'prior period error' for the purposes of AASB 108?

Accepted Answer

A)  Mathematical mistakes. 
B)  Fraud. 
C)  Misinterpretations of fact. 
D)  Human error. 
E)  None of the given answers. 
A)  Mathematical mistakes. 
B)  Fraud. 
C)  Misinterpretations of fact. 
D)  Human error. 
E)  None of the given answers.

Question 5

If it is found that an error had been made in a prior period.

Accepted Answer

A)  The error should be rectified by including the item of income or expense in the period in which the error was discovered. 
B)  AASB 101 does not cover this concept and so no entry is required. 
C)  AASB 108 requires that errors are corrected via an adjustment to opening retained earnings. 
D)  Material errors discovered in the current reporting period must be included in that period's income statement, while non-material errors may be corrected with an adjustment to opening retained earnings. 
E)  None of the given answers. 
A)  The error should be rectified by including the item of income or expense in the period in which the error was discovered. 
B)  AASB 101 does not cover this concept and so no entry is required. 
C)  AASB 108 requires that errors are corrected via an adjustment to opening retained earnings. 
D)  Material errors discovered in the current reporting period must be included in that period's income statement, while non-material errors may be corrected with an adjustment to opening retained earnings. 
E)  None of the given answers.

Question 6

AASB 2 lists a number of factors that need to be considered when valuing an executive share option.They include:

Accepted Answer

A)  The expected volatility of the share price. 
B)  The exercise price of the share. 
C)  The life of the underlying share. 
D)  The expected volatility of the share price and the exercise price of the share. 
E)  The expected volatility of the share price, the exercise price of the share and the life of the underlying share 
A)  The expected volatility of the share price. 
B)  The exercise price of the share. 
C)  The life of the underlying share. 
D)  The expected volatility of the share price and the exercise price of the share. 
E)  The expected volatility of the share price, the exercise price of the share and the life of the underlying share

Question 7

An income statement that includes the following items: Revenue
Cost of Sales
Selling Expenses
Financial Expenses
Would have been prepared using the:

Accepted Answer

A)  Nature of expense method. 
B)  Narrative method. 
C)  Revenues and gains approach. 
D)  The function of expense approach. 
E)  None of the given answers. 
A)  Nature of expense method. 
B)  Narrative method. 
C)  Revenues and gains approach. 
D)  The function of expense approach. 
E)  None of the given answers.

Question 8

All adjustments to equity other than those related to transactions with owners in their capacity as owners are disclosed in the Statement of Comprehensive Income (AASB 101):

Accepted Answer

A) True 
 B)False

Question 9

AASB 101 permits entities to present the components of other comprehensive income either before tax effects (gross presentation)or after their related tax effects (net presentation).

Accepted Answer

A) True 
 B)False

Question 10

Following are the items of income and expense recognised during the period by Murray LtD.   Which of the following combinations identify all items permitted in AASB 101 "Presentation of Financial Statements" to be presented under other comprehensive income?

Accepted Answer

A)  I, II, V and VI; 
B)  II, III, VI and V; 
C)  I, III, and VI; 
D)  II, IV and VI 
E)  III, IV and V; 
A)  I, II, V and VI; 
B)  II, III, VI and V; 
C)  I, III, and VI; 
D)  II, IV and VI 
E)  III, IV and V;

Question 11

Which of the following is not required to be shown on the face of the income statement?

Accepted Answer

A)  Tax Expense. 
B)  Revenue. 
C)  Share of profit or loss of joint ventures using the equity method. 
D)  Profit or loss attributable to minority interests. 
E)  Share of profit or loss of joint ventures using the proportional consolidation method. 
A)  Tax Expense. 
B)  Revenue. 
C)  Share of profit or loss of joint ventures using the equity method. 
D)  Profit or loss attributable to minority interests. 
E)  Share of profit or loss of joint ventures using the proportional consolidation method.

Question 12

As part of the process of international harmonisation,standard setters have removed the need for professional judgement to be exercised in respect of expenses; all discretion that once existed has been removed.

Accepted Answer

A) True 
 B)False

Question 13

The choice between reporting expenses by nature or by function is extremely important,as different net profit figures are derived depending upon the choice made:

Accepted Answer

A) True 
 B)False

Question 14

The choice of classification between nature and function of expenses from ordinary activities depends on:

Accepted Answer

A)  The size of the items that would be reported under the possible classifications. 
B)  The historical evidence about the probability of the items recurring. 
C)  The nature of the entity and historical and industry factors. 
D)  The classification that best reflects the way expenses vary directly or indirectly with the entity's level of activity. 
E)  None of the given answers. 
A)  The size of the items that would be reported under the possible classifications. 
B)  The historical evidence about the probability of the items recurring. 
C)  The nature of the entity and historical and industry factors. 
D)  The classification that best reflects the way expenses vary directly or indirectly with the entity's level of activity. 
E)  None of the given answers.

Question 15

Government departments are now required to report in accordance with AAS 29 'Financial reporting by government departments'.Opponents of this requirement suggest that:

Accepted Answer

A)  it is not a good move as it makes managers to be more accountable for their department's performance. 
B)  it is not a good move, as it emphasises the use of cash accounting by government departments. 
C)  it is not a good move, as it distracts managers from pursuing their proper goals: the provision of social services. 
D)  it is not a good move as it introduces value added reporting. 
E)  All of the given answers. 
A)  it is not a good move as it makes managers to be more accountable for their department's performance. 
B)  it is not a good move, as it emphasises the use of cash accounting by government departments. 
C)  it is not a good move, as it distracts managers from pursuing their proper goals: the provision of social services. 
D)  it is not a good move as it introduces value added reporting. 
E)  All of the given answers.

Question 16

The income statement satisfies the requirements of the Corporations Act 2001 for a 'profit and loss statement':

Accepted Answer

A) True 
 B)False

Question 17

Different measurement models affect the determination of income and expenses.The different measurement models include:

Accepted Answer

A)  Historical cost, market value, present value. 
B)  Historical cost, direct costs, indirect costs. 
C)  Current cost, historical cost, overhead cost. 
D)  Market value, opportunity cost, historical cost. 
E)  None of the given answers. 
A)  Historical cost, market value, present value. 
B)  Historical cost, direct costs, indirect costs. 
C)  Current cost, historical cost, overhead cost. 
D)  Market value, opportunity cost, historical cost. 
E)  None of the given answers.

Question 18

Reports in the financial press that a particular company reported healthy profits despite increased wage costs are indicative of:

Accepted Answer

A)  The negative impact of reporting payments to employees as expenses while payments to owners are treated as distributions of profits. 
B)  The implied emphasis on the returns to owners being good and returns to other stakeholders such as employees as being bad. 
C)  The effect of reporting employees as expenses and not reporting the social costs of unemployment on decisions to restructure companies to reduce the work force. 
D)  The way accounting reflects and helps to re-create widely held views about the roles of various stakeholders in the entity. 
E)  All of the given answers. 
A)  The negative impact of reporting payments to employees as expenses while payments to owners are treated as distributions of profits. 
B)  The implied emphasis on the returns to owners being good and returns to other stakeholders such as employees as being bad. 
C)  The effect of reporting employees as expenses and not reporting the social costs of unemployment on decisions to restructure companies to reduce the work force. 
D)  The way accounting reflects and helps to re-create widely held views about the roles of various stakeholders in the entity. 
E)  All of the given answers.

Question 19

If the exercise (strike)price of a call option is greater than the current share price,the option is said to be 'in-the-money':

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is not in accordance with AASB 101 "Presentation of Financial Statements" with respect to the statement of comprehensive income?

Accepted Answer

A)  All items of income and expense recognised in a period are to be presented in a single statement of comprehensive income; 
B)  All items of income and expense recognised in a period are permitted to be presented in two statements: 1) a separate income statement and 2) a statement beginning with profit or loss and displaying components of other comprehensive income; 
C)  An entity shall present an analysis of expenses in profit or loss using a classification based on either the nature of expenses or their function within the entity, whichever provides information that is reliable and more relevant; 
D)  Components of other comprehensive income include gain on sale of property plant and equipment; 
E)  All of the given answers. 
A)  All items of income and expense recognised in a period are to be presented in a single statement of comprehensive income; 
B)  All items of income and expense recognised in a period are permitted to be presented in two statements: 1) a separate income statement and 2) a statement beginning with profit or loss and displaying components of other comprehensive income; 
C)  An entity shall present an analysis of expenses in profit or loss using a classification based on either the nature of expenses or their function within the entity, whichever provides information that is reliable and more relevant; 
D)  Components of other comprehensive income include gain on sale of property plant and equipment; 
E)  All of the given answers.

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

The effect of a revision of an accounting estimate must be recognised in profit and loss in which reporting periods?

AASB 101 permits an entity to present all items of income and expense recognised in a period to be presented in either the statement of comprehensive income or the income statement.

All disclosure requirements that relate to an entity's profit or loss are included in AASB 101:

Which of the following would not be considered a 'prior period error' for the purposes of AASB 108?

If it is found that an error had been made in a prior period.

AASB 2 lists a number of factors that need to be considered when valuing an executive share option.They include:

An income statement that includes the following items: Revenue Cost of Sales Selling Expenses Financial Expenses Would have been prepared using the:

All adjustments to equity other than those related to transactions with owners in their capacity as owners are disclosed in the Statement of Comprehensive Income (AASB 101):

AASB 101 permits entities to present the components of other comprehensive income either before tax effects (gross presentation)or after their related tax effects (net presentation).

Following are the items of income and expense recognised during the period by Murray LtD. Which of the following combinations identify all items permitted in AASB 101 "Presentation of Financial Statements" to be presented under other comprehensive income?

Which of the following is not required to be shown on the face of the income statement?

As part of the process of international harmonisation,standard setters have removed the need for professional judgement to be exercised in respect of expenses; all discretion that once existed has been removed.

The choice between reporting expenses by nature or by function is extremely important,as different net profit figures are derived depending upon the choice made:

The choice of classification between nature and function of expenses from ordinary activities depends on:

Government departments are now required to report in accordance with AAS 29 'Financial reporting by government departments'.Opponents of this requirement suggest that:

The income statement satisfies the requirements of the Corporations Act 2001 for a 'profit and loss statement':

Different measurement models affect the determination of income and expenses.The different measurement models include:

Reports in the financial press that a particular company reported healthy profits despite increased wage costs are indicative of:

If the exercise (strike)price of a call option is greater than the current share price,the option is said to be 'in-the-money':

Which of the following statements is not in accordance with AASB 101 "Presentation of Financial Statements" with respect to the statement of comprehensive income?

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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