IFRS CPA Exam with correct answers |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
How should a first-time adopter of IFRS recognize the adjustments required to present its
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opening IFRS statement of financial position? - correct answer✔✔All of the adjustments
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should be recognized directly in retained earnings or, if appropriate, in another category of
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
equity
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? - correct |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
answer✔✔January 1, year 1. |||\\\ |||\\\ |||\\\
Upon first-time adoption of IFRS, an entity may elect to use fair value as deemed cost for -
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
correct answer✔✔Any individual item of property, plant, and equipment.
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IFRS, which of the following is the first step within the hierarchy of guidance to which
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
management refers, and whose applicability it considers, when selecting accounting policies? - |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
correct answer✔✔Apply a standard from IFRS if it specifically relates to the transaction, other
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
event, or condition. |||\\\ |||\\\
Which of the following is true about financial statement requirements under IFRS? - correct
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
answer✔✔Prior year comparative financial statements are required. |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
According to the IASB Framework for the Preparation and Presentation of Financial Statements, |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
the fundamental qualitative characteristic of relevance includes - correct answer✔✔Predictive
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
value and confirmatory value.
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Which of the following organizations is responsible for setting International Financial Reporting
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Standards? - correct answer✔✔International Accounting Standards Board. |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
, Which of the following is not one of the criteria for revenue recognition for sales of goods
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
under IFRS? - correct answer✔✔Payment has been received. |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
If the outcome of rendering services cannot be estimated reliably, IFRS. requires the use of
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
which revenue recognition method? - correct answer✔✔Cost recovery method.
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According to the IASB Framework, the two criteria required for incorporating items into the |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
income statement or statement of financial position are that - correct answer✔✔It meets the
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
definition of an element and can be measured reliably. |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
According to the IASB Framework, the financial statement element that is defined as increases |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
in economic benefits during the accounting period in the form of inflows or enhancements of
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
assets or decreases of liabilities that result in increases in equity, other than those relating to
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
contributions from equity participants, is - correct answer✔✔Income |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Grim Corporation reports under IFRS. Grim issued 2,000 $1,000 convertible bonds at par, with
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
an annual interest rate of 6% when the market was 8%. The bonds are due in 5 years and each
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
$1,000 bond is convertible into 3 shares of common stock. At what amount would Grim record
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
the liability component of the bond? - correct answer✔✔- $1,840,285
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- To do this, discount the bond at market interest rates as in US GAAP. The liability component
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
is the discounted amount and the equity component is the residual of the cash received less
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
the discounted amount. Calculations are as follows:
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- Face amount of the bonds: 2,000 * $1,000 = $2,000,000
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- Present value of $1 for the principal
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- ($2,000,000 * 0.68058) = $1,361,160
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- Present value of an ordinary annuity for the
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- interest ($120,000 * 3.99271) = $ 479,125
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- Value of the liability = $1,840,285
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- Value of the equity ($2,000,000 - $1,840,285) = $ 159,715
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
How should a first-time adopter of IFRS recognize the adjustments required to present its
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
opening IFRS statement of financial position? - correct answer✔✔All of the adjustments
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
should be recognized directly in retained earnings or, if appropriate, in another category of
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
equity
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? - correct |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
answer✔✔January 1, year 1. |||\\\ |||\\\ |||\\\
Upon first-time adoption of IFRS, an entity may elect to use fair value as deemed cost for -
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
correct answer✔✔Any individual item of property, plant, and equipment.
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
IFRS, which of the following is the first step within the hierarchy of guidance to which
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
management refers, and whose applicability it considers, when selecting accounting policies? - |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
correct answer✔✔Apply a standard from IFRS if it specifically relates to the transaction, other
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
event, or condition. |||\\\ |||\\\
Which of the following is true about financial statement requirements under IFRS? - correct
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
answer✔✔Prior year comparative financial statements are required. |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
According to the IASB Framework for the Preparation and Presentation of Financial Statements, |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
the fundamental qualitative characteristic of relevance includes - correct answer✔✔Predictive
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
value and confirmatory value.
|||\\\ |||\\\ |||\\\ |||\\\
Which of the following organizations is responsible for setting International Financial Reporting
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Standards? - correct answer✔✔International Accounting Standards Board. |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
, Which of the following is not one of the criteria for revenue recognition for sales of goods
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
under IFRS? - correct answer✔✔Payment has been received. |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
If the outcome of rendering services cannot be estimated reliably, IFRS. requires the use of
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
which revenue recognition method? - correct answer✔✔Cost recovery method.
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
According to the IASB Framework, the two criteria required for incorporating items into the |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
income statement or statement of financial position are that - correct answer✔✔It meets the
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
definition of an element and can be measured reliably. |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
According to the IASB Framework, the financial statement element that is defined as increases |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
in economic benefits during the accounting period in the form of inflows or enhancements of
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
assets or decreases of liabilities that result in increases in equity, other than those relating to
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
contributions from equity participants, is - correct answer✔✔Income |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
Grim Corporation reports under IFRS. Grim issued 2,000 $1,000 convertible bonds at par, with
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
an annual interest rate of 6% when the market was 8%. The bonds are due in 5 years and each
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
$1,000 bond is convertible into 3 shares of common stock. At what amount would Grim record
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
the liability component of the bond? - correct answer✔✔- $1,840,285
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- To do this, discount the bond at market interest rates as in US GAAP. The liability component
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
is the discounted amount and the equity component is the residual of the cash received less
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
the discounted amount. Calculations are as follows:
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- Face amount of the bonds: 2,000 * $1,000 = $2,000,000
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- Present value of $1 for the principal
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- ($2,000,000 * 0.68058) = $1,361,160
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- Present value of an ordinary annuity for the
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- interest ($120,000 * 3.99271) = $ 479,125
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- Value of the liability = $1,840,285
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
- Value of the equity ($2,000,000 - $1,840,285) = $ 159,715
|||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\ |||\\\
