ACA Accounting (IFRS/UK GAAP) 3

Question 1

IAS 38 permits capitalisation of development costs when:

Accepted Answer

Management intends to complete the asset and it is technically feasible

Answer

IAS 38 allows development costs to be capitalised only when six specific criteria are met, including technical feasibility, intention to complete, ability to use or sell, and probable future economic benefits.

Question 2

Under IFRS, deferred tax is calculated using which method?

Accepted Answer

Balance sheet liability method

Answer

IAS 12 requires the balance sheet liability method (temporary difference approach), comparing the carrying amount of assets and liabilities to their tax base.

Question 3

Which depreciation method allocates a higher charge in the earlier years of an asset's life?

Accepted Answer

Reducing balance method

Answer

The reducing balance method applies a fixed percentage to the reducing carrying amount, resulting in higher depreciation charges in earlier years and lower charges later.

Question 4

Under IAS 21, the functional currency of an entity is:

Accepted Answer

The currency of the primary economic environment in which the entity operates

Answer

IAS 21 defines functional currency as the currency of the primary economic environment in which the entity operates, based on factors such as the currency influencing sales prices and costs.

Question 5

Under IAS 23, borrowing costs that are directly attributable to the acquisition of a qualifying asset must be:

Accepted Answer

Capitalised as part of the cost of the asset

Answer

IAS 23 requires borrowing costs directly attributable to a qualifying asset to be capitalised as part of its cost; all other borrowing costs are expensed.

ACA ICAEW Practice Test

ACA ICAEW Practice Test

ACA Accounting (IFRS/UK GAAP) 3