ACA Financial Reporting 1

Question 1

Which body issues International Financial Reporting Standards (IFRS)?

Accepted Answer

International Accounting Standards Board (IASB)

Answer

The IASB, operating under the IFRS Foundation, is the independent standard-setting body responsible for developing and issuing IFRS used in over 140 countries.

Question 2

Under IAS 1, the statement of financial position (balance sheet) must present current and non-current assets and liabilities separately unless:

Accepted Answer

A liquidity-based presentation provides more reliable information

Answer

IAS 1 generally requires current/non-current distinction, but permits a liquidity-based presentation when this provides more relevant information (e.g., banks and financial institutions).

Question 3

Under IFRS 5, a non-current asset classified as held for sale must be measured at:

Accepted Answer

The lower of carrying amount and fair value less costs to sell

Answer

IFRS 5 requires non-current assets held for sale to be measured at the lower of carrying amount and fair value less costs to sell; depreciation ceases on reclassification.

Question 4

Consolidated financial statements are required when a parent entity has:

Accepted Answer

Control over one or more subsidiaries

Answer

IFRS 10 defines control as having power over the investee, exposure to variable returns, and ability to use power to affect returns. A parent must consolidate all subsidiaries it controls.

Question 5

Under IFRS, how is a gain on bargain purchase (negative goodwill) treated?

Accepted Answer

Recognised immediately in profit or loss

Answer

IFRS 3 requires that after reassessment, any remaining excess of fair value of net assets acquired over consideration paid (negative goodwill/bargain purchase gain) is recognised immediately in profit or loss.

ACA ICAEW Practice Test

ACA ICAEW Practice Test

ACA Financial Reporting 1