ACA Financial Reporting 3

Question 1

Under IFRS 8, operating segments are reported based on:

Accepted Answer

The management approach — how the chief operating decision maker reviews the business

Answer

IFRS 8 uses the management approach: segments are defined the way management internally reviews the business for resource allocation and performance assessment purposes.

Question 2

Under IAS 24, a key management personnel (KMP) disclosure must include:

Accepted Answer

Total compensation of KMP by category (salary, share-based, post-employment, etc.)

Answer

IAS 24 requires disclosure of total KMP compensation in aggregate, broken down into categories such as short-term benefits, post-employment benefits, and share-based payments.

Question 3

Under IAS 7, interest paid by a company can be classified as:

Accepted Answer

Either operating or financing cash flow, disclosed consistently

Answer

IAS 7 allows interest paid to be classified as either operating or financing cash flow; the classification must be consistent between periods and disclosed. Under FRS 102, interest paid is financing.

Question 4

Under IFRS 13, fair value is defined as:

Accepted Answer

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Answer

IFRS 13 defines fair value as an exit price — the price to sell an asset or transfer a liability in an orderly market transaction between market participants at the measurement date.

Question 5

Under IFRS, a lease incentive received from a landlord (e.g., a rent-free period) is treated by the lessee as:

Accepted Answer

A reduction of lease costs spread over the lease term

Answer

Under IFRS 16, the lease incentive affects the measurement of the lease liability and right-of-use asset; effectively the benefit is spread over the lease term through the amortisation of the ROU asset.

ACA ICAEW Practice Test

ACA ICAEW Practice Test

ACA Financial Reporting 3