Certificate in International Financial Reporting Intangibles, Tax, and Cash Flow 2

Question 1

Under IAS 38, which of the following development costs can be capitalised?

Accepted Answer

Costs that meet all six criteria including technical feasibility and intention to complete

Answer

IAS 38 requires all six development criteria to be met simultaneously before capitalisation is allowed.

Question 2

Under IAS 12, current tax and deferred tax arising from items recognised in OCI should be:

Accepted Answer

Recognised in OCI

Answer

IAS 12 requires tax to follow the underlying transaction—if the item is in OCI, so is its tax.

Question 3

Under IAS 7, the indirect method of presenting operating cash flows begins with:

Accepted Answer

Profit before tax, adjusted for non-cash items and working capital changes

Answer

The indirect method reconciles profit before tax back to operating cash flow by adding back non-cash charges and adjusting for working capital.

Question 4

Under IAS 7, how are dividends paid classified in the cash flow statement?

Accepted Answer

Either as financing or operating activities (entity's choice, consistently applied)

Answer

IAS 7 allows dividends paid to be classified as financing (cost of capital) or operating (ability to pay from operations).

Question 5

Under IAS 38, intangible assets with an indefinite useful life are:

Accepted Answer

Not amortised but tested for impairment annually

Answer

Indefinite-life intangibles are not amortised; instead they undergo annual impairment testing.

Certificate in International Financial Reporting Practice Test