Pre Test

Question 1 1. In 2XX7, Oz Ltd (DL) bought an abandoned lot of land on the main street in Sheffield, England for 200,000 British Pounds Sterling. On December 31. 2X10, the land was determined to be impaired and written down to 50,000 Pounds. The Great Recession ends and on December 31, 2X12, the land appreciates in value to 100,000 Pounds. The journal entry for this land on December 31, 2X12 is: Impaired assets may not be written up Debit land 200, 000 Pounds, Credit gain 200,000 Pounds Debit land 100, 000 Pounds, Credit gain 100,000 Pounds Debit land 50, 000 Pounds, Credit gain 50, 000 Pounds 5 points Question 2 1. The Statement of Financial Position in the IFRS, is the ________under US GAAP Income Statement Balance Sheet Statement of Cash Flow Equity Statement 5 points Question 3 1. Total comprehensive income is defined under IFRS as: Changes in equity during period resulting from transactions and other events Changes resulting from transactions with owners in their capacity as owners Is the same thing as the income statement Does not include cash flow hedges 5 points Question 4 1. Unlike the US GAAP balance sheet, the IFRS: There is no difference Presents equity before assets Is two columns Does not present goodwill 5 points Question 5 1. A major difference between the IFRS and US GAAP is: US GAAP is principle-based and IFRS is rule-based US GAAP allows capitalization of successful development for all industries GAAP is more cash flow oriented US GAAP allows LIFO 5 points Question 6 1. The Totto Ltd. (G) has 1 million Euros in convertible bond, with 300,000 Euros determined to be the equity portion of the debt. The journal entry for the sale of the bond to the German public on the DAX would be: Debit to cash for 1 million Euros, Credit to bond payable for 1million Euros Debit to cash for 300,000 Euros, Credit to stock for 300,000 Euros Debit to cash for 300,000 Euros, Credit to bond payable for 300,000 Euros Debit to cash for 1 million Euros, Credit to bond payable for 700,000 Euros and credit to equity for 300,000 Euros 5 points Question 7 1. For a non-current asset to be classified as held-for-sale the asset must be: In saleable condition Converted to cash through use Highly possible to be sold Planned to be sold within two years 5 points Question 8 1. Under the IFRS, revenue is recognized in all below situations except one when: Economic benefits are likely Economic benefits are reliably measured Stage of completion is reliably ,measured Costs are reliably measured 5 points Question 9 1. The Lion Incorporated is currently going bankrupt and is a subsidiary of the Dorothy Ltd. The CFO of the Dorothy Ltd is preparing consolidating statements for a listing of the company on the French stock exchange. She does not include in consolidation the Lion Company, saying Lion does not have and is not in the process of having debt or equity instruments that are publically traded. The CFO is: Not compliant with the IFRS In compliance with the IFRS Committing fraud Manipulating data 5 points Question 10 1. The CFO of US company Tin Man Corp. knows that under IFRS, foreign currency translations starts with identifying the functional currency for parent and the foreign operations, then translating backwards into functional currency and then translating further into presentational currency. Tin Man is listing its stock exchange and presenting its financial statement under IFRS. The CFO forgets the IFRS rules of translations. She is: Not compliant with the IFRS In compliance with the IFRS Committing fraud Manipulating data 5 points Question 11 1. The non-controlling interest (NCI) of subsidiary, Tornado Ltd., is valued by its parent, Home Co. in consolidation. The valuation of Tornado is based on using: An investment in subsidiary account The percentage of the NCI holding based on net assets The percentage of the NCI holding based on identifiable net assets The percentage of the NCI holding of the net income 5 points Question 12 1. Under the IFRS, consistency: Excludes the use of the fair value option Replaces faithfully representation in the accounting concepts Requires a entity to use the same accounting policies at interim and year-end Requires convergence to US GAAP when in doubt of principle 5 points Question 13 1. In regard to employee benefits, on October 20, 2X13, the CFO of Scare Crow PLC in London is committed to terminating Aunt Emma on December 31, 2X13 and will be offering her a benefit package of 100,000 British Pounds Sterling. Aunt Emma is qualified to retired from Scare Crow on December 31, 2X16. The proper treatment of this decision is October 31, 2X13 statement: Debit termination expense for 100,000 British Pounds Sterling, Credit termination payable 100,000 British Pounds Sterling December 31, 2X13 statement: Debit termination expense for 100,000 British Pounds Sterling, Credit termination payable 100,000 British Pounds Sterling December 31, 2X16 statement: Debit termination expense for 100,000 British Pounds Sterling, Credit termination payable 100,000 British Pounds Sterling No journal entry is required until Aunt Emma takes the termination cash out 5 points Question 14 1. Under IFRS, a lease is not an operating lease and is classified as capital lease when: 50% or more of its economic life transfers to the lessee The present value of lease payments is 50% more than its asset value Risks and rewards of ownership remain with leaser and transferred to lessee Under the IFRS, there is no distinction between operating and capital lease 5 points Question 15 1. During the first half of 2X13, the French corporate tax rate was 26%. At the end of 2013, the French Parliament announced a changed in the corporate tax rate from 25% (July 2X13 onward) to an expected 20%. The earnings before taxes (EBT) for Kansas Ltd (Fr) are 80 million Euros first half; 90 million Euros second half of 2X13. The CFO decides to use the 20% tax rate in 2X13, prior to the passing of legislation. He is: Not compliant with the IFRS In compliance with the IFRS Committing fraud Manipulating data 5 points Question 16 1. The same CFO of Kansas Ltd (Fr) observes that asset ratios are excellent but debt is high. He arranges his financial statements so that assets, liabilities, and equity are presented on one page running down each other, with assets presented first. He is: Not compliant with the IFRS In compliance with the IFRS Committing fraud Manipulating data 5 points Question 17 1. Financial statements of Kansas Ltd (Fr) for 2X13 are authorized by management and auditors on February 15, 2X13 for issuance on February 28, 2X13. On February 20, Kansas settles as a plaintiff (payer of settlement) a 5 million Euro lawsuit. CFO of Kansas Ltd (Fr) makes a second decision regarding the presentation of the financial statements and decides this settlement does not need to be recognized in 2X13. He is: Not compliant with the IFRS In compliance with the IFRS Committing fraud Manipulating data 5 points Question 18 1. Since 2009, with the release of IFRS 9, which covers the classification/ measurement of financial assets, which is also known as phase I of the replacement of IAS, the IASB is seeking to move the valuation of financial instruments closer to: Amortized value Cost value Exit value Fair value 5 points Question 19 1. US GAAP and the IFRS differ on their definition of financial assets in that only the IFRS defines it as: Cash An equity instrument (of another entity) A contractual right to receive cash There is no difference in the definition between US GAAP and the IFRS 5 points Question 20 1. US GAAP and IFRS differ on treatment of impairment of tangible assets as follows: IFRS, tangible assets are tested only when factors suggest impairment US GAAP, tangible assets are tested only when factors suggest impairment Under IFRS, tangible assets are tested annually There is no difference between US GAAP and the IFRS on this subject