1.
The management of Orcena Corporation wants to apply IFRS 13. A question raised by the financial controller to his staff is whether applying IFRS 13 would change the requirements to measure certain investmnets at fair value or cost. Which of the following statements is/are correct? Statement I – I – IFRS IFRS 13 will not change whether the investments should be measured ar fair value or cost. Statement II – II – IFRS IFRS 13 will change which investments are measured at fair value. Statement III – III – IFRS IFRS 13 specifies how to measure fair value. Statement IV- IFRS 13 will change when to measure fair value A. I and III only C. I and II only
2.
B. I and IV only D. II and IV only
De Vera Corporation acquires a research and development project in a business combination. The entity does not intend to complete the project because it would compere with one of its own projects. Instead, th entity intends to hold the project to prevent its competitors from obtaining access to the technology. In doing this, the project is expected to provide defensive value, principally by improiving the prospects for the entity’s own competing technology. To measure the fair value of the acquired R&D project at initial recognition, the highest and best use of the project would be determined on which of the following basis? A. The entity’s own intended use of technology B. How market participants would use the technology C. Both of the above D. None of the above
Information on the amount that would currently be required to construct a substitute software asset of comparable utility.
Based on this information, which of the following types of valuation technique did the entity use to measure fair value? I – Income Income approach II- Cost approach III- Market approach A.
I only
B. II only
C. I and II only
D. I, II and III
5. Lorenz Corp is preparing to apply IFRS 13 for the first time. The financial reporting manager asks his team to prepare the following information for disclosure in relation to fair value measurement categorized within Level 2 and Level 3 of the fair value hierarchy: A description of the valuation techniques used in the fair value measurement A description of the inputs used in the fair value measurement Quantitative information about significant unobservable inputs for Level 3
The assistant manager is of the opinion that Lorenz Corp is not required to create quantitative information just to comply with the standard if this information was not already developed by Lorenz Corp, while the financial reporting manager believes it is mandatory to create such quantitative information. Which of the following is correct?
3.
Which of the following is/are Level 2 input/s? I – The The price per square meter for a building derived from observable market data from similar buildings in similar locations II – II – Quoted Quoted price of Vision Company, Ltd listed in Asian stock markets but are not actively traded in these markets III – III – Price Price for an ABC Bank bond that is derived from XYZ Banl bonds which have similar criteria and are actively traded IV – IV – Bank Bank Z bond price based on yield curve constructed from quoted bonds and treasury bills. A. I, II and III only C. II and IV only
4.
B. I, III and IV only D. I, II, III and IV
An entity acquires a group of assets including an income-producing software asset. To allocate the cost of the group to the individual assets acquired, the entity measures the fair value of the software asset. The entity determines that the software asset would provide maximum value to market participants through its use in combination with other assets or with other assets and liabilities. The following information was used to determine fair value: Cash flows reflecting the income stream expected to result from the software asset (license fee
A. Lorenz Corp is not required to develop quantitative information just to comply with IFRS 13 but cannot ignore information that is not reasonably available B. Lorenz Corp is required to develop quantitative information even if it has not already been developed C. Lorenz Corp is not required to develop quantitative information for Level 3 inputs per IFRS 13 D. Lorenz Corp need to use available data to develop quantitative information. 6. IFRS 13 deals with fair value measurements of which of the following assets and liabilities? I- Debt and equity securities II- Share-based payment transactions III-Investment III-Investment properties IV- Derivative assets and liabilities A. I and III only
B. II and IV only
C. I, II and III only
D. I, III and IV only
12. Which of the following are rules for recognizing current tax, according to the standard? 7. a. b. c. d.
8. a. b. c. d.
How might Fleurise, Nina Miller, and all users of IAS 1 apply the information provided in the presentation of IFRS financial statements? To make economic decisions regarding the company’s financial position, financial performance, and cash flows To make economic decisions regarding the company’s financial performance, cash flows, and hiring guidelines To make economic decisions regarding the company’s cash flows, hiring guidelines, and environmental position To make economic decisions regarding the company’s financial performance, environmental position, and community service What predictions regarding Fleurise or another company might be made through using IFRS financial statements? Predictions related to the company’s future financial position, as well as market timing and certainty Predictions related to the company’s future financial performance, as well as their competitors’ financial performance Predictions related to the company’s future inventory flows, as well as inventory timing Predictions related to the company’s future cash flows, as well as cash flow timing and certainty
9. a. b.
What would be included in a complete set of IFRS financial statements? A balance sheet, an income statement, a statement of changes in equity, and a cash flow statement A balance sheet, an income statement, a statement of changes in equity, a cash flow statement, and notes comprising a summary of significant accounting policies and other explanatory notes c. A balance sheet, an income statement, a statement of changes in equity, a cash flow statement, a financial review by management, and notes comprising a summary of significant accounting policies and other explanatory notes d. A balance sheet, an income statement, a statement of changes in equity, a cash flow statement, a financial review by management, value-added statements, and notes comprising a summary of significant accounting policies and other explanatory notes
10. Which of the following companies would use IAS 1? a. Profit-oriented b. Non-profit c. Government d. All of the above 11. What is deferred tax, according to IAS 12? a. The amount that the tax authorities assess to be payable for the period, calculated according to their own rules b. The profit (loss) for a period, determined in accordance with the rules established by the tax authorities, upon which income taxes are payable (recoverable) c. The difference between the carrying amount of an asset or liability and its tax base d. Taxes that have an effect on future tax cash flows
I. Current tax for current and prior periods should, to the extent unpaid, be recognized as a liability. II. If the amount already paid exceeds the amount due for these periods, the excess is recognized as an asset. III. Whatever tax is assessed to be payable for the year is recognized as an expense, except to the extent that the tax arises from a transaction or event which is recognized, in the same or in a different period, directly in equity. IV. The balance sheet picks up the difference between that amount and any amount paid as a liability or as an asset a. b. c. d.
I and II only I, II and III only I, II, III and IV I, III and IV only
13. Which of the following is/are an exception(s) to IAS 12’s recognition rules for deferred tax liabilities? I. Deferred tax liabilities are not recognized on temporary differences that arise from the initial recognition of goodwill. II. Deferred tax assets and deferred tax liabilities are not recognized on temporary differences that arise from the initial recognition of an asset or liability in a transaction that, at the time of the transaction, is not a business combination and affects neither accounting profit nor taxable profit. a. b. c. d.
I only II only I and II None of the above
14. According to IAS 12, which of the following is/are disclosure requirements for taxes? A. Tax expense relating to the reduction of deferred (but not current) tax expense by using a previously unrecognized tax loss, tax credit, or temporary difference of a prior period B. The write-down (or its reversal) of a current tax asset C. An explanation of changes in the applicable tax rates compared to the previous accounting period D. None of the above 15. Company X recognizes deferred taxes on revaluation of land and building due to the different accounting treatments of land and buildings under IFRS and the purpose of the tax calculation. Under IFRS, Company X applies a revaluation model of accounting while for the purpose of tax calculation, land and buildinsgs are measured at historical cost less depreciation for buildings. During the current accounting period, a gain on revaluation of land and buildings which amounted to P150,000 was recognized within other comprehensive income. Company X has chosen to present two statements: a separate statement of profit and loss and a statement of comprehensive income. Where should Company X recognize tax consequences of this gain during the current
A. In the statement of changes in equity B. In the statement of profit and loss C. In the statement of comprehensive income D. In either A or C
B. Post- employment benefits, as the benefits are payable after the employee completes service C. Termination benefits, as the executive has accepted early termination in exchange for compensation D. None of the above
16. Which of the following segments need to be disclosed separately? I – Operating segments that contribute 10% or more of the entity’s total sales II - Operating segments that contribute 10% or more of the combined reported profit of all reporting segments III - Operating segments that contribute 10% ormore of the entity’s total cost of sales IV - Operating segments that have 10% or more of the combined assets of all operating segments A. I and II
B. II and IV
C. I, II and IV
D. II, III and IV
20. Florian is going to adopt IFRS for the first set of financial statements as at 31 December 2014. Which of the following exemptions can Florian use? A. Florian can assume that defined benefit obligation as of 1 January 2013, 31 December 2013 and 31 December 2014 are unchanged from previous GAAP so that it has to do the actuarial calculation only as at 31 December 2014. B. Florian can include hindsight obtained in 2014to determine the discount rate as at 31 December 2013.
17. What is the requirement of IFRS 8 in relation to aggregation of operating segments? A. Aggregation of operating segments requires that they exhibit similar economic characteristics, including similar long-term gross margins.
C. There are no exemptions related to measurement, presentation and disclosure for employee benefit for an IFRS first-time adopter with an annual period beginning after 1 January 2014. D. Florian is not required to disclose the comparative figures for 2013 as at 1 January 2013.
B. Aggregation of operating segments does not always require that they exhibit similar economic characteristics. C. Aggregation of operating segments requires that they exhibit similar economic characteristics, not including similar long-term gross margins.
21. Group A has acquired the following. Which of the following acquisitions are business combination under IFRS 3?
D. None of the above
I - Land and a vacant building from Company B. No process, other assets or employees are required. Group A does not enter into any contracts of Company B.
18. NF Company decided to terminate a number of employees (which is not part of a wider restructuring in scope of IAS 37). It is unlikely that significant changes to this decision will be made. What steps must NF have completed in order to recognize a liability for cost of the termination benefits? A. Create a plan that includes the location, function and number of employees whose services are to be terminated B. Communicate the plan to employees in sufficient detail so that affected employees can determine the type and amount of benefits they will receive should they be terminated
II - An operating hotel, the hotel’s employees, the franchise agreement, inventory, reservation system and all “back office” operations III - All of the outstanding shares in Biotech D, a development stage company that has a license for product candidate. Phase I clinical trialsare currently being performed by Biotech D employees. Biotech D’s administrative and accounting functions are performed by a contract employee. Select the correct answer.
C. Create a plan that includes the time when the terminations will be completed
A.
All three acquisitions are business combinations under IFRS 3.
D. All items must be completed.
B.
I and II acquisitions are business combinations under IFRS 3.
19. Abacus Ltd. enters into an agreement for an executive to retire early. This agreement is not part of a wider restructuring plan. The executive is 1 year away from his current retirement date. Under the plan, Abacus commits to continue paying executive 50% of his salary until the normal retirement date; however, the executive will no longer be required to provide any service for this period.
C.
I and III acquisitions are business combinations under IFRS 3.
D.
II and III acquisitions are business combinations under IFRS 3.
How would Abacus classify this plan? A. Short-term employee benefits, as the benefits are expected to be paid within 12 months of the executive’s
22. Entity A acquired Entity B. On the acquisition date, Entity B had an operating lease as a lessee with a remaining period of two years out of the original four years. Due to significant changes in the market, Entity B is paying less than what you would expect to currently pay for a similar lease. The value of the existing lease
A. Entity A should disregard this, as this is an operating lease of Entity B and no asset or liability is recognized related to operating leases. B. Entity A determines whether the terms of each operating lease in which Entity B is the lessee are favorable or unfavorable. Entity A should account for the difference between the value of the existing lease terms and the market terms in profit or loss. C. Entity A determines whether the terms of each operating lease in which Entity B is the lessee are favorable or unfavorable. Entity A should recognize an intangible asset separate from goodwill for the favorable portion of the operating lease relative to market terms. D. None of the above. 23. Entity A had several business acquisitions during the reporting period and after the reporting period. Entity A will disclose, among other information, the following: I.
The name and a description of the acquiree
II.
The acquisition date
III.
The percentage of voting equity interests acquired
IV. The primary reasons for the business combination and a description of how the acquirer obtained control of the acquiree. Select the correct answer. A. These disclosures shall be done for each business combination that occurred in the reporting period only, but are not required for business combinations that occurred after the end of the reporting period. B. These disclosures shall be done for each material business combination that occurred both in the reporting period after the end of the reporting period, but before the financial statements are authorized for issue. The information is disclosed in aggregate for individually immaterial business combinations. C. These disclosures re optional for each business combination that occurred both in the reporting period and after the end of the reporting period, but before the financial statements are authorized for issue. D. These disclosures shall be done for each business combinations that occurred both in the reporting period and after the end of the reporting period, but before the financial statements are authorized for issue. 24. Colorado has a 10% holding in Darweesh Establishment. Each of the seven other investors in Darweesh holds between 10% and 20% of its equity. The Darweesh Establishment owns a fleet of ships that is used but all investors to transport their own products around the world. The operation of Darweesh and of its fleet is the subject of a detailed agreement among all the investors. Colorado has a director on the board of Darweesh but, in accordance with the agreement, the entity is directed by one of the other investors. How should this investment be classified?
A.
A subsidiary
B.
An associate
C.
Probably a joint operation
D.
Probably a joint venture
25. HFR Ltd. Has a 12% holding in the shares of ABC Ltd. In addition, HFR has, through one of its subsidiaries, an option to buy 13% more shares in ABC. Although the exercise price is in the money, HFR does not have the intention and the financial ability to exercise this option. How should this investment be classified? A.
A subsidiary
B.
An Associate
C.
A joint arrangement
D.
None of these categories
26. Which of the following statements about accounting is true or false? I. The Romans kept elaborate financial records and standardized systems for purposes such as the accountability of provincial governors but they did not develop any system of commercial bookkeeping. II. The first published work on double-entry bookkeeping is presumed to be a book on arithmetic written by a businessman which included a chapter the subject. III. The phenomenon of globalization gave rise to the complexity of international business activities and led to the mandatory uniform application of international financial reporting standards by all countries Statement I Statement II Statement III A. B. C. D.
True True True True
True False True False
False True True False
27. Choose the incorrect statement about generally accepted accounting principles (GAAP): A. They are not rigid laws as they are subject to amendment from time to time B. Firms that do not comply with GAAP may suffer negative economic consequences C. Generally accepted accounting principles and regulatory accounting principles are both enforced by the Bureau of Internal Revenue. D. The Philippine Financial Reporting Standards that constitute GAAP in the Philippines are not included in the scope of the Conceptual Framework 28. The body established by the Financial Reporting Standards Council as its support group tasked to study and deliberate on controversial issues affecting Philippine accounting practice is A. Philippine Accounting Principles Committee B. Standing Interpretations Committee C. Philippine Interpretations Committee D. International Financial Reporting Standards Committee
29. Which of the following statements on the scope of authority of the PFRSs and the Conceptual Framework is false? A. The Philippine Financial Reporting Standards in the Philippines include the PFRSs, the PASs, and the Philippine Interpretations B. The Conceptual Framework has the highest level of authority in financial accounting and reporting practice in the Philippines C. In the absence of a Standard or an Interpretation that specifically applies to a transaction, management should consider the applicability of the Conceptual Framework in developing and applying an accounting policy that results in information that is relevant and reliable D. The Philippine Financial Accounting Standards applies to all financial reporting enterprises in the Philippines 30. Which of the following best describes the double-entry concept? A. Only two accounts are affected by each recording of accountable event. B. The debit – credit convention must be used. C. For every increase in asset, there must be an increase in liability or revenue. D. Events and transactions are analyzed and recorded using the principle of duality and equality 31. Which of the following statements about financial accounting isincorrect ? A. General purpose financial statements must be prepared by a certified public accountant. B. Financial accounting is a social science that can be influenced by changes in legal, political, social, and business environments. C. The preparation of general-purpose financial statements is usually based on the assumption that the primary users of information are external decision-makers. D. The general objective of financial accounting is to provide information about the financial position, performance, and cash flows of an entity that is useful in the making of economic decisions 32. Which of the following statements will not pertain to an asset? A. It can command a price B. It should be exclusively owned by an economic entity C. It is an economic good D. It is limited in supply 33. If an entity uses the modified cash basis of accounting, the modifications from the accrual basis should have substantial support which requires that A. The financial statements have only minor modifications from GAAP. B. The modifications must be the same as those required by regulatory body. C. The modifications must be the same as GAAP and not illogical. D. No modifications are allowed. 34. Which of the following statements isincorrect ? A. All of the accounts of a specific business enterprise are referred to as a ledger.
D.
The fact that an expense is recognized on the income statement indicates that an equivalent outlay of cash has been made in the same period.
35. Which of the following entities are required to apply the PFRS for SMEs in Philippine financial reporting? A. Exelsior Enterprises with total assets of P 347M and total liabilities of P 284 M B. ABC Noverlty Shoppe with total assets of P 30 M and total liabilities of P5 M and submits financial statements to creditors, suppliers, and regulatory bodies. C. ABE Insurance Company with total assets of P 340 M and total liabilities of P 195 M D. Rural Bank of Capistrano, Tarlac, with total assets of P 300 M and total liabilities of P 120 M 36. Which of the following statements about Philippine GAAP is (are) false? I. Before year 2000, Philippine GAAP was largely influenced by US GAAP (FASB) II. The use of revalued amounts of property and equipment was allowed in the Philippines even before the IFRSs were adopted by the Philippine accountancy profession. III. All economic entities or enterprises in the Philippines are required to follow full Philippine Financial Reporting Standards (PFRSs) and Philippine Accounting Standards (PAS) in the preparation of financial statements IV. There are a few instances when some provisions of the PASs and PFRSs differ from the IASs and the IFRSs A. I and II only B. II and III only C. III and IV only D. II, III and IV only
37. Which of the following statementsdoes not properly describe the fact that the Accountancy Profession is a communication profession? A. Financial statements should use terminology within the level of understanding of the statement user. B. Financial statements can be expressed in the Spanish or Chinese language C. Financial statements, as far as possible, should show information that can be verified from documentary evidence in order to gain the confidence of statement users D. Financial statements can be expressed in any dialect of a country 38. Which TWO of the following is an application of the science aspect of accounting? I. Accountants use their judgment in the choice of the inventory cost flow to be applied to inventory units on hand at the end of the accounting period. II. Accountants use well-defined steps in the processing and issuance of financial information III. External auditors attest to the fairness of presentation of financial condition and operating results IV. Accountants record the value of a purchased machinery by referring to the amount appearing on the purchase invoice. A. I and II B. II and IV only C. II and III only D.III and IV only 39. Which of the following is an asset but not an economic resource?
40. Which of the following is not a characteristic of financial accounting? A. Use of facts and estimates C. Subjective data provided relevant B. Primarily historical in nature
D.
Concerned with general and purpose reports
41. How would the declaration and subsequent issuance of a 30% stock dividend by the issuer affect each of the following the market value of the share exceeds the par value of the stock? Common Stock Additional paid-in capital Retained Earnings Stockholders’ Equity A. B. C. D.
No effect No effect Increase Increase
No effect Increase No effect No effect
42. How would a stock split affect each of the following? Asset Total stockholders’ equity A. B. C. D.
Increase No effect No effect Decrease
Increase No effect No effect Decrease
No effect Decrease Decrease Decrease
No effect No effect Decrease No effect
Additional paid in capital No effect No effect Increase Decrease
C. The government has a plan for a law requiring all environment damage to be rectified D. A chemical spill from a chemical plant has caused harm to the surrounding wildlife 46. A lessee when accounting for a lease incentive received under an operating lease treats is as a: A. increase in rental income over the lease term; B. increase in rental expense over the lease term; C. reduction in rental expense over the lease term; D. reduction in rental income over the lease term 47. Which of the following is not true regarding a defined contribution plan? a. An appropriate funding pattern must be established to ensure that enough money will be available at retirement to meet the benefits promised. b. An appropriate funding pattern must be established to ensure that enough money will be available at retirement to meet the benefits promised c. The expense recognized each period as equal to the cash contribution using current salary levels d. “Vested benefits” require a certain minimum number of years of service and to which an employee is entitled to receive when he resigns and are not contingent upon additional service under the plan 48. When the fair value of plan assets exceeds the defined benefit obligation, PAS 19R A. Requires recognition of an asset. B. Requires recognition of an asset if the excess fair value of plan assets exceeds the corridor amount C. Recommends but does not require recognition of an asset D. Does not permit recognition of an asset
43. Araya Commercial obtained an interest-free loan of P 500,000 and a cash grant of P 400,000 from the City of Albay. The cash grant is a partial subsidy for the annual salary of five of its employees for the year 2014 . How should Araya Commercial account for these events? A. Only the cash grant should be taken to Equity, as additional paid-in capital B. Only the cash grant should be recognized as income C. Both the cash grant and the interest-free loan should be taken to Equity, as additional paid-in capital D. Both the cash grant and the interest-free loan should be recognized as income
49. With respect to the computation of earnings per share, which of the following would be most indicative of a simple capital structure? A. Common stock, preferred stock, and convertible securities outstanding B. Earnings derived from one primary line of the business C. Ownership interests consisting solely common stock D. Equity represented materially by liquid asset
44. Which of the following statements is true? A. Temporary differences occur because accounting standards and income tax laws differ as to when they recognize assets, liabilities, owners’ equity, revenues, gains, expenses and losses B. The term “future taxable amount” relates to a deferred tax asset C. “Future taxable amounts” include revenues and gains that are included in the tax returnbefore they are recognized for accounting purposes. D. “Future deductible amounts” include expenses and lossesthat are included in the tax return before they are recognized for accounting purposes.
50. Which of the following statements about government funds is true or false? Statement 1: Government funds include public moneys of every sort and other resources pertaining to any agency of the government.
45. An entity operates a chemical plant and has a published policy of making good any damage caused to the environment. Which of the following would give rise to a provision? A. It is likely that a chemical spill which would result to pay penalty will occur next year Research suggests that there is a possibility that the entity’s action may cause damage to surrounding
Statement 2: Government funds or property shall be spent or used solely for public purpose A. B. C. D.
Both statements are true Both statements are false First statements is true; second statement is false First statement is false; second statement is true
51. An entity capitalizes borrowing costs as part of the cost of a qualifying asset on the commencement date. The commencement date for capitalization is the date when entity first meets all of the following EXCEPT:
B. Upon receipt of progress payments and government grants related to the asset. C. It incurs borrowing costs. D. It incurs expenditures for the asset.
56. IFRS 4 does not apply to:
52. If the property comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If the portions could not be sold separately, the entity shall: A. Recognize both portions as Property, Plant and Equipment (PPE) only. B. Recognize both as Investment property only if the other portion is insignificant in nature. C. Recognize the whole property either as Investment Property or PPE depending on which portion has the larger Fair Value. D. Recognize both portions as Investment Property only. 53. ABC has an investment, Entity K, which it controls through holding the majority equity interest and because it has the ability to appoint the majority of the executive directors of the board of directors of Entity K. Which of the following standards shall ABC apply to account for its investment? A. B. C. D.
PFRS 12 Disclosure of Interests in Other Entities PAS 28 (Revised) Investments in Associates and Joint Ventures PFRS 10 Consolidated Financial Statements PFRS 11 Joint Arrangements
54. I, J and K enter into an agreement and set up a joint steering committee. Each party has one vote and two votes are needed to carry a motion. K has ultimate decision-making authority in cases where the joint steering committee cannot reach an agreement. For example, if no combination of I, J and K can agree with each other, K would have the ultimate decision making authority. Which of the following statement is/are true applying principles of PFRS 11 – Joint Arrangements? I. II. III. a.
There is joint control. K has control because of his decision-making authority. I and J could agree together, without needing the agreement of K. I and III only
b. II only
c.
III only
d. All are false
55. Cash paid to acquire non-controlling interests shall be presented as cash used in ____________ activities in the consolidated statement of cash flows. A. B. C. D.
Operating Investing Financing Either investing or financing
I. II. III. IV. V. A. B. C. D.
Financial instruments issued with a discretionary participation features Financial guarantee contracts Product Warranties Issued directly by manufacturer, dealer or retailer. Insurance Contracts Direct insurance contracts in which the entity is the policy holder. I and V I and IV II , III and V II , III , IV and V
57. To comply with Par 23 of IFRS 6: Exploration and Evaluation of Mineral Resources the entity shall disclose: A. Substantive Expenditure on exploration B. The period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed C. The amounts of assets, liabilities, income and expense and operating and investing cash flows arising from the exploration for and evaluation of mineral resources. D. All of the above. 58. An example of notional amount is a. Number of barrels of oil b. Interest rates c. Currency swaps d. Stock prices 59. Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)changes the accounting policy requirements for biological assets that meet the definition of bearer plants. Theamendment defines a bearer plant as “living plant that: (Select the true statement/s) Statement I: is used in the production or supply of agricultural produce Statement II: is expected to bear produce for more than one period Statement III: has a remote likelihood of being sold as agricultural produce, even for incidental scrap sales a.
I, II and III
b. I and II only
c.
II and III only
d. I and III only
60. Statement 1: Under PFRS for SMEs, an entity is required to recognize all actuarial gains and loss in profit
Statement 2: Under PFRS 13, Fair Value Measurement, active market is defined as the market with the greatest volume and level of activity for the asset or liability. A. B. C. D.
64. Which is true? I.
Substantial modification of the terms of an existing financial liability or a part of it shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. II. An exchange between an existing borrower and lender of debt instruments with substantially different terms shall not be accounted as an extinguishment of the original financial liability. III. Entity shall remove a financial liability or a part of a financial liability from its statement of financial position when, and only when, it is extinguished (when the obligation specified in the contract is discharged or cancelled or expires).
Both statements are true. Both statements are false. Statement 1 is true; statement 2 is false. Statement 1 is false; statement 2 is true.
61. Statement 1: Deferred tax should be measured at the tax rates that are expected to apply in the period when the deferred tax asset or liability is recognized. Statement 2: The acquirer shall measure at the acquisition date components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation at either:
a. b. c. d.
II only II and III I and III All of the statements are correct.
a) fair value; or b) the present ownership instruments' proportionate share in the recognized amounts of the acquiree's identifiable net assets. Once the acquirer has chosen to measure the non-controlling interests in the acquiree at (a) or (b), the acquirer can only measure the non-controlling interests in the acquiree as such for all subsequent business combinations.
65. A, B, C and D enter into agreement No. 1 to undertake oil and gas exploration. Committee No. 1 is formed to direct all activities related to the activity including review and approval of annual budgets and operating policies. Committee No. 1 consists of four members nominated by A, B, C and D. The decisions of Committee No. 1 require the unanimous vote of the members.
A. Both statements are true. B. Both statements are false. C. Statement 1 is true; statement 2 is false. D. Statement 1 is false; statement 2 is true. E. 62. IFRIC 4, Determining whether an Arrangement contains a Lease does not apply to:
A and B enter into agreement No. 2, which establishes Committee No. 2 to coordinate cooperation between A and B, with respect to the same oil and gas exploration activity. A and B each appoint one representative to Committee No. 2. Committee No. 2 has the power to make decisions to be submitted for approval to Committee No. 1. Any matter to be decided by Committee No. 2 requires the consent of both parties. However, if agreement cannot be reached between A and B, B has the deciding vote. The decisions made in Committee No. 2 are binding on A and B and they must vote accordingly in Committee No. 1. Who among A, B, C and D have joint control applying PFRS 11 – Joint Arrangements?
A. B. C. D.
Outsourcing arrangements Public-to-private service concession arrangements Arrangements in the telecommunications industry Take-or-pay and similar contracts
63. If an entity is required by the standard to separate an embedded derivative from its host contract, but is unable to measure the embedded derivative separately either at acquisition or at the end of a subsequent financial reporting period. The entity shall: A. B. C. D.
Designate the embedded derivative only as at Fair value through profit or loss. Designate the entire hybrid contract as at Fair value through profit or loss. Designate the host contract only as at Other Comprehensive Income. Designate the entire hybrid contract as at Other Comprehensive Income.
a.
A, B, C and D
b. B, C and D only
c.
C and D only
d. None of them
66. An entity shall determine whether a transaction or other event is a business combination by applying the definition in PFRS 3, Business Combinations, which requires that the assets acquired and liabilities assumed constitute a/an _________. If the assets acquired are not a/an _________, the reporting entity shall account for the transaction or other event as a/an ___________. a. b. c. d.
operating segment, operating segment, business combination operating segment, business, asset acquisition business, business, asset acquisition business, operating segment, asset acquisition
67. ABC Company is an associate of XYZ Company. Which is/are FALSE?
a.
XYZ Company can lose significant influence over ABC Company as a result of a contractual agreement. b. Value in use is the present value of the estimated future cash flows expected to be generated by ABC Company, including cash flow from operations of the investee and the proceeds from the ultimate disposal of the investment. c. When ABC Company has outstanding cumulative preference shares, the XYZ Company shall compute its share of earnings or losses after deducting the preference dividends, whether or not such dividends are declared. d. If the investment of XYZ to ABC Company is achieved in stages, it is covered by PAS 28. 68. Which of the following statements is (are)true regarding impairment loss? A. All property and equipment items should be tested for impairment annually. B. The impairment loss should be allocated, first , to corporate assets, then allocated to the individual assets comprising the cash-generating unit, on a pro-rata basis based on their carrying amounts, and then, to goodwill. C. To ensure uniformity of practice, the formula used in computing impairment loss is the same for all assets. D. An impairment loss of an asset carried at historical cost should always be taken to the income statement. 69. Purchases without any bidding is an example of: a.
Unconscionable
b. Excessive
d. Irregular
A. shall derecognize the financial asset B. shall derecognize the financial asset and recognize separately as assets or liabilities any rights and obligations created or retained in the transfer C. shall continue to recognize the financial asset D. shall continue to recognize the financial asset but also recognize as liabilities any rights created or retained in the transfer 71. Which of the following statements is/are true regarding the amendments in PAS 41 and PAS 16 that will be effective in January 1, 2016?
II. III. IV.
a.
Demolition costs of the old building shall be considered as part of costs of site preparation mentioned under PAS 16.17(b) and, therefore, shall capitalized as part of the new building. b. If the land and building purchased in a lump sum price will be subsequently measured using the fair value model, the land and building will be classified as two separate items under Investment Property at their allocated cost determined using the relative fair value. c. As the entity, at date of acquisition, has decided to initially use the property as owner-occupied property, the land and building acquired in lump sum price will be classified as two separate items under Plant, Property and Equipment measured at their allocated cost determined using the relative fair value method. d. None of the above 73. Which of the following statements is/are false in relation to the annual improvements to IFRS? I. II.
III. c. Unnecessary
70. In PFRS 9 – Financial Instruments, if the entity transfers substantially all the risks and rewards of ownership of the financial asset, the entity
I.
c. I, III and IV only d. IV only 72. Which of the following statements is/are true?
Bearer biological assets will be accounted for as property, plant and equipment, separate from any related produce. Entities will have the option to apply IAS 16’s cost model or revaluation model to subsequently measure bearer biological assets. Entities following either model will need to determine the useful life of the bearer biological asset in order to depreciate it. The useful life will need to be re-evaluated every 3 years. Early adoption of the new requirements is permitted. I, II and III only
IV.
Joint arrangements are outside the scope of IFRS 3, not just joint ventures. In accounting for contingent consideration in a business combination under IFRS 3 – Business Combinations, contingent consideration can be measured at fair value through other comprehensive income. Short-term receivables and payables with no stated interest rates must be held at invoice amounts under IFRS 13 – Fair Value Measurement . A management entity – an entity that provides key management personnel services is not a related party subject to the related party disclosures under IAS 24. a. I, II and III only b. II, III and IV only c. I, III and IV only d. IV only
74. Which of the following does not qualify for exemption under PFRS 1 for purposes of retrospective application? a. Hedge accounting b. Fair value accounting for investment property c. Estimate made under previous GAAP d. Financial assets and financial liabilities derecognized prior to January 1, 2001
75. Which of the following statements is/are false about the changes in PAS 16 – Property, Plant and Equipment and PAS 38 – Intangible Assets? I. When an item of PPE or Intangible Asset is revalued, the carrying amount of that asset is adjusted to the revalued amount. This should be done by adjusting the gross carrying amount in a manner that is consistent with the change in the gross carrying amount of the asset so that revaluation of the carrying amount of the asset. For example, the gross carrying amount may be restated by reference to observable market data or it may be restated proportionately to the change in the carrying amount. The accumulated depreciation at the date of the revaluation is
II.
adjusted to equal the difference between the gross carrying amount and the carrying amount of the asset after taking into account accumulated impairment losses When an item of PPE or Intangible Asset is revalued, the carrying amount of that asset may be adjusted to the revalued amount by eli minating the accumulated depreciation against the gross carrying amount of the asset. a. I only b. II only c. I and II d. None of the above
76. The 2014 new chart of accounts was based on: a. NGAS b. IAS
c. IFRS
d. IPSAS
77. PACMan Company signs a contract with a licensor for the exclusive rights to broadcast matches in a longestablished sporting competition covering the whole season for a number of years. The entity is required to pay agreed amounts at the start of each season, with the rights to that season and future seasons reverting to the licensor if payment is not made on time. PACMan concludes that an obligation does not exist until the beginning of each season for the amount payable to secure rights for that season. In addition, PACMan Company acquires a basketball team. A critical factor in the Company’s decision to acquire the team was the reputation of its players, many of whom are regularly selected to play for their country. A player cannot play for a team unless he is registered with the relevant basketball authority. It is customary to see exchange transactions involving players' registrations. The payment to a player's previous team in connection with the transfer of the player's registration enables the acquiring team to negotiate a playing contract with the player that covers a number of seasons and prevents other teams from using that player's services. Which of the following statements is/are true applying principles of IAS 38 – Intangible Assets in relation to the acquisition of the basketball team? I. The amounts paid for the transfer of the player correspond to the acquisition of a contractual right. II. As it results from a contractual right, it is identifiable. III. The cost in this case is reliably measurable, being the price agreed in the contract with other basketball team. IV. The item does not meet the definition of an intangible asset since no future economic benefits are expected from this acquisition. a. b. c. d.
I, II and III only II, III and IV only I, III and IV only IV only
78. Which of the following standards may not be applied in accounting for ANIMALS in zoo (or Game Park) that does not have an active breeding program and rarely sells any animals or animal products and BACTERIA in the pharmaceutical industry that involves development of a culture
II. III. IV.
PAS 16 PAS 36 PAS 41
a. I, II and III only b. I and II only c. II only d. IV only 79. The IASB tentatively decided that the mandatory effective date of IFRS 9 – Financial Instruments will be for annual periods beginning on or after __________________. a. January 1, 2017 b. January 1, 2018 c. January 1, 2015 d. January 1, 2016 80. All of the following are national government agencies except: a. PUP b. COA c. GSIS
d. BIR
81. The weighted average inventory costing method is particularly suitable to inventory when: A. dissimilar products are stored in separate locations; B. the entity carries stocks of raw materials, work-in-progress and finished goods; C. goods have distinct use-by dates and the goods produced first must be sold earliest D. homogeneous products are mixed together 82. Inventory estimates will be required for the following except A. when interim financial statements are prepared B. when inventory is destroyed by typhoon or lahar flow C. as proof of reasonable accuracy of the physical inventory D. in the determination of the ending inventory to be shown on the balance sheet at year end. 83. When an inventory costing formula is changed, the change is required to be applied: A. prospectively and the adjustment taken through the current profit or loss; B. retrospectively and the adjustment taken through the opening balance of accumulated profits; C. prospectively and the current period adjustment recognized directly in equity; D. retrospectively and the adjustment recognized as an extraordinary gain or loss. 84. According to PAS 2 – Inventories, which of the following will be included in the computation of the cost ratio when estimating inventories by the average retail method? A. Purchase returns B. Mark-up, net C. Mark-down, net D. All of these 85. The following assets are recognized upon initial measurement on the basis of fair value rather than historical cost except A. Investment property B. Held-for-trading securities
86. The amortization of premium over the life of the bond is an adjustment of interestincome in the investor’s books A. up B. down C. Steady D. Cannot be determined 87. At balance sheet date, Monica Company was awaiting the final details of a court case for damages awarded in its favor. The amount and probable receipt of damages is unknown and will not be decided until the court sits again in several months’ time. How is this event dealt with in the preparation of the financial statements? A. do not recognize or disclose in the financial statements as the possibility of receiving damages is remote; B. recognize as an asset in the financial statements as the receipt of damages is probable; C. disclose in the notes to the financial statements as it is possible that the entity will receive the damages and the court decision is out of its control; D. recognize as a deferred asset in the balance sheet and re-classify as a non-current asset when the court decision is known. 88. Mikey Inc. is facing a lawsuit for product liability damages which remains unsettled on balance sheet date, December 31, 2014. Company lawyers estimate a probable loss amounting to P 1,000,000. Mikey’s insurance adjuster however, has opined that recovery from the insurance company amounting to P 700,000 is virtually certain. Under PAS 37, how should these situations be presented in the financial statements, Dec. 31, 2013? A. Contingent Loss of P1,000,000; Contingent Liability of P 1,000,000 B. Loss, net of gain, P300,000; Liability, net of Asset of P 300,000 C. Loss, net of gain, P 300,000; Asset, P 700,000; Liability, P 1,000,000 D. Loss, P 1.000,000; Liability, P1,000,000; Contingent Asset, P 700,000; Contingent Liability, P1,000,000 89. Which of the following statements is (are) true? I. A legal obligation is one that arises only from legislation II. When an enterprise, by an established pattern of past practice, or a sufficiently specific current statement has indicated to other parties that it will accept certain responsibilities, it incurs a constructive obligation III. A contingent asset should be recognized in the books of account if it is probable that economic resources will flow to the enterprise. A. Only I is true B. Only II is true C. I and II are true D. II and III are true 90. Which of the following situations will require disclosure as a related party? A. In consolidated financial statements in respect to intra-group transactions B. In related party relationships where control exists, irrespective of whether there have been transactions between related parties C. In financial statements of state-controlled enterprises of transactions with other state-controlled enterprises D. In parent financial statements when they are made available or published with the consolidated financial statements 91. Disclosure of related-party transactions is required by GAAP because
B. They cannot be presumed to be carried out on an arms-length basis and thus, the enterprise’s Financial statements are not complete and reliable without such disclosures C. They usually have a greater material effect on financial statements than transactions between unrelated parties D. They usually involve irregularities 92. On October 1, 2013, Bona Company contracted to buy foreign goods requiring payment in dollars one month after their receipt at Nova’s factory. Title to the goods passed on December 28, 2013. The goods were still in transit on December 31, 2013. Exchange rates of the peso to the dollar were P 68. P 76 and P 80 on Oct. 1, Dec. 28, and Dec. 31, respectively. According to PAS 1, Nova should account for the exchange rate fluctuation in 2013 as A. A loss included in net income from operating activities B. A loss included in net income after operating activities but before net income from ordinary activities C. An extraordinary loss D. A gain included in net income after operating activities but before net income from ordinary activities. 93. Which of the following statements regarding Cash and Cash equivalents is false? A. Not all items included in cash constitute legal tender B. Cash should be valued at fair value C. Compensating cash balance that are legally restricted for the payment of a current liability can be shown as part of Cash and Cash Equivalent provided the restriction is disclosed. D. If a bank or financial institution holding funds of a reporting entity is in bankruptcy or financial difficulty such cash should be written down to estimated realizable value if the amount is lower than face value 94. Which of the following statements pertaining to PAS 7, Statement of Cash Flows is (are) true? I. In a statement of cash flows using the indirect approach for operating activities an increase in inventories should be presented as a deduction from net income. II. In a Statement of Cash Flows, banks and financial institutions are allowed to report their receipts and disbursement transactions at net, III. Non – cash financing and investing activitiesneed not be reported in the financial statements, whether on the face or in the notes thereto IV. In a statement of Cash Flows using the indirect approach, decreases in cash equivalents should be presented as addition to net inome A. I and II only B. I, III, and IV only C. I II and IV only D. I, II, III, IV 95. AG&P, a construction entity entered into two contracts with LEGASPI MALL, which were signed and negotiated as a single package: (1) a contract to build a Shopping Mall over a period of three years, and (2) a maintenance contract on the building for a period of five years. Under PAS 11, how should the two contracts be accounted for? A. Treat the building contract under the cost recovery method and the maintenance contract under the percentage of completion method. B. Combined and treated as a single contract C. Segregated and considered two separate contracts. D. Recognize both contracts under the completed production method
96. For entities wanting to use the cost model of accounting, the revaluation of a subsidiary’s assets would be undertaken in the: A. subsidiary’s records; B. parent entity’s records; C. consolidation worksheet; D. notes to the consolidated financial statements. 97. Which of the following government sector got the biggest slice of the 2014 budget: a. Social Services b. Defense c. Economic Services d. General Services
Public
98. The following Cash account tittles are included in the trial balance of a national government agency, except a. Petty cash b. Cash-in Vault c. Cash-Collecting d. Cash-MDS, Officer Regular 99. In a business combination the revaluation of non-current assets in the records of the subsidiary, means that the subsidiary has effectively adopted the: A. parent-entity model of consolidation; B. proprietary model of accounting; C. cost model of accounting; D. revaluation model of accounting. 100. What is the best cost accumulation procedure to use when many batches, each differing as to product specification, are produced? A. Job order B. Process C. Actual D. Standard
