ACCA ACCA Financial Reporting Standards 2

Question 1

Under IFRS 9, into which three categories are financial assets classified?

Accepted Answer

Amortized cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL)

Answer

Held-to-maturity, available-for-sale, and trading

Answer

Short-term, long-term, and derivative

Answer

Debt, equity, and hybrid instruments

Question 2

What does IAS 19 govern in financial reporting?

Accepted Answer

Employee benefits including pensions

Answer

Property, plant and equipment

Answer

Foreign currency transactions

Answer

Provisions and contingent liabilities

Question 3

Under IFRS 3, how should goodwill arising on a business combination be accounted for?

Accepted Answer

Recognized as an asset and tested annually for impairment

Answer

Amortized over its useful economic life

Answer

Written off immediately against retained earnings

Answer

Recognized as an expense in the year of acquisition

Question 4

What is the 'conceptual framework' in IFRS and what is its primary purpose?

Accepted Answer

A guide that underpins the development of IFRS standards and assists preparers in applying them

Answer

A legal document that overrides all individual standards

Answer

A list of approved accounting methods for each industry

Answer

A compliance checklist issued by national regulators

Question 5

Under IAS 37, when should a provision be recognized on the balance sheet?

Accepted Answer

When there is a present obligation, probable outflow of resources, and reliable estimate

Answer

When management decides to set aside funds for a future event

Answer

When an expense is likely to occur in the next financial year

Answer

Only when a legal claim has been filed against the company

Question 6

What is the 'effective interest method' used for under IFRS financial reporting?

Accepted Answer

Amortizing the premium or discount on financial instruments to reflect true interest cost

Answer

Allocating dividends to shareholders over time

Answer

Calculating depreciation on PPE using interest-equivalent rates

Answer

Determining the fair value of derivative instruments