Cuestionario: Accounting Standards Framework and IAS — 41 preguntas

1. What is the primary purpose of International Accounting Standards?

A. To provide optional personal opinions about accounting practice

B. To replace professional judgment in every accounting decision

C. To determine an entity’s tax rates and government subsidies

D. To establish rules for measuring transactions and disclosing information to users

Answer: (D)

Explicación

International Accounting Standards establish rules for measuring transactions and events affecting financial position and performance and for disclosing information to users. They are not merely optional personal opinions.

2. How do accounting standards promote consistency while preserving professional responsibility?

A. They evaluate financial statements without providing a basis for comparison

B. They reduce differences in similar circumstances while leaving room for professional judgment

C. They eliminate differences in all accounting judgments

D. They allow each accountant to select any preferred accounting treatment

Answer: (B)

Explicación

Accounting standards reduce differences in expression and practice under similar circumstances, but they do not eliminate the need for professional judgment. They also provide a framework for evaluating professional work and responsibility.

3. What is the primary role of the Conceptual Framework for Financial Reporting?

A. To provide detailed requirements for every individual transaction

B. To regulate the accounting profession in each national jurisdiction

C. To establish concepts underlying financial statements prepared for external users

D. To prescribe an entity’s annual budget and operating strategy

Answer: (C)

Explicación

The Conceptual Framework establishes the concepts underlying the preparation and presentation of financial statements for external users. An individual accounting standard provides specific requirements.

4. Which combination represents subjects addressed by the Conceptual Framework?

A. Tax enforcement, audit licensing, budgeting, and management compensation

B. Inventory counts, payroll processing, bank reconciliation, and invoice approval

C. Share trading, monetary policy, economic forecasting, and industry regulation

D. Useful information, financial statement elements, recognition and measurement, and capital maintenance

Answer: (D)

Explicación

The Conceptual Framework addresses the objective of financial statements, qualitative characteristics, financial statement elements, their recognition and measurement, and capital and capital maintenance concepts.

5. Why is financial information considered relevant to users’ decisions?

A. It is prepared by a certified accountant

B. It contains only information about past transactions

C. It follows the same presentation format in every entity

D. It can make a difference through predictive value, confirmatory value, or both

Answer: (D)

Explicación

Relevant information is capable of influencing users’ decisions because it has predictive value, confirmatory value, or both. Relevance does not depend solely on who prepared the information.

6. Which description best captures faithful representation in financial reporting?

A. Information includes only estimates that can be measured with absolute certainty

B. Information reflects the phenomena it purports to represent completely, neutrally, and without error

C. Information emphasizes favorable results to support management’s objectives

D. Information presents identical amounts across all reporting periods

Answer: (B)

Explicación

Faithful representation requires information to represent the underlying phenomena completely, neutrally, and without error. It does not mean presenting only favorable information or excluding all estimates.

7. What is the main objective of IAS 1?

A. To establish a basis for presenting general-purpose financial statements comparably across periods and entities

B. To establish requirements for measuring and recognizing inventory expenses

C. To determine the membership of international accounting standard-setting bodies

D. To define the future economic benefits associated with assets

Answer: (A)

Explicación

IAS 1 establishes the basis for presenting general-purpose financial statements so they are comparable with an entity’s previous periods and with other entities. Inventory measurement and expense recognition are associated with IAS 2.

8. Which item is included in a complete set of financial statements?

A. The statement of financial position, performance statements, changes in equity, cash flows, and notes

B. Only the statement of financial position and the income statement

C. Only the notes containing significant accounting policies

D. The statement of cash flows and management’s internal operating budget

Answer: (A)

Explicación

A complete set includes the statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flows, and notes with accounting policies and explanatory information.

9. When may an entity use a liquidity-based presentation instead of separately presenting current and non-current items?

A. When management prefers a shorter financial statement format

B. Whenever the entity reports a profit for the period

C. When a liquidity-based presentation provides more relevant information, as may occur for some financial institutions

D. When the entity has no notes accompanying its financial statements

Answer: (C)

Explicación

Current and non-current assets and liabilities are generally presented separately, unless a liquidity-based presentation provides more relevant information. This may be appropriate for some financial institutions.

10. A receivable is expected to be collected eight months after the reporting period and is not held for trading. How should it generally be classified?

A. As a current liability because collection has not occurred

B. As a non-current asset because it is not held for trading

C. As a current asset because it is expected to be realized within twelve months

D. As equity because it represents a future economic benefit

Answer: (C)

Explicación

An asset is current when it is expected to be realized within twelve months after the reporting period, even if it is not held mainly for trading. The receivable therefore generally qualifies as current.

11. Which item is outside the scope of IAS 2 Inventories?

A. Work in progress from a construction contract

B. Raw materials awaiting production

C. Finished goods held for ordinary sale

D. Merchandise purchased for resale

Answer: (A)

Explicación

IAS 2 applies to ordinary inventories but excludes work in progress arising from construction contracts. Financial instruments and certain biological assets are also outside its scope.

12. How is net realizable value calculated for inventory?

A. Purchase cost less accumulated depreciation and selling costs

B. Fair value less administrative and financing costs

C. Estimated selling price less completion and selling costs

D. Estimated selling price plus completion and selling costs

Answer: (C)

Explicación

Net realizable value is the estimated selling price in the ordinary course of business less estimated completion costs and costs necessary to make the sale.

13. An inventory item has a cost of $80 and a net realizable value of $72. At what amount should it be measured?

A. $72

B. $80

C. $152

D. $8

Answer: (A)

Explicación

Inventories are measured at the lower of cost and net realizable value. Therefore, the item is measured at $72.

14. Which combination represents costs included in inventory cost?

A. Purchase costs, conversion costs, and costs bringing inventory to its present condition

B. Selling costs, storage costs, and abnormal waste costs

C. Advertising costs, distribution costs, and general administration costs

D. Financing costs, dividends, and income taxes

Answer: (A)

Explicación

Inventory cost includes costs of purchase, costs of conversion, and other costs incurred to bring inventories to their present location and condition.

15. For which periods must an entity present a cash flow statement under IAS 7?

A. Only for the first year of operation

B. For every period for which financial statements are presented

C. Only when management considers it useful

D. Only when the entity reports a cash deficit

Answer: (B)

Explicación

IAS 7 requires a cash flow statement as a component of the financial statements for every reporting period presented; it is not an optional supplementary schedule.

16. Which investment best meets the definition of a cash equivalent?

A. A non-current loan receivable from a major customer

B. A long-term equity investment with fluctuating market value

C. A property held for rental income over several years

D. A short-term, highly liquid investment with insignificant risk of value changes

Answer: (D)

Explicación

Cash equivalents are short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

17. Which activity classification is correct for the purchase of equipment using cash?

A. Cash-equivalent activity because the payment is made immediately

B. Investing activity because it involves acquiring a long-term asset

C. Financing activity because cash is paid to an external party

D. Operating activity because equipment supports revenue generation

Answer: (B)

Explicación

Investing activities include acquiring and disposing of long-term assets and investments other than cash equivalents. Purchasing equipment is therefore an investing cash flow.

18. How does the indirect method of presenting operating cash flows differ from the direct method?

A. It adjusts profit or loss for non-cash items and working-capital changes

B. It excludes all cash receipts from customers and suppliers

C. It reports only financing receipts and payments

D. It classifies every cash flow as an investing activity

Answer: (A)

Explicación

The indirect method begins with profit or loss and adjusts it for non-cash items, working-capital changes, and certain investing or financing items. The direct method discloses major classes of gross cash receipts and payments.

19. What is an accounting policy?

A. A mathematical error discovered in a current-period ledger

B. A specific principle, basis, convention, rule, or practice used in preparing financial statements

C. An amount revised because new information changes a previous estimate

D. A cash payment made to settle a prior-period liability

Answer: (B)

Explicación

Accounting policies are the specific principles, bases, conventions, rules, and practices an entity applies when preparing and presenting financial statements.

20. A company revises the useful life of machinery because new technical information becomes available. What does this represent?

A. A prior-period error

B. A change in accounting policy

C. A change in accounting estimate

D. A correction of a mathematical omission

Answer: (C)

Explicación

A change in accounting estimate results from new information or developments and is not a correction of an error. Revising an asset’s useful life is an example.

21. Which situation constitutes a prior-period error?

A. Updating an estimate because economic conditions changed after reporting

B. Failing to record an expense despite reliable information available when the statements were prepared

C. Using an accounting policy required by a newly issued IFRS

D. Revising an asset’s warranty obligation after new claims data emerges

Answer: (B)

Explicación

A prior-period error is an omission or misstatement caused by failing to use, or misusing, reliable information that was available or could reasonably have been obtained when the statements were prepared.

22. When may an entity change an accounting policy?

A. Only when required by an IFRS or when it provides reliable and more relevant information

B. Whenever the change increases reported profit

C. Whenever the entity wants to avoid presenting comparative information

D. Whenever management prefers a simpler accounting treatment

Answer: (A)

Explicación

An accounting policy may be changed only when required by an IFRS or when the change results in reliable and more relevant information about the entity’s financial position, performance, or cash flows.

23. Which period defines the time during which an event is considered an event after the reporting period?

A. From the reporting date until the financial statements are published publicly

B. From the reporting date until the financial statements are authorized for issue

C. From the authorization date until the financial statements are distributed

D. From the beginning of the next year until the audit is completed

Answer: (B)

Explicación

Events after the reporting period occur between the end of the reporting period and the date when the financial statements are authorized for issue. Events occurring after authorization fall outside this definition.

24. A court settlement after year-end confirms that an obligation already existed at the reporting date. How should this event be classified?

A. As a disclosure-only event because legal matters cannot affect prior amounts

B. As an adjusting event because it provides evidence of an existing condition

C. As a non-adjusting event because the settlement occurred after year-end

D. As a future operating event because it affects the next reporting period

Answer: (B)

Explicación

An adjusting event provides evidence of conditions that existed at the reporting date. The later settlement confirms the prior obligation and therefore affects the reported amounts.

25. What accounting treatment is required for an adjusting event identified after the reporting period?

A. Recognize the event entirely in the following reporting period

B. Adjust the amounts recognized in the financial statements

C. Ignore the event because it occurred after year-end

D. Disclose the event without changing recognized amounts

Answer: (B)

Explicación

Amounts recognized in the financial statements are adjusted for adjusting events because those events provide evidence about conditions existing at the reporting date.

26. A major business combination occurs after the reporting date but before authorization of the financial statements. If material, how should it generally be treated?

A. Ignore it because business combinations are excluded from subsequent-event reporting

B. Recognize the combination as an impairment loss at the reporting date

C. Do not adjust recognized amounts, but disclose its nature and financial effect

D. Adjust recognized amounts because every material event changes prior-year figures

Answer: (C)

Explicación

A major business combination after the reporting date is a non-adjusting event. Recognized amounts are not adjusted, but a material event is disclosed by describing its nature and estimating its financial effect, or stating that the effect cannot be estimated.

27. Which arrangement meets the definition of a construction contract?

A. A purchase order for inventory manufactured under ordinary production procedures

B. A specifically negotiated contract to construct a single asset or interrelated group of assets

C. A standard rental agreement granting use of an existing building for five years

D. A service agreement providing routine maintenance for completed equipment

Answer: (B)

Explicación

A construction contract is specifically negotiated to construct a single asset or a group of interrelated or interdependent assets. A lease grants a right to use an existing asset rather than constructing one.

28. Which statement correctly distinguishes a fixed-price construction contract from a cost-plus contract?

A. A fixed-price contract has no stated price, while a cost-plus contract uses only a fixed unit price

B. A fixed-price contract reimburses defined costs, while a cost-plus contract uses an agreed total price

C. A fixed-price contract uses an agreed price, while a cost-plus contract reimburses defined costs plus a fee

D. A fixed-price contract is based on incurred costs, while a cost-plus contract is based on output volume

Answer: (C)

Explicación

A fixed-price contract provides for a fixed total price or fixed price per unit of output. A cost-plus contract reimburses allowable or defined costs and adds a percentage or fixed fee.

29. When the outcome of a construction contract can be estimated reliably, how are revenue and costs generally recognized?

A. By reference to the stage of completion at the reporting date

B. By deferring both revenue and costs until the contract is legally closed

C. As revenue immediately and costs when the customer makes payment

D. Only when the entire construction project is completed

Answer: (A)

Explicación

When contract results can be estimated reliably, revenue and costs are recognized by reference to the stage of completion at the reporting date. Any expected contract loss is recognized immediately as an expense.

30. A construction contract’s outcome cannot be estimated reliably, but incurred costs are probably recoverable. How should revenue be recognized?

A. Recognize revenue only to the extent of costs incurred that are probably recoverable

B. Recognize no revenue until the contract is completed

C. Recognize the full contract price based on the original estimate

D. Recognize revenue based on the percentage of cash received from the customer

Answer: (A)

Explicación

When the outcome cannot be estimated reliably, revenue is recognized only to the extent that incurred costs are probably recoverable. Contract costs are expensed as incurred.

31. What characteristic distinguishes a finance lease from an operating lease?

A. A finance lease gives the lessee temporary access but retains all ownership risks with the lessor

B. A finance lease records payments as operating expenses without recognizing an asset or liability

C. A finance lease transfers substantially all risks and rewards incidental to ownership

D. A finance lease applies only when legal ownership transfers at the beginning of the lease

Answer: (C)

Explicación

A finance lease transfers substantially all risks and rewards incidental to ownership, whether or not legal ownership eventually transfers. An operating lease does not transfer substantially all those risks and rewards.

32. Which description best defines an operating lease?

A. A lease that transfers substantially all ownership risks and rewards to the lessee

B. A contract under which the lessee purchases the asset through installments

C. A lease that does not transfer substantially all risks and rewards incidental to ownership

D. A contract that transfers legal title to the asset at commencement

Answer: (C)

Explicación

An operating lease is a lease that is not a finance lease; consequently, it does not transfer substantially all risks and rewards incidental to ownership.

33. At commencement, at what amount does a lessee initially recognize a finance lease asset and liability?

A. The asset’s carrying amount in the lessor’s financial statements

B. The lower of the asset’s fair value and the present value of minimum lease payments

C. The higher of the asset’s fair value and the present value of minimum lease payments

D. The total of all future lease payments without discounting

Answer: (B)

Explicación

A lessee initially recognizes the finance lease asset and liability at the lower of fair value and the present value of minimum lease payments. Initial direct costs are added to the asset.

34. How are payments under an operating lease generally recognized by the lessee?

A. As an expense on a straight-line basis over the lease term

B. As a liability reduction using a constant periodic interest rate

C. As an asset measured at the present value of all lease payments

D. As an expense only when each payment is made, regardless of the benefit pattern

Answer: (A)

Explicación

Operating-lease payments are generally recognized as an expense on a straight-line basis over the lease term, unless another systematic basis better represents the time pattern of the user’s benefit.

35. What does an entity’s functional currency represent?

A. The currency of its primary economic environment

B. The currency in which it pays most dividends

C. The currency required by its parent company

D. The currency used to display its financial statements

Answer: (A)

Explicación

Functional currency is the currency of the primary economic environment in which the entity operates. It differs from presentation currency, which is used to display the financial statements.

36. Which item meets the definition of a monetary item?

A. Inventory measured at historical cost

B. Prepaid insurance measured at cost

C. Equipment measured at fair value

D. A receivable for a fixed amount of cash

Answer: (D)

Explicación

A monetary item is money held or an asset or liability to be received or paid in a fixed or determinable amount of money. Inventory, equipment, and prepaid insurance are non-monetary items in these examples.

37. A company purchases goods for 20,000 units of a foreign currency when the exchange rate is 0.85 reporting-currency units per foreign-currency unit. At what amount should the transaction initially be recorded in the reporting currency?

A. 20,000 reporting-currency units

B. 23,529 reporting-currency units

C. 850 reporting-currency units

D. 17,000 reporting-currency units

Answer: (D)

Explicación

A foreign-currency transaction is initially recorded by multiplying the foreign-currency amount by the transaction-date exchange rate: 20,000 × 0.85 = 17,000 reporting-currency units.

38. How should a foreign-currency monetary payable be translated at a reporting date?

A. Using the transaction-date rate

B. Using the rate at the previous reporting date

C. Using the closing rate

D. Using the rate when the payable was originally estimated

Answer: (C)

Explicación

Foreign-currency monetary items are translated at each reporting date using the closing rate. Historical-cost non-monetary items use the transaction-date rate, while fair-value non-monetary items use the rate when fair value was measured.

39. What is the primary distinction between consolidated and separate financial statements?

A. Consolidated statements report only cash flows, while separate statements report only assets and liabilities

B. Consolidated statements combine a parent and subsidiaries as one economic entity, while separate statements account for investments held by the investor

C. Consolidated statements account for investments individually, while separate statements combine the group

D. Consolidated statements use IFRS 9, while separate statements are required to use the equity method

Answer: (B)

Explicación

Consolidated financial statements present the parent and subsidiaries as a single economic entity. Separate financial statements account for the investments held by the parent or investor individually.

40. In separate financial statements, how may investments in subsidiaries, joint ventures, and associates be accounted for?

A. At fair value through other comprehensive income in every case

B. Only using the equity method for every investment

C. Only by consolidating the underlying entities

D. At cost or in accordance with IFRS 9, using the same treatment for each class of investment

Answer: (D)

Explicación

Separate financial statements permit investments in subsidiaries, joint ventures, and associates to be accounted for at cost or in accordance with IFRS 9. The same accounting treatment must be applied to each class of investment.

41. When should a dividend from a subsidiary be recognized in profit or loss in separate financial statements?

A. When the subsidiary declares an intention to pay it

B. When the subsidiary’s annual financial statements are approved

C. When the investor’s right to receive the dividend is established

D. When the cash is deposited in the investor’s bank account

Answer: (C)

Explicación

Dividends from a subsidiary, joint venture, or associate are recognized in profit or loss when the investor’s right to receive them is established, rather than necessarily when cash is received.