IFRS Standards: The Quiz

1. A statement of financial position is required as part of a complete set of IFRS financial statements.

True

False

A complete set of IFRS financial statements is specified in IAS 1 Presentation of Financial Statements. The statement of financial position is also called the balance sheet.

Explanation

A complete set of IFRS financial statements is specified in IAS 1 Presentation of Financial Statements. The statement of financial position is also called the balance sheet.

2. Depreciation is the systematic allocation of the depreciable amount of an asset over its useful life.

True

False

See IAS 16 Property, Plant and Equipment.

Explanation

See IAS 16 Property, Plant and Equipment.

3. Because companies seek capital at the best price wherever it is available, and investors and lenders seek investment opportunities wherever they can get the best returns commensurate with the risks involved, investors and lenders need financial information that is relevant, reliable and comparable across borders.

True

False

The explanation for the given correct answer is that companies seek capital at the best price wherever it is available, and investors and lenders seek investment opportunities wherever they can get the best returns commensurate with the risks involved. In order to make informed decisions, investors and lenders need financial information that is relevant, reliable, and comparable across borders. This ensures that they can assess the potential risks and returns of investments in different countries and make optimal investment decisions.

Explanation

The explanation for the given correct answer is that companies seek capital at the best price wherever it is available, and investors and lenders seek investment opportunities wherever they can get the best returns commensurate with the risks involved. In order to make informed decisions, investors and lenders need financial information that is relevant, reliable, and comparable across borders. This ensures that they can assess the potential risks and returns of investments in different countries and make optimal investment decisions.

4. Many academic studies of the use of IFRS Standards have concluded that IFRS Standards have improved efficiency of capital markets or promoted cross-border investment.

True

False

For example, see Ann Tarca, 'The Case for Global Accounting Standards: Arguments and Evidence'. http://www.ifrs.org/Use-around-the-world/Documents/Case-for-Global-Accounting-Standards-Arguments-and-Evidence.pdf.

Explanation

For example, see Ann Tarca, 'The Case for Global Accounting Standards: Arguments and Evidence'. http://www.ifrs.org/Use-around-the-world/Documents/Case-for-Global-Accounting-Standards-Arguments-and-Evidence.pdf.

5. Consolidated financial statements are the financial statements of a group of companies in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.

True

False

Yes. See IFRS 10 Consolidated Financial Statements.

Explanation

Yes. See IFRS 10 Consolidated Financial Statements.

6. A summary of significant accounting policies must be included in the notes to IFRS financial statements.

True

False

Required by IAS 1 Presentation of Financial Statements.

Explanation

Required by IAS 1 Presentation of Financial Statements.

7. If an item of property, plant, and equipment is impaired, the entity must reduce that item's carrying amount to its recoverable amount, and recognise an impairment loss.

True

False

See IAS 36 Impairment of Assets.

Explanation

See IAS 36 Impairment of Assets.

8. IFRS Standards are developed by the International Accounting Standards Board, which operates under the independent, public-interest IFRS Foundation and is not an agency of any government.

True

False

The explanation for the given correct answer is that IFRS Standards are indeed developed by the International Accounting Standards Board (IASB). The IASB operates independently under the IFRS Foundation, which is a public-interest organization and not affiliated with any government agency. Therefore, the statement is true.

Explanation

The explanation for the given correct answer is that IFRS Standards are indeed developed by the International Accounting Standards Board (IASB). The IASB operates independently under the IFRS Foundation, which is a public-interest organization and not affiliated with any government agency. Therefore, the statement is true.

9. The mission of the IFRS Foundation is to develop, in the public interest, a single set of high quality global accounting standards that bring transparency, accountability and efficiency to financial markets around the world.

True

False

The mission of the IFRS Foundation is to develop a single set of high-quality global accounting standards that bring transparency, accountability, and efficiency to financial markets worldwide. This implies that the statement is correct, as it aligns with the stated mission of the foundation.

Explanation

The mission of the IFRS Foundation is to develop a single set of high-quality global accounting standards that bring transparency, accountability, and efficiency to financial markets worldwide. This implies that the statement is correct, as it aligns with the stated mission of the foundation.

10. Under IFRS Standards, when one company (the parent) controls another company (the subsidiary), the parent is required to prepare consolidated financial statements (with limited exceptions).

True

False

This is the core principle in IFRS 10 Consolidated Financial Statements.

Explanation

This is the core principle in IFRS 10 Consolidated Financial Statements.

11. Under IFRS 16 Leases, a lessee recognises an asset representing its right to use the underlying leased asset and a liability representing its obligation to make lease payments.

True

False

See IFRS 16 Leases.

Explanation

See IFRS 16 Leases.

12. Under IFRS Standards, the objective of financial reporting is to provide financial information about a company that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to that company.

True

False

See Chapter 1 'The objective of financial reporting' in The Conceptual Framework for Financial Reporting.

Explanation

See Chapter 1 'The objective of financial reporting' in The Conceptual Framework for Financial Reporting.

13. Under IFRS Standards, in a business combination the acquiring company generally recognises the assets acquired, and the liabilities assumed, at their fair values on the acquisition date.

True

False

See IFRS 3 Business Combinations.

Explanation

See IFRS 3 Business Combinations.

14. Once a new IFRS Standard or major amendment has been in place for several years, the International Accounting Standards Board conducts a Post-implementation Review to assess whether the Standard is achieving its objective and, if not, what amendments should be considered.

True

False

See the IASB Due Process Handbook available on its website.

Explanation

See the IASB Due Process Handbook available on its website.

15. The use of one set of high quality standards by companies throughout the world improves the comparability and transparency of financial information and reduces financial statement preparation costs.

True

False

The statement suggests that using one set of high-quality standards globally benefits companies by making financial information more comparable and transparent, and also reduces the costs associated with preparing financial statements. This implies that having a standardized framework for financial reporting allows for easier analysis and understanding of financial information, leading to more informed decision-making by stakeholders. Additionally, using a common set of standards eliminates the need for companies to adapt their financial reporting practices to different jurisdictions, thus reducing the costs involved in complying with multiple reporting requirements.

Explanation

The statement suggests that using one set of high-quality standards globally benefits companies by making financial information more comparable and transparent, and also reduces the costs associated with preparing financial statements. This implies that having a standardized framework for financial reporting allows for easier analysis and understanding of financial information, leading to more informed decision-making by stakeholders. Additionally, using a common set of standards eliminates the need for companies to adapt their financial reporting practices to different jurisdictions, thus reducing the costs involved in complying with multiple reporting requirements.

16. More than 100 jurisdictions currently require IFRS Standards for all or most domestic listed companies.

True

False

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

Explanation

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

17. Under IFRS Standards, a company must disclose information about its relationships and transactions with related parties and about compensation of key management personnel.

True

False

See IAS 24 Related Party Disclosures.

Explanation

See IAS 24 Related Party Disclosures.

18. In a 2012 report, the Trustees of the IFRS Foundation reaffirmed their belief that a single set of IFRS Standards is in the best interests of the global economy.

True

False

The report is on the IFRS Foundation's website. Go to 'About us' then 'IFRS Foundation' then 'Governance and oversight' then 'Strategy Review '.

Explanation

The report is on the IFRS Foundation's website. Go to 'About us' then 'IFRS Foundation' then 'Governance and oversight' then 'Strategy Review '.

19. At the end of each reporting period an entity must translate foreign currency monetary items (such as cash, investments, and accounts receivable and payable) at the closing exchange rate (the rate at the end of the reporting period).

True

False

See IAS 21 The Effects of Changes in Foreign Exchange Rates.

Explanation

See IAS 21 The Effects of Changes in Foreign Exchange Rates.

20. A company that adopts IFRS Standards for the first time must measure and disclose how the transition from its previous national standards to IFRS Standards affected the entity's reported financial position, financial performance, and cash flows.

True

False

See IFRS 1 First-time Adoption of International Financial Reporting Standards.

Explanation

See IFRS 1 First-time Adoption of International Financial Reporting Standards.

21. Under IFRS Standards, inventories are normally measured at the lower of cost and net realisable value.

True

False

See IAS 2 Inventories.

Explanation

See IAS 2 Inventories.

22. If an IFRS Standard does not specifically address a particular kind of transaction, IFRS Standards require management to use its judgement in developing and applying an accounting policy that results in information that is relevant and reliable.

True

False

See IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Explanation

See IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

23. Under IFRS Standards, revenue from providing services to a customer is typically recognised over a period of time--the period in which the services are provided.

True

False

See IFRS 15 Revenue from Contracts with Customers.

Explanation

See IFRS 15 Revenue from Contracts with Customers.

24. For statement of cash flows, operating activities are the principal revenue-producing activities of the entity.

True

False

See IAS 7 Statement of Cash Flows.

Explanation

See IAS 7 Statement of Cash Flows.

25. Good accounting standards enable capital markets to allocate funds more efficiently.

True

False

Good accounting standards enable capital markets to allocate funds more efficiently by providing reliable and transparent financial information. These standards ensure that financial statements are prepared in a consistent and accurate manner, allowing investors to make informed decisions. With reliable accounting information, investors can assess the financial health and performance of companies, which helps in the efficient allocation of funds. Additionally, good accounting standards promote trust and confidence in the financial markets, attracting more investors and facilitating capital flow.

Explanation

Good accounting standards enable capital markets to allocate funds more efficiently by providing reliable and transparent financial information. These standards ensure that financial statements are prepared in a consistent and accurate manner, allowing investors to make informed decisions. With reliable accounting information, investors can assess the financial health and performance of companies, which helps in the efficient allocation of funds. Additionally, good accounting standards promote trust and confidence in the financial markets, attracting more investors and facilitating capital flow.

26. In most of the jurisdictions that have adopted IFRS Standards, the auditor's report refers to conformity with International Financial Reporting Standards.

True

False

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

Explanation

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

27. IFRS Standards require that share-based payment transactions, including the issue of shares and share options, must be recognised in the financial statements.

True

False

See IFRS 2 Share-based Payment.

Explanation

See IFRS 2 Share-based Payment.

28. Derivative financial instruments ('derivatives') can be assets or liabilities under IFRS Standards.

True

False

See IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments.

Explanation

See IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments.

29. Under IFRS Standards, inventories must be written down to net realisable value if net realisable value is below cost.

True

False

See IAS 2 Inventories.

Explanation

See IAS 2 Inventories.

30. If a country does not have a stock exchange, it does not benefit from IFRS Standards.

True

False

IFRS Standards (including the IFRS for SMEs Standard) are designed to provide relevant and reliable information for all investment, lending, and credit decisions, not just investment decisions by stock exchange investors. Many non-public companies use IFRS Standards.

Explanation

IFRS Standards (including the IFRS for SMEs Standard) are designed to provide relevant and reliable information for all investment, lending, and credit decisions, not just investment decisions by stock exchange investors. Many non-public companies use IFRS Standards.

31. The requirements in IFRS Standards (Standards and mandatory application guidance) are available for free download on the IFRS Foundation's website.

True

False

The requirements in IFRS Standards (Standards and mandatory application guidance) are available for free download on the IFRS Foundation's website.

Explanation

The requirements in IFRS Standards (Standards and mandatory application guidance) are available for free download on the IFRS Foundation's website.

32. A company that adopts IFRS Standards for the first time in 2016 must also restate the disclosures relating to 2015 that are included in the notes to its 2016 financial statements (with some exceptions).

True

False

See IFRS 1 First-time Adoption of International Financial Reporting Standards.

Explanation

See IFRS 1 First-time Adoption of International Financial Reporting Standards.

33. An automobile dealer sells new cars alone, sells car maintenance service alone, and sells a package of a new car plus full maintenance service for three years, five years, or as long as the buyer owns the car. When it sells a package of a new car plus a period of full maintenance service, IFRS Standards require the dealer to account for the car sale separately up front and account for the service revenue over the service period.

True

False

See IFRS 15 Revenue.

Explanation

See IFRS 15 Revenue.

34. An IFRS Foundation study of over 140 jurisdictions found that over 80% of the jurisdictions already require the use of IFRS Standards by all or most public companies.

True

False

The given statement is true. According to an IFRS Foundation study, more than 80% of jurisdictions already have a requirement for the use of IFRS Standards by all or most public companies. This indicates that a majority of countries have adopted IFRS as the accounting standard for their public companies.

Explanation

The given statement is true. According to an IFRS Foundation study, more than 80% of jurisdictions already have a requirement for the use of IFRS Standards by all or most public companies. This indicates that a majority of countries have adopted IFRS as the accounting standard for their public companies.

35. The International Accounting Standards Board publishes its proposed Standards for public comment in a document called an 'Exposure Draft'.

True

False

The International Accounting Standards Board (IASB) releases its proposed Standards for public feedback through an 'Exposure Draft'. This document allows stakeholders and the public to review and provide comments on the proposed Standards before they are finalized and implemented. Therefore, the statement that the IASB publishes its proposed Standards in an 'Exposure Draft' is true.

Explanation

The International Accounting Standards Board (IASB) releases its proposed Standards for public feedback through an 'Exposure Draft'. This document allows stakeholders and the public to review and provide comments on the proposed Standards before they are finalized and implemented. Therefore, the statement that the IASB publishes its proposed Standards in an 'Exposure Draft' is true.

36. A company purchased a license to use, for five years, computer software developed by another company. Under IFRS Standards the license is recognised as an asset and its cost amortised over the five years.

True

False

Under IAS 38 Intangible Assets, intangible assets with finite lives are amortised.

Explanation

Under IAS 38 Intangible Assets, intangible assets with finite lives are amortised.

37. The International Accounting Standards Board monitors the implementation of new or amended IFRS Standards to identify any implementation problems that may need to be addressed by an IFRIC Interpretation or a narrow-scope amendment to the Standard.

True

False

The statement is true because the International Accounting Standards Board (IASB) is responsible for overseeing the implementation of new or amended International Financial Reporting Standards (IFRS). This includes monitoring the application of these standards to identify any issues that may arise during implementation. If any problems are identified, the IASB may address them by issuing an IFRIC Interpretation or making a narrow-scope amendment to the standard. This ensures that the standards are effectively implemented and any potential issues are resolved.

Explanation

The statement is true because the International Accounting Standards Board (IASB) is responsible for overseeing the implementation of new or amended International Financial Reporting Standards (IFRS). This includes monitoring the application of these standards to identify any issues that may arise during implementation. If any problems are identified, the IASB may address them by issuing an IFRIC Interpretation or making a narrow-scope amendment to the standard. This ensures that the standards are effectively implemented and any potential issues are resolved.

38. Under IFRS Standards, assets classified as 'held for sale' must be presented separately in the statement of financial position.

True

False

See IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Explanation

See IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

39. The European Union Accounting Regulation requires that all European companies whose securities trade in a regulated securities market must use IFRS Standards as adopted by the EU in their consolidated financial statements.

True

False

You can find the Regulation here: http://ec.europa.eu/internal_market/accounting/legal_framework/regulations_adopting_ias/index_en.htm

Explanation

You can find the Regulation here: http://ec.europa.eu/internal_market/accounting/legal_framework/regulations_adopting_ias/index_en.htm

40. The comment letters that the International Accounting Standards Board receives on discussion documents and Exposure Drafts are public documents, available on the IFRS Foundation website.

True

False

The links are on the individual project pages. The 'Work Plan' has one page with links to all projects since 2006.

Explanation

The links are on the individual project pages. The 'Work Plan' has one page with links to all projects since 2006.

41. Most of the listed companies on the main board of the stock exchange in Switzerland use IFRS Standards.

True

False

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

Explanation

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

42. Under IFRS Standards, a company applies the same accounting policies in quarterly and half-yearly reports as in its most recent annual report.

True

False

See IAS 34 Interim Financial Reporting.

Explanation

See IAS 34 Interim Financial Reporting.

43. A statement of cash flows is required as part of a complete or condensed set of financial statements included in an interim financial report prepared under IFRS Standards.

True

False

See IAS 34 Interim Financial Reporting.

Explanation

See IAS 34 Interim Financial Reporting.

44. A deferred tax asset is recognised for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that the company can use those carryforwards to reduce future tax payments.

True

False

See IAS 12 Income Taxes.

Explanation

See IAS 12 Income Taxes.

45. An intangible asset is an identifiable non-monetary asset without physical substance.

True

False

See IAS 38 Intangible Assets.

Explanation

See IAS 38 Intangible Assets.

46. A warranty obligation is an example of a provision under IFRS Standards.

True

False

See IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Explanation

See IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

47. The International Accounting Standards Committee (IASC) began setting International Accounting Standards (now known as IAS Standards) in 1973.

True

False

The International Accounting Standards Committee (IASC) did indeed start setting International Accounting Standards (now known as IAS Standards) in 1973. This indicates that the statement is accurate and true.

Explanation

The International Accounting Standards Committee (IASC) did indeed start setting International Accounting Standards (now known as IAS Standards) in 1973. This indicates that the statement is accurate and true.

48. A company that has issued convertible debt faces potential dilution of its earnings per share.

True

False

See IAS 33 Earnings per Share. Dilution is a reduction in earnings per share or an increase in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions

Explanation

See IAS 33 Earnings per Share. Dilution is a reduction in earnings per share or an increase in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions

49. Under IFRS Standards, the recoverable amount of recognised goodwill must be estimated each year, and an impairment loss is recognised if the recoverable amount is less than the carrying amount.

True

False

Under IFRS Standards, the recoverable amount of recognised goodwill must be estimated each year. This means that companies need to assess the value of their goodwill annually to determine if it is still recoverable. If the estimated recoverable amount is less than the carrying amount (the value at which the goodwill is recorded on the balance sheet), an impairment loss must be recognized. This ensures that the carrying amount of goodwill is not overstated and reflects its true value in the financial statements. Therefore, the statement "Under IFRS Standards, the recoverable amount of recognised goodwill must be estimated each year, and an impairment loss is recognized if the recoverable amount is less than the carrying amount" is true.

Explanation

Under IFRS Standards, the recoverable amount of recognised goodwill must be estimated each year. This means that companies need to assess the value of their goodwill annually to determine if it is still recoverable. If the estimated recoverable amount is less than the carrying amount (the value at which the goodwill is recorded on the balance sheet), an impairment loss must be recognized. This ensures that the carrying amount of goodwill is not overstated and reflects its true value in the financial statements. Therefore, the statement "Under IFRS Standards, the recoverable amount of recognised goodwill must be estimated each year, and an impairment loss is recognized if the recoverable amount is less than the carrying amount" is true.

50. If a contract with a customer requires an entity to deliver two distinct goods or services, it must recognise revenue separately for each of the two goods or services when they are delivered to the customer--even if the customer pays a single lump-sum amount up front.

True

False

See IFRS 15 Revenue from Contracts with Customers.

Explanation

See IFRS 15 Revenue from Contracts with Customers.

51. The IFRS Foundation decides which countries must use IFRS Standards.

True

False

Legislators and/or regulators in each jurisdiction decide which accounting standards best serve the capital markets in that jurisdiction.

Explanation

Legislators and/or regulators in each jurisdiction decide which accounting standards best serve the capital markets in that jurisdiction.

52. In assessing impairment under IFRS Standards, if the value in use of an individual asset cannot be determined, recoverable amount is determined for the smallest group of assets that includes the individual asset and that generates independent cash flows (cash-generating unit).

True

False

See IAS 36 Impairment of Assets.

Explanation

See IAS 36 Impairment of Assets.

53. A company that adopts IFRS Standards for the first time in 2016 must also restate its 2015 financial information to conform to IFRS Standards (with some exceptions).

True

False

See IFRS 1 First-time Adoption of International Financial Reporting Standards.

Explanation

See IFRS 1 First-time Adoption of International Financial Reporting Standards.

54. Under IFRS Standards, government grants are recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate.

True

False

See IAS 20 Accounting for Government Grants and Disclosure of Government Assistance.

Explanation

See IAS 20 Accounting for Government Grants and Disclosure of Government Assistance.

55. A mining company builds an open pit mine in 2016. It expects the mine to operate for 10 years, after which the law requires the company to do major and costly site restoration work. Under IFRS Standards, in 2016, the company will recognise the estimated cost of the obligatory site restoration work as part of the initial cost of the mine, and will recognise a liability to pay the restoration cost.

True

False

See IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Explanation

See IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

56. A company owns a five-year-old jet airplane that it could sell today for $1,000,000. A new version of the same model jet airplane, with newer technology, can be purchased for $2,000,000. Under IFRS Standards the fair value of the old plane is $1,000,000.

True

False

See IFRS 13 Fair Value Measurement.

Explanation

See IFRS 13 Fair Value Measurement.

57. If the carrying amount of an asset exceeds its recoverable amount, the asset is described under IFRS Standards as impaired.

True

False

See IAS 36 Impairment of Assets.

Explanation

See IAS 36 Impairment of Assets.

58. A company would normally correct material prior period errors retrospectively by restating the comparative amounts for the prior period(s) presented in which the error occurred.

True

False

See IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Explanation

See IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

59. Under IFRS Standards, the net realisable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

True

False

See IAS 2 Inventories.

Explanation

See IAS 2 Inventories.

60. The International Accounting Standards Board replaced the International Accounting Standards Committee in 2001.

True

False

The International Accounting Standards Board (IASB) did indeed replace the International Accounting Standards Committee (IASC) in 2001. The IASC was formed in 1973 and was responsible for developing international accounting standards. However, it faced criticisms for its lack of enforcement powers and inconsistencies in its standards. As a result, the IASB was established in 2001 as an independent standard-setting body to develop and promote the use of high-quality global accounting standards. Therefore, the statement "The International Accounting Standards Board replaced the International Accounting Standards Committee in 2001" is true.

Explanation

The International Accounting Standards Board (IASB) did indeed replace the International Accounting Standards Committee (IASC) in 2001. The IASC was formed in 1973 and was responsible for developing international accounting standards. However, it faced criticisms for its lack of enforcement powers and inconsistencies in its standards. As a result, the IASB was established in 2001 as an independent standard-setting body to develop and promote the use of high-quality global accounting standards. Therefore, the statement "The International Accounting Standards Board replaced the International Accounting Standards Committee in 2001" is true.

61. An example of a contingent liability under IFRS Standards is a lawsuit against the company for which the outcome is still uncertain.

True

False

See IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Explanation

See IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

62. If a country has hyperinflation (a very high inflation rate), IFRS financial statements are expressed in units of currency adjusted to reflect changes in a general price index.

True

False

See IAS 29 Financial Reporting in Hyperinflationary Economies.

Explanation

See IAS 29 Financial Reporting in Hyperinflationary Economies.

63. The current chairman of the International Accounting Standards Board is Hans Hoogervorst.

True

False

Mr Hoogervorst has been IASB Chairman since 1 July 2011.

Explanation

Mr Hoogervorst has been IASB Chairman since 1 July 2011.

64. The International Accounting Standards Board's headquarters are at 30 Cannon Street in London.

True

False

The explanation for the given correct answer is that the International Accounting Standards Board's headquarters are indeed located at 30 Cannon Street in London. This is a factual statement and can be verified through official sources or the organization's website.

Explanation

The explanation for the given correct answer is that the International Accounting Standards Board's headquarters are indeed located at 30 Cannon Street in London. This is a factual statement and can be verified through official sources or the organization's website.

65. For presentation in the statement of financial position (balance sheet), financial instruments are classified into financial assets, financial liabilities, and equity instruments.

True

False

Financial instruments are classified into financial assets, financial liabilities, and equity instruments for presentation in the statement of financial position (balance sheet). This classification helps in providing a clear and accurate representation of the financial position of an entity. Financial assets represent the rights to receive cash or other financial assets, financial liabilities represent the obligations to transfer cash or other financial assets, and equity instruments represent the residual interest in the assets of an entity after deducting liabilities. Thus, it is true that financial instruments are classified into these categories for presentation in the statement of financial position.

Explanation

Financial instruments are classified into financial assets, financial liabilities, and equity instruments for presentation in the statement of financial position (balance sheet). This classification helps in providing a clear and accurate representation of the financial position of an entity. Financial assets represent the rights to receive cash or other financial assets, financial liabilities represent the obligations to transfer cash or other financial assets, and equity instruments represent the residual interest in the assets of an entity after deducting liabilities. Thus, it is true that financial instruments are classified into these categories for presentation in the statement of financial position.

66. Under IFRS Standards, if a company builds an office building for its own use, it may account for the building at historical cost less accumulated depreciation and impairment losses, with depreciation and impairment losses recognised in profit or loss.

True

False

See IAS 16 Property, Plant and Equipment. This building is not investment property.

Explanation

See IAS 16 Property, Plant and Equipment. This building is not investment property.

67. Under IFRS Standards, if a non-current asset is held for sale, it must be written down to recoverable amount (fair value less costs to sell), and depreciation stops.

True

False

See IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Explanation

See IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

68. IFRS Standards require a listed company to disclose information about the different products and services it sells and the different geographical areas in which it operates.

True

False

See IFRS 8 Operating Segments.

Explanation

See IFRS 8 Operating Segments.

69. The bankruptcy of a major debtor a few days after the end of a company's financial year and before its financial statements were issued would likely be taken into account under IFRS Standards in measuring the provision for bad debts at year-end.

True

False

See IAS 10 Events after the Reporting Period.

Explanation

See IAS 10 Events after the Reporting Period.

70. Under IFRS Standards an entity that chooses to revalue its property, plant and equipment will recognise revaluation increases in other comprehensive income but not in profit or loss (assuming they do not reverse a previous revaluation decrease that was recognised in profit or loss).

True

False

See IAS 16 Property, Plant and Equipment.

Explanation

See IAS 16 Property, Plant and Equipment.

71. If a company overestimated the amount of income tax it owes for the current year, and paid the government too much in estimated taxes, the overpayment is reported under IFRS Standards as an asset.

True

False

See IAS 12 Income Taxes.

Explanation

See IAS 12 Income Taxes.

72. A fundamental principle in IFRS Standards is that an asset must not be carried in the financial statements at more than the amount to be recovered through its use or sale.

True

False

See IAS 36 Impairment of Assets.

Explanation

See IAS 36 Impairment of Assets.

73. Nearly 500 foreign companies whose securities trade in the United States file IFRS financial statements with the US Securities and Exchange Commission.

True

False

The statement is true because nearly 500 foreign companies that have their securities traded in the United States are required to file IFRS financial statements with the US Securities and Exchange Commission. This indicates that these companies follow the International Financial Reporting Standards (IFRS) when preparing their financial statements, which are then submitted to the SEC for regulatory purposes.

Explanation

The statement is true because nearly 500 foreign companies that have their securities traded in the United States are required to file IFRS financial statements with the US Securities and Exchange Commission. This indicates that these companies follow the International Financial Reporting Standards (IFRS) when preparing their financial statements, which are then submitted to the SEC for regulatory purposes.

74. Under IFRS Standards, amounts in a company's financial statements for 2016 would not be adjusted to reflect a fire loss that occurred in January 2017 (before the 2016 financial statements are issued), but disclosure may be required.

True

False

See IAS 10 Events after the Reporting Period.

Explanation

See IAS 10 Events after the Reporting Period.

75. Some topics in full IFRS Standards are omitted from the IFRS for SMEs Standard because they are not relevant to typical small and medium-sized entities.

True

False

See the Basis for Conclusions to the IFRS for SMEs Standard.

Explanation

See the Basis for Conclusions to the IFRS for SMEs Standard.

76. Under IFRS Standards, the value in use of an asset is the expected future cash flows that the asset in its current condition will produce, discounted to present value using an appropriate pre-tax discount rate.

True

False

See both IAS 36 Impairment of Assets and IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Explanation

See both IAS 36 Impairment of Assets and IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

77. The Conceptual Framework sets out the concepts that underlie the preparation and presentation of financial statements for external users.

True

False

The Conceptual Framework for Financial Reporting is available on the IFRS Foundation website www.ifrs.org.

Explanation

The Conceptual Framework for Financial Reporting is available on the IFRS Foundation website www.ifrs.org.

78. Under IFRS Standards, revenue from providing goods to a customer is typically recognised when the customer gets control over the goods (which is usually when they are delivered).

True

False

See IFRS 15 Revenue from Contracts with Customers.

Explanation

See IFRS 15 Revenue from Contracts with Customers.

79. The profiles of IFRS adoption on the IFRS Foundation's website show widespread global adoption of IFRS Standards, with very few local modifications.

True

False

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

Explanation

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

80. Under IFRS Standards, most biological (agricultural) assets other than bearer plants are measured at fair value at each reporting date, with fair value changes recognised in profit or loss.

True

False

See IAS 41 Agriculture.

Explanation

See IAS 41 Agriculture.

81. Under IFRS Standards, the last-in, first-out (LIFO) method of determining the cost of inventory sold is not permitted.

True

False

See IAS 2 Inventories.

Explanation

See IAS 2 Inventories.

82. The legal entity in the IASB structure is the IFRS Foundation.

True

False

The IFRS Foundation is indeed the legal entity in the IASB structure. The IFRS Foundation is responsible for the governance and oversight of the International Accounting Standards Board (IASB), which is the independent standard-setting body that develops and publishes International Financial Reporting Standards (IFRS). The IFRS Foundation ensures that the IASB operates in the public interest and maintains the necessary legal and financial framework for its activities. Therefore, the statement "The legal entity in the IASB structure is the IFRS Foundation" is true.

Explanation

The IFRS Foundation is indeed the legal entity in the IASB structure. The IFRS Foundation is responsible for the governance and oversight of the International Accounting Standards Board (IASB), which is the independent standard-setting body that develops and publishes International Financial Reporting Standards (IFRS). The IFRS Foundation ensures that the IASB operates in the public interest and maintains the necessary legal and financial framework for its activities. Therefore, the statement "The legal entity in the IASB structure is the IFRS Foundation" is true.

83. Under IFRS Standards, a joint venturer measures its interest in the joint venture using the equity method.

True

False

See IFRS 11 Joint Arrangements.

Explanation

See IFRS 11 Joint Arrangements.

84. Under IFRS Standards, a provision (a liability of uncertain amount or timing) expected to be settled beyond one year from the balance sheet date must be measured on a discounted present value basis if the time value of money is material.

True

False

See IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Explanation

See IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

85. Under IFRS Standards, contingent assets are generally not recognised, but they are disclosed when it is more likely than not that an inflow of benefits will occur..

True

False

See IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Explanation

See IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

86. Japanese companies are not permitted to use IFRS Standards.

True

False

Virtually all listed Japanese companies are permitted to use IFRS Standards, and many large listed companies do so.

Explanation

Virtually all listed Japanese companies are permitted to use IFRS Standards, and many large listed companies do so.

87. IASB members are appointed by the Trustees of the IFRS Foundation.

True

False

See IFRS Foundation Constitution.

Explanation

See IFRS Foundation Constitution.

88. While the European Union remains the single biggest IFRS jurisdiction, the combined GDP of IFRS jurisdictions outside of the European Union (US$27 trillion) is now greater than that of the European Union itself (US$19 trillion).

True

False

The explanation for the given correct answer is that the combined GDP of IFRS jurisdictions outside of the European Union is now greater than that of the European Union itself. This means that the economic power and influence of countries using IFRS outside of the EU have surpassed that of the EU. Therefore, it is true that the combined GDP of IFRS jurisdictions outside of the European Union is now greater than that of the European Union.

Explanation

The explanation for the given correct answer is that the combined GDP of IFRS jurisdictions outside of the European Union is now greater than that of the European Union itself. This means that the economic power and influence of countries using IFRS outside of the EU have surpassed that of the EU. Therefore, it is true that the combined GDP of IFRS jurisdictions outside of the European Union is now greater than that of the European Union.

89. The Accounting Standards Advisory Forum (ASAF) is a group of national accounting standard-setters charged with advising the International Accounting Standards Board on major technical issues related to the Board's standard setting activities.

True

False

Information about ASAF may be found on the IFRS Foundation's website: http://www.ifrs.org/About-us/IASB/Advisory-bodies/ASAF/Pages/Accounting-Standards-Advisory-Forum.aspx

Explanation

Information about ASAF may be found on the IFRS Foundation's website: http://www.ifrs.org/About-us/IASB/Advisory-bodies/ASAF/Pages/Accounting-Standards-Advisory-Forum.aspx

90. The impairment of goodwill is assessed by considering the recoverable amount of the cash generating unit(s) to which it is allocated.

True

False

See IAS 36 Impairment of Assets.

Explanation

See IAS 36 Impairment of Assets.

91. In measuring the fair value of an investment, IFRS Standards do not permit an investor to 'second guess' the quoted market price of an investment. That is, even if the investor is confident that the quoted market price undervalues an investment and the investor intends to hold on to the investment until the market turns around, IFRS Standards require that the investor measure fair value using the quoted market price.

True

False

See IFRS 13 Fair Value Measurement.

Explanation

See IFRS 13 Fair Value Measurement.

92. When an entity first recognises a financial asset, it classifies it based on the entity's business model for managing the asset and the asset's contractual cash flow characteristics. Consequently, after acquisition some financial assets will be measured at amortised cost while others will be measured at fair value.

True

False

This is a fundamental principle of IFRS 9 Financial Instruments.

Explanation

This is a fundamental principle of IFRS 9 Financial Instruments.

93. The first-in, first-out (FIFO) method is an acceptable cost formula under IFRS Standards for measuring the cost of large quantities of individually insignificant items of inventory.

True

False

See IAS 2 Inventories.

Explanation

See IAS 2 Inventories.

94. The effect of a change in an accounting estimate is recognised prospectively in the period of the change and future periods, rather than by restating the comparative information for the prior period(s) presented.

True

False

See IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Explanation

See IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

95. Most countries that have adopted the IFRS for SMEs Standard give SMEs the option of using full IFRS Standards instead.

True

False

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

Explanation

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

96. The Trustees of the IFRS Foundation appoint the members of the International Accounting Standards Board.

True

False

Yes, as provided in the Constitution of the IFRS Foundation.

Explanation

Yes, as provided in the Constitution of the IFRS Foundation.

97. IFRS Standards provide the financial information for public capital markets covering over half of the world's GDP.

True

False

Analysis of IFRS jurisdictions by GDP shows that capital market investors and lenders in jurisdictions with 57 per cent of the world’s GDP receive IFRS financial statements.

Explanation

Analysis of IFRS jurisdictions by GDP shows that capital market investors and lenders in jurisdictions with 57 per cent of the world’s GDP receive IFRS financial statements.

98. Under IFRS Standards, financial assets and financial liabilities are offset (netted in the statement of financial position) only when the entity has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or realise the asset and settle the liability simultaneously.

True

False

See IAS 32 Financial Instruments: Presentation.

Explanation

See IAS 32 Financial Instruments: Presentation.

99. Lenders, creditors, and other users of the financial statements of small and medium-sized entities (SMEs) are primarily interested in information about cash flows, liquidity, and solvency, rather than information that helps them forecast an SME's earnings or share price.

True

False

See the Basis for Conclusions to the IFRS for SMEs Standard.

Explanation

See the Basis for Conclusions to the IFRS for SMEs Standard.

100. IFRS Standards permit a company to choose either the fair value model or the cost model to account for its investment property (land and buildings held for investment purposes).

True

False

See IAS 40 Investment Property.

Explanation

See IAS 40 Investment Property.

101. For a construction contract, when it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

True

False

Under IFRS 15 Revenue from Contracts with Customers, onerous construction contracts are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 requires recognition of a provision in such circumstances.

Explanation

Under IFRS 15 Revenue from Contracts with Customers, onerous construction contracts are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 requires recognition of a provision in such circumstances.

102. An entity must not describe its financial statements as complying with IFRS Standards unless they comply with all of the requirements of all IFRS Standards (including IFRIC Interpretations).

True

False

See IAS 1 Presentation of Financial Statements.

Explanation

See IAS 1 Presentation of Financial Statements.

103. Approximately 150 people are on the staff of the International Accounting Standards Board and IFRS Foundation.

True

False

The statement is true because it states that approximately 150 people are on the staff of the International Accounting Standards Board and IFRS Foundation. This indicates that there is a staff of around 150 individuals working for these organizations, suggesting that the statement is correct.

Explanation

The statement is true because it states that approximately 150 people are on the staff of the International Accounting Standards Board and IFRS Foundation. This indicates that there is a staff of around 150 individuals working for these organizations, suggesting that the statement is correct.

104. Full IFRS Standards are numbered sequentially as they are issued (IFRS 1, IFRS 2, IFRS 3, etc), while sections of the IFRS for SMEs Standard are sequenced by topic.

True

False

The explanation for the given correct answer is that full IFRS Standards are indeed numbered sequentially as they are issued, such as IFRS 1, IFRS 2, IFRS 3, etc. On the other hand, sections of the IFRS for SMEs Standard are sequenced by topic. This means that the numbering system for the two standards is different, with full IFRS Standards following a sequential numbering and IFRS for SMEs Standard following a topical sequencing. Therefore, the statement "Full IFRS Standards are numbered sequentially as they are issued, while sections of the IFRS for SMEs Standard are sequenced by topic" is true.

Explanation

The explanation for the given correct answer is that full IFRS Standards are indeed numbered sequentially as they are issued, such as IFRS 1, IFRS 2, IFRS 3, etc. On the other hand, sections of the IFRS for SMEs Standard are sequenced by topic. This means that the numbering system for the two standards is different, with full IFRS Standards following a sequential numbering and IFRS for SMEs Standard following a topical sequencing. Therefore, the statement "Full IFRS Standards are numbered sequentially as they are issued, while sections of the IFRS for SMEs Standard are sequenced by topic" is true.

105. A company sells a very significant segment of its business on 30 June 2015. Its profit or loss for the full year ended 31 December 2015 will not include any profit or loss earned by the segment that was sold.

True

False

The profit or loss earned by the sold segment prior to 30 June 2015 would be included in the company's 2015 profit or loss, but it would be reported separately from the profit or loss from continuing operations.

Explanation

The profit or loss earned by the sold segment prior to 30 June 2015 would be included in the company's 2015 profit or loss, but it would be reported separately from the profit or loss from continuing operations.

106. The disclosures about financial assets and financial liabilities that are required by IFRS 7 Financial Instruments: Disclosures apply only to banks, insurance companies, and other financial institutions.

True

False

The IFRS 7 disclosures about financial instruments apply to all companies, not just financial institutions.

Explanation

The IFRS 7 disclosures about financial instruments apply to all companies, not just financial institutions.

107. Hong Kong and Macau are regions within China that have their own accounting standards different from Chinese Accounting Standards.

True

False

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

Explanation

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

108. Under IFRS Standards, in presenting cash flows from operations in the cash flow statement, the indirect method is required. The direct method is prohibited.

True

False

IAS 7 Statement of Cash Flows permits both the indirect and the direct methods of presenting operating cash flows.

Explanation

IAS 7 Statement of Cash Flows permits both the indirect and the direct methods of presenting operating cash flows.

109. Under IFRS Standards, most non-current liabilities are measured on a discounted present value basis, but this is not the case for deferred tax liabilities.

True

False

See IAS 12 Income Taxes.

Explanation

See IAS 12 Income Taxes.

110. The costs of processing of wool into yarn are accounted for under IFRS 2 Inventories rather than under IAS 41 Agriculture.

True

False

See IAS 41 Agriculture.

Explanation

See IAS 41 Agriculture.

111. A company that adopts the cost model for its investment property (land and buildings held for investment purposes) must nonetheless disclose the fair value of its investment properties.

True

False

See IAS 40 Investment Property.

Explanation

See IAS 40 Investment Property.

112. A basic principle in IFRS Standards is that a company recognises revenue from the sale of goods or services when it transfers the promised goods or services to the customer.

True

False

See IFRS 15 Revenue from Contracts with Customers.

Explanation

See IFRS 15 Revenue from Contracts with Customers.

113. Under IFRS Standards, the issuance of share options to employees must be reflected in a company's profit or loss and financial position.

True

False

See IFRS 2 Share-based Payment.

Explanation

See IFRS 2 Share-based Payment.

114. Under IFRS Standards, only companies with public accountability (listed companies and financial institutions) must present a cash flow statement.

True

False

A statement of cash flows is part of a complete set of IFRS financial statements for all companies, including unlisted companies.

Explanation

A statement of cash flows is part of a complete set of IFRS financial statements for all companies, including unlisted companies.

115. An insurance company would look to IAS 39 and IFRS 9 (the financial instruments standards), rather than to the insurance standard, to decide how to measure and account for its investments in debt and equity securities.

True

False

See IFRS 4 Insurance Contracts.

Explanation

See IFRS 4 Insurance Contracts.

116.

At the commencement date, a lessee is required to recognise a right-of-use asset and a lease liability for all leases except those with terms of less than one year and those for low-value items.

True

False

See IFRS 16 Leases.

Explanation

See IFRS 16 Leases.

117. The International Accounting Standards Board has a public consultation on its agenda of projects once every three years.

True

False

See the IASB Due Process Handbook, available on its website.

Explanation

See the IASB Due Process Handbook, available on its website.

118. Under IFRS Standards, an automobile dealer would, most likely, measure the cost of new cars sold by specifically determining the actual cost of the particular car sold.

True

False

Under IAS 2 Inventories, the specific identification method of determining cost is required when the cost of inventory items is individually significant.

Explanation

Under IAS 2 Inventories, the specific identification method of determining cost is required when the cost of inventory items is individually significant.

119. A company has surplus cash that it expects to need for a project five years from now. The company invests that cash in a five-year interest-paying low-risk bond. Under IFRS Standards the bond would be measured at amortised cost.

True

False

See IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement.

Explanation

See IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement.

120. IFRS Standards have specific accounting rules for commitments made by a bank to provide a loan at a future date at a below-market interest rate.

True

False

These rules are in both IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments.

Explanation

These rules are in both IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments.

121. Under IFRS Standards, an item is material if it has a physical presence, that is, it can be seen or touched.

True

False

Under IFRS Standards, an item is material if it could affect decisions made by users of financial statements.

Explanation

Under IFRS Standards, an item is material if it could affect decisions made by users of financial statements.

122. Under IFRS Standards, joint arrangements, joint operations and joint ventures all mean the same thing.

True

False

A joint arrangement is an arrangement of which two or more parties have joint control. A joint operation is a joint arrangement in which the parties that have joint control (ie joint operators) have rights to the specific assets, and obligations for the specific liabilities, relating to the arrangement. A joint venture is a joint arrangement in which the parties that have joint control (ie joint venturers) have rights to the net assets of the arrangement.

Explanation

A joint arrangement is an arrangement of which two or more parties have joint control. A joint operation is a joint arrangement in which the parties that have joint control (ie joint operators) have rights to the specific assets, and obligations for the specific liabilities, relating to the arrangement. A joint venture is a joint arrangement in which the parties that have joint control (ie joint venturers) have rights to the net assets of the arrangement.

123. In 2016 a company discovers it made a material error that resulted in overstating its 2011 profit by 1,000,000 euros. To correct the error under IFRS Standards, it will reduce its profit for 2016 by 1,000,000 euros.

True

False

Under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, errors are corrected by restating the prior period financial statements.

Explanation

Under IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, errors are corrected by restating the prior period financial statements.

124. Paul A Volcker, the former chairman of the US Federal Reserve, was also chairman of the IFRS Foundation Trustees.

True

False

He was Chairman of the IFRS Foundation Trustees 2000—2005.

Explanation

He was Chairman of the IFRS Foundation Trustees 2000—2005.

125. IASB meetings are publicly webcast.

True

False

The meetings are also open to public observation in person (free registration is required).

Explanation

The meetings are also open to public observation in person (free registration is required).

126. The IFRS Foundation's study of over 140 jurisdictions found that several jurisdictions have adopted recent, but not the latest, Bound Volumes of IFRS Standards.

True

False

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

Explanation

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

127. A foreign (non-US) company listed on the New York Stock Exchange is permitted to use IFRS Standards rather than US GAAP for filings in the US.

True

False

This is true, and a reconciliation to US GAAP amounts is not required. Around 500 foreign companies use IFRS Standards in the United States.

Explanation

This is true, and a reconciliation to US GAAP amounts is not required. Around 500 foreign companies use IFRS Standards in the United States.

128. Because the International Accounting Standards Board operates in the public interest, its Standards are not subject to copyright, and anyone is free to republish them or use them in other ways.

True

False

IFRS Standards are the proprietary copyright material of the IFRS Foundation. While the Standards are available for free download on the IFRS Foundation's website, they may not be duplicated or posted on other websites except with the explicit agreement of the IFRS Foundation.

Explanation

IFRS Standards are the proprietary copyright material of the IFRS Foundation. While the Standards are available for free download on the IFRS Foundation's website, they may not be duplicated or posted on other websites except with the explicit agreement of the IFRS Foundation.

129. If an investor using IFRS Standards will be measuring an investment in equity shares at fair value through profit or loss, the brokerage commission that the investor paid to buy those shares is charged to expense at the time of purchase rather than being added to the cost of the investment.

True

False

See IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement.

Explanation

See IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement.

130. IFRS Standards allow a company to use hedge accounting that, in defined circumstances, enables the company to defer recognition in profit or loss of some losses on financial instruments.

True

False

See IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement.

Explanation

See IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement.

131. A company had been depreciating a large machine for the past five years over an estimated ten year life but now concludes that, because of technological change, the machine has only 2 more remaining years of useful life. Under IFRS Standards, the company will recompute the depreciation for the first five years and restate its profit for those years.

True

False

A change in the estimated useful life of a depreciable asset is a change in accounting estimate, which is accounted for prospectively, not retroactively.

Explanation

A change in the estimated useful life of a depreciable asset is a change in accounting estimate, which is accounted for prospectively, not retroactively.

132. An important reason for global accounting standards is that cross-border ownership of stocks and bonds amounts to many trillions of US dollars.

True

False

Some recent statistics are in 'Pocket Guide to IFRS Standards: The Global Financial Reporting Language'.

Explanation

Some recent statistics are in 'Pocket Guide to IFRS Standards: The Global Financial Reporting Language'.

133. The IFRS for SMEs Standard is used mainly in Asia and Africa but not used much in Central America, South America, or the Caribbean.

True

False

The IFRS for SMEs Standard has been widely adopted throughout the world, including in most countries of Central America, South America, and the Caribbean.

Explanation

The IFRS for SMEs Standard has been widely adopted throughout the world, including in most countries of Central America, South America, and the Caribbean.

134. Because of the difficulties of getting prior period information, a company adopting IFRS Standards for the first time is not required to restate any prior year comparative figures.

True

False

A company adopting IFRS Standards for the first time is required to restate at least one prior year, but IFRS 1 First-time Adoption of IFRS provides exceptions and simplifications because of restatement difficulties.

Explanation

A company adopting IFRS Standards for the first time is required to restate at least one prior year, but IFRS 1 First-time Adoption of IFRS provides exceptions and simplifications because of restatement difficulties.

135. If an insurance company provides insurance coverage to cover losses from a catastrophic tsunami that occurs, on average, once every 50 years, it must recognise the entire loss when the tsunami occurs. It is prohibited from accumulating the loss year by year in advance of the tsunami.

True

False

Yes. A loss event occurs, and an obligation to policyholders arises, only when the tsunami happens.

Explanation

Yes. A loss event occurs, and an obligation to policyholders arises, only when the tsunami happens.

136. An investor buys a bond that can be converted into equity shares of the company that issued the bond. For now the investor plans to hold the bond and collect interest, but if the market price of the equity shares increases, the investor may exercise its right to convert. The investor must account for the bond at fair value through profit or loss.

True

False

See IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement.

Explanation

See IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement.

137. A country's income tax rate in 2016 (current year) is 40%. In 2016, the government enacted an increase in the rate to 45% effective 1 January 2018. Under IFRS Standards, a deferred tax liability at 31 December 2016 that is expected to be paid in 2019 would be measured at 45%, not 40%.

True

False

See IAS 12 Income Taxes.

Explanation

See IAS 12 Income Taxes.

138. Under the new lease accounting requirements of IFRS 16 Leases, a tenant who rents two floors of a new ten floor office building for five years will show the present value of the lease obligation as a liability in the tenant's statement of financial position.

True

False

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Previously, under IAS 17 Leases, this lease is an operating lease, and the lease obligation is not shown in the statement of financial position (balance sheet).

Explanation

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Previously, under IAS 17 Leases, this lease is an operating lease, and the lease obligation is not shown in the statement of financial position (balance sheet).

139. Under IFRS Standards, a company may choose the cost model for one class of property, plant and equipment (perhaps vehicles) and the revaluation model for another class of property, plant and equipment (perhaps buildings).

True

False

See IAS 16 Property, Plant and Equipment. Note that a company must use the same model for all assets in the same class.

Explanation

See IAS 16 Property, Plant and Equipment. Note that a company must use the same model for all assets in the same class.

140. Cash, accounts receivable, and accounts payable are examples of financial instruments under IFRS Standards.

True

False

See IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments.

Explanation

See IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments.

141. Seller A contracts to sell to Buyer B a truck and a three-year maintenance contract for a combined package price of 100,000 currency units. The stand-alone selling prices for the truck is 80,000 currency units and for the maintenance contract 30,000 currency units. Under IFRS Standards, Seller A would recognise a total of 110,000 currency units of revenue.

True

False

Under IFRS 15 Revenue from Contracts with Customers, the two separate performance obligations (sale of a truck and sale of a maintenance contract) are accounted for as separate revenue transactions.

Explanation

Under IFRS 15 Revenue from Contracts with Customers, the two separate performance obligations (sale of a truck and sale of a maintenance contract) are accounted for as separate revenue transactions.

142. The preparation of interim financial reports generally requires a greater use of estimation methods than annual financial statements.

True

False

See IAS 34 Interim Financial Reports.

Explanation

See IAS 34 Interim Financial Reports.

143. The IFRS for SMEs Standard is a stand-alone Standard in the sense that a small company using it is not required to also look to the requirements of full IFRS Standards in preparing its financial statements.

True

False

The IFRS for SMEs Standard is a stand-alone Standard.

Explanation

The IFRS for SMEs Standard is a stand-alone Standard.

144. A restaurant chain opens a new restaurant and (as is normal) expects the restaurant to lose money during the first two to three years of operations, until a sufficiently large group of customers has been developed to make the restaurant profitable. Under IFRS Standards, the company must recognise a liability for the total estimated future losses at the time the restaurant is opened.

True

False

Anticipated future losses are not recognised as liabilities under IFRS Standards. Liabilities are present obligations only.

Explanation

Anticipated future losses are not recognised as liabilities under IFRS Standards. Liabilities are present obligations only.

145. Under IFRS 16 Leases, issued in 2016, a lessee's contractual obligations under all material leases longer than one year are shown as liabilities in the lessee's balance sheet.

True

False

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee recognises a right-of-use asset, representing its right to use the underlying leased asset, and a lease liability, representing its obligation to make lease payments.

Explanation

IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee recognises a right-of-use asset, representing its right to use the underlying leased asset, and a lease liability, representing its obligation to make lease payments.

146. The International Accounting Standards Board's main office is in Brussels.

True

False

The International Accounting Standards Board's main office is in London.

Explanation

The International Accounting Standards Board's main office is in London.

147. Under IFRS Standards, the cost of goodwill (excess of the cost to acquire another company over the fair values of the net assets acquired) is amortised over the shorter of the estimated life of the goodwill and 10 years.

True

False

Under IFRS 3 Business Combination, goodwill is not amortised but, rather, is tested for impairment at least annually and, if impaired, an impairment loss is recognised.

Explanation

Under IFRS 3 Business Combination, goodwill is not amortised but, rather, is tested for impairment at least annually and, if impaired, an impairment loss is recognised.

148. Palm oil trees are 'bearer plants' because they are grown solely to extract oil from the fruit. Under IFRS Standards, an agricultural company operating a palm oil tree plantation has a choice of measuring the palm trees at either fair value through other comprehensive income or at historical cost less accumulated depreciation and impairment.

True

False

Under IAS 41 Agriculture, the palm oil trees (bearer plants) are accounted for under IAS 16 Property, Plant and Equipment. IAS 16 allows an option of (a) the cost-depreciation-impairment model or (b) the revaluation-through-other-comprehensive-income model.

Explanation

Under IAS 41 Agriculture, the palm oil trees (bearer plants) are accounted for under IAS 16 Property, Plant and Equipment. IAS 16 allows an option of (a) the cost-depreciation-impairment model or (b) the revaluation-through-other-comprehensive-income model.

149. If a retailer gives customers a 30-day right to return goods that have been purchased, the retailer will not recognise an estimated liability for future returns under IFRS Standards because the amount is not known until after the end of the 30-day period.

True

False

If the amount of returns can be estimated, it must be recognised at the same time as the related revenue is recognised.

Explanation

If the amount of returns can be estimated, it must be recognised at the same time as the related revenue is recognised.

150. If the amount of expected future cash flows cannot be determined for an individual asset, an impairment loss is not recognised under IFRS Standards.

True

False

If the amount of expected future cash flows cannot be determined for an individual asset, IAS 36 Impairment of Assets requires that impairment is assessed on the basis of the cash flows of the 'cash generating unit' that includes the individual asset.

Explanation

If the amount of expected future cash flows cannot be determined for an individual asset, IAS 36 Impairment of Assets requires that impairment is assessed on the basis of the cash flows of the 'cash generating unit' that includes the individual asset.

151. A contingent liability is not recognised in the statement of financial position.

True

False

A contingent liability is not recognised in the statement of financial position. However, unless the possibility of an outflow of economic resources is remote, a contingent liability is disclosed in the notes.

Explanation

A contingent liability is not recognised in the statement of financial position. However, unless the possibility of an outflow of economic resources is remote, a contingent liability is disclosed in the notes.

152. Under IFRS Standards, all borrowing costs are charged to expense when incurred.

True

False

Under IAS 23 Borrowing Costs, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognised as an expense.

Explanation

Under IAS 23 Borrowing Costs, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognised as an expense.

153. Under IFRS Standards, many purchased intangible assets are recognised assets, while the cost to develop an identical asset internally must be charged to expense.

True

False

See IAS 38 Intangible Assets.

Explanation

See IAS 38 Intangible Assets.

154. Only a small minority of Latin American countries are using IFRS Standards.

True

False

Most Latin American countries have adopted IFRS Standards.

Explanation

Most Latin American countries have adopted IFRS Standards.

155. Adoption of IFRS Standards is concentrated almost entirely in Europe.

True

False

Countries throughout the world have adopted IFRS Standards. In fact, while the European Union remains the single biggest IFRS jurisdiction, the combined GDP of IFRS jurisdictions outside of the European Union (US$27 trillion) is now greater than that of the European Union itself (US$19 trillion).

Explanation

Countries throughout the world have adopted IFRS Standards. In fact, while the European Union remains the single biggest IFRS jurisdiction, the combined GDP of IFRS jurisdictions outside of the European Union (US$27 trillion) is now greater than that of the European Union itself (US$19 trillion).

156. Under IFRS Standards all research and development costs are charged to expense when incurred.

True

False

Under IAS 38 Intangible Assets, research expenditure is recognised as an expense. Development expenditure that meets specified criteria is recognised as an intangible asset.

Explanation

Under IAS 38 Intangible Assets, research expenditure is recognised as an expense. Development expenditure that meets specified criteria is recognised as an intangible asset.

157.

A lessee signs a 10-year lease on a building beginning 1 January 2017, with an option to extend for another 10 years. The lessee is highly likely to extend the lease. On 1 January 2017 the lessee will measure its lease obligation based on the present value of the lease payments over the next 20 years, not just 10 years.

True

False

See IFRS 16 Leases.

Explanation

See IFRS 16 Leases.

158. A company that is being sued will not recognise any liability until a court judgement or legal settlement has been reached because, until that point, the company has no obligation to pay.

True

False

A liability would be recognised even before judgement or settlement and measured at the best estimate of the expenditure required to settle the obligation at the end of the reporting period.

Explanation

A liability would be recognised even before judgement or settlement and measured at the best estimate of the expenditure required to settle the obligation at the end of the reporting period.

159. Under IFRS Standards, all financial assets are measured at fair value.

True

False

Those held solely to collect principal and interest are measured at amortised cost. Others are measured at fair value.

Explanation

Those held solely to collect principal and interest are measured at amortised cost. Others are measured at fair value.

160. A company receives a single non-refundable up-front payment for goods that it will manufacture and deliver to the customer over the next four years. The company can make an accurate estimate of the future production costs. The company will recognise the entire non-refundable up-front payment as revenue when received, and at the same time recognise the estimated costs as expense.

True

False

Revenue is recognised only when the seller satisfies its performance obligation to the customer, which for goods is normally the point of delivery.

Explanation

Revenue is recognised only when the seller satisfies its performance obligation to the customer, which for goods is normally the point of delivery.

161. Under IFRS Standards, intangible assets must not be revalued. They are always measured at cost less accumulated amortisation and impairment.

True

False

Under IFRS Standards, intangible assets may be revalued if value can be determined by reference to prices in an active market.

Explanation

Under IFRS Standards, intangible assets may be revalued if value can be determined by reference to prices in an active market.

162. Most European countries have their own national accounting standards, making it difficult for investors to compare financial information reported by listed companies across borders.

True

False

By a Regulation adopted by the European Union (EU), all European companies whose securities trade in a regulated market in Europe must use IFRS Standards as adopted by the EU in their consolidated financial statements, not national standards.

Explanation

By a Regulation adopted by the European Union (EU), all European companies whose securities trade in a regulated market in Europe must use IFRS Standards as adopted by the EU in their consolidated financial statements, not national standards.

163. If, in a business combination, the acquiring company concludes that the fair value of the net assets it acquired are greater than the fair value paid to acquire the other company, IFRS Standards do not permit recognition of a gain in such a 'bargain purchase'.

True

False

Under IFRS 3 Business Combinations a gain from a bargain purchase is recognised immediately in profit or loss.

Explanation

Under IFRS 3 Business Combinations a gain from a bargain purchase is recognised immediately in profit or loss.

164. Under IFRS Standards, intangible assets are always measured at cost less accumulated amortisation and impairment. They can never be revalued upwards.

True

False

Under IAS 38 Intangible Assets, a company may choose to measure an intangible asset at fair value if fair value can be determined by reference to an active market.

Explanation

Under IAS 38 Intangible Assets, a company may choose to measure an intangible asset at fair value if fair value can be determined by reference to an active market.

165. The IFRS for SMEs Standard requires approximately the same number of disclosures as full IFRS Standards but has fewer accounting policy options.

True

False

The IFRS for SMEs Standard requires far fewer disclosures than are required in full IFRS Standards.

Explanation

The IFRS for SMEs Standard requires far fewer disclosures than are required in full IFRS Standards.

166. Under IFRS Standards, companies must disclose the total compensation paid to each of the top five paid managers.

True

False

IAS 24 Related Party Disclosures requires an entity to disclose key management personnel compensation in total and by category as defined in the Standard.

Explanation

IAS 24 Related Party Disclosures requires an entity to disclose key management personnel compensation in total and by category as defined in the Standard.

167. A manufacturing company has its corporate headquarters in Hong Kong, where the local currency is the Hong Kong dollar. However its only factory is in mainland China, and most of its revenue and expenses are in renminbi, the Chinese currency. Because the company's functional currency is renminbi, IFRS Standards require that the company present its financial statements in renminbi, not Hong Kong dollars.

True

False

IAS 21 The Effects of Changes in Foreign Exchange Rates permits an entity to present its financial statements in any currency (or currencies). If the presentation currency differs from the entity’s functional currency, the entity must translate its results and financial position into the presentation currency.

Explanation

IAS 21 The Effects of Changes in Foreign Exchange Rates permits an entity to present its financial statements in any currency (or currencies). If the presentation currency differs from the entity’s functional currency, the entity must translate its results and financial position into the presentation currency.

168. Under IFRS Standards, intangible assets are never amortised; rather, they are tested annually for impairment and, if impaired, a loss is recognised.

True

False

Under IAS 38 Intangible Assets, intangible assets with limited lives are amortised (and also assessed for impairment).

Explanation

Under IAS 38 Intangible Assets, intangible assets with limited lives are amortised (and also assessed for impairment).

169. The IFRS Foundation is publicly accountable to a Monitoring Board of public capital market regulatory authorities.

True

False

Information about the Monitoring Board may be found on the IFRS Foundation's website here: http://www.ifrs.org/About-us/Pages/Monitoring-Board.aspx

Explanation

Information about the Monitoring Board may be found on the IFRS Foundation's website here: http://www.ifrs.org/About-us/Pages/Monitoring-Board.aspx

170. Under the regulations of the United Nations, the International Accounting Standards Board has the authority to require the use of IFRS Standards in any country as long as the Board first invites public comment on the proposal in that country.

True

False

Neither the Board nor the IFRS Foundation has the power to require any companies to use IFRS Standards.

Explanation

Neither the Board nor the IFRS Foundation has the power to require any companies to use IFRS Standards.

171. In most countries where IFRS Standards are required for listed companies, different accounting standards are required for banks and insurance companies.

True

False

This is true in a few countries, but in the majority of IFRS jurisdictions IFRS Standards are required for banks and insurance companies as well as for other listed companies.

Explanation

This is true in a few countries, but in the majority of IFRS jurisdictions IFRS Standards are required for banks and insurance companies as well as for other listed companies.

172. Under IFRS Standards, an entity may present its financial statements in any currency even if that currency is not the one in which the entity gets most of its revenues and incurs most of its expenses.

True

False

See IAS 21 The Effects of Changes in Foreign Exchange Rates.

Explanation

See IAS 21 The Effects of Changes in Foreign Exchange Rates.

173. IFRS Standards require disclosures about a company's major customers.

True

False

See IFRS 8 Operating Segments.

Explanation

See IFRS 8 Operating Segments.

174. Because of the uncertainties surrounding the exploration for minerals, an oil and gas or mining company using IFRS Standards is not required to write down, or write off, any capitalised exploration costs until the mining project has been abandoned.

True

False

IFRS 6 Exploration for and Evaluation of Mineral Resources requires recognition and measurement of impairment of capitalised exploration costs even before a project has been abandoned.

Explanation

IFRS 6 Exploration for and Evaluation of Mineral Resources requires recognition and measurement of impairment of capitalised exploration costs even before a project has been abandoned.

175. In preparing an IFRS cash flow statement, investments in quoted equity securities are considered cash equivalents because they are readily convertible into cash.

True

False

Under IAS 7 Statement of Cash Flows, cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

Explanation

Under IAS 7 Statement of Cash Flows, cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

176. Under IFRS Standards, the legal and other fees relating to the issue of share options to employees are charged directly against shareholders' equity rather than recognised as an expense in measuring profit or loss.

True

False

Under IFRS Standards, the legal and other fees associated with the issuance of share options to employees are considered as a part of shareholders' equity. This means that these fees are not recognized as an expense in measuring profit or loss. Instead, they are directly charged against shareholders' equity.

Explanation

Under IFRS Standards, the legal and other fees associated with the issuance of share options to employees are considered as a part of shareholders' equity. This means that these fees are not recognized as an expense in measuring profit or loss. Instead, they are directly charged against shareholders' equity.

177. To account for the cost of drilling oil wells, an oil company adopting IFRS Standards for the first time can continue to use the accounting policies it had been using immediately prior to adopting IFRS Standards.

True

False

See IFRS 6 Exploration for and Evaluation of Mineral Resources.

Explanation

See IFRS 6 Exploration for and Evaluation of Mineral Resources.

178. In most countries that have adopted IFRS Standards, the auditor's report states that the financial statements comply with national accounting standards rather than IFRS Standards. The fact that national standards have been converged with IFRS Standards is explained in a note to the financial statements.

True

False

In most countries that have adopted IFRS Standards, the auditor's report states that financial statements comply with IFRS Standards rather than with national standards.

Explanation

In most countries that have adopted IFRS Standards, the auditor's report states that financial statements comply with IFRS Standards rather than with national standards.

179. If a company acquires a building in exchange for its equity shares, in the cash flow statement under IFRS Standards that is reported as a cash outflow from investing activities and a cash inflow from financing activities.

True

False

This is a non-cash transaction that, under IAS 7 Statement of Cash Flows, is not reported in the cash flow statement but is disclosed separately.

Explanation

This is a non-cash transaction that, under IAS 7 Statement of Cash Flows, is not reported in the cash flow statement but is disclosed separately.

180. A bank makes a five-year loan, and will receive 5 per cent interest during those five years plus repayment of the principal of the loan at the end. The bank always intends to hold this type of loan to maturity. After two years the fair value of this loan is greater than the face amount because the market rate of interest for this type of loan has dropped to 4 per cent. Under IFRS Standards, the bank must recognise a gain at the end of year two.

True

False

If the bank's business model is to hold such loans solely to receive principal and interest, the loans are measured at amortised cost. Increases in fair value are not recognised as gains.

Explanation

If the bank's business model is to hold such loans solely to receive principal and interest, the loans are measured at amortised cost. Increases in fair value are not recognised as gains.

181. Although a derivative is a financial instrument, it is not recognised as an asset or liability if there is no up-front cost or payment when the contract is entered into.

True

False

Under both IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments, derivative contracts are recognised as soon as the contract is entered into and are subsequently remeasured to fair value at each financial reporting date.

Explanation

Under both IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments, derivative contracts are recognised as soon as the contract is entered into and are subsequently remeasured to fair value at each financial reporting date.

182. If a country adopts national accounting standards that are broadly consistent with IFRS Standards, companies using those standards may describe their financial statements as 'in conformity with IFRS Standards'.

True

False

Under IAS 1 Presentation of Financial Statements, an entity must not describe financial statements as complying with IFRS Standards unless they comply with all the requirements of IFRS Standards.

Explanation

Under IAS 1 Presentation of Financial Statements, an entity must not describe financial statements as complying with IFRS Standards unless they comply with all the requirements of IFRS Standards.

183. Because it is not possible to make a reliable estimate of the fair value of share options when they are granted to employees, under IFRS Standards, an expense is recognised and measured when the employee exercises the option.

True

False

Under IFRS 2 Share-based Payment, an expense is recognised and measured when the option is granted.

Explanation

Under IFRS 2 Share-based Payment, an expense is recognised and measured when the option is granted.

184. A few countries that have adopted IFRS Standards for most listed companies require different standards for banks.

True

False

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

Explanation

See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

185. An entity's intention to hold an asset or settle a liability is not relevant in determining the asset or liability's fair value.

True

False

See IFRS 13 Fair Value Measurement.

Explanation

See IFRS 13 Fair Value Measurement.

186. Under IFRS Standards, 'fair value' is defined as today's purchase price or replacement cost, that is, an entry price, as opposed to a selling price or exit price.

True

False

Under IFRS 13 Fair Value Measurement, fair value is an exit (selling) price, not an entry (buying or replacement) price.

Explanation

Under IFRS 13 Fair Value Measurement, fair value is an exit (selling) price, not an entry (buying or replacement) price.

187. A company decides that it wants to increase its reported profits by switching from the weighted average method to the first-in, first-out method of determining its cost of goods sold. IFRS Standards allow the company to make this accounting policy change.

True

False

Under IFRS Standards, an entity changes an accounting policy only if the change is required by a Standard or it improves the relevance and reliability of information in the financial statements. Increasing reported profits is not a justification for a change in accounting policy.

Explanation

Under IFRS Standards, an entity changes an accounting policy only if the change is required by a Standard or it improves the relevance and reliability of information in the financial statements. Increasing reported profits is not a justification for a change in accounting policy.

188. If Company A controls Company B, under IFRS Standards Company A must use the equity method in its separate financial statements to account for its investment in Company B.

True

False

In separate financial statements, investments in subsidiaries may be accounted for (a) at fair value through profit or loss, (b) at amortised cost, or (c ) using the equity method. See IAS 27 Separate Financial Statements.

Explanation

In separate financial statements, investments in subsidiaries may be accounted for (a) at fair value through profit or loss, (b) at amortised cost, or (c ) using the equity method. See IAS 27 Separate Financial Statements.

189. Under IFRS Standards, all land and buildings are measured at fair value if a reliable measure of fair value is available.

True

False

Under IFRS Standards, measurement of land and buildings at fair value is an option, but not a requirement.

Explanation

Under IFRS Standards, measurement of land and buildings at fair value is an option, but not a requirement.

190. If a company owns a bond that pays fixed amounts of interest and principal on fixed dates, and its policy is to hold that bond for trading depending on market price fluctuations, the company will measure that bond at amortised cost under IFRS Standards.

True

False

If the company's business model is to trade the bond depending on market price fluctuations, amortised cost is not permitted. The company accounts for the bond at fair value through profit or loss.

Explanation

If the company's business model is to trade the bond depending on market price fluctuations, amortised cost is not permitted. The company accounts for the bond at fair value through profit or loss.

191. The members of the International Accounting Standards Board serve as representatives of the individual accounting standard-setting boards from their home countries.

True

False

Board members serve as expert individuals, not as representatives of any external organisations.

Explanation

Board members serve as expert individuals, not as representatives of any external organisations.

192. Under IFRS Standards, a company may choose to measure any financial asset or financial liability at fair value through profit or loss.

True

False

The fair value option is available only when there is an 'accounting mismatch'.

Explanation

The fair value option is available only when there is an 'accounting mismatch'.

193. Seller A sells a machine to Buyer B for the fixed price of 100,000 dollars plus an additional amount to be paid one year later based on the output of the machine during that first year to a maximum of 40,000 dollars. Seller A is highly confident that it will receive an additional 40,000 dollars based on the output of the machine in the first year. Seller A will measure its up-front revenue from sale of the machine at 140,000 dollars.

True

False

Under IFRS 15 Revenue from Contracts with Customers, estimated variable consideration is included in the up-front revenue to the extent that it is highly probable that a significant reversal of revenue will not occur when the uncertainty about performance is resolved.

Explanation

Under IFRS 15 Revenue from Contracts with Customers, estimated variable consideration is included in the up-front revenue to the extent that it is highly probable that a significant reversal of revenue will not occur when the uncertainty about performance is resolved.

194. IFRS Standards requires that all companies disclose earnings per share in their financial statements.

True

False

Under IAS 33 Earnings per Share, only companies whose debt or equity securities trade in a public market are required to disclose earnings per share.

Explanation

Under IAS 33 Earnings per Share, only companies whose debt or equity securities trade in a public market are required to disclose earnings per share.

195. The mission of the IFRS Foundation and the International Accounting Standards Board is to develop, in the public interest, high quality accounting standards that countries can use as the basis for designing their own national standards.

True

False

The goal is one single set of global accounting standards, rather than multiple sets of national standards.

Explanation

The goal is one single set of global accounting standards, rather than multiple sets of national standards.

196. The Conceptual Framework states that present and potential equity investors (shareholders, as opposed to lenders and creditors) are the primary group of users of company financial statements.

True

False

The Conceptual Framework identifies all investors, lenders, and creditors as the primary users of a company's financial statements.

Explanation

The Conceptual Framework identifies all investors, lenders, and creditors as the primary users of a company's financial statements.

197. The IFRS Foundation has found that most countries in the world have modified IFRS Standards before adopting IFRS Standards as their national standards.

True

False

To the contrary, the IFRS Foundation's study found that jurisdictions made very few modifications to IFRS Standards, and the few that were made were generally regarded as temporary steps in the jurisdiction’s plans to adopt IFRS Standards.

Explanation

To the contrary, the IFRS Foundation's study found that jurisdictions made very few modifications to IFRS Standards, and the few that were made were generally regarded as temporary steps in the jurisdiction’s plans to adopt IFRS Standards.

198. Very few countries have simply said that IFRS Standards are their national accounting standards without the need for 'endorsement' of each individual new or amended IFRS Standard. Rather, most countries consider each individual new or amended IFRS Standard to decide whether to endorse it for use in those countries.

True

False

The majority of jurisdictions that have adopted IFRS Standards do not need to endorse each individual new or amended IFRS Standard. The original adoption of IFRS Standards in those jurisdictions also includes new or amended IFRS Standards.

Explanation

The majority of jurisdictions that have adopted IFRS Standards do not need to endorse each individual new or amended IFRS Standard. The original adoption of IFRS Standards in those jurisdictions also includes new or amended IFRS Standards.

199. The Trustees of the IFRS Foundation determine the IASB agenda of technical projects.

True

False

The International Accounting Standards Board determines its own technical agenda.

Explanation

The International Accounting Standards Board determines its own technical agenda.

200. The only piece of land owned by a company is land that it had purchased and holds as an investment for future appreciation. Under IFRS Standards the company is required to measure the land at fair value through profit or loss.

True

False

IAS 40 Investment Property permits, but does not require, the fair-value-through-profit-or-loss model.

Explanation

IAS 40 Investment Property permits, but does not require, the fair-value-through-profit-or-loss model.