International Finance Reporting Standards for Compensation
Professionals Exam
Question 1. What is the primary objective of financial reporting under IFRS?
A) To ensure tax compliance
B) To provide information useful for economic decision-making
C) To maximize profits
D) To reduce audit fees
Answer: B
Explanation: The primary objective of financial reporting under IFRS is to provide information about the
financial position, performance, and changes in financial position of an entity that is useful to a wide
range of users for economic decision-making.
Question 2. What organization is responsible for issuing International Financial Reporting Standards
(IFRS)?
A) SEC
B) FASB
C) IASB
D) AICPA
Answer: C
Explanation: The International Accounting Standards Board (IASB) is responsible for developing and
issuing IFRS.
Question 3. Which fundamental qualitative characteristic of financial information ensures that the
information is complete, neutral, and free from error?
A) Relevance
B) Faithful representation
C) Timeliness
D) Comparability
Answer: B
Explanation: Faithful representation requires that financial information is complete, neutral, and free
from error.
Question 4. Which enhancing qualitative characteristic of financial reporting enables users to identify
similarities and differences between entities?
A) Verifiability
B) Understandability
C) Comparability
D) Timeliness
Answer: C
Explanation: Comparability allows users to compare financial information across different entities and
time periods.
Question 5. Under IFRS, what is the main purpose of the Statement of Financial Position?
A) To show cash flows
B) To show sources of revenue
C) To show assets, liabilities, and equity at a point in time
D) To show profit or loss for the year
Answer: C
, International Finance Reporting Standards for Compensation
Professionals Exam
Explanation: The Statement of Financial Position provides a snapshot of an entity’s assets, liabilities, and
equity at the reporting date.
Question 6. Which financial statement primarily reports an entity’s revenues and expenses for a period?
A) Statement of Financial Position
B) Statement of Profit or Loss
C) Statement of Cash Flows
D) Statement of Changes in Equity
Answer: B
Explanation: The Statement of Profit or Loss (Income Statement) reports an entity’s revenues and
expenses for a specific period.
Question 7. What does the Statement of Other Comprehensive Income include?
A) Only cash flow items
B) Only accumulated profits
C) Items of income and expense not recognized in profit or loss
D) Only revenue and cost of sales
Answer: C
Explanation: The Statement of Other Comprehensive Income includes items not recognized in the profit
or loss, such as revaluation gains.
Question 8. Which statement provides information about an entity’s cash inflows and outflows from
operating, investing, and financing activities?
A) Statement of Financial Position
B) Statement of Comprehensive Income
C) Statement of Changes in Equity
D) Statement of Cash Flows
Answer: D
Explanation: The Statement of Cash Flows presents cash inflows and outflows categorized by operating,
investing, and financing activities.
Question 9. Which accounting basis recognizes revenue and expenses when they are earned or incurred,
regardless of when cash is received or paid?
A) Cash basis
B) Accrual basis
C) Modified cash basis
D) Tax basis
Answer: B
Explanation: Accrual accounting recognizes transactions when they occur, not when cash is exchanged.
Question 10. Which of the following is NOT a fundamental qualitative characteristic under IFRS?
A) Relevance
B) Faithful representation
C) Timeliness
D) None of the above
, International Finance Reporting Standards for Compensation
Professionals Exam
Answer: C
Explanation: Timeliness is an enhancing qualitative characteristic, not a fundamental one.
Question 11. What is the key purpose of adopting a single set of global accounting standards like IFRS?
A) Increase local regulation
B) Improve comparability and reduce cost of capital
C) Increase regulatory complexity
D) Reduce transparency
Answer: B
Explanation: Global standards improve comparability for investors and reduce the cost of capital for
companies.
Question 12. Which body developed the Conceptual Framework for Financial Reporting?
A) FASB
B) GAAP
C) IASB
D) SEC
Answer: C
Explanation: The IASB developed the Conceptual Framework to guide the preparation and presentation
of financial statements.
Question 13. Which of the following is NOT an enhancing qualitative characteristic under IFRS?
A) Verifiability
B) Timeliness
C) Understandability
D) Faithful representation
Answer: D
Explanation: Faithful representation is a fundamental characteristic, not an enhancing one.
Question 14. What does the accrual basis of accounting help ensure for employee compensation
expenses?
A) They are recognized when paid
B) They are recognized when incurred
C) Only recognized at year-end
D) Only recognized if cash is available
Answer: B
Explanation: Accrual accounting ensures that compensation expenses are recognized in the period the
employee provides the service.
Question 15. Which of the following is NOT one of the four main financial statements under IFRS?
A) Statement of Changes in Equity
B) Statement of Cash Flows
C) Statement of Financial Activities
D) Statement of Profit or Loss
Answer: C
, International Finance Reporting Standards for Compensation
Professionals Exam
Explanation: The correct four statements are: Financial Position, Profit or Loss, Cash Flows, and Changes
in Equity.
Question 16. Under IFRS, which statement reflects changes in an entity’s equity during a period?
A) Statement of Changes in Equity
B) Statement of Financial Position
C) Statement of Profit or Loss
D) Statement of Cash Flows
Answer: A
Explanation: The Statement of Changes in Equity shows movements in equity, including share capital,
reserves, and retained earnings.
Question 17. Which qualitative characteristic ensures that users can confirm information with evidence?
A) Comparability
B) Verifiability
C) Timeliness
D) Relevance
Answer: B
Explanation: Verifiability means information can be confirmed by independent observers.
Question 18. Under IFRS, what is the purpose of the Statement of Profit or Loss?
A) To report cash flows
B) To show assets and liabilities
C) To display revenue and expenses for a period
D) To show only comprehensive income
Answer: C
Explanation: The Statement of Profit or Loss reports income, expenses, and resulting profit or loss.
Question 19. What does the term “reporting period” refer to in IFRS?
A) The time between audits
B) The year a company is founded
C) The period covered by financial statements
D) The time taken to prepare financials
Answer: C
Explanation: Reporting period refers to the time span for which financial statements are prepared,
typically a year or quarter.
Question 20. Which of the following is NOT a purpose of the IASB’s Conceptual Framework?
A) To assist in developing IFRS
B) To provide guidance for resolving accounting issues
C) To set tax rates
D) To help users understand financial statements
Answer: C
Explanation: The Conceptual Framework does not set tax rates; it guides standard setting and financial
statement preparation.
Professionals Exam
Question 1. What is the primary objective of financial reporting under IFRS?
A) To ensure tax compliance
B) To provide information useful for economic decision-making
C) To maximize profits
D) To reduce audit fees
Answer: B
Explanation: The primary objective of financial reporting under IFRS is to provide information about the
financial position, performance, and changes in financial position of an entity that is useful to a wide
range of users for economic decision-making.
Question 2. What organization is responsible for issuing International Financial Reporting Standards
(IFRS)?
A) SEC
B) FASB
C) IASB
D) AICPA
Answer: C
Explanation: The International Accounting Standards Board (IASB) is responsible for developing and
issuing IFRS.
Question 3. Which fundamental qualitative characteristic of financial information ensures that the
information is complete, neutral, and free from error?
A) Relevance
B) Faithful representation
C) Timeliness
D) Comparability
Answer: B
Explanation: Faithful representation requires that financial information is complete, neutral, and free
from error.
Question 4. Which enhancing qualitative characteristic of financial reporting enables users to identify
similarities and differences between entities?
A) Verifiability
B) Understandability
C) Comparability
D) Timeliness
Answer: C
Explanation: Comparability allows users to compare financial information across different entities and
time periods.
Question 5. Under IFRS, what is the main purpose of the Statement of Financial Position?
A) To show cash flows
B) To show sources of revenue
C) To show assets, liabilities, and equity at a point in time
D) To show profit or loss for the year
Answer: C
, International Finance Reporting Standards for Compensation
Professionals Exam
Explanation: The Statement of Financial Position provides a snapshot of an entity’s assets, liabilities, and
equity at the reporting date.
Question 6. Which financial statement primarily reports an entity’s revenues and expenses for a period?
A) Statement of Financial Position
B) Statement of Profit or Loss
C) Statement of Cash Flows
D) Statement of Changes in Equity
Answer: B
Explanation: The Statement of Profit or Loss (Income Statement) reports an entity’s revenues and
expenses for a specific period.
Question 7. What does the Statement of Other Comprehensive Income include?
A) Only cash flow items
B) Only accumulated profits
C) Items of income and expense not recognized in profit or loss
D) Only revenue and cost of sales
Answer: C
Explanation: The Statement of Other Comprehensive Income includes items not recognized in the profit
or loss, such as revaluation gains.
Question 8. Which statement provides information about an entity’s cash inflows and outflows from
operating, investing, and financing activities?
A) Statement of Financial Position
B) Statement of Comprehensive Income
C) Statement of Changes in Equity
D) Statement of Cash Flows
Answer: D
Explanation: The Statement of Cash Flows presents cash inflows and outflows categorized by operating,
investing, and financing activities.
Question 9. Which accounting basis recognizes revenue and expenses when they are earned or incurred,
regardless of when cash is received or paid?
A) Cash basis
B) Accrual basis
C) Modified cash basis
D) Tax basis
Answer: B
Explanation: Accrual accounting recognizes transactions when they occur, not when cash is exchanged.
Question 10. Which of the following is NOT a fundamental qualitative characteristic under IFRS?
A) Relevance
B) Faithful representation
C) Timeliness
D) None of the above
, International Finance Reporting Standards for Compensation
Professionals Exam
Answer: C
Explanation: Timeliness is an enhancing qualitative characteristic, not a fundamental one.
Question 11. What is the key purpose of adopting a single set of global accounting standards like IFRS?
A) Increase local regulation
B) Improve comparability and reduce cost of capital
C) Increase regulatory complexity
D) Reduce transparency
Answer: B
Explanation: Global standards improve comparability for investors and reduce the cost of capital for
companies.
Question 12. Which body developed the Conceptual Framework for Financial Reporting?
A) FASB
B) GAAP
C) IASB
D) SEC
Answer: C
Explanation: The IASB developed the Conceptual Framework to guide the preparation and presentation
of financial statements.
Question 13. Which of the following is NOT an enhancing qualitative characteristic under IFRS?
A) Verifiability
B) Timeliness
C) Understandability
D) Faithful representation
Answer: D
Explanation: Faithful representation is a fundamental characteristic, not an enhancing one.
Question 14. What does the accrual basis of accounting help ensure for employee compensation
expenses?
A) They are recognized when paid
B) They are recognized when incurred
C) Only recognized at year-end
D) Only recognized if cash is available
Answer: B
Explanation: Accrual accounting ensures that compensation expenses are recognized in the period the
employee provides the service.
Question 15. Which of the following is NOT one of the four main financial statements under IFRS?
A) Statement of Changes in Equity
B) Statement of Cash Flows
C) Statement of Financial Activities
D) Statement of Profit or Loss
Answer: C
, International Finance Reporting Standards for Compensation
Professionals Exam
Explanation: The correct four statements are: Financial Position, Profit or Loss, Cash Flows, and Changes
in Equity.
Question 16. Under IFRS, which statement reflects changes in an entity’s equity during a period?
A) Statement of Changes in Equity
B) Statement of Financial Position
C) Statement of Profit or Loss
D) Statement of Cash Flows
Answer: A
Explanation: The Statement of Changes in Equity shows movements in equity, including share capital,
reserves, and retained earnings.
Question 17. Which qualitative characteristic ensures that users can confirm information with evidence?
A) Comparability
B) Verifiability
C) Timeliness
D) Relevance
Answer: B
Explanation: Verifiability means information can be confirmed by independent observers.
Question 18. Under IFRS, what is the purpose of the Statement of Profit or Loss?
A) To report cash flows
B) To show assets and liabilities
C) To display revenue and expenses for a period
D) To show only comprehensive income
Answer: C
Explanation: The Statement of Profit or Loss reports income, expenses, and resulting profit or loss.
Question 19. What does the term “reporting period” refer to in IFRS?
A) The time between audits
B) The year a company is founded
C) The period covered by financial statements
D) The time taken to prepare financials
Answer: C
Explanation: Reporting period refers to the time span for which financial statements are prepared,
typically a year or quarter.
Question 20. Which of the following is NOT a purpose of the IASB’s Conceptual Framework?
A) To assist in developing IFRS
B) To provide guidance for resolving accounting issues
C) To set tax rates
D) To help users understand financial statements
Answer: C
Explanation: The Conceptual Framework does not set tax rates; it guides standard setting and financial
statement preparation.
