Question 1

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.

Question 2

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.

Question 3

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 4

Profit is calculated as the difference between income and expenses as defined by the AASB Conceptual Framework.As a result:

Accepted Answer

A)  The matching principle is of prime importance in calculating profit. 
B)  Profit is influenced directly by the definitions and measurement rules for assets and liabilities. 
C)  There is no need for separate recognition criteria for profit. 
D)  Profit is influenced directly by the definitions and measurement rules for assets and liabilities and there is no need for separate recognition criteria for profit.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Discovery of an error from a prior period corrected retrospectively is an example of an item reportable under other comprehensive income.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Discuss the impact changes in accounting policies can have on users of the financial statements.

Accepted Answer

The answer of Discuss the impact changes in accounting policies...

Question 9

What is a prior period error?
 How has the treatment of prior period errors changed from the former AASB 1018 to the current AASB 108?
 What is the major implication of this change?

Accepted Answer

The answer of What is a prior period error?
 How...

Question 10

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)  An entity shall not present any items of income or expense as extraordinary items, in the statement of comprehensive income or the separate income statement (if presented), or in the notes. 
B)  An entity shall disclose the amount of income tax relating to each component of other comprehensive income, including reclassification adjustments, either in the statement of comprehensive income or in the notes. 
C)  As a minimum, the statement of comprehensive income shall include line items of each component of other comprehensive income classified by nature. 
D)  An entity shall recognise all items of income and expense in a period in profit or loss unless an Australian Accounting Standard requires or permits otherwise, for example, the financial effect of changes in accounting estimates.

Question 11

An entity shall recognise all items of income and expense in a period in profit or loss unless an Australian Accounting Standard requires or permits otherwise.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  fair values become of critical importance. 
B)  such rights are recognised as intangible assets. 
C)  many social costs are ignored. 
D)  these financial reports are always prepared on a 'true and fair' basis.

Question 13

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.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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 16

Changes in accounting estimates include:

Accepted Answer

A)  changes in expected warranty costs on goods sold under guarantee. 
B)  changes in the expected pattern of consumption of economic benefits of depreciable assets. 
C)  changes in the provision for inventory obsolescence. 
D)  all of the given answers.

Question 17

AASB 2 requires that the fair value of the option issued as a share-based payment to an employee,be determined and this value be deemed to be the cost of the options.

Accepted Answer

A) True 
 B)False

Exam 16: The Statement of Comprehensive Income and Statement of Changes in Equity

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

Examples of classification of expenses by their nature are:

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.

Profit is calculated as the difference between income and expenses as defined by the AASB Conceptual Framework.As a result:

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

Discovery of an error from a prior period corrected retrospectively is an example of an item reportable under other comprehensive income.

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

Discuss the impact changes in accounting policies can have on users of the financial statements.

What is a prior period error? How has the treatment of prior period errors changed from the former AASB 1018 to the current AASB 108? What is the major implication of this change?

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 entity shall recognise all items of income and expense in a period in profit or loss unless an Australian Accounting Standard requires or permits otherwise.

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

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

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

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

Changes in accounting estimates include:

AASB 2 requires that the fair value of the option issued as a share-based payment to an employee,be determined and this value be deemed to be the cost of the options.