ACCA AS Financial Reporting 2

Question 1

Under IAS 38, an internally generated brand should be:

Accepted Answer

Expensed as incurred; it cannot be recognised as an intangible asset

Answer

IAS 38 prohibits recognition of internally generated brands, mastheads, customer lists and similar items as intangible assets. Their costs must be expensed as incurred.

Question 2

Goodwill arising on consolidation is calculated as:

Accepted Answer

Fair value of consideration paid less fair value of net assets acquired

Answer

IFRS 3 goodwill = Fair value of consideration transferred + Fair value of non-controlling interest − Fair value of identifiable net assets acquired.

Question 3

Under IAS 21, which exchange rate is used to translate a foreign currency transaction at the date of a sale?

Accepted Answer

Rate at the date of the transaction (spot rate)

Answer

Under IAS 21, foreign currency transactions are initially recorded at the spot exchange rate at the transaction date. Monetary items are subsequently retranslated at the closing rate.

Question 4

Under IAS 36, an impairment loss on an asset is recognised when:

Accepted Answer

The carrying amount exceeds the asset's recoverable amount

Answer

IAS 36: an asset is impaired if its carrying amount exceeds its recoverable amount (the higher of fair value less costs to sell and value in use). An impairment loss is recognised immediately.

Question 5

Which of the following is the correct treatment for a finance lease in the lessee's financial statements under IFRS 16?

Accepted Answer

A right-of-use asset and lease liability are recognised on the balance sheet

Answer

IFRS 16 requires lessees to recognise a right-of-use asset (the present value of future lease payments) and a corresponding lease liability on the statement of financial position for virtually all leases.

ACCA Applied Skills Practice Test

ACCA Applied Skills Practice Test

ACCA AS Financial Reporting 2