IFRS

Question 1

Earnings management…
A) …is illegal.
B) …is considered to always be harmful to shareholders.
C) …has a range of meanings
D) …is a valuation technique for intangible assets

Answer 1

C) …has a range of meanings

Question 2

Which of the following is an example of an earnings management pattern?
A) Taking a big bath
B) Taking a shower
C) Jungle Book
D) Income Balance

Answer 2

A) Taking a big bath

Question 3

Earnings management is:
A) Discussions with stockholder
B) Marketing during slow periods to try and increase sales.
C) The choice by a manager of accounting policies so as to achieve some specific
objective.
D) A financial ratio used to better understand the relationship between earnings
and sales

Answer 3

C) The choice by a manager of accounting policies so as to achieve some specific
objective.

Question 4

Which of the following statements is true:
A) Choosing a specific write-off period is an example for real earnings
management
B) Accounting earnings management is illegal
C) Accounting earnings management takes place during the fiscal year.
D) Real earnings management takes place during the fiscal year.

Answer 4

D) Real earnings management takes place during the fiscal year.

Question 5

Which if the following can be an example for real earnings management?
A) Estimating residual value
B) Determining a valuation model for property, plant and equipment.
C) Sale-and-lease-back
D) Not to publish the financial statement

Answer 5

C) Sale-and-lease-back

Question 6

The choice between first-in, first-out or weighted average cost (inventories-
IAS 2) is an example for…
A) …flexibility in accounting standards where choices are specified.
B) …flexibility in accounting standards where there is no choice.
C) …flexibility in accounting standards where choices are not specified.
D) …real earnings management.

Answer 6

A) …flexibility in accounting standards where choices are specified.

Question 7

Financial statement analysis makes use of:
A) Market data
B) Financial disclosure
C) Economic data
D) All of the above

Answer 7

D) All of the above

Question 8

Deducing cost of goods sold from sales results in…
A) …net income.
B) …gross profit.
C) …sales turnover.
D) …EBITDA.

Answer 8

B) …gross profit.

Question 9

The free cash flow combines …
A) …net income and cash flow from financing
B) …EBITDA and sales
C) …cash flow from operating activities and cash flow from investing activities
D) …net cash flow and cash flow from operating activities

Answer 9

C) …cash flow from operating activities and cash flow from investing activities

Question 10

A margin is…
A) …EBITDA minus depreciation and amortization
B) …comparison of profit with the investment necessary to generate the profit
C) …the portion of profit that is sales
D) …the portion of sales that is a profit.

Answer 10

D) …the portion of sales that is a profit.

Question 11

Which returns reflects how much profit a company generates with the
money shareholder have invested?
A)
Net income
Average Net Cash Flow
B)
Total debt
Total shareholders′ equity
C)
Total assets
Total shareholders′ equity
D)
Net income
Average shareholders′ equity

Answer 11

D)
Net income
Average shareholders′ equity

Question 12

Dividing the gross profit by sales results in…
A) …gross margin
B)… net profit margin
C)…gross efficiency
D)… EBIT

Answer 12

A) …gross margin

Question 13

Which ratio reflects the average number of times per period that the money
invested in assets is converted into sales?
A)
EBIT
Capital Employed
B)
Total debt
Total assets
C)
Sales
Total assets
D)
Current assets
Current liabilities

Answer 13

C)
Sales
Total assets

Question 14

Which Ratio can be used to examine the firm’s liquidity
A)
PPE Investments
PPE Depriciation
B)
Total debt
Total assets
C)
Cost of goods sold
Average inventory
D)
Current assets
Current liabilities

Answer 14

D)
Current assets
Current liabilities

Question 15

What information can be found in a balance sheet?
A) Supplementary information on a firm’s business model
B) The profit or loss for the accounting period
C) The financial position on a particular date; i.e. assets, liabilities and
shareholders’ equity
D) Compensation plans for the board of directors

Answer 15

C) The financial position on a particular date; i.e. assets, liabilities and
shareholders’ equity

Question 16

reinvestment rate above 1 indicates?
Reinvestment Rate (PPE) =
PPE Investments
PPE Depriciation
A) The firm is shrinking
B) The firm is growing
C) The firm is bankrupt
D) The firm conducts earnings management in an illegal way

Answer 16

B) The firm is growing

Question 17

What information can be found in an income statement?
A) Revenues, expenditures, net profit or loss
B) Daily stock prices
C) A reconciliation of the beginning and ending balances of all revenue
accounts.
D) CEO entrance date

Answer 17

statement?

A) Revenues, expenditures, net profit or loss

Question 18

The Total Shareholder Return includes:
A) EBIDT, EBITDA, and net income
B) Total assets, net income, dividends
C) Change in share price, dividends
D) Change in share price, net income

Answer 18

C) Change in share price, dividends

Question 19

The Equity-to-Fixed Assets Ratio can be used to examine the firm’s
A) Financial profitability
B) Total shareholder return
C) Horizontal balance sheet sturcture
D) Interest coverage

Answer 19

C) Horizontal balance sheet sturcture

Question 20

What is a financial instrument?
A) A firm policy that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity
B) A contract that results in a financial asset of one entity and a liability instrument
of another entity.
C) A contract that gives rise to a financial liability or equity instrument of one entity
and a financial asset of another entity.
D) A contract that gives rise to equity instruments of two entities.

Answer 20

C) A contract that gives rise to a financial liability or equity instrument of
one entity and a financial asset of another entity.

Question 21

Which of the following is not a financial asset?
A) Cash.
B) Accounts payables.
C) A forward with a positive value.
D) An option to sell shares of an entity.

Answer 21

B) Accounts payables.

Question 22

Which of the following does not give rise to a financial liability?
A) Issuing a 10-year industry bond
B) Being granted a loan of 1 Mio. Euros by Deutsche Bank.
C) A forward for buying crude oil in 1 year for 50 Euros per barrel and the current
market value of 1 barrel of crude oil is 40 Euros.
D) Buying an option for selling shares of an entity for 50 Euros and current market
value of the shares is 60 Euros.

Answer 22

D) Buying an option for selling shares of an entity for 50 Euros and current
market value of the shares is 60 Euros.

Question 23

A debt instrument for which the business model is hold the financial
instrument and collect the contractual cash flows and for which the SSPI
criterion is fulfilled is measured at …
A) … amortised cost.
B) … fair value through other comprehensive income.
C) … fair value through profit andr loss.
D) … net realisable value

Answer 23

A) … amortised cost.

Question 24

Forward contracts are measured at …
A) … amortised cost.
B) … fair value through other comprehensive income.
C) … fair value through profit and loss.
D) … net realisable value.

Answer 24

C) … fair value through profit and loss.

Question 25

Shares which are held for trading are measured …
A) … only at amortised cost.
B) … only at fair value through other comprehensive income.
C) … only at fair value through profit and loss.
D) … fair value through profit and loss or fair value through other comprehensive
income.

Answer 25

C) … only at fair value through profit and loss.

Question 26

The best measure for the fair value of financial instruments (level 1) are…
A) … discounted future cashflows.
B) … results of an valuation model.
C) … quoted market prices.
D) … best estimates.

Answer 26

C) … quoted market prices.

Question 27

A forward is measured at the balance sheet date. The value was – 2 Mio. at
the last balance sheet date and now is – 4 Mio. What are the booking
entries?
A) DR expenses 2 Mio., CR financial asset 2 Mio.
B) DR expenses 2 Mio., CR financial liability 2 Mio.
C) DR other comprehensive income, 2 Mio., CR financial liability 2 Mio.
D) DR other comprehensive income 2 Mio. CR financial asset 2 Mio.

Answer 27

B) DR expenses 2 Mio., CR financial liability 2 Mio.

Question 28

Shares are measured at FVTOCI. The value increased from 3 Mio. to 4 Mio.
In comparison to last year. What are the booking entries?
A) DR income 1 Mio., CR financial asset 1 Mio.
B) DR financial asset 1 Mio., CR other comprehensive income 1 Mio.
C) DR other comprehensive income, 1 Mio., CR financial asset 1 Mio.
D) DR other comprehensive income 1 Mio. CR financial liability 1 Mio.

Answer 28

B) DR financial asset 1 Mio., CR other comprehensive income 1 Mio.

Question 29

What is a provision?
A) A contingent liability with uncertain future cash flows.
B) A liability with uncertain amount or timing.
C) A economic benefit to a third party due to a future event.
D) An entry in other comprehensive income.

Answer 29

B) A liability with uncertain amount or timing.

Question 30

The recognition of a provision does not require …
A) … that the amount can be measured reliably.
B) … that it is identifiable.
C) … that the outflow of economic benefits is probable.
D) … that it results from a past event

Answer 30

B) … that it is identifiable.

Question 31

Which of the following is not a present obligation from which a provision
can result ?
A) A sale contract for products with warranties.
B) A pattern of past practice of paying bonuses to employees.
C) A court order to decontaminate land.
D) A management decisions to repair a machine.

Answer 31

D) A management decisions to repair a machine.

Question 32

What are the probability requirements for the outflow of future economic
benefits for a contingent liability?
A) Probable but not remote and not possible.
B) Possible but not probable and not remote.
C) Remote but not possible and not probable.
D) None of the above.

Answer 32

B) Possible but not probable and not remote.

Question 33

Provisions are measured at …
A) … cost.
B) … probability weighted fair value.
C) … net realisable value.
D) … best estimate

Answer 33

D) … best estimate.

Question 34

If the risks specific to the liability and the time value
of money are ignored a provision for a lawsuit is measured at …
A) … the estimated cash ouflow with the highest likelihood.
B) … the most likely cash inflow.
C) … the probability-weighted expected value.
D) … the most likely fair value.

Answer 34

A) … the estimated cash ouflow with the highest likelihood.

Question 35

An entity sells 2,000 units of a product with warranties under which the
entity will repair any manufacturing defects that become apparent within the
first six months after purchase. If a minor defect is detected in a product,
estimated repair costs of 50€ will result. If a major defect is detected in a
product, estimated repair costs of 100€ will result. The entity’s experience
together with its future expectations indicate that 90 per cent of the goods
sold have no defects, 5 per cent of the goods sold have minor defects and 5
per cent of the goods sold have major defects. What is the value of the
provision to be recognized?
A) 5,000€.
B) 10,000€.
C) 15,000€.
D) 20,000€.

Answer 35

C) 15,000€.

Question 36

An entity wins a lawsuit in 2016 for which a provision of 1 Mio. € was
recognized in 2015 for the case of a loss. What are the necessary booking
entries?
A) DR income 1 Mio. CR provision 1 Mio.
B) DR provision 1 Mio. CR cash 1 Mio.
C) DR provision 1 Mio. CR expenses 1 Mio.
D) DR provision 1 Mio. CR income 1 Mio.

Answer 36

D) DR provision 1 Mio. CR income 1 Mio.