IAS 8 + CF

Question 1

What shd be done if an item under SOFP was incorrectly classified in prior years FS?

Answer 1

IAS 8 states that it be corected retrospectively.

IF, there is evidence to support that item has not appeared in the SOFP, unlikely that it was misclassified

Question 2

In the cf, faithful representation means representation of the […] of economic phenomenon instead of representation of its […] form only.

Answer 2

1- substance
2 - legal

Question 3

CF 2010 defines LIABILITY as “A […] of an entity arising from […], the settlement of which is […] to result in an outflow from the entity of resources embodying economic benefits”.

Answer 3

1 - present oblg
2 - past event
3 - expected

Question 4

CF 2018 defines LIABILITY as “ A […] of the entity […] an economic resource as result of […].

Answer 4

1 - present oblg
2 - to transfer
3 - past event

Question 5

prior year adjustment are caused due to changes in […] and […]

Answer 5

1 - acc policy
2 - correction of error / prior period error

Question 6

CF states that Faithful representation is only possible if the transactions and other events are accounted for and presented in accordance with their [Blank-1]………….and economic reality, commercial intention and not merely their legal form. Hence a sale and repurchase of a non-financial asset will be accounted for as a [Blank-2] ………. arrangement based on the substance of the transaction.

Answer 6

1 - substance
2 - financing / secured loan / finc liab / secured liab/ loan

Question 7

In response to numerous stakeholders, prudence is reintroduced IN CF 2018 in support of the principle of [Blank-1] ………. for the purposes of faithful representation. The Board observed, describes prudence as ‘the exercise of [Blank-2] ……….. when making [Blank-3] ……………. under conditions of [Blank-4] …………….’. Prudence does not allow for [Blank-5] …………… or [Blank-6] ……………… of assets, liabilities, income or expenses.

Answer 7

1 - neutrality
2 - caution
3 - judgements/ decisions
4 - uncertainty
5 - overstatement/ under
6 - understatement / over

Question 8

CF 2010 DEFINES ASSET AS ‘A resource [Blank-1] …………..by the entity as a result of [Blank-2] …….. ………and from which [Blank-3] ………………… …………………… …………………… are ‘EXPECTED’ to flow to the entity.’ CF 2018 DEFINES ASSET AS ‘ A [Blank-4] ……………… ………………… ………………. controlled by the entity as a result of past events. An economic resource is a [Blank-5]………….. that has the [Blank-6] …………… to produce economic benefits.

Answer 8

1 - controlled
2 - past event
3 - future economic benefits
4 - present economic resource
5 - right
6 - potential

Question 9

CF 2018 contains a rebuttable presumption that All items of [Blank-1] ………… …….. ………… are reported in SOPL, and this presumption can only be rebutted by the IASB when setting standards, not by preparers in applying the standards. Furthermore, the IASB will only be able to do this for income and expenses arising from changes in assets and liabilities that are measured using [Blank-2] …. …..

Answer 9

1 - income and expense
2 - current value

Question 10

The Primary user need information about the resources of the entity not only to assess an entity’s prospects for future net cash inflows but also how [Blank-1] E…………….. A…….. E………………… Management has discharged their responsibilities in making use of the entity’s existing resources (i.e. stewardship).

Answer 10

efficiently and effectively

Question 11

CF 2018 States that an entity should recognise an asset or a liability (and any related income, expense or changes in equity) if such recognition provides users of FS with:

• [Blank-1] ………… information about the asset or the liability and about any income, expense or changes in equity
• a [Blank-2] …………….. ………………of the asset or liability and of any income, expenses or changes in equity, and
• information that results in [Blank-3]……………. ………….. ……….. ………………… of providing that information.

Answer 11

1 - relevant
2 - faithful representation
3 - benefits exceeding the cost

Question 12

Relevant financial information is capable of making a difference in the decisions made by users if it has [Blank-1] ……..value, [Blank-2] value…………., or both.

Answer 12

1 - confirmatory
2 - predictive

Question 13

Information is material if its [Blank-1] ………….. …………. ………………. could influence the economic decisions of users taken on the basis of the Financial Statements. As materiality is an [Blank-2] …………. ……….. aspect of relevance based on the nature or magnitude, or both, consequently, the Board cannot specify a [Blank-3] ……………. ……………. threshold for materiality or predetermine what could be material in a particular situation. The assessment of an item as material or immaterial may affect its treatment in the accounts and determining whether or not an item is material is very [Blank-4] ………. exercise based on the value of the item and its context relative to the business.

Answer 13

1 - omission or misstatement
2 - entity specific
3 - uniform quantitative
4 - subjective

Question 14

The objective of general purpose financial reporting is to provide financial information about the reporting [Blank-1] …………to facilitate the [Blank-2] ………… …………….. in making economic decisions as to providing resources to the entity.

Answer 14

1 - entity
2 - primary user

Question 15

Changes in a reporting entity’s economic resources and claims result from that entity’s performance and from other events or transactions such as issuing debt or equity instrument. Users need to be able to distinguish between both of these changes. The changes in an entity’s economic resources and claims not resulting from financial performance is presented in such as the issue of equity instruments or distributions of cash or other assets to shareholders is presented in the [Blank-1] ………… as [Blank-2] ……….. ……….. …. ……………….

Answer 15

1 - SOCE
2 - owner movement in equity

Question 16

CF 2018 states that “Control of an Economic Resource” includes those arise from legal right and the present ability to prevent other parties from [Blank-1] ……………. ……….. …………. of the economic resource and from obtaining the economic benefits that may flow from it.

Having exposure to [Blank-2] ……………. ……………. (both positive and negative) in the amount of the economic benefits produced by an economic resource may indicate that the entity controls the resource.

Answer 16

1 - directing the use
2 - significant variations

Question 17

In the (rare) case of conflict between an IFRS and the conceptual framework (CF), then in the preparation of Financial statements the recognition and measurement criteria in the conceptual framework will prevail.

YES or NO

Answer 17

NO

Question 18

CF 2018 STATES THAT THE 2 QUALITATIVE CHARACTERISTICS OF USEFUL INFORMATION ARE [Blank-1] ……………. WHICH INCLUDES [Blank-2]…………….AND [Blank-3]……………. ………………… THE 4 ENHANCHING QUALITATIVE CHARACTERISTICS STATED IN THE CF ARE [Blank-4] ……………. ANSWER THE 4 ENHANCING CHARACTERISTIC BASED ON THE MNEMONIC GIVEN IN CLASS.

Answer 18

1 - relevance
2 - faithful representation
3 - materiality
4 - CUT-V

Question 19

IAS 8 STATES THAT PRIOR YEAR ADJUSTMENTS (PYA) IS CHANGES IN ACCOUNTING ESTIMATES.

YES or NO

Answer 19

NO

Question 20

When [Blank-1] ………………….. amounts in financial reports cannot be observed directly and must instead be estimated, [Blank-2] ………….. uncertainty arises. Faithful representation of information does not mean that that information must be accurate in all respects. The CF observes that the use of [Blank-3] estimates, which imply a certain degree of uncertainty, is an essential part of the preparation of financial information and this does not necessarily [Blank-4] …………….. the usefulness of the information, if the estimates are clearly and accurately [Blank-5] ……………and explained. Even a high level of measurement uncertainty does not necessarily prevent such an estimate from providing useful information.

Answer 20

1 - monetary
2 - measurement
3 - reasonable
4 - undermines
5 - described/ disclosed

Question 21

PRIOR YEAR ADJUSTRMENTS REQUIRE A [Blank-1] ………….. ADJUSTMENTS TO FINANCIAL STATEMENTS AND A CHANGE IN ACCOUNTING ESTIMATE REQUIRES A [Blank-2] ……………. ADJUSTMENT TO FINANCIAL STATEMENTS.

Answer 21

1 - retrospective
2 - prospective

Question 22

Coate, a public limited company, is a producer of ecologically friendly electrical power (green electricity). Coate’s revenue comprises mainly the sale of electricity and green certificates.

In the notes to Coate’s financial statements for the year ended 30 November 2012, the tax expense included an amount in respect of ‘Adjustments to current tax in respect of prior years’ and this expense had been treated as a prior year adjustment. These items related to adjustments arising from tax audits by the authorities in relation to previous reporting periods.

The issues that resulted in the tax audit adjustment were not a breach of tax law but related predominantly to transfer pricing issues, for which there was a range of possible outcomes that were negotiated during 2012 with the taxation authorities. Further at 30 November 2011, Coate had accounted for all known issues arising from the audits to that date and the tax adjustment could not have been foreseen as at 30 November 2011, as the audit authorities changed the scope of the audit. No penalties were expected to be applied by the taxation authorities.

IDENTIFY IF THIS IS A PYA OR A CHANGE IN ACCOUNTING ESTIMATE [Blank-1] AND REQUIRES A [Blank-2] ADJUSTMENT TO FINANCIAL ASTATEMENTS.

Answer 22

1 - CAE
2 - prospective