IFRS CPA EXAM
On March 22, year 1, Cole Corporation received notification of legal action against the firm.
Cole's attorneys determine that it is *probable the company will lose the suit*, and the loss is
estimated at $2,000,000. Cole's accountants believe this *amount is material and should be
disclosed*. Cole prepares its financial statements in accordance with IFRS. How should the
*estimated loss be disclosed* in Cole's financial statements at December 31, year 1? ✔✔As a
*provision for loss* reported in the *balance sheet* and a *loss on the income statement*
IFRS requires *changes in accounting principles* to be reported ✔✔On a retrospective basis
Which of the following is *not* one of the *criteria for revenue recognition* for *sales of
goods* under IFRS? ✔✔Payment has been received.
Under IFRS, which of the following is *not* a method that may be used to *account for treasury
stock*? ✔✔Retained earnings method
On July 1, year 2, a company decided to adopt IFRS. The company's first IFRS reporting period is
as of and for the year ended December 31, year 2. The company will present one year of
comparative information. What is the company's *date of transition* to IFRS? ✔✔January 1,
year 1.
Under IFRS, a *voluntary change* in accounting method *may only be made* by a company if
✔✔The new method provides *reliable and more relevant* information.
Under IFRS, *changes in accounting* policies are ✔✔*Permitted* if the change will result in a
more *reliable and more relevant* presentation of the financial statements.
Galaxy Corporation prepares its financial statements in accordance with IFRS. Galaxy intends to
*refinance a $10,000 note payable* due on February 20, year 2. The company expects the note
to be refinanced for a period of five years. Under *what circumstances* can Galaxy *report the
note payable as a noncurrent liability* on its December 31, year 1 statement of financial
position? ✔✔If Galaxy has executed an agreement to refinance before December 31, year 1.
Morgan Corp. signs a lease to rent equipment for *ten years*. The lease payments of $10,000
per year are due on January 2 each year. At the end of the lease term, Morgan *may purchase
the equipment for $50*. The equipment is estimated to have a *useful life of 12 years*.
Morgan prepares its financial statements in accordance with IFRS. Morgan should *classify this
lease* as a(n) ✔✔Finance lease
, Under IFRS, which of the following accounts would *not be considered a "provision"*?
✔✔Note payable
Which of the following is *not true* about *accounting for inventory* under IFRS?
✔✔Inventories are *always valued at net realizable value*
(valued at lower of cost or nrv)
According to the IASB Framework for the Preparation and Presentation of Financial Statements,
the fundamental *qualitative characteristic of relevance* includes ✔✔Predictive value and
confirmatory value.
Upon first-time adoption of IFRS, an entity may elect to *use fair value as deemed cost* for
✔✔Any individual item of property, plant, and equipment.
For IFRS purposes, *cash advances and loans from bank overdrafts* should be reported on the
statement of cash flows as ✔✔Operating activities.
Under IFRS, when an entity chooses the *revaluation model* as its accounting policy for
*measuring property, plant, and equipment*, which of the following statements is correct?
✔✔When an asset is revalued, the *entire class* of *PPE* to which that asset belongs *must
be revalued*
When the *revaluation model* is used for reporting* plant, property, and equipment*, the
*gain or loss* should be *included in* ✔✔A *revaluation surplus* account is *other
comprehensive income*
Santiago Corp. signs an agreement to lease land and a building for *20 years*. At the end of the
lease, the property will *not transfer* to Santiago. The life of the building is estimated to be
*20 years*. Santiago prepares its financial statements in accordance with IFRS. How should
Santiago account for the lease? ✔✔The land is recorded as an operating lease, and the building
is recorded as a finance lease
Filigree Corporation prepares its financial statements in accordance with IFRS. Filigree
*acquired equipment by issuing 5,000 shares* of its common stock. How should this
transaction be reported on the statement of cash flows? ✔✔In the *notes* to the financial
statements as a *significant noncash transaction*.
On March 22, year 1, Cole Corporation received notification of legal action against the firm.
Cole's attorneys determine that it is *probable the company will lose the suit*, and the loss is
estimated at $2,000,000. Cole's accountants believe this *amount is material and should be
disclosed*. Cole prepares its financial statements in accordance with IFRS. How should the
*estimated loss be disclosed* in Cole's financial statements at December 31, year 1? ✔✔As a
*provision for loss* reported in the *balance sheet* and a *loss on the income statement*
IFRS requires *changes in accounting principles* to be reported ✔✔On a retrospective basis
Which of the following is *not* one of the *criteria for revenue recognition* for *sales of
goods* under IFRS? ✔✔Payment has been received.
Under IFRS, which of the following is *not* a method that may be used to *account for treasury
stock*? ✔✔Retained earnings method
On July 1, year 2, a company decided to adopt IFRS. The company's first IFRS reporting period is
as of and for the year ended December 31, year 2. The company will present one year of
comparative information. What is the company's *date of transition* to IFRS? ✔✔January 1,
year 1.
Under IFRS, a *voluntary change* in accounting method *may only be made* by a company if
✔✔The new method provides *reliable and more relevant* information.
Under IFRS, *changes in accounting* policies are ✔✔*Permitted* if the change will result in a
more *reliable and more relevant* presentation of the financial statements.
Galaxy Corporation prepares its financial statements in accordance with IFRS. Galaxy intends to
*refinance a $10,000 note payable* due on February 20, year 2. The company expects the note
to be refinanced for a period of five years. Under *what circumstances* can Galaxy *report the
note payable as a noncurrent liability* on its December 31, year 1 statement of financial
position? ✔✔If Galaxy has executed an agreement to refinance before December 31, year 1.
Morgan Corp. signs a lease to rent equipment for *ten years*. The lease payments of $10,000
per year are due on January 2 each year. At the end of the lease term, Morgan *may purchase
the equipment for $50*. The equipment is estimated to have a *useful life of 12 years*.
Morgan prepares its financial statements in accordance with IFRS. Morgan should *classify this
lease* as a(n) ✔✔Finance lease
, Under IFRS, which of the following accounts would *not be considered a "provision"*?
✔✔Note payable
Which of the following is *not true* about *accounting for inventory* under IFRS?
✔✔Inventories are *always valued at net realizable value*
(valued at lower of cost or nrv)
According to the IASB Framework for the Preparation and Presentation of Financial Statements,
the fundamental *qualitative characteristic of relevance* includes ✔✔Predictive value and
confirmatory value.
Upon first-time adoption of IFRS, an entity may elect to *use fair value as deemed cost* for
✔✔Any individual item of property, plant, and equipment.
For IFRS purposes, *cash advances and loans from bank overdrafts* should be reported on the
statement of cash flows as ✔✔Operating activities.
Under IFRS, when an entity chooses the *revaluation model* as its accounting policy for
*measuring property, plant, and equipment*, which of the following statements is correct?
✔✔When an asset is revalued, the *entire class* of *PPE* to which that asset belongs *must
be revalued*
When the *revaluation model* is used for reporting* plant, property, and equipment*, the
*gain or loss* should be *included in* ✔✔A *revaluation surplus* account is *other
comprehensive income*
Santiago Corp. signs an agreement to lease land and a building for *20 years*. At the end of the
lease, the property will *not transfer* to Santiago. The life of the building is estimated to be
*20 years*. Santiago prepares its financial statements in accordance with IFRS. How should
Santiago account for the lease? ✔✔The land is recorded as an operating lease, and the building
is recorded as a finance lease
Filigree Corporation prepares its financial statements in accordance with IFRS. Filigree
*acquired equipment by issuing 5,000 shares* of its common stock. How should this
transaction be reported on the statement of cash flows? ✔✔In the *notes* to the financial
statements as a *significant noncash transaction*.
