Deck 14: The Statement of Comprehensive Income

Question 1

When items are required to be classified as extraordinary,which of the following is/are not true?

A) Users of financial statements are able to make more accurate predictions of future performance
B) Management is able to classify gains as operating income and losses as extraordinary items
C) It allows managers to misclassify expenses as extraordinary
D) None; all are true

Answer 1

D

Question 2

Which items bypass the profit figure under the operating-profit approach?

A) Revenues and expenses resulting from changes in accounting policies
B) Revenue and expenses relating to prior periods
C) Revenues and expenses relating to events outside the ordinary operations of the entity
D) All of the above

Answer 2

D

Question 3

Under AASB 101,which of these items need not be disclosed separately on the face of the 'statement of profit or loss and other comprehensive income'?

A) Income tax expense
B) Bad and doubtful debts
C) Finance costs
D) None of the above, i.e., all must be disclosed separately on the face of the income statement

Answer 3

B

Question 4

Which of these is correct? An advantage of the comprehensive income approach to profit measurement is:

A) profit is determined conceptually not arbitrarily
B) no revenue or expense items bypass the income statement
C) the method gives the most useful profit for estimating future profit performance
D) A and B are both correct

Question 5

Which statement in relation to the treatment of expenses under AASB 101 is correct?

A) It is optional for an entity with revenue from the sale of goods to disclose cost of sales
B) Expenses should be classified according to their nature or their function
C) Expenses are defined exactly in accordance with the Framework
D) A and B are correct

Question 6

The inclusion of increments and decrements of non-current assets required by the comprehensive income approach:

A) may reduce the reliability of the financial statements
B) must always be confirmed as an arms-length transaction
C) A and B above
D) None of the above

Question 7

The approach where profit is measured as the revenue from operations minus expenses from operations is known as:

A) the all-inclusive approach
B) the operating-profit approach
C) the comprehensive income approach
D) the working profit approach

Question 8

Explain and discuss how profit results may be manipulated if the rules allow the separate reporting of operating items and extraordinary items.Explain how accounting standard setters in Australia have responded to a perceived creative approach to extraordinary items in the previous standard.Do you think their response is justified?

Question 9

Which term describes items of income and expense (including reclassification adjustments)that are not recognised in profit or loss as required or permitted by other Australian Accounting Standards?

A) Operating income
B) Other comprehensive income
C) Net income
D) Equity

Question 10

Items not included in the operating profit calculation under AASB 101 are:

A) prior period adjustments
B) events outside ordinary operations
C) adjustments due to changes in accounting policies
D) all of the above

Question 11

Under AASB 101,the nature and amount of which type of items should be disclosed separately?

A) Extraordinary items
B) Significant items
C) Material items
D) None of the above

Question 12

Benefits attributed to the comprehensive income approach include:

A) the statements of comprehensive income is determined conceptually
B) no items that satisfy the definition and recognition for income or expense bypass the statement of comprehensive income
C) the statement of comprehensive income is more reliable than its predecessor
D) all of the above

Question 13

A difference between the all-inclusive and the comprehensive income approaches to profit measurement is that:

A) the all-inclusive approach is broader than the comprehensive income approach
B) the two approaches have different treatments for prior-period adjustments
C) the comprehensive income approach includes all recognised changes in the carrying amount of assets and liabilities in the profit calculation
D) all are differences

Question 14

In the United States,SFAS 130 requires which profit figure to be disclosed?

A) Profit after tax after applying all other accounting standards
B) The comprehensive income figure which includes all income and expenses that have previously bypassed the profit calculation after tax and been taken directly to equity
C) Neither A nor B
D) Both A and B

Question 15

The expense example that is a classification by nature rather than by function is:

A) depreciation expense
B) administrative expenses
C) marketing expenses
D) occupancy expenses

Question 16

Define income and explain how it differs from revenue.

Question 17

Which statement concerning Australian accounting standards is correct?

A) Current Australian accounting standards do not identify any particular categories of 'unusual' items for special disclosure in the income statement
B) Current Australian accounting standards require activities that are attributable to transactions or other events outside the ordinary activities of the entity to be disclosed separately
C) AASB 101 requires the separate disclosure of significant items
D) None of the above is correct

Question 18

The concept of profit that is generally regarded as the most useful in predicting future profits is:

A) the comprehensive income approach
B) the operating-profit approach
C) the all-inclusive approach
D) No difference is seen in the usefulness of the different profit approaches in predicting future profits

Question 19

The Australian Accounting Standards Board changed the name 'statement of financial performance' to 'statement of profit and loss and other comprehensive income':

A) to be consistent with the Corporations Act
B) to be consistent with international accounting standards
C) to be consistent with US accounting standards
D) because of the development of accounting standards that are applicable to both the private and public sectors

Question 20

Explain and discuss the advantages and disadvantages of the operating-profit and the comprehensive income approaches to profit measurement.Which approach do you think is the most useful for decision making?

Question 21

Which of the following is considered a disadvantage of the statement of value added?

A) Could cause confusion with the statement of comprehensive income
B) Costs may exceed benefits
C) May be regarded as a preferable way of describing performance
D) All answers are correct

Question 22

AASB 101 allows preparers two options in the classification of items for the statement of comprehensive income statements.Discuss.

Question 23

The standard that requires the disclosure of auditor's remuneration and executives' remuneration in the published reports is:

A) AASB 1031
B) AASB 101
C) AASB 118
D) No accounting standard requires the disclosure of auditor's remuneration and executives' remuneration

Question 24

The amount retained for asset replacement and growth is one feature of:

A) The statement of value added
B) Other comprehensive income
C) Equity
D) Operating income