Question 1

Which of the following statements is INCORRECT?

Accepted Answer

A)  The International Accounting Standards Board was replaced by the International Standards Committee in 2001. 
B)  The International Accounting Standards Board is funded by the IASC Foundation. 
C)  The responsibility for issuing International Financial Reporting Standards lies with the International Accounting Standards Board. 
D)  Members of the International Accounting Standards Board are appointed by the IFRS Foundation. 
A)  The International Accounting Standards Board was replaced by the International Standards Committee in 2001. 
B)  The International Accounting Standards Board is funded by the IASC Foundation. 
C)  The responsibility for issuing International Financial Reporting Standards lies with the International Accounting Standards Board. 
D)  Members of the International Accounting Standards Board are appointed by the IFRS Foundation. A

Question 2

Which of the following income and expense items is NOT recorded initially directly in equity?

Accepted Answer

A)  The impairment of goodwill in accordance with IAS 36 Impairment of Assets, where the entity is confident that the factors giving rise to the impairment will reverse in a future period. 
B)  An increase in the fair values of land & buildings, where the revaluation method is used to account for land & buildings in accordance with IAS 16 Property, Plant & Equipment. 
C)  A change in the fair value of an investment in another entity, which is classified as an available-for-sale financial asset in accordance with IAS 39 Financial Instruments: Recognition & Measurement. 
D)  Foreign currency translation adjustments arising on the translation of a foreign operations financial statements from their functional currency in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. 
A)  The impairment of goodwill in accordance with IAS 36 Impairment of Assets, where the entity is confident that the factors giving rise to the impairment will reverse in a future period. 
B)  An increase in the fair values of land & buildings, where the revaluation method is used to account for land & buildings in accordance with IAS 16 Property, Plant & Equipment. 
C)  A change in the fair value of an investment in another entity, which is classified as an available-for-sale financial asset in accordance with IAS 39 Financial Instruments: Recognition & Measurement. 
D)  Foreign currency translation adjustments arising on the translation of a foreign operations financial statements from their functional currency in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. A

Question 3

Which of the following statements is CORRECT?

Accepted Answer

A)  IAS 8 Accounting Policies, Changes in Accounting Estimates, and Errors requires that The Framework be followed in the absence of a specific standard or interpretation. 
B)  IAS 8 Accounting Policies, Changes in Accounting Estimates, and Errors recommends, but does not require The Framework to be followed in the absence of a specific standard or interpretation. 
C)  The Framework is used solely by the IASB when considering new accounting issues. 
D)  The Framework is non-binding guidance which does not have to be followed by preparers of financial statements. 
A)  IAS 8 Accounting Policies, Changes in Accounting Estimates, and Errors requires that The Framework be followed in the absence of a specific standard or interpretation. 
B)  IAS 8 Accounting Policies, Changes in Accounting Estimates, and Errors recommends, but does not require The Framework to be followed in the absence of a specific standard or interpretation. 
C)  The Framework is used solely by the IASB when considering new accounting issues. 
D)  The Framework is non-binding guidance which does not have to be followed by preparers of financial statements. A

Question 4

Which of the following statements is INCORRECT?

Accepted Answer

A)  The Framework identifies the qualitative characteristics that make information in financial statements useful. 
B)  The Framework defines principles for accounting recognition, measurement and disclosure. 
C)  The Framework defines the objective of financial statements. 
D)  The Framework defines the basic elements of financial statements and the concepts for recognizing and measuring them in financial statements. 
A)  The Framework identifies the qualitative characteristics that make information in financial statements useful. 
B)  The Framework defines principles for accounting recognition, measurement and disclosure. 
C)  The Framework defines the objective of financial statements. 
D)  The Framework defines the basic elements of financial statements and the concepts for recognizing and measuring them in financial statements.

Question 5

In accordance with the conceptual framework, income is recognised in the statement of profit or loss and other comprehensive income when:

Accepted Answer

A)  an decrease in future economic benefits relating to an decrease in an asset or an increase in a liability can be measured reliably. 
B)  an increase in future economic benefits relating to an increase in an asset or a decrease in a liability can be measured reliably. 
C)  an increase in future economic benefits relating to an increase in an asset can be measured reliably. 
D)  an increase in future economic benefits relating to an decrease in an asset or a increase in a liability can be measured reliably. 
A)  an decrease in future economic benefits relating to an decrease in an asset or an increase in a liability can be measured reliably. 
B)  an increase in future economic benefits relating to an increase in an asset or a decrease in a liability can be measured reliably. 
C)  an increase in future economic benefits relating to an increase in an asset can be measured reliably. 
D)  an increase in future economic benefits relating to an decrease in an asset or a increase in a liability can be measured reliably.

Question 6

In relation to measurement of the elements of financial statements

Accepted Answer

A)  The Framework acknowledges that a variety of measurement bases are used to different degrees and in varying combinations in financial statements. 
B)  The Framework includes detailed concepts and principles for selecting which measurement basis should be used for particular elements of financial statements. 
C)  Net realisable value is the preferred basis for measurement of assets. 
D)  The Framework adopts a mixed attribute accounting model 
A)  The Framework acknowledges that a variety of measurement bases are used to different degrees and in varying combinations in financial statements. 
B)  The Framework includes detailed concepts and principles for selecting which measurement basis should be used for particular elements of financial statements. 
C)  Net realisable value is the preferred basis for measurement of assets. 
D)  The Framework adopts a mixed attribute accounting model

Question 7

Which of the following statements is INCORRECT in relation to the recognition criteria for elements of the financial statements?

Accepted Answer

A)  Assets are recognised when it is probable that future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably. 
B)  Because equity is the arithmetic difference between assets and liabilities, a separate recognition criteria for equity is not needed in The Framework. 
C)  Liabilities are recognised when it is probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount at which settlement will take place can be measured reliably. 
D)  Income is recognised when an increase in future economic benefits related to a decrease in an asset or an increase in a liability that has arisen can be measured reliably. 
A)  Assets are recognised when it is probable that future economic benefits will flow to the entity and the asset has a cost or value that can be measured reliably. 
B)  Because equity is the arithmetic difference between assets and liabilities, a separate recognition criteria for equity is not needed in The Framework. 
C)  Liabilities are recognised when it is probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation and the amount at which settlement will take place can be measured reliably. 
D)  Income is recognised when an increase in future economic benefits related to a decrease in an asset or an increase in a liability that has arisen can be measured reliably.

Question 8

An asset is defined in the conceptual framework as:

Accepted Answer

A)  a resource controlled by the entity as a result of past events 
B)  a resource controlled by the entity as a result of future events and from which possible future economic benefits may flow to the entity. 
C)  a resource controlled by the entity from which future economic benefits are expected to flow to the entity. 
D)  a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. 
A)  a resource controlled by the entity as a result of past events 
B)  a resource controlled by the entity as a result of future events and from which possible future economic benefits may flow to the entity. 
C)  a resource controlled by the entity from which future economic benefits are expected to flow to the entity. 
D)  a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Question 9

The measurement method most commonly used in the preparation of financial statements is:

Accepted Answer

A)  present value; 
B)  current replacement cost; 
C)  discounted future cash flows; 
D)  historical cost. 
A)  present value; 
B)  current replacement cost; 
C)  discounted future cash flows; 
D)  historical cost.

Question 10

Which of the following is a key assumption underlying the preparation of financial statements?

Accepted Answer

A)  the going concern basis of accounting 
B)  the matching principle 
C)  the prudence principle 
D)  the historical cost measurement basis 
A)  the going concern basis of accounting 
B)  the matching principle 
C)  the prudence principle 
D)  the historical cost measurement basis

Question 11

Accounting information that is complete is an example of information that satisfies which of the following characteristics of financial information identified in The Framework?

Accepted Answer

A)  Understandability 
B)  Relevance 
C)  Reliability 
D)  Comparability 
A)  Understandability 
B)  Relevance 
C)  Reliability 
D)  Comparability

Question 12

In making a judgment in developing or applying an accounting policy about whether information is relevant and reliable in the financial statements, management must refer to the following reference first:

Accepted Answer

A)  the definitions in the IASB Framework; 
B)  requirements and guidance in Standards and Interpretations; 
C)  recognition criteria contained in the IASB Framework; 
D)  the measurement concepts for assets, liabilities, income and expenses in the IASB Framework. 
A)  the definitions in the IASB Framework; 
B)  requirements and guidance in Standards and Interpretations; 
C)  recognition criteria contained in the IASB Framework; 
D)  the measurement concepts for assets, liabilities, income and expenses in the IASB Framework.

Question 13

A liability is defined in conceptual framework as:

Accepted Answer

A)  possible obligation of the entity, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. 
B)  a possible obligation of the entity expected to arise from future events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. 
C)  a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. 
D)  a present obligation of the entity arising from past events, the settlement of which is expected to result in an inflow to the entity of resources embodying economic benefits. 
A)  possible obligation of the entity, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. 
B)  a possible obligation of the entity expected to arise from future events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. 
C)  a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. 
D)  a present obligation of the entity arising from past events, the settlement of which is expected to result in an inflow to the entity of resources embodying economic benefits.

Question 14

If management intends to liquidate the entity's operations, financial statements are prepared on the basis of

Accepted Answer

A)  Historical cost 
B)  Historical cost with a note that the entity is about to liquidate 
C)  Expected liquidation values 
D)  Financial statements do not have to be prepared. 
A)  Historical cost 
B)  Historical cost with a note that the entity is about to liquidate 
C)  Expected liquidation values 
D)  Financial statements do not have to be prepared.

Question 15

In relation to the concept of recognition of an item in the financial statements:

Accepted Answer

A)  Items of equity must satisfy both the probability and measurement criteria before they can be recognised. 
B)  Assets can only be recognised where there is a high probability of future economic benefits flowing to the entity. 
C)  Expenses are recognised when a decrease in a future economic benefit related to an increase in an asset or a decrease in a liability has arisen that can be measured reliably. 
D)  For items to qualify for recognition in the financial statements as liabilities or income they must first satisfy the definition of an element, and then meet both the probability and measurement requirements in relation to recognition. 
A)  Items of equity must satisfy both the probability and measurement criteria before they can be recognised. 
B)  Assets can only be recognised where there is a high probability of future economic benefits flowing to the entity. 
C)  Expenses are recognised when a decrease in a future economic benefit related to an increase in an asset or a decrease in a liability has arisen that can be measured reliably. 
D)  For items to qualify for recognition in the financial statements as liabilities or income they must first satisfy the definition of an element, and then meet both the probability and measurement requirements in relation to recognition.

Question 16

Which of the following bodies report to the IFRS Foundation?

Accepted Answer

A)  The IASB and AASB 
B)  The IASB, AASB and the IFRS Advisory Council 
C)  The IASB and the FASB 
D)  The IASB and the IFRS Advisory Council 
A)  The IASB and AASB 
B)  The IASB, AASB and the IFRS Advisory Council 
C)  The IASB and the FASB 
D)  The IASB and the IFRS Advisory Council

Question 17

Which of the following statements in relation to income is true?

Accepted Answer

A)  Gains are normally reported separately from revenue in the Statement of Profit or Loss and Other Comprehensive Income due to the different probabilities attached to that type of income. 
B)  The Framework requires that all items of income are reported on a net basis. 
C)  Gains and revenue are different in nature and therefore are recognised as separate elements of the financial statements per The Framework. 
D)  The Framework defines income as an increase in economic benefits which results in an increase in equity. 
A)  Gains are normally reported separately from revenue in the Statement of Profit or Loss and Other Comprehensive Income due to the different probabilities attached to that type of income. 
B)  The Framework requires that all items of income are reported on a net basis. 
C)  Gains and revenue are different in nature and therefore are recognised as separate elements of the financial statements per The Framework. 
D)  The Framework defines income as an increase in economic benefits which results in an increase in equity.

Question 18

Which of the following is NOT a criteria for recognition of revenue from the sale of goods under IAS 18 Revenue?

Accepted Answer

A)  The seller has transferred the significant risks and rewards of ownership to the buyer. 
B)  The costs incurred, or to be incurred, in respect of the transaction can be measured reliably. 
C)  The stage of completion at the statement of financial position date can be measured reliably. 
D)  The amount of revenue can be measured reliably. 
A)  The seller has transferred the significant risks and rewards of ownership to the buyer. 
B)  The costs incurred, or to be incurred, in respect of the transaction can be measured reliably. 
C)  The stage of completion at the statement of financial position date can be measured reliably. 
D)  The amount of revenue can be measured reliably.

Question 19

Expenses are recognised in the statement of profit or loss and other comprehensive
Income when

Accepted Answer

A)  increase in future economic benefits related to a increase in an asset or an increase in a liability can be measured reliably. 
B)  a decrease in future economic benefits related to a decrease in an asset or an increase in a liability can be measured reliably. 
C)  a decrease in future economic benefits related to a decrease in an asset or an decrease in a liability can be measured reliably. 
D)  none of the options are correct. 
A)  increase in future economic benefits related to a increase in an asset or an increase in a liability can be measured reliably. 
B)  a decrease in future economic benefits related to a decrease in an asset or an increase in a liability can be measured reliably. 
C)  a decrease in future economic benefits related to a decrease in an asset or an decrease in a liability can be measured reliably. 
D)  none of the options are correct.

Question 20

Which of the following statements is INCORRECT in relation to the preparation of financial statements?

Accepted Answer

A)  General Purpose Financial Statements must be prepared in accordance with accounting standards. 
B)  General Purpose Financial Statements are reports intended to meet the information needs common to users who are unable to command the preparation of reports tailored so as to specifically meet all their information needs. 
C)  The sole objective of a General Purpose Financial Statement is to serve an economic decision making objective. 
D)  The objective of a General Purpose Financial Statement is to provide information useful to users for making and evaluating decisions about the allocation of scarce resources. 
A)  General Purpose Financial Statements must be prepared in accordance with accounting standards. 
B)  General Purpose Financial Statements are reports intended to meet the information needs common to users who are unable to command the preparation of reports tailored so as to specifically meet all their information needs. 
C)  The sole objective of a General Purpose Financial Statement is to serve an economic decision making objective. 
D)  The objective of a General Purpose Financial Statement is to provide information useful to users for making and evaluating decisions about the allocation of scarce resources.

Exam 1: The Conceptual Framework of the Iasb

Which of the following statements is INCORRECT?

Which of the following income and expense items is NOT recorded initially directly in equity?

Which of the following statements is CORRECT?

Which of the following statements is INCORRECT?

In accordance with the conceptual framework, income is recognised in the statement of profit or loss and other comprehensive income when:

In relation to measurement of the elements of financial statements

Which of the following statements is INCORRECT in relation to the recognition criteria for elements of the financial statements?

An asset is defined in the conceptual framework as:

The measurement method most commonly used in the preparation of financial statements is:

Which of the following is a key assumption underlying the preparation of financial statements?

Accounting information that is complete is an example of information that satisfies which of the following characteristics of financial information identified in The Framework?

In making a judgment in developing or applying an accounting policy about whether information is relevant and reliable in the financial statements, management must refer to the following reference first:

A liability is defined in conceptual framework as:

If management intends to liquidate the entity's operations, financial statements are prepared on the basis of

In relation to the concept of recognition of an item in the financial statements:

Which of the following bodies report to the IFRS Foundation?

Which of the following statements in relation to income is true?

Which of the following is NOT a criteria for recognition of revenue from the sale of goods under IAS 18 Revenue?

Expenses are recognised in the statement of profit or loss and other comprehensive Income when

Which of the following statements is INCORRECT in relation to the preparation of financial statements?

Shareholders Equity: Share Capital and Reserves

Fair Value Measurement

Revenue

Provisions, Contingent Liabilities and Contingent Assets

Income Taxes

Financial Instruments

Share-Based Payments

Inventories

Employee Benefits

Property, Plant and Equipment

Leases

Intangible Assets

Business Combinations

Impairment of Assets

Accounting for Mineral Resources

Agriculture

Financial Statement Presentation

Statement of Cash Flows

Earnings Per Share

Operating Segments

Operating Segments

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Translation of the Financial Statements of Foreign Entities

Associates and Joint Ventures

Joint Arrangements

Filters