TOA 1406 PRESENTATION AND PREPARATION OF FS AND DISCLOSURE.docx

TOA-1406 Presentation and Preparation of Financial Statements and Disclosures

PAS1 Presentation and Preparation of Financial Statements 1. They are a structured representation of the financial position and financial performance of an entity. A. Statement of financial position B. Statement of changes in equity C. Financial statements D.  Notes to financial statements 2. Which of the following is not a component of the financial statements? A. B. C. D.

Statement of financial position Statement of changes in equity Director’s report  Notes to financial statements

3. Which is incorrect regarding an income statement? A. An entity may present the components of profit or loss as part of a single statement of comprehensive income. B. An entity may present the components of profit or loss in a separate income statement. C. When prepared, an income statement must be immediately before the statement of comprehensive income. D. When a separate income statement is prepared, it is not considered a part of a complete set of financial statements. 4. A financial financial review by management that describes and explain the main features of the entity’s financial performance and financial position, and the principal uncertainties it faces A. B. C. D.

Is not part of the complete set of FS Is part of the complete set of FS Is within the scope of PAS 1 Must be included in notes to the FS

5. For SMEs, if the only changes to the equity during the periods for which the financial statements are presented arise from profit or loss, payment of dividends, corrections of prior  period errors, and changes in accounting policy, the entity is allowed to present, in place of a separate statement of comprehensive income and statement of changes in equity, a single A. Statement of income and retained earnings

B. Statement of comprehensive retained earnings C. Statement of comprehensive performance D. Statement of financial performance and position 6. For SMEs, which has no items of other comprehensive income in a period, the ‘bottom line’ in its income statement or statement of comprehensive income is labeled A. Comprehensive income B.  Net income C. Total comprehensive income D. Profit or loss 7. S1. An entity whose financial statements comply with PFRS shall make an explicit and unreserved statement of such compliance in the n otes to financial statements. S2. An entity shall not describe financial statements as complying with PFRSs unless they comply with substantially all of the requirements of PFRS. S3. An entity can rectify inappropriate accounting policies either by disclosure of the accounting policies used or by notes or explanatory material. A. B. C. D.

False, False, True True, False, False False, True, False False, False, False

8. Which of the basic financial statements is not prepared using the accrual basis of accounting? accoun ting? A. B. C. D.

 None Statement of financial position Statement of cash flows Statement of comprehensive income

9. Per PAS 1, on frequency of reporting, an entity shall present a complete set of financial statements (including comparative information) A. B. C. D.

At least annually Whenever the entity wishes At least semi-annually Quarterly

10. An entity disclosing comparative information shall present, as a minimum (choose the incorrect statement) A. 2 statements of financial position

B. 2 statements of comprehensive income C. 3 statements of financial position when an entity applies an accounting policy retrospectively D. 3 statements of comprehensive income when an entity applies an accounting policy retrospectively 11. An entity is required to disclose 3 statements of financial position as comparative information when (choose the exception) A. B. C. D.

It reclassifies items in its financial statements It decides, for the first time, to disclose comparative information It applies accounting policy retrospectively It makes a retrospective restatement of items in its financial statements

12. XYZ Inc. decided to extend its reporting period from a year (12-month period) to a 15-month  period. Which of the following is not required under PAS 1 in case of change in reporting  period? A. XYZ Inc. should disclose the reason for using a lo nger period than a period of 12 moths. B. XYZ Inc. should change the reporting period only if other similar entities in the geographical area in which it generally operates have done so in the current year; otherwise its financial statements would not be comparable to others. C. XYZ Inc. should disclose the comparative amounts used in the financial statements are not entirely comparable. D. XYZ Inc. should disclose the fact that amounts presented in the financial statements are not entirely comparable. 13. Which of the following information is not specifically a required disclosure of PAS1? A.  Name of the reporting entity or other means of identification, and any change in that information from the previous year. B. Level of rounding used in presenting the financial statements C. Whether the financial statements cover the individual entity or a group of entities D.  Names of major/significant shareholders of the entity E. The presentation currency 14. Courier Trading is a manufacturing entity in the Philippines. It sells its products, buys it materials and supplies, pays its employees and obtains its financing sources in Philippine pesos. Due to reporting requirements, the FS of Courier for the current year are stated in US dollars. Which is false? A. The Philippine peso id Courier’s functional currency B. The US dollar is a foreign currency to Courier

C. An entity may present its FS at a currency other than its functional currency D. The Philippine peso is Courier’s presentation currency 15. The operating cycle of an entity A. Is usually assumed to be more than 12 months due to business cycles B. Has a maximum period of 12 months C. Is the time between the acquisition of assets for processing and their realization in cash or cash equivalents D. Is the same as the operating cycle of other entities 16. According to the conceptual framework, which of the following statements conforms to the realization concept? A. Equipment depreciation was assigned to production department and then to product unit costs. B. Depreciated equipment was sold in exchange of a note receivable. C. Cash was collected on account receivable D. Product unit costs were assigned to cost of goods sold when the units were sold. 17. Under current PFRSs, which of the following statements is (are) true? S1. Deferred tax asset is always a non-current asset. S2. Financial assets classified as held for trading are alwa ys current assets. A. B. C. D.

S1 only S1 and S2 S2 only  Neither S1 nor S2

18. A liability shall be classified as current asset when (choose the incorrect one) A. B. C. D.

It is expected to be settled in the entity’s normal operating cycle It is held primarily for the purpose of being traded It is due to be settled within 12 months after the reporting period The entity has an unconditional right to defer the settlement of the liability for at least 12 months after the reporting period

19. A currently maturing long-term obligation is classified as non-current asset when: I. II.

An agreement to reschedule payment on a long-term basis is completed on or before the end of reporting period. The entity has discretion to refinance or roll over the obligation for at least 12 months after the reporting period under an existing loan fa cility.

A. B. C. D.

Both I and II  Neither I nor II I only II only

20. Some borrowing agreements incorporate covenants which have the effect that the liability  becomes payable on demand if certain conditions related to covenants are breached. In such a case, the liability is classified as: I. II. A. B. C. D.

Current even if the lender has agreed, after the reporting period and before the statements are authorized for issue, not to demand payment as a consequence of the breach.  Noncurrent when the lender has agreed on or before the end of the reporting period to  provide a grace period ending at least 12 months after that date. Either I or II  Neither I nor II I only II only

21. Which of the following is not the basic purpose of the notes to financial statements? A. To present information about the basis of preparation of the FS and the specific accounting policies selected and applied. B. To disclose the information required by the PFRS that is not presented elsewhere in FS. C. To provide additional information which is not presented on the face of FS but that is necessary for a pair presentation. D. To provide information about the financial position, financial performance and cash flow of an entity that is useful to a wide range of users in making economic decision. 22. Among the following, which is normally the first disclosure contained in the notes to FS? A. B. C. D.

Other disclosure Supporting information for items presented on the face of FS Summary of significant accounting policies Statement of compliance with PFRS

23. Which one of the following is not required to be presented as minimum information on the face of statement of financial position? A. B. C. D.

Investment property Investment accounted for under equity method Biological asset Contingent liability

24. Which one of the following is not required to be presented as minimum information on the face of statement of financial position? A. B. C. D.

Investment property  Noncurrent asset held for sale Provisions Goodwill

25. Per Pas 1, they shall not be classified as current. A. B. C. D.

Assets and liabilities of disposal group Financial assets and liabilities Trade and other payables Deferred tax asset and liabilities

26. When an entity presents the income statement items based on their nature, no allocations of expenses to functional classifications are necessary. Which of the following is not a classification of expense by nature? A. B. C. D.

Changes in inventories of finished goods and work in progress Raw materials and consumables used Depreciation and amortization expense Distribution cost

27. When an entity opts to present the income statement classifying expenses by function, which of the following is not required to be disclosed as “additional information”? A. B. C. D.

Depreciation expense Employee benefits expense Director’s remuneration Amortization expense

28. Which of the following should be disclosed in a Summary of Significant Policies? A. B. C. D.

Types of executory contracts Amount for cumulative effect of change in accounting principle Claims of equity holder Depreciation method followed

29. The single step income statement emphasizes A. B. C. D.

The gross profit figure The revenues and total expenses More than one subtraction in the statement The various components of income from continuing operations

30. Limitations of the income statement include all the following except A. B. C. D.

Items that cannot be measured reliably are not rep orted Only actual amounts are reported in determining net income Income measurement involves judgment Income numbers are affected by the accounting methods employed

31. Which of the following is statement? A. B. C. D.

not  

a generally practiced method of presenting the income

Including prior period adjustments in determining net income The single step income statement The consolidated statement of income Including gains and losses from discontinued operations of a component of a business in determining net income

32. Income taxes are allocated to I. II. III. A. B. C. D.

Cumulative effect of a change in accounting principle Discontinues operations Prior period adjustments I and II only I and III only II and III only I, II and III

33. Which of the following is true about intra period tax allocation? A. It arises because certain revenues and expenses items appear in the income statement either before or after they are included in the tax return B. It is required for extraordinary items and cumulative effect of accounting changes but not for prior period adjustments C. Its purpose is to allocate income tax expense evenly over a number of accounting periods D. Its purpose is to relate the income tax expense to items which affect the amount of tax 34. Comprehensive income includes all except A. B. C. D.

Dividend revenue Losses on disposal of assets Investments by owners Unrealized holding gains

PAS 34 Interim Reporting 1. Under PAS 34, interim financial reports should be published

A. B. C. D.

Within a month of the half-year end On a quarterly basis Once in a year at any time in that year Whenever the entity wishes

2. The IASB encourages publicly traded entities to provide interim financial reports A. B. C. D.

At least at the end of the half-year end and within 60 days of the end of interim period Within a month of the half-year end On a quarterly basis Whenever the entity wishes

3. If an entity does not prepare interim financial reports, then A. B. C. D.

The year-end financial statements are deemed not to comply with PFRS The year-end financial statements’ compliance with PFRS is not affected The year-end financial statements will not be acce ptable under local legislation Interim financial reports should be included in the year-end financial statements

4. Interim financial report shall include as a minimum A. B. C. D.

A complete set of financial statements complying with PAS 1 A condensed set of financial statements and selected notes A balance sheet and income statement only A condensed balance sheet, income statement, and cash flow statement only

5. PAS 34 states a presumption that anyone reading interim financial reports will A. B. C. D.

Understand all PFRS Have access to the records of entity Have access to the most recent annual report  Not make decisions based on the report

6. An entity owns a number of farms that harvest produced seasonally. Approximately 80% of entity’s sales are in the periods of August to October. Because the entity’s business is seasonal, PAS 34 suggests A. Additional notes be written in the interim reports about the seasonal nature of the  business B. Disclosure of the financial information for the latest and comparative 12-month period in addition to the interim report C. Additional disclosure in the accounting policy note D.  No additional disclosure

7. An entity is preparing half-yearly financial information in line with PAS 34. The period to be covered by the FS is the 6 months to June 30, 20X7. A new IFRS has been published that is effective for periods beginning on or after January 1, 20X7. The entity must adopt the PFRS A. B. C. D.

In the FS for the year to December 31, 20X7, only In its interim FS to June 30, 20X7, only In its interim FS to June 30, 20X7 and its annual FS to December 31, 20X7 At its own discretion

8. Which of the following statements is true concerning interim financial reporting? A. An extraordinary is defined as being material based on the relationship of the item to the interim period results B. The results of a disposal of a business segment maybe considered material for the interim  period but not for the annual period C.  No income tax effect will be recognized in an interim period that incur a loss D. The income tax rate to be used for an interim period is based on the estimated income tax and return on annual income 9. Which of the following is an acceptable practice as it relates to interim financial reporting? A. B. C. D.

Delayed recognition of inventory market declines until year end Delayed recognition of unplanned standard cost system variance until year end Use of variable costing inventory method for determining inventor y cost Used of the grossed profit method to determine interim inventory accou nts

10. Minimum disclosure are not required as part o f interim financial reporting A. B. C. D.

Sales or gross revenue Primary and fully diluted earnings per share Contingent items Segment information

11. Which of the following inventory procedures cannot be applied for interim reporting? A. B. C. D.

Estimation of inventory using gross profit method Delayed recognition of permanent losses from inventory market declines Delayed recognition of temporary inventory market declines Earnings per share presentation

12. Minimum disclosure requirements for companies using interim financial information will include which of the following? A. Sales and cost of goods sold for the current quarter and the current year to date B. The contribution margin by product line for current quarter and the current year to date

C. Primary and fully diluted EPS for each period presented D. An interim statement of financial position 13. For interim financial reporting, an inventory loss from a temporary market decline in the first quarter which can be reasonably be expected to be restored in the fourth quarter A. Should be recognize as a loss proportionately in each of the first, second, third and fourth quarter B. Should be recognize as a loss in the first quarter C.  Need not be recognize as a loss in the first quarter D. Should be recognize as a loss in each of the first, second and third quarter 14. Which of the following need not be disclosed in interim financial statements? A. B. C. D.

EPS Changes in accounting principles Seasonal revenue Components of cost of goods sold

15. Cost not directly associated with revenue A. Can be recognized in any interim period provided they are recognized in the year of incurrence B. Should be recognized in the year of incurrence if they cannot be allocated among interim  periods on a reasonable basis C. Should be allocated in a pro rata basis to all interim periods from the date of incurrence to the end of fiscal year D. May be treated as if they were annualized cost 16. Most interim periods gain and losses, for the purpose of interim disclosure A. B. C. D.

Are deferred until year end Are followed to be offset against each other Are recognized in the interim period of incurrence Are allocated ratably over remaining interim periods

17. Interim income tax expense is based on A. B. C. D.

An estimate of annual tax rate Four times the interim period’s pretax earnings if the interim period is a qua rter  The interim period’s pretax earnings and tax rate a pplicable in the period The average income tax rate for all previous interim periods and the current interim  period

18. How is the income tax expense for the third quarter interim period computed? A. The annual rate multiplied by the third quarter pretax earnings B. The estimated tax rate for the first three quarters based on annual rate, less a similar estimate for the first two quarters C. The rate applicable during the third quarter multiplied by four times the third quarter  pretax earnings D. One-half of the difference between total estimated annual income tax expense and the income tax for the first two quarters 19. Choose the correct statement concerning GAAP as it relates to interim reports for business enterprises. A. B. C. D.

Interim reports are required for business enterprises Interim reports are optional for many enterprises. But are subject to GAAP if published Interim reports must be 3 months long Reports for four interim periods must be published if any interim reports are published

20. When preparing an interim period, unusual or non-recurring items should be A. B. C. D.

Deferred and recognize in the last interim period of the fiscal year in which they occurred Recognized in full in the interim period in which they occurred Ignored because the focus of interim reporting is on recurring items Apportioned over the interim period in which first recognized subsequent interim periods of the fiscal year

21. Which statements best describes a view of interim reports relative to annual reports, for  purpose of interim reporting? A. B. C. D.

An interim period should be viewed primarily as an integral part of an accounting period An interim period should be viewed as a period which stands alone Interim period must be audited, as are annual report Interim reports are required under GAAP

22. Choose the correct statement concerning recognition of expense in interim reports. A. All interim period costs must be associated with revenue in the interim pe riod B. Some cost can be allocated arbitrarily to any of the interim periods reported within the year C. Cost which are directly associated with revenue should be matched against that revenue in the interim period D. Interim period expense recognition follows GAAP for annual periods for all cost

23. Which of the following methods of inventory valuation is allowable at interim dates but not at year end? A. B. C. D.

Retail method Specific identification Weighted average Estimated gross profit rates

24. If annual major repairs made in the first quarter and paid for in the second quarter clearly  benefit the entire year, when should they expensed? A. B. C. D.

In full in the first quarter In full in the second quarter An allocated portion in each quarter of the year All expenses affecting more than one quarter should be recognized in the last year of the fiscal year

25. Conceptually, interim financial statements can be described as emphasizing A. B. C. D.

Timeliness over reliability Reliability over relevance Relevance over comparability Comparability over neutrality

26. For external reporting purpose, it is appropriate to use estimated gross profit rates to determine the cost of goods sold for I. II. A. B. C. D.

Interim financial reporting Year-end financial reporting I only II only Both I and II  Neither I nor II

27. Which entries are required by PAS 34 to present interim financial reports? I. II. A. B. C. D.

Publicly-listed entities Private entities I only II only Both I and II  Neither I nor II

28. Not a required statement when an entity presents quarterly interim reports for 2012

A. Statement of financial position at June 30, 2012 and December 31, 2011 B. Statement of comprehensive income for the 6 months ending June 30, 2012 and June 30, 2011 C. Statement of comprehensive income for the 3 months ending June 30, 2012 and June 30, 2011 D. Statement of cash flows for the 3 months ending June 30, 2012 and June 30, 2011 29. For interim financial reporting, an extraordinary gain occurring in the second quarter should  be A. B. C. D.

Recognized ratably over the last three quarters Recognized ratably over all four quarters with the first quarter being restated Recognized in the second quarter Disclosed by note only in the second quarter

PAS 10 Events after the Reporting Period

1. Per PAS 10 Events after the Reporting Period, these are events that provide evidence of conditions that existed at the end of reporting period A. B. C. D.

Events after the reporting period Subsequent events Adjusting events  Non-adjusting events

2. Most likely a non-adjusting event A. The settlement after the reporting period of a court case that confirms that the entity had a  present obligation at the end of the period B. The bankruptcy of a customer that occurs after the reporting period C. The determination after the reporting period of the amount of profit-sharing or bonus  payments D. Decline in market value of investments between the end of the reporting period and the date when the FS are authorized for issue 3. Most likely an adjusting events A. Declaration of dividends after the reporting period B. A major business combination after the reporting period C. Commencing major litigation arising solely out of events that occurred after the reporting  period D. The discovery of frauds or errors that show that the FS are incorrect 4. If dividends are declared after the reporting period but before the FS are authorized for issue

A. B. C. D.

The dividends are not reflected in the FS  No liability shall be recognized at the end of the reporting period  No disclosure shall be included in the FS The dividends shall be accrued as at the end of the reporting period

5. ABC Ltd. decided to operate a new amusement park that will cost P1million to build in the year 2005. Its financial year-end is December 31, 2005. ABC Ltd. has applied for a letter of guarantee for P700, 000. The letter of guarantee was issued on March 31, 2006. The audited FS have been authorized to be issued on April 18, 2006. The adjustment required to be made to the FS for the 3 year ended December 31, 2005, should be A. B. C. D.

Booking a P700, 000 long-term payable Disclosing P700, 000 as contingent liability in 2005 FS Increasing the contingency reserve by P700, 000 Do nothing

6. A new drug named “EEE” introduced by Genius Inc. in the market on December 1, 2005. Genius Inc.’s financial year ends on December 31, 2005. It was the only company that is  permitted to manufacture this patented drug. The drug is used by patients suffering from an irregular heartbeat. On March 31, 2006, after the drug was introduced, more than 1000 patients died. After a series of investigation, authorities discovered that when this drug was simultaneously used with “BBB”, a drug used to regulate hypertension, the patient’s blood would clot and the patient suffered stroke. A law suit for P100,000,000 has been filed against Genius Inc. The financial statements were authorized for issuance on April 30, 2006. Which of the following options is appropriate accounting treatment for this post-balance sheet event PAS 10? A. The entity should provide P100,000,000 because this is an “adjusting events” and the financial statements were authorized to be issued after the accident. B. The entity should disclose P100,000,000 as a contingent liability because it is an “adjusting event”. C. The entity should disclose P100,000,000 as a “contingent liability” because it is a present obligation with an improbable outflow. D. Assuming the probability of law suit being decided is remote, the entity should disclose it in the footnotes, because it is a non-adjusting material event. 7. At the balance sheet date, December 31, 2005, ABC Inc. carried a receivable from XYZ, a major customer, at P10 million. The “authorization date” of the financial statements is on February 16, 2006. XYZ declared bankruptcy on Valentine’s Day (February 14,2006). ABC Inc. will A. Disclose the fact that XYZ has declared bank ruptcy in footnotes.

B. Make a provision for this post-balance sheet event in its FS (as opposed to disclosure in footnotes). C. Ignore the event and wait for the outcome of bankruptcy because the events took place after the year-end. D. Reverse the sale pertaining to this receivable in the comparatives for the prior period and treat this as an “error” under PAS 8. 8. Excellent Inc. built a new factory building during 2005 at a cost of P20 million. At December 31, 2005, the net book value of the building was P19 million. Subsequent to year-end, on March 15, 2006, the building was destroyed by fire and the claim against the insurance company proved futile because the cause of the fire was negligence on the part of the caretaker of the building. If the date of authorization of the FS fir the year ended December 31,2005, was March 31, 2006, Excellent Inc. should A. Write the net book value to its scrap value because the insurance claim would not fetch any compensation. B. Make a provision for one-half of the net book value of the building. C. Make a provision to three fourths of the net book value of the building based on prudence D. Disclose this non-adjusting event in the footnotes. 9. International Inc. deals extensively with foreign entities, and its FS reflect these foreign currency translations. Subsequent to the balance sheet date, and before the “date of authorization” of the issuance of the FS, there were abnormal fluctuations in foreign currency rates. International Inc. should A. Adjust the foreign exchange year-end balance to reflect all the abnormal adverse fluctuations in foreign exchange rates B. Adjust the foreign exchange year-end balance to reflect the abnormal adverse fluctuations in foreign exchange rates (and not just adverse movements) C. Disclose the post –   balance sheet event in footnotes as a non-adjusting event D. Ignore the post-balance sheet event 10. Which of the following events after the reporting period would generally, but no adjustment of the FS? A. Retirement of the company president B. Settlement of litigation when the event gave rise to the litigation occurred prior to end of reporting period. C. Employee strikes D. Issue a large amount of shares

10. Which of the following events after the reporting period would generally require disclosure,  but no adjustment of the financial statements? A. Retirement of the company president B. Settlement of litigation when the event that gave rise to the litigation occurred prior to end of the reporting period C. Employee strikes D. Issue of a large amount of shares 11. Which of the following subsequent events would require adjustment of the accounts be fore issuance of the financial statements? A. Loss of plant as a result of fire B. Changes in the quoted market prices of securities held as an investment C. Loss on an uncollectible account receivable resulting from a customer’s major flood loss D. Loss on a lawsuit, the outcome of which was deemed uncertain at year end PFRS 8 Operating Segments

1. An operating segment is a component of an entity: I.

That engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity) II. Whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its  performance III. For which discrete financial information is available A. I and II C. I and Ill B. II and Ill D. I, II and Ill 2. Per PFRS 8, its function is to allocate resources to and assess the performance of the operating segments of an entity. A. Chief operating decision maker C. Segment manager B. Executive director D. Chief executive officer 3. Statement 1. Segment reporting shall apply to the separate or individual and consolidated financial statements of entities whose equity or debt instruments are traded in a public market. Statement 2. If a financial report contains both the consolidated and the separate financial statements of the parent, segment information must be presented on both the consolidated and separate financial statements. A. True True C. False False

B. True False

D. FalseTrue

4. Enterprise-wide disclosures include disclosures about: (A) Geographic areas; (B) Allocated costs A. (A)Yes;(ß)yes C. (A)No;(B)No B. (A) Yes; (B) No D. (A) No; (B) Yes 5. Enterprise-wide disclosures are required by publicly held companies with Only one reportable segment A B. C. D.

. Yes Yes No No

More than on reportable segment Yes No Yes No

6. In financial reporting for segments of a business, an enterprise shall disclose all of the following except A. B. C. D.

Types of products and services from which each reportable segment derives its revenues The title of the chief operating decision maker of each reportable segment Factors used to identify the enterprises reportable segments The basis of measurement of segment profit or loss and segment assets

7. In financial reporting for segments of a business enterprise, segment data may be aggregated A. B. C. D.

Before performing the 10% tests if a majority of the a ggregation criteria are met If the segments do not meet the 10% tests but meet all of the aggregation criteria Before performing the 10% tests if all of the aggregation criteria are met If any one of the aggregation criteria are met

8. The method used to determine what information to report for business segments is referred to as the A. Segment approach B. Operating approach

C. Enterprise approach. D. Management approach

9. Two or more operating segments may be aggregated into a single operating segment if aggregation is consistent with the core principle of P FRS 8, and the segments are similar in each

of the following respects: (choose the exception) A. B. C. D.

The nature of the products and services The nature of the production processes The type or class of customer for their products o r services Proximity of operations

10. Which of the following is (are) correct? I.

II.

Operating segments that do not meet any of the quantitative thresholds may be considered reportable, and separately disclosed, if mana gement believes that information about the segment would be useful to users of the financial statements. An entity may combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds to produce a reportable segment onl y if the operating segments have similar economic characteristics and share any of the aggregation criteria.

A. I only B. Il only

C. I and Il D. None

11. Revenue of a segment includes A. only sales to unaffiliated customers B. sales to unaffiliated customers and interest revenue C. sales to unaffiliated customers and intersegment sales D. sales to unaffiliated customers and other revenue and gains 12. An operating segment is a reportable segment if A. its operating profit is 10% or more of the combined operating profit of profitable segments B. its operating loss is 10% or more of the combined operating.losses of segments that incurred an operating loss C. the absolute amount of its operating profit or loss is 10% or more of the – companys combined operating profit or loss D. none of these 13. A segment of a business enterprise is to be reported separately when the revenues of the segment constitute 10 percent or more of the: A. total combined revenues of all segments reporting profits B. total revenues of all the enterprises industry segments C. total export and foreign sales

D. combined net income of all segments reporting profits 14. Nenn Inc. is a multidivisional corporation which has both intersegment sales and sales to unaffiliated customers. Nenn should report segment financial information for each division meeting which of the following criteria? A. Segment profit or loss is 10% or more of consolidated p rofit or loss B. Segment profit or loss is 10% or more of combined profit or loss of all company segments C. Segment revenue is 10% or more of combined revenue of all the company segments D. Segment revenue is 10% or more of consolidated revenue PAS 24 Related Parties

1. Which of the following is not a related party as envisaged by PAS 24? A. A director of the entity. B. The parent company of the entity C. A shareholder of the entity that holds 1% stake in the entity D. The son of the chief executive officer of the entity 2. PAS 24 requires disclosure of compensation of key management personnel. Which of the following would not be considered “compensation” for this purpose? A. Short-term benefits C. Termination benefits B. Share-based payments D. Reimbursement of out-of-pocket expenses 3. To enable financial statement users to form a view about the effects of the related-party transactions, PAS 24 requires certain disclosures to be made. Which of the following disclosures is not a mandated disclosure under PAS 24? . A. Relationships between parents and subsidiaries irrespective of whether there have b een transactions between those related parties. B.  Names of all the “associates” that an entity has dealt with during the year C.  Name of the entity’s parent and, if different, the ultimate controlling party D. If neither the entity’s parent nor its ultimate controlling entity produces financial statements available for public use, then the name of the next most senior parent that does so 4. If there were related-party transactions during the year, an entity needs to make, at a minimum, certain disclosures. Which of the following is not a required minimum disclosure under PAS 24?

A. The amount of the related-party transactions B. The amount of the outstanding related-party balan ces and their terms and conditions along with details of guarantees given and received C. The amounts of similar transactions with unrelated (third) parties to establish that comparable related-party transactions have been entered at arm’s length D. Provisions for doubtful debts related to the amount of o utstanding related-party balances and expense recognized during the year in respect of bad or doubtful debts due from related parties 5. The minimum disclosures prescribed under PAS 24 are to be made separately for certain categories of related parties. Which of the following is not among the list of categories specified under the Standard for the purposes of separate disclosure? A. Entities with joint control or significant influence over the entity B. The parent company of the entity C. An entity that has a common director with the entity D. Joint ventures in which the entity is a venturer PAS 37 Contingent Assets and Liabilities

1. Per PAS 37, it is an existing liability of uncertain timing or uncertain amo unt. A. Provision C. Estimated liability B. Contingent liability D. Obligating event 2. A contingent liability is a I.

Possible obligation that arises from past event and whose ex istence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the entity’s control. II. Contingent liability is a present obligation that arises from past event but is not recognized because it is not probable that a transfer of economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured reliably. A. Both I and Il C. I only B.  Neither I nor Il D. Il only 3. In measuring a provision, which of the following is correct? I. II.

The amount recognized should be the best estimate of the expenditure required to settle the obligation. Where there is a continuous range of possible out comes and each point in that range is as likely as any other, the midpoint of the range is used.

III.

Where the provision measured involves a large population of items, the obligation may  be statistically estimated by weighting all possible outcomes by their associated  possibilities.

A. I, Il and Ill B. I and II only

C. I and III only D. II and III only

4. Sl. A contingent liability is disclosed and recognized in the books when it is both probable and measurable. S2. A contingent asset is disclosed and recognized in the books when it is both probable and measurable. A. True True C. False False B. True False D. FalseTrue 5. Which of the following definitions is correct? Definition 1 An obligating event is one that creates a legal or constructive obligation because the entity has no other realistic alternative but to settle the obligation Definition 2 A legal obligation is one arising from a contract legislation or other operation of law. A. B. C. D.

Both I and lI . B. Neither I nor II I only II only

6. It’s an obligation that is derived from an entity s actions where the entity has indicated to other  parties that it will accept certain responsibilities by reason of an established pattern of past  practice published policy or a sufficiently specific current statement and as a result the entity has created a valid expectation on the part of other parties that it will discharge those responsibilities. A. Constructive obligation C: Contingent obligation B. Legal obligation D. Present obligation 7. Which of the following statements is correct when some or all-of the expenditures required to settle a provision is expected to be reimbursed by another party? I. II.

The reimbursement shall be recognized when it is probable and measurable. The reimbursement shall be treated as a separate asset and not netted against the estimated liability for the provision. In the income statement, however, the provision may  be presented net of the reimbursement.

III.

The amount of the reimbursement shall not exceed the amount of the provision. A. I, li and Ill B. I and Il only

C.- land Ill only D. Il and III only

8. Management can estimate the amount of loss that will occur if a foreign government expropriates some company assets. If expropriation is reasonably possible, a loss contingency should be A. B. C. D.

Disclosed but not accrued as a liability Disclosed and accrued as a liability Accrued as a liability but not disclosed  Neither accrued-as a liability nor disclosed

9. Invern Inc. has a self-insurance plan Each year retained earnings is appropriated for Contingencies in an amount equal to insurance premiums saved less recognized losses from lawsuits and other claims. As a result of a 2012 accident, Invern s a defendant in a lawsuit in which it will probably have to pay damages of P 190,000. What are the effects of this. lawsuit’s  probable outcome on Invern’s 2012 financial statements? A. An increase in expenses and no effect on liabilities B. An increase in both expenses and liabilities C.  No effect on expenses and an increase in liabilities D.  No effect on either expenses or liabilities 10. When can a “provision” be recognized in accordance with PAS 37? A. When there is a legal obligation arising from a past (obligating) event, the probability of the outflow of resources is more than remote (but less than probable), and a reliable estimate can be made of the amount of the obligation B. When there is a constructive obligation as a result of a past (obligating) event, the outflow of resources is probable, and a reliable estimate can be made of the amount of the obligation C. When there is a possible obligation arising from a past e vent, the outflow of resources is  probable, and an approximate amount can be set aside toward the obligation D. When management decides that it is essential that a provision be made for unforeseen circumstances and keeping in mind this year the, profits were enough but next year there may be losses 11. Amazon Inc. has been served a legal notice on December 15, 20X1, by the local environmental protection agency (EPA) to fit smoke detectors in its factory on or before June 30, 20X2 (before June 30 of the following year). The cost of fitting smoke detectors in its factory is estimated at P250,000. How should Amazon Inc. treat this in its financial statements for the year ended December 31, 20X1?

A. Recognize a provision for P250,000 in the financial statements for the year ended December 31, 20X1 B. Recognize a provision for P125,000 in the financial statements for the year ended December 31, 20X1, because the other 50% of the estimated amount will be recognized next year in the financial statement for the year ended December 31, 20X2 C. Because Amazon Inc. canavoid the future expenditure by changing the method of operations and thus there is no present obligation for the future expenditure, no provision is required at December 3, 20X1, but as there is a possible obligation, this warrants disclosure in footnotes to the financial statements for the year ended December 31, 20X1 D. ignore this forth purposes of the financial statements for the year ended December 31, 20X1, and neither disclose nor provide the estimated amount of P250,000 12. A competitor has sued an entity for unauthorized use of its patented technology. The amount that the entity may be required to pay to the competitor if the competitor succeeds in the lawsuit is determinable with reliability, and according to the legal cou nsel it is less than probable (but more than remote) that an outflow of the resources would be needed to meet the obligation. The entity that was sued should at yearend: A. Recognize a provision for this possible obligation B. Make a disclosure of the possible obligation in footno tes to the financial statement C. Make no provision or disclosure and wait until the lawsuit is finally decided and then expense the amount paid on settlement, if any D. Set aside, as an appropriation, a contingency reserve, an amount based on the best estimate of the possible liability. 13. Management can estimate the amount of loss that will occur if a foreign government expropriates some company assets. If expropriation is reasonably possible, a loss contingency should be A. B. C. D.

Disclosed but not accrued as a liability Disclosed, and accrued as a liability Accrued as a liability but not disclosed  Neither accrued as a liability nor disclosed

14. In 2012, a contract dispute between Dollis Co. and Brooks Co. was submitted to binding arbitration. In 2012, each party’s attorney indicated privately that the probable award in Dollis favor could be reasonably estimated. In 2013, the arbitrator decided in favor of Dollis. When should Dollis and Brooks recognize their respective gain and loss? Dollis’ gain Brooks’ loss A. 2012 2012 B. 2012 2013 C. 2013 2012

D. 2013 2013 15. A factory owned by XYZ Inc. was destroyed by fire. XYZ Inc. lodged an insurance clairl, for the value of the factory building, plant, and an amount equal to one year’s net profit. During the year there were a number of meetings with the representatives of the insurance company. Finally,  before year-end, it was decided that XYZ Inc. would receive compensation for 90% of its claim. XYZ Inc. received a letter that the settlement check for that amount had been mailed, but it was not received before year-end. How should XYZ Inc. treat this in its financial statements? A. Disclose the contingent asset in the footnotes B. Wait until next year when the settlement check is actually received and not recognize or disclose this receivable at all since at year-end i t is a contingent asset C. Because the settlement of the claim was conve yed by a letter from the insurance company that also stated that the settlement check was in the mail for 90% of the clàim, record 90% of the claim as a receivable as it is virtually certain that the contingent asset will be received D. Because the settlement of the claim was conve yed by a letter from the insurance company that also stated that the settlement check was in the mail for 90% of the claim, record 100% of the claim a receivable at year-end as it is virtually certain that the contingent asset will be received, and adjust the 10% next year when the settlement check is actually received 16. It is a program that is planned and controlled by management, and materially changes either: (a) the scope of a business undertaken by an entity; or (b) the manner in which that business is conducted. A. Discontinued operation B. Quasi-reorganization

C. Restructuring D. Business combination

17. The board of directors of ABC Inc. decided on December 15, 2OXX, to wind up international operations in the Far East and move them to Australia. The decision was based on a detailed formal plan of restructuring as required by lAS 37. This decision was conveyed to all workers an management personnel at the headquarters in Europe. The cost of restructuring the operations in the Far East as per this detailed plan was P2 million. How should ABC Inc. treat this restructuring in its financial statements for the year-end December 31, 2 OXX? A. Because ABC Inc. has not announced the restructuring to those affected by the decision and thus has not raised an expectation that ABC Inc. will actually carry out the restructuring (and as no constructive obligation has arisen), only disclose the restructuring decision and the cost of restructuring of P2 million in footnotes to-the financial statements

B. Recognize provision for restructuring since the board of directors has approved it and it has been announced in-the headquarters of ABC Inc. in Europe C. Mention the decision to restructure and the cost involved in the chairman’s statement in the annual report since it a decision of the board of directors D. Because the restructuring has not commenced before year-end, based on prudence, wait until next year and do nothing in this year’s financial statements