Certificate in International Financial Reporting Leases, Provisions, and Employee Benefits 2

Question 1

Under IFRS 16, the lease liability is initially measured at:

Accepted Answer

The present value of future lease payments not paid at commencement

Answer

The sum of undiscounted lease payments

Answer

The fair value of the leased asset

Answer

The nominal value of minimum lease payments

Question 2

Under IAS 37, how should a provision be measured?

Accepted Answer

At the best estimate of the expenditure required to settle the obligation

Answer

At the maximum possible outflow

Answer

At the minimum possible outflow

Answer

At undiscounted future cash flows

Question 3

Under IAS 37, an onerous contract provision is required when:

Accepted Answer

The unavoidable costs of the contract exceed the expected economic benefits

Answer

A contract has become unprofitable

Answer

A counterparty has defaulted

Answer

Management decides to exit a contract

Question 4

Under IAS 19, the net interest cost on a defined benefit plan is calculated as:

Accepted Answer

Net defined benefit liability × discount rate

Answer

Expected return on plan assets × discount rate

Answer

Current service cost × inflation rate

Answer

Projected benefit obligation × expected return

Question 5

Under IFRS 16, a lessor classifies leases as finance or operating based on:

Accepted Answer

Whether substantially all the risks and rewards of ownership are transferred to the lessee

Answer

The length of the lease term

Answer

Whether the asset is specialised

Answer

The lessee's accounting treatment

Question 6

Under IAS 37, a restructuring provision can be recognised only when:

Accepted Answer

A detailed formal plan exists and the entity has raised a valid expectation in those affected

Answer

Management approves the plan internally

Answer

The restructuring is announced to the public

Answer

Costs have actually been incurred