Deck 12: Reports and Disclosures Ii: the Financial Statements

Question 1

Total comprehensive profit is the sum of (a) period profit or loss, (b) other comprehensive profit and (c) expenses recognised as a deduction from equity.

Answer 1

False

Question 2

A construction company that specialises in building bridges over large areas of water should classify its assets as 'current', based on:

A)the 12-month period starting from the end of the current reporting period
B)the 6-month period starting from the end of the current reporting period
C)its operating cycle ...the time normally taken to construct such bridges
D)the 12-month period starting from the fourth month after the end of the current reporting period

Answer 2

C

Question 3

Consider the following account balances and other information, and answer the question that follows.
$\begin{array}{lccc} & \text { 30 June 20X1 } & \text { 30 June 20X2 } & \text { 30 June 20X3 } \\& \text { \$000 } & \text { \$000 } & \text { \$000 } \\\text { Accounts receivable } & 1000 & 2000 & 1500 \\\text { Estimated uncollectible debts } & 10 & 11 & 12 \\\text { Uncollectible debts expense } & \mathrm{Ni} 1 & 1 & 3\end{array}$
Credit sales for the year ended 30 June 20X2 totaled $2 200 000 and credit sales for the year ended 30 June 20X3 totaled $3 000 000.Bad debts were all recognised by debiting the Estimated uncollectible debts account.What was the total amount of cash received from customers over the period 1 July 20X1 to 30 June 20X3?

A)$4 697 000
B)$4 698 000
C)$4 700 000
D)$4 702 000

Answer 3

$4 698 000

Question 4

AASB 101 expressly prohibits the use of 'fixed assets' instead of non-current assets.

Question 5

AQ Pty Ltd, a large proprietary company that is a reporting entity, found that the carrying amount of its inventory exceeded its net realisable value, resulting in the recognition of a large expense during the 20X3 financial year.This inventory impairment expense was significantly more than for previous years.This expense should:

A)be separately disclosed only in the profit or loss statement
B)be separately disclosed either in the profit or loss statement or in the notes to the financial statements
C)be separately disclosed in the notes to the financial statements
D)not be separately disclosed because AQ Pty Ltd only has to comply with what are described in the textbook as the core accountings standards.

Question 6

Under AASB 101, the changes in equity statement does not have to disclose separately the amount of dividends recognised as distributions to owners.

Question 7

Under AASB 101, the measure of profit presented is found by:

A)subtracting from operating income (revenues and gains) recognised the amount of operating expenses recognised
B)income (revenues and gains) recognised less expenses recognised
C)income (revenues and gains) recognised less expenses recognised, excluding extraordinary items
D)income (revenues and gains) recognised less expenses recognised, but excluding those recognised as other comprehensive profit under the requirements of an accounting standard

Question 8

Information on earnings per share is only required by listed entities or entities in the process of listing.

Question 9

The test for deciding if additional line items must be included in the comprehensive profit statement is that the information is material.

Question 10

Which of the following are included in calculating weighted average number of shares used for basic earnings per share:
Ian adjustment for the date on which new shares were issued
IIthe date on which shares acquired under a share buyback were acquired by the company
IIIthe amount paid up on shares
IVthe number of shares on issue at the beginning of the reporting period

A)I and II only
B)each of I, II, III and IV
C)I, II and IV only
D)III and IV only

Question 11

While the total amount of dividend recognised as distributions to owners must be disclosed under AASB 101, the amount per share does not have to be disclosed.

Question 12

The alternative liquidity based classification of assets and liabilities can only be adopted by financial institutions such as banks, building societies and insurance companies.

Question 13

During 19X2, a computer was donated to a charity organisation.At that time, the charity intended to use the computer to coordinate its activities and maintain its volunteer database.It was subsequently discovered that the computer was inadequate for the organisation's needs, and it was sold for cash by the organisation during 20X2.In this organisation's cash flow statement for 20X2, which one of the following combinations of classification of cash flows is correct?
Cash Outflow Cash Inflow

A)- Investing
B)- Financing
C)Investing Investing
D)Operating Operating

Question 14

Under AASB 101, separate disclosure is not required in the changes in equity statement of the amount of total comprehensive profit attributable to both the owners of the parent and to non-controlling shareholders.

Question 15

Under AASB 118 Revenue, interest revenue of a bank in 20X0 would most likely be classified in that bank's 20X0 profit or loss statement or the notes to the financial statement as:

A)abnormal revenue
B)other revenue
C)revenue from rendering of services
D)interest revenue

Question 16

AASB 101 does not allow the use of alternative names for the financial statements.

Question 17

Assuming materiality requirements are satisfied, when preparing its comprehensive profit statement a reporting entity must comply with:
AASB 118 AASB 101 AASB 108

A)Yes Yes Yes
B)No Yes No
C)Yes Yes No
D)Yes No Yes

Question 18

Which of the following statements is true? The measure of earnings used in calculating basic earnings per share:

A)must be determined after deducting dividends paid to ordinary shareholders
B)must exclude all extraordinary items
C)must exclude profit allocated to non-controlling interest
D)is always equal to period profit or loss

Question 19

A cash flow statement is only required for listed entities.

Question 20

The liquidity format for presenting assets and liabilities in the balance sheet should always be used when:

A)the firm is in the growth phase of its life-cycle
B)the firm is in the decline phase of its life-cycle
C)that presentation provides information that is reliable and more relevant
D)that presentation provides more material information

Question 21

For a balance sheet, which of the following statements most accurately describes the requirements of AASB 101 in respect of tax assets and liabilities?

A)for non-current liabilities, both the liability for current tax and deferred tax liabilities are required
B)for current liabilities, both the liability for current tax and deferred tax liabilities are required
C)the current-asset and non-current liability for deferred tax are required
D)all tax assets and all tax liabilities are classified as non-current

Question 22

When calculating basis earnings per share, which of the following is incorrect:

A)the denominator is the weighted average number of ordinary shares
B)share splits are assumed to have taken place at the beginning of the first reporting period for which EPS is presented
C)share consolidation are assumed to have taken place on the last day of the reporting period
D)an adjustment is made for partly paid shares

Question 23

A listing of possible things to be included in the changes in equity statement was prepared by a trainee in the financial controller's division of Financial Excellence Ltd.The listing contained the following:
I total comprehensive profit for the period
II total amounts comprehensive profit allocated to non-controlling interest and owners of the parent
III for each component of equity, retrospective effect of changes in accounting policy
IV for each component of equity, retrospective correction of errors
V for each component of equity, a reconciliation between the amounts at the beginning and the end of the reporting period
VI the reconciliation required by V includes changes due to period profit or loss
VII the reconciliation required by V includes changes due to each items of other comprehensive profit
VIII the reconciliation required by V includes changes with owners in their capacity as owners
Only the following must be included in a changes in equity statement:

A)all of IV to VIII
B)I, II and III
C)all of I to VIII and the amount of earnings per share
D)all of I to VIII

Question 24

Which of the following is not required in respect of the cash flow statement?

A)separately reported cash flows from investing activities
B)cash flow relating to income tax
C)the policies by which the entity decides what are cash and cash-equivalent items
D)the proportion of sales that are not on credit

Question 25

Which of the following must be disclosed in the comprehensive profit statement or the associated notes:
Ias a line item, the amount of the total income recognised (both revenue and gains)
IIabnormal items
IIIextraordinary items
IVperiod profit or loss
Vprofit or loss attributable to (i) the parent and (ii) non-controlling interest

A)all of I, II, III, IV, and V
B)I, IV, and V only
C)IV and V only
D)I, II, IV, and V only

Question 26

Under AASB 101.56, all deferred tax assets and deferred tax liabilities are classified as non-current, therefore both B and C are incorrect; D is incorrect as line items is specified for current liabilities for current tax .
Liquidity Ltd's reporting date is 31 March.Some time ago the company issued debentures totaling $10 million, the maturity date of which is 30 June 20X5.The directors are confident that they will be able to refinance the debt as interest rates have fallen from 12% to less than 9%.How should the debentures be classified on 31 March 20X5

A)the whole amount is a non-current asset
B)$7 500 000 non-current liability and $2 500 000 current liability
C)the whole amount is a current liability
D)given the amount of the debentures, the liquidity basis would be both more relevant and reliable, so no classification will be required

Question 27

Under AASB 101.56, all deferred tax assets and deferred tax liabilities are classified as non-current, therefore both B and C are incorrect; D is incorrect as line items is specified for current liabilities for current tax .
In applying AASB 101, the term 'class of non-current asset' means:

A)the line items specified by AASB 101.68
B)is not defined
C)is the same as that in the old AASB 1041
D)the classification adopted by IOSCO, the international association of securities regulators

Question 28

Under AASB 101.56, all deferred tax assets and deferred tax liabilities are classified as non-current, therefore both B and C are incorrect; D is incorrect as line items is specified for current liabilities for current tax .
Under AASB 101 which of the following is not required to be disclosed in relation to owners' equity:

A)the proportion of each class of shares listed for trading on a stock exchange
B)the number of fully paid shares and the number of partly paid shares
C)for each class of shares, the rights to participate in dividends
D)a reconciliation of the number of shares issued at the beginning and end of the reporting period

Question 29

In calculating basis earning per share, the amount of earnings on which it is based is:

A)period net profit or loss adjusted for extraordinary items
B)profit or loss attributable to ordinary shareholders (excludes non-controlling interest) plus adjustments for preference share dividends
C)profit or loss attributable to ordinary shareholders (excludes non-controlling interest)
D)profit or loss attributable to all ordinary shareholders

Question 30

Under AASB 101.56, all deferred tax assets and deferred tax liabilities are classified as non-current, therefore both B and C are incorrect; D is incorrect as line items is specified for current liabilities for current tax .
Which of the following statements most accurately reflects the requirements of AASB 101:

A)both a changes in equity statement and a funds statement must be included in a financial report
B)a changes in equity statement and the amount of basic earning per share must be included in all cases
C)a balance sheet, a comprehensive profit statement and a cash flow statement must be included
D)a balance sheet and profit or loss statement must both be included

Question 31

A listing of possible things to be included in the changes in equity statement was prepared by a trainee in the financial controller's division of Financial Excellence Ltd.The listing contained the following:
I total comprehensive profit for the period
II total amounts comprehensive profit allocated to non-controlling interest and owners of the parent
III for each component of equity, retrospective effect of changes in accounting policy
IV for each component of equity, retrospective correction of errors
V for each component of equity, a reconciliation between the amounts at the beginning and the end of the reporting period
VI the reconciliation required by V includes changes due to period profit or loss
VII the reconciliation required by V includes changes due to each items of other comprehensive profit
VIII the reconciliation required by V includes changes with owners in their capacity as owners
The items for which disclosure must be made for each component of equity are:

A)III to V
B)III to VIII
C)I to III
D)all of I to VIII

Question 32

Under AASB 101.56, all deferred tax assets and deferred tax liabilities are classified as non-current, therefore both B and C are incorrect; D is incorrect as line items is specified for current liabilities for current tax .
Which of the following best reflects the requirements of AASB 101 in respect of the provision of a separate profit or loss statement?

A)one must be provided if doing so is necessary for an understanding of the entity's financial performance
B)their inclusion is solely at the discretion of management
C)must be presented when the entity has no items of other comprehensive profit
D)one must always be presented

Question 33

A listing of terms that have been used to describe amounts disclosed in financial statements was compiled by one of the independent directors of Financial Excellence Ltd:
I.profit or loss arising from ordinary activities
II.profit or loss
III.extraordinary items
IV.abnormal items
V.total comprehensive profit
VI.earnings per share
Under AASB 101, disclosure is required of:

A)II and V
B)I to III and V and VI
C)I, II and V
D)All if I to VI