International Accounting Standards: Quiz!

14 Questions | Total Attempts: 1865

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International Accounting Standards: Quiz!


Questions and Answers
  • 1. 
    What are the two key criteria for an item of property, plant & equipment to be “recognized” as an asset? 
    • A. 

      When it can be reliably measured

    • B. 

      When it is controlled by the entity

    • C. 

      When it is probable that economic benefits will flow to the entity from the asset

    • D. 

      When it has a residual value

  • 2. 
    What does IAS 16 state about how we should depreciate an asset?
    • A. 

      All assets having a known useful life should be depreciated

    • B. 

      Assets should be recognised in the balance sheet at their carrying amount

    • C. 

      Assets should be depreciated by systematically allocating their depreciable amount over their useful life

    • D. 

      The carrying amount of an asset is the value recognised in the accounts after deducting depreciation and impairment losses

  • 3. 
    How should an entity choose which depreciation method to use?
    • A. 

      Always use 25% diminishing balance unless there is a good reason not to

    • B. 

      The method which best reflects way we use up the value of the asset over its expected useful life

    • C. 

      If the residual value is negligible you can ignore it when calculating the depreciable amount

    • D. 

      Useful life and and residual value should be reviewed annually and any changes reported according to IAS 8

    • E. 

      When determining useful life, expected usage and expected physical wear and tear must be considered

  • 4. 
    What are the 3 key elements used to decide whether an intangible fixed asset should be recognised in the accounts?
    • A. 

      Control, marketability, materiality

    • B. 

      Completion of development, control, identifiability

    • C. 

      Control, identifiability, economic benefits

    • D. 

      Intention to complete development, economic benefits, identifiability

  • 5. 
    Research costs - What does IAS38, Intangible Assets, the state is the accounting treatment for research costs?
    • A. 

      All research costs should be written off at the time they are incurred in line with the Prudence Concept.

    • B. 

      Revenue costs are treated as expenses on the Income Statement whereas Capital costs are treated as Non-current Assets

  • 6. 
    Which TWO of the following options show ALL 6 of the criteria an entity needs to demonstrate in order to recognize development expenditure as a capital cost?
    • A. 

      Intention to complete, technically feasible, usefulness or marketability

    • B. 

      Control, technically feasible, usefulness

    • C. 

      Sufficient resources to enable completion, cost can be reliably measured, how economic benefits will be achieved

    • D. 

      Identifiability, cost can be reliably measured, control

  • 7. 
    IAS 36 Impairment of fixed assets - The present value of future net cash inflows to the entity from a Cash Generating Unit is the definition of which value?
    • A. 

      Value in use

    • B. 

      Recoverable amount

    • C. 

      Carrying amount

  • 8. 
    What does the following definition describe? “the higher of the fair value less costs to sell, and the value in use of an asset or cash-generating unit” 
    • A. 

      Carrying amount

    • B. 

      Recoverable amount

    • C. 

      Market value in an arm's length transaction

  • 9. 
    Why would we need to consider a Cash generating unit (a group of assets) rather than an individual non-current asset when determining recoverable amount? 
    • A. 

      It is not economically viable to work out the future cash inflows from an individual asset

    • B. 

      Materiality

    • C. 

      Because individual assets often don't create cash inflows on their own

  • 10. 
    If the carrying amount (net book value) of an asset is below the recoverable amount, what is the name we give to the difference between the two values? 
    • A. 

      Revaluation loss

    • B. 

      Impairment loss

    • C. 

      Notional loss on sale

  • 11. 
    What types of property are considered to be an investment property?
    • A. 

      Land held for capital appreciation

    • B. 

      Vacant land

    • C. 

      Empty warehouse

    • D. 

      Property to let

  • 12. 
    Which type of lease is normally long term and transfers all the risks and rewards of ownership?
    • A. 

      Finance lease

    • B. 

      Operating lease

  • 13. 
    IAS17 allows us to capitalize an asset on a finance lease, this increases our Net Assets Which of the following criteria in our contract would indicate that we should NOT capitalize the leased asset? 
    • A. 

      Term of the lease is major part of the asset's useful life

    • B. 

      At inception, PV of minimum lease payments is substantially all of the FV of the asset

    • C. 

      Lessor is responsible for repairs

    • D. 

      Ownership transferred at end of lease

    • E. 

      Lessee has option to purchase at end of lease at price so much lower than Fair Value it is almost certain they will exercise the option

  • 14. 
    IAS 2 requires stock to be valued at “lower of cost and NRV” By recognizing that stock is worth less than what it cost the entity, we have recognized the loss in the accounts before it has occurred ie before we have sold the stock. This is in line with the _______ concept.
    • A. 

      Matching

    • B. 

      Business Entity

    • C. 

      Reliability

    • D. 

      Prudence

    • E. 

      Historical Cost

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