IFRS and Financial Reporting
Exam Materials
Course Introduction
This course provides an in-depth understanding of International Financial Reporting Standards (IFRS) and their application in the preparation and presentation of financial statements. It examines the key principles, concepts, and objectives underlying IFRS, highlighting the differences and similarities with local Generally Accepted Accounting Principles (GAAP). Students will learn how to interpret and apply IFRS to real-world financial reporting scenarios, analyze financial statements from a global perspective, and assess the quality and comparability of financial information across international boundaries. The course also covers recent developments and updates in IFRS, ensuring learners are well-equipped to meet the evolving demands of global financial reporting and disclosure practices.
Recommended Textbook
Intermediate Accounting 2nd Edition Volume I by Kin Lo George Fisher
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10 Chapters
1107 Verified Questions
1107 Flashcards
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Page 2
Chapter 1: Fundamentals of Financial Accounting Theory
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33 Flashcards
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Sample Questions
Q1) Which statement is not correct?
A)Financial accounting is the process of providing information to external parties.
B)Accounting is about the communication of financial information.
C)Accounting is the production of information about an enterprise and the transmission of that information to those who need the information.
D)Financial accounting is the process of providing information to internal parties.
Answer: D
Q2) Management motivation to increase the likelihood that the company will receive a $50,000 government rebate best illustrates which of the following?
A)Earnings management.
B)Positive accounting theory.
C)Information asymmetry.
D)Efficient securities market.
Answer: A
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Chapter 2: Conceptual Frameworks for Financial Reporting
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60 Flashcards
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Sample Questions
Q1) Which statement best describes a publicly accountable enterprise?
A)An entity that has not issued debt instruments that are outstanding and traded in a public market.
B)An entity that holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.
C)An entity that has not issued equity instruments that are outstanding and traded in a public market.
D)An entity that holds assets in a legal capacity for a broad group of outsiders as one of its primary businesses.
Answer: B
Q2) Which is an assumption of financial information in the IFRS Framework?
A)Accrual basis of accounting.
B)Historical cost.
C)Timeliness.
D)Financial capital maintenance.
Answer: D
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Chapter 3: Accrual Accounting
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Sample Questions
Q1) Which one of the following errors would cause a company's unadjusted trial balance to be out of balance?
A)Overstating an asset balance by $100 and a revenue balance by the same amount.
B)Failure to post the debit portion of a journal entry to the proper account (recorded, for example, in a revenue rather than an expense account).
C)Recording a $5,000 revenue transaction by crediting the accounts receivable account and debiting the revenue account.
D)Recording $1,000 cash collected from a customer as a debit to the cash account and a debit to the accounts receivable account.
Answer: D
Q2) Changes in accounting estimates are based on
A)new information that has now become available.
B)management bias.
C)information available from the use of hindsight.
D)comparable industry practice.
Answer: A
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Chapter 4: Revenue Recognition
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Sample Questions
Q1) In July, Telly-Rental sells a home theatre for $1,000 on an installment basis. Telly-Rental generally earns a gross margin of 25%. The customer pays $500 in December. How much revenue is recorded by Telly-Rental in December?
A)$0
B)$125
C)$250
D)$500
Q2) Why is there risk of earnings overstatement in accounting for construction contracts?
A)The long term nature of such contracts makes them a low risk area.
B)Allocation of revenue and expenses between two or more periods simplifies the accounting.
C)Significant professional judgment is required to make estimates used in the calculations.
D)Percentage of completion method reduces the potential for earnings management, manipulation and errors.
Q3) Explain how the timing of revenue recognition is affected by multiple deliverables in the arrangement. Explain how revenue is ultimately recognized in a multiple deliverable sales transaction.
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Page 6
Chapter 5: Cash and Receivables
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Sample Questions
Q1) The following accounts were abstracted from Almond Co.'s unadjusted trial balance at December 31, 2013: Debit Credit Accounts receivable $3,850,000
Allowance for uncollectible accounts 51,000
Net credit sales $5,950,000
The company estimates that 5 percent of the gross accounts receivable will become uncollectible. After adjustment at December 31, 2013, the allowance for doubtful accounts should have a credit balance of
A)192,500
B)243,500
C)246,500
D)297,500
Q2) What is not included in "cash and cash equivalents"?
A)Canadian cash on hand.
B)Demand deposits.
C)Six-month term deposits.
D)Three-month Treasury bills.
Q3) Explain why a bank reconciliation is necessary.
Q4) Explain two problems associated with the direct write-off method.
Q5) Identify the two criteria for classifying an investment as a cash equivalent.
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Chapter 6: Inventories
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Sample Questions
Q1) Which statement best explains the difference between the retail inventory and gross margin methods?
A)The retail inventory method estimates cost of goods sold by applying an average gross margin to the amount of sales recorded for the period.
B)The retail inventory method estimates ending inventory cost using wholesale prices and an average gross margin.
C)The gross margin method calculates an estimated ending inventory balance by using the inventory cost flow equation.
D)The gross margin method calculates an estimate of cost of goods sold using the inventory cost flow equation.
Q2) Explain how a merchandising company can manipulate earnings through its year-end inventories. What can an auditor do to detect this type of manipulation?
Q3) Explain how manufacturing companies can manipulate earnings through its production process. What should an auditor or financial statement user do to detect this type of manipulation?
Q4) Explain the meaning of product costs and period costs. Discuss which costs should be included in the cost of inventories.
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Chapter 7: Financial Assets
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Sample Questions
Q1) Which statement is correct about financial instruments?
A)A contract whose value changes according to a specified variable, requires little or no initial investment and is settled at a future date.
B)A contract that gives the holder the residual interest in an entity after deducting all of its liabilities.
C)Any contract that gives rise to a financial asset for one entity and a financial liability or equity instrument for another entity.
D)Any contract that entitles the holder to joint interest in an entity after deducting all of its liabilities.
Q2) Explain the nature of and the appropriate accounting treatment for held-for-trading securities and available-for-sale securities.
Q3) Which statement is not correct about "control"?
A)Control is presumed when an entity has more than 50% of the voting power of the investee.
B)Having control allows the entity to direct the strategic operations of the investee.
C)Control is presumed when an entity owns more than 50% of the investee.
D)Consolidation is used when an entity has control over the investee.
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Page 9
Chapter 8: Property, Plant, and Equipment
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Sample Questions
Q1) Which of the following is not a characteristic of property, plant and equipment (PPE)?
A)PPE are held for sale in the ordinary course of business.
B)PPE are held for administrative purposes of the business.
C)PPE are held for use in the ordinary course of business.
D)PPE are held for rental to others by the business.
Q2) On January 1, 2011, a machine was purchased for $12,000. The machine was estimated to have a 10 year useful life and a residual value of $500. Straight-line depreciation is to be used. On January 1, 2013, the machine was then exchanged for computer equipment with a fair value of $10,000. Assuming that the exchange had commercial substance, how much would be recorded as a gain on disposal of the machine on January 1, 2013?
A)$0
B)$300
C)$400
D)$500
Q3) Explain why earnings manipulation of property, plant and equipment can have long-lasting impact on the financial statements.
Q4) Explain how non-monetary transactions are accounted for.
Q5) Explain derecognition of property, plant or equipment.
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Chapter 9: Intangible Assets, Goodwill, Mineral Resources, and
Government Grants
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Q1) What are the unique features that lead to the differing accounting treatment between research and development costs?
Q2) In 2012, New Wave Inc. (NW)set up a new manufacturing facility in Manitoba. To encourage NW to set up its factory, the province provided equipment with a fair value of $75,000 and an estimated useful life of 10 years using straight-line depreciation. What journal entry would be required to record the equipment contribution in fiscal 2012, using the net method?
A)A credit to donation revenue of $75,000.
B)A credit to other comprehensive income - donated assets of $75,000.
C)A credit to deferred income of $75,000.
D)A credit to property, plant and equipment for $75,000.
Q3) Which statement is correct?
A)Capitalization of costs ceases when the post development phase begins.
B)The development phase includes generating new ideas or searching for new materials.
C)The project must meet IAS 38 criteria before research costs can be capitalized.
D)The post development phase includes designing, constructing or testing a prototype.
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Page 11
Chapter 10: Applications of Fair Value to Non-Current Assets
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Sample Questions
Q1) Explain how an impairment loss is recorded for non-current assets.
Q2) Which of the following is not a concept supporting impairment testing?
A)An asset should be presented at its fair value.
B)An asset's carrying value should be recoverable from sale.
C)An asset's carrying value should be recoverable from use.
D)An asset should not be overstated.
Q3) Which of the following is correct with respect to the accounting for "investment properties"?
A)Under IFRS, fair values must be disclosed if the cost model is used.
B)Under ASPE, fair values must be disclosed if the cost model is used.
C)Under IFRS, either the revaluation or fair value model may be used.
D)Under ASPE, either the revaluation or fair value model may be used.
Q4) When does agricultural activity end?
A)To point just before harvest.
B)To point of harvest.
C)To point of sale to wholesaler.
D)To point of sale to final customer.
Q5) Explain why non-current assets held for sale are recorded at the lower of carrying value and fair value less costs to sell.
Q6) Explain when a non-current asset is impaired. Page 12
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