X has control over the composition of Y’s board of directors. X owns 49% of Y and is the largest shareholder. X has an agreement with Z, which owns 10% of Y, whereby Z will always vote in the same way as X. Can X exercise control over Y?
Which of the following is not a condition for hedge accounting?
An entity has created a new market research division that will be financed internally. The entity has two business segments: domestic electrical goods and computer products. The segments will not receive any apparent benefits from the new division. Will the new division be disclosed under IAS 14 as a separate business segment?
In the case of grants related to an asset, which of these accounting treatments (balance sheet presentation) is prescribed by IAS 20?
The minimum disclosures prescribed under IAS 24 are to be made separately for certain categories of related parties. Which of the following is not among the list of categories specified under the Standard for the purposes of separate disclosure?
When it is difficult to distinguish between a change of estimate and a change in accounting policy, then an entity should:
Which of these considerations would not be relevant in determining the entity’s functional currency?
IAS 26 deals with:
A construction company signed a contract to build a theater over a period of two years, and with this contract also signed a maintenance contract for five years. Both the contracts are negotiated as a single package and are closely interrelated to each other. The two contracts should be:
An entity contributes to an industrial pension plan that provides a pension arrangement for its employees. A large number of other employers also contribute to the pension plan, and the entity makes contributions in respect of each employee. These contributions are kept separate from corporate assets and are used together with any investment income to purchase annuities for retired employees. The only obligation of the entity is to pay the annual contributions. This pension scheme is a:
A manufacturing group has just acquired a con- trolling interest in a football club that is listed on a stock exchange. The management of the manufacturing group wishes to exclude the football club from the consolidated financial statements on the grounds that its activities are dissimilar. How should the football club be accounted for?
How should gain on sale of an office building owned by the entity be presented in a cash flow statement?
An entity is engaged in the manufacturing industry and has recently purchased an 80% holding in a small financial services group. This group does not meet any of the threshold criteria for a reportable segment. Can the entity disclose the financial services group as a separate business segment?
Which of the following is not a related party as envisaged by IAS 24?
Capitalization of borrowing costs:
What is the accounting for treasury share transactions?
The accounting concept that is principally used to classify leases into operating and finance is:
When an entity opts to present the income statement classifying expenses by function, which of the following is not required to be disclosed as “additional information”?
An entity installed a new production facility and incurred a number of expenses at the point of installation. The entity’s accountant is arguing that most expenses do not qualify for capitalization. Included in those expenses are initial operating losses. These should be:
“Bill and hold” sales, in which delivery is delayed at the buyer’s request but the buyer assumes title and accepts invoicing, should be recognized when:
To enable financial statement users to form a view about the effects of the related party transactions, IAS 24 requires certain disclosures to be made. Which of the following disclosures is not a mandated disclosure under IAS 24?
Which is the correct accounting treatment for a finance lease in the accounts of a lessor?
When an independent valuation expert advises an entity that the salvage value of its plant and machinery had drastically changed and thus the change is material, the entity should:
Contract prices are not necessarily relevant in determining fair value, and the fair value of a biological asset or agricultural produce is not adjusted be- cause of the existence of a contract.
An entity operates in the gas industry and has four different productive processes within the production cycle. It is essentially a vertically integrated business. The entity proposes to disclose segmental information regarding each of the four operations. Can the entity disclose separately as business segments the four operations within the production cycle?
In rare circumstances, when a retirement benefit plan has attributes of both defined contribution and defined benefit plans, according to IAS 26 it is deemed:
Borrowing costs can be capitalized as part of the asset when:
An entity has revalued its property and has recognized the increase in the revaluation reserve in its financial statements. The carrying value of the property was USD 8 million. The revalued amount was USD 10 million.Tax base of the property was $6 million. In the country, the tax rate applicable to profits is 35% and the tax rate applicable to profits made on the sale of property is 30%. Where will the tax liability be recognized and at what amount?
In the case of a defined benefit plan, IAS 26:
XYZ Inc. owns a fleet of over 100 cars and 20 ships. It operates in a capital-intensive industry and thus has significant other property, plant, and equipment that it carries in its books. It decided to revalue its property, plant, and equipment. The company’s accountant has suggested the alternatives that follow. Which one of the options should XYZ Inc. select in order to be in line with the provisions of IAS 16?
An entity has a subsidiary that operates in a foreign country. The subsidiary sold goods to the parent for €2.1 million. The functional currency of the entity is the dollar.The cost of the goods to the subsidiary was €1.2 million.The goods were recorded by the entity at $1.05 million (€2 = 1 USD) and were all unsold at the year-end of December 31, 20X6.The exchange rate at that date was €1.5 = 1 USD.What is the value of the intragroup profit that will be eliminated on December 31, 20X6?
XYZ Inc. decided to extend its reporting period from a year (12-month period) to a 15-month period. Which of the following is not required under IAS 1 in case of change in reporting period?
An entity imported machinery to install in its new factory premises before year-end. However, due to circumstances beyond its control, the machinery was delayed by a few months but reached the factory premises before year-end. While this was happening, the entity learned from the bank that it was being charged interest on the loan it had taken to fund the cost of the plant. What is the proper treatment of freight and interest expense under IAS 16?
An entity acquired 60% of the share capital of a foreign entity on June 30, 20X6. The fair value of the net assets of the foreign entity at that date was €6 million. This value was €1.2 million higher than the carrying amount of the net assets of the foreign entity. The excess was due to the increase in value of non-depreciable land. The functional currency of the entity is the dollar. The financial year-end of the entity is December 31, 20X6. The exchange rates at June 30, 20X6, and December 31, 20X6, were €1.5 = 1 USD and €2 = 1 USD respectively.What figures for the fair value adjustment should be included in the group financial statements for the year ended December 31, 20X6?
Excellent Inc. built a new factory building during 2005 at a cost of USD 20 million. At December 31, 2005, the net book value of the building was USD 19 million.Subsequent to year-end, on March 15, 2006, the building was destroyed by fire and the claim against the insurance company proved futile because the cause of the fire was negligence on the part of the caretaker of the building.If the date of authorization of the financial statements for the year ended December 31, 2005, was March 31, 2006, Excellent Inc. should:
Lessors should show assets that are out on operating leases and income therefrom as follows:
Where there is a lease of land and buildings and the title to the land is not transferred, generally the lease is treated as if:
An entity issued a convertible bond on January 1, 20X4 that matures in five years. The bond can be converted into ordinary shares at any time.The entity has calculated that the liability and equity components of the bond are three million dollars for the liability component and one million dollars for the equity component, giving a total amount of the bond of four million dollars.The interest rate on the bond is 6%, and local tax legislation allows a tax deduction for the interest paid in cash. Calculate the deferred tax liability arising on the bond as at the year ending December 31, 20X4. The local tax rate is 30%.
IAS 24 requires disclosure of compensation of key management personnel. Which of the following would not be considered “compensation” for this purpose?
XYZ Inc. changes its method of valuation of inventories from weighted-average method to first-in, first-out (FIFO) method. XYZ Inc. should account for this change as:
M Ltd, a new company manufacturing and selling consumable products, has come out with an offer to refund the cost of purchase within one month of sale if the customer is not satisfied with the product. When should M Ltd. recognize the revenue?
X owns 50% of Y’s voting shares. The board of directors consists of six members; X appoints three of them and Y appoints the other three. The casting vote at meetings always lies with the directors appointed by X. Does X have control over Y?
Which of the following situations would prima facie lead to a lease being classified as an operating lease?
An entity has decided to protect its pension obligation with an insurance policy. The insurance policy permits the entity to cash in the insurance policy. Is this insurance policy a qualifying insurance policy that will be included in plan assets?
In calculating whether potential ordinary shares are dilutive, the profit figure used as the “control number” is:
Which one of the following is not required to be presented as minimum information on the face of the balance sheet, according to IAS 1?
Which of the following information is not specifically a required disclosure of IAS 1?
An entity has a subsidiary that operates in a foreign country.
International Inc. deals extensively with foreign entities, and its financial statements reflect these foreign currency transactions. Subsequent to the balance sheet date, and before the “date of authorization” of the issuance of the financial statements, there were abnormal fluctuations in foreign currency rates. International Inc. should:
An enterprise need disclose diluted EPS only if it differs from basic EPS by a material amount.
Change in accounting policy does not include:
Which of the following reports is not a component of the financial statements according to IAS 1?
An entity started trading in country A, whose currency was the dollar. After several years the entity expanded and exported its product to country B, whose currency was the euro. The business was conducted through a subsidiary in country B. The subsidiary is essentially an extension of the entity’s own business, and the directors of the two entities are common. The functional currency of the subsidiary is:
An entity classifies a lease of land and buildings as an investment property under IAS 40. The entity has adopted the fair value model. In this case:
Micrium, a computer chip manufacturing company, sells its products to its distributors for onward sales to the ultimate customers. Due to frequent fluctuations in the market prices for these goods, Micrium has a “price protection” clause in the distributor agreement that entitles it to raise additional billings in case of upward price movement. Another clause in the distributor’s agreement is that Micrium can at any time reduce its inventory by buying back goods at the cost at which it sold the goods to the distributor. Distributors pay for the goods within 60 days from the sale of goods to them. When should Micrium recognize revenue on the sale of goods to the distributors?
What is the objective of financial statements according to the Framework?
An entity purchases a building and the seller accepts payment partly in equity shares and partly in debentures of the entity. This transaction should be treated in the cash flow statement as follows:
An entity has split its business segments on the basis of the law governing its different types of business. Two business segments that the entity has identified are insurance and banking. Within the banking group, several different services are provided: retail banking, merchant banking, and small business advisory service. The insurance entities sell travel insurance, health insurance, and property insurance. The entity operates throughout the world in several countries and continents. What basis should the entity re- port its segmental information?
An entity has a subsidiary that operates in a country where the exchange rate fluctuates wildly and there are seasonal variations in the income and expenditure patterns. Which of the following rates of exchange would probably be used to translate the foreign subsidiary’s income statement?