Certificate in International Financial Reporting (CertIFR) — Questions and Answers

Question 1: Under IAS 19, which component of defined benefit cost is recognised in profit or loss?

Past service cost only
Actuarial gains and losses only
Remeasurements only
Current service cost and net interest cost (Correct answer)

Correct answer: Current service cost and net interest cost

Service cost (including past service cost) and net interest cost are recognised in profit or loss under IAS 19.

Question 2: Under IAS 7, which of the following is classified as a financing activity in the cash flow statement?

Taxes paid
Dividends received from associates
Interest received on investments
Proceeds from issuing shares (Correct answer)

Correct answer: Proceeds from issuing shares

IAS 7 classifies proceeds from equity and borrowing transactions as financing activities.

Question 3: Under IAS 1, how should material items be presented in the financial statements?

Omitted if immaterial
Aggregated with similar items
Disclosed only in the notes
Separately disclosed (Correct answer)

Correct answer: Separately disclosed

IAS 1 requires material items to be presented separately so users can assess their effect.

Question 4: Which of the following is an exemption under IFRS 16 that allows a lessee to expense lease payments straight-line?

Leases with variable payments only
Leases with purchase options
Short-term leases (12 months or less) and low-value asset leases (Correct answer)
All operating leases

Correct answer: Short-term leases (12 months or less) and low-value asset leases

IFRS 16 permits the short-term and low-value exemptions which allow straight-line lease expense treatment.

Question 5: What is 'value in use' under IAS 36?

Net book value of the asset
Current market selling price
Present value of future cash flows expected from the asset (Correct answer)
Replacement cost of the asset

Correct answer: Present value of future cash flows expected from the asset

Value in use is the discounted present value of the cash inflows and outflows attributable to the asset.

Question 6: Under IAS 21, when a foreign subsidiary is translated into the parent's presentation currency using the closing rate method, exchange differences are recognised in:

Profit or loss immediately
Goodwill in the consolidated balance sheet
Retained earnings of the subsidiary
Other comprehensive income (foreign currency translation reserve) (Correct answer)

Correct answer: Other comprehensive income (foreign currency translation reserve)

Translation differences arising from converting a foreign operation are parked in OCI as a translation reserve.

Question 7: Under IAS 33, basic earnings per share (EPS) is calculated as:

Total profit divided by shares in issue at year-end
Profit attributable to ordinary equity holders divided by the weighted average number of ordinary shares outstanding (Correct answer)
Operating profit divided by ordinary shares
Diluted profit divided by diluted shares

Correct answer: Profit attributable to ordinary equity holders divided by the weighted average number of ordinary shares outstanding

Basic EPS uses profit attributable to ordinary shareholders and a time-weighted average share count.

Question 8: Under IAS 37, a provision should be recognised when:

A constructive obligation exists with any probability of outflow
There is a present obligation, it is probable an outflow will be required, and the amount can be reliably estimated (Correct answer)
Legal proceedings have commenced
An obligation exists regardless of probability

Correct answer: There is a present obligation, it is probable an outflow will be required, and the amount can be reliably estimated

All three criteria—present obligation, probable outflow, and reliable estimate—must be met for a provision.

Question 9: Under IAS 7, the indirect method of presenting operating cash flows begins with:

Profit before tax, adjusted for non-cash items and working capital changes (Correct answer)
Cash receipts from customers
Total revenues
Net profit after tax

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

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

Question 10: When translating the financial statements of a foreign subsidiary for consolidation, IAS 21 requires income and expense items to be translated at:

The lowest rate recorded during the reporting period
The historical rate at the date of acquisition of the subsidiary
The closing rate at the reporting date
Exchange rates at the dates of the transactions, with the average rate permitted as a practical approximation (Correct answer)

Correct answer: Exchange rates at the dates of the transactions, with the average rate permitted as a practical approximation

IAS 21 requires income and expenses to be translated at exchange rates at the dates of transactions, but an average rate may be used when rates do not fluctuate significantly.

Question 11: An entity with a USD functional currency holds a EUR-denominated trade receivable. Between the transaction date and year-end, the EUR strengthens against the USD. Where is the resulting exchange difference recognized?

In profit or loss for the period (Correct answer)
Adjusted retrospectively against the original revenue figure
In other comprehensive income until the receivable is collected
Deferred in equity until settlement

Correct answer: In profit or loss for the period

Under IAS 21, exchange differences on monetary items (such as trade receivables) are recognized in profit or loss in the period they arise.

Question 12: Company P (functional currency GBP) has a long-term intragroup loan to subsidiary S (functional currency EUR) that is not expected to be settled in the foreseeable future. How are exchange differences on this loan treated in P's individual financial statements?

Eliminated in P's individual statements as an intragroup balance
Deferred until the loan is eventually repaid
Recognized in profit or loss in P's individual financial statements
Recognized in OCI in P's individual financial statements (Correct answer)

Correct answer: Recognized in OCI in P's individual financial statements

In P's individual statements the balance is a monetary item subject to normal IAS 21 treatment — exchange differences go to profit or loss; OCI treatment only applies at the consolidated level when the loan forms part of the net investment.

Question 13: Under IAS 7, how are dividends paid classified in the cash flow statement?

As investing activities
Either as financing or operating activities (entity's choice, consistently applied) (Correct answer)
Always as operating activities
Always as financing activities

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

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

Question 14: Under IFRS 9, a financial asset is measured at amortised cost if it passes which two tests?

Business model test (hold to sell) and fair value test
Business model test (hold to collect) and SPPI test (Correct answer)
Duration test and coupon test
Liquidity test and credit quality test

Correct answer: Business model test (hold to collect) and SPPI test

Amortised cost classification requires the asset to be held to collect contractual cash flows that are solely payments of principal and interest.

Question 15: Under IFRS 9, the Expected Credit Loss (ECL) model applies to which financial instruments?

Only financial assets at FVTPL
All financial instruments including derivatives
Only credit cards and mortgages
Financial assets measured at amortised cost and FVOCI, and loan commitments (Correct answer)

Correct answer: Financial assets measured at amortised cost and FVOCI, and loan commitments

IFRS 9's ECL impairment model applies to debt instruments at amortised cost or FVOCI, and certain off-balance sheet exposures.

Certificate in International Financial Reporting (CertIFR)

The ACCA CertIFR is an online, on-demand certificate-level qualification that tests knowledge and application of International Financial Reporting Standards (IFRS), covering topics from the Conceptual Framework and group accounting to financial instruments and foreign currency.

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60 min

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50%

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