Financial Reporting Standards
Exam Review
Course Introduction
Financial Reporting Standards is a course designed to provide students with a comprehensive understanding of the principles, frameworks, and regulations governing the preparation and presentation of financial statements. The course explores the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP), analyzing their application to various transactions, events, and conditions faced by entities. Topics include revenue recognition, measurement of assets and liabilities, disclosure requirements, and the role of standard-setting bodies. Emphasis is placed on the interpretation and critical evaluation of financial statements in accordance with global standards, enabling students to apply these principles in real-world business scenarios and ensure transparency, comparability, and accountability in financial reporting.
Recommended Textbook
Accounting for Corporate Combinations and Associations 7th Australian Edition by Neal Arthur
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11 Chapters
368 Verified Questions
368 Flashcards
Source URL: https://quizplus.com/study-set/3411
Page 2
Chapter 1: Text Objectives and Introduction to Consolidation
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28 Verified Questions
28 Flashcards
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Sample Questions
Q1) On July 1 20X5,Helios Ltd acquired 100,000 shares in Havers Ltd for $10 per share.The shares were acquired for trading purposes.During the year ended June 30 20X6,Helios Ltd received a fully franked dividend from Havers Ltd amounting to $60,000.The income tax rate was 30%.At June 30 20X6,the shares were quoted in the market at $9 per share,although the fall in the market price was considered to be only temporary.As a result of this investment,Helios Ltd would:
A) Report a profit before tax from the investment of $60,000 and report the investment in its balance sheet at June 30 20X6 at an amount of $900,000.
B) Report a loss before tax from the investment of $40,000 and report the investment in its balance sheet at June 30 20X6 at an amount of $900,000.
C) Report a profit before tax from the investment of $60,000 and report the investment in its balance sheet at June 30 20X6 at an amount of $1,000,000.
D) None of the above.
Answer: B
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Chapter 2: Principles of Consolidation
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42 Verified Questions
42 Flashcards
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Sample Questions
Q1) There is no limit to the amount of impairment loss write down of the assets of a cash generating unit (CGU)
A)True
B)False
Answer: False
Q2) A dividend paid by a subsidiary out of pre-acquisition profits will always result in the parent company's investment in subsidiary asset being impaired.
A)True
B)False
Answer: False
Q3) Explain why the existence of goodwill enables an entity to generate higher future cash flows or profits than would otherwise occur.
Answer: Goodwill:
- Goodwill represents future economic benefits arising from unidentified assets acquired in a business combination
- The future economic benefits include such things as customer base,employees,and superior manufacturing processes which make the parent willing to pay more than the value of the identified assets and liabilities
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Chapter 3: Fair Value Adjustments and Tax Effects
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34 Verified Questions
34 Flashcards
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Sample Questions
Q1) A company purchases all the issued shares of B company for $2,000,000.The net assets of B Company consist of land $2,100,000 and a liability of $100,000.A company will record the acquisition as follows:
A) DR Land $2,100,000 CR Liability $100,000
CR Cash $2,000,000
B) DR Shares in B $2,000,000 CR Share Capital $2,000,000
C) DR Shares in B $2,000,000 CR Cash $2,000,000
D) none of the above
Answer: C
Q2) Intra group dividends do not result in a requirement for tax effect adjustments on consolidation if:
A) group companies are Australian
B) the dividend is fully franked
C) Both A and B
D) none of the above
Answer: C
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Chapter 4: Intra-Group Transactions
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36 Verified Questions
36 Flashcards
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Sample Questions
Q1) Explain why cash will never be adjusted in consolidation journal entries
Q2) Tax effect adjustments only apply to consolidation adjusting entries which affect the carrying amount of parent subsidiaries
A)True
B)False
Q3) P Ltd acquired inventories for $150,000 which were sold to its subsidiary S Ltd for $120,000 (assume a tax rate of 30%)On consolidation a deferred tax liability would be recorded for:
A) $45,000
B) $36,000
C) $9,000
D) Not recorded
Q4) Current accounting regulations require the separate disclosures in profit or loss of gains and losses on disposal of non current assets
A)True
B)False
Q5) Explain why it is necessary to adjust unrealised profit in opening inventory on consolidation
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Chapter 5: Non-Controlling Interest
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37 Verified Questions
37 Flashcards
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Sample Questions
Q1) The shareholders of the parent entity in a group are entitled to:
A) total profits of all group members
B) parent entity interest in consolidated group profit
C) non controlling interest in consolidated group profit
D) none of the above
Q2) P Ltd purchased 80% of the issued ordinary shares of S Ltd.S Ltd capital structure is:
Ordinary shares 200,000 fully paid shares x $1
Preference shares 50,000 fully paid shares x $1
Preference shares have the same rights as ordinary shares
The NCI in S Ltd is:
A) 20%
B) 16%
C) 36%
D) none of the above
Q3) Using the proportionate interest goodwill method,goodwill on acquisition is:
A) $92,000
B) $12,000
C) $36,000
D) none of the above
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Page 7
Chapter 6: Partly-Owned Subsidiaries: Indirect
Non-Controlling Interest
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27 Verified Questions
27 Flashcards
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Sample Questions
Q1) A owns 80% of B and B owns 60% of C.If C pays a dividend and B distributes the amount received to its own shareholders,the allocation of the dividend will be:
A) parent 48%, NCI 52%
B) parent 52%, NCI 48%
C) parent 100%
D) NCI 100%
Q2) Using the data from Question 4 the total NCI in S1 Ltd is:
A) 10%
B) 14%
C) 24%
D) none of the above
Q3) Why does the multiple consolidation method adopt a revaluation approach to the net assets of subsubsidiaries?
Q4) Using the data from Question 2 the Parent Ltd NCI indirect ownership interest in S2 is:
A) 10%
B) 40%
C) 6%
D) none of the above
8
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Chapter 7: Consolidated Cash Flow Statements
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25 Verified Questions
25 Flashcards
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Sample Questions
Q1) The following items must be separately disclosed in a statement of cash flows:
A) interest paid and received
B) dividends paid and received
C) Both A and B
D) No separate disclosure required
Q2) Insurance proceeds from the destruction of a factory by fire would be classified as:
A) operating cash flow
B) financing cash flow
C) investing cash flow
D) none of the above
Q3) Discuss why Australia moved from a requirement to prepare a statement of sources and application of funds to a statement of cash flows.
Q4) Cash flows from operating activities is the default classification in a statement of cash flows
A)True
B)False
Q5) Discuss the basis of classifying cash flows arising from interest paid.
Q6) Why is cash flow from operating activities seen as a performance measure?
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Chapter 8: Accounting for Joint Arrangements
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44 Verified Questions
44 Flashcards
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Sample Questions
Q1) Which of the following statements more adequately reflects the current accounting position in regards to accounting for an associate entity?
A) The reporting by the investor of dividend revenue under the cost method is perceived to be an adequate indicator of investment performance in the case of a significant investment.
B) Even with representation on the associate's Board of Directors, an investor cannot have the power to manipulate its reported earnings (through participation in the dividend policy decisions of the associate) and thus present a misleading picture of its earnings performance.
C) Because of the varying dividend policies of investees it is unlikely that dividend income will provide a reliable indicator of the investment performance of any associate. D) None of the above.
Q2) Accounting for investment in associates by parent entities using the equity method will be done:
A) in the parent entity financial statements
B) in the consolidated financial statements
C) in either the parent entity or consolidated financial statements
D) none of the above
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Chapter 9: Accounting for Associates and Joint Ventures: the Equity Method
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Sample Questions
Q1) Jointly controlled operations and jointly controlled assets result from an unincorporated contractual association
A)True
B)False
Q2) The line by line method of accounting for joint venture categories of jointly controlled operations and jointly controlled assets is the same as the proportionate consolidation method of accounting for jointly controlled entities
A)True
B)False
Q3) What factors are relevant to the choice of accounting methods for venturers in jointly controlled entities?
Q4) A venture must recognise its interest in a jointly controlled entity using:
A) proportionate consolidation
B) equity method
C) either proportionate consolidation or equity method
D) one line method
Q5) Discuss the principles applying to the calculation of a gain on the sale of a portion of a jointly controlled operation.
11
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Chapter 10: Translation and Consolidation of Foreign Currency Financial Statements
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31 Verified Questions
31 Flashcards
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Sample Questions
Q1) Translation of financial statements into the presentation currency requires:
A) translation of assets and liabilities at closing rate
B) translation of revenues and expenses at historical or average rate
C) both A and B
D) none of the above
Q2) When the functional currency of a foreign operation is a foreign currency,translation of financial statements is done using:
A) current rate method
B) temporal method
C) either current rate or temporal method
D) none of the above
Q3) In the separate income statement of Johnson Ltd for the year ended June 30 20X7,the translation gain or loss arising on the loan from the Bank Negara was (rounded to the nearest thousand dollars):
A) A translation gain of $311,111
B) A translation loss of $444,000
C) A translation loss of $600,000
D) Nil, since any loss is initially recognised in equity.
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Chapter 11: Segment Reporting by Diversified Entities
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27 Verified Questions
27 Flashcards
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Sample Questions
Q1) In reporting segment information an entity must provide a reconciliation of:
A) reportable segment sales revenue to total revenue
B) reportable segment profit or loss before tax to total profit or loss before tax
C) reportable segment assets and liabilities to total assets and liabilities
D) all of the above
Q2) A diversified group is one that operates in markets that:
A) have different rates of profitability
B) have different opportunities for growth
C) have different degrees of risk
D) all of the above
Q3) On revenue criteria only,the reportable business segments are:
A) Piebalds, Pintos and Crillos.
B) Piebalds, Skewbalds, Pintos and Crillos.
C) Piebalds, Skewbalds, Pintos, Crillos and Others.
D) None of the above.
Q4) Under current accounting standards companies are required to report information on geographical segments.
A)True
B)False
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