Mixed Deck — All Certificate in International Financial Reporting Topics Flashcards

Under IFRS 9, what is the 'SPPI' test used to determine?

Answer: Whether contractual cash flows are solely payments of principal and interest

The SPPI test ensures the cash flows are consistent with a basic lending arrangement, enabling amortised cost classification.

Under IAS 37, a contingent liability is:

Answer: Disclosed in the notes but not recognised in the financial statements

A contingent liability is disclosed rather than recognised because the outflow is possible but not probable.

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

Answer: The present value of future lease payments not paid at commencement

IFRS 16 requires discounting future lease payments using the rate implicit in the lease or the incremental borrowing rate.

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

Answer: Separately disclosed

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

Under IAS 19, short-term employee benefits (e.g., wages, paid annual leave) are measured:

Answer: At the undiscounted amount expected to be paid

Short-term benefits are not discounted because they are expected to be settled within 12 months.

Under IAS 36, an impairment loss is recognised when an asset's carrying amount exceeds its:

Answer: Recoverable amount

IAS 36 requires recognition of an impairment loss when carrying amount exceeds the higher of fair value less costs of disposal and value in use.

Under IAS 19, termination benefits are recognised as a liability and expense when:

Answer: The entity can no longer withdraw the offer of those benefits

Termination benefits are recognised at the earlier of when the entity cannot withdraw the offer or when it recognises restructuring costs.

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

Answer: Not amortised but tested for impairment annually

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

Under IAS 8, how should material prior period errors be corrected?

Answer: By restating the comparative amounts for prior periods presented

IAS 8 requires retrospective restatement of comparative information for material prior period errors.

Under IFRS 3, the acquisition method requires the acquirer to be identified based on:

Answer: Which entity obtains control over the other

The acquirer is the entity that obtains control as defined by IFRS 10.

Under IFRS 9, Stage 1 of the ECL model requires recognising impairment based on:

Answer: 12-month expected credit losses

Stage 1 covers instruments with no significant increase in credit risk, requiring only 12-month ECL.

Under IAS 21, how should monetary items denominated in a foreign currency be translated at the reporting date?

Answer: At the closing (spot) rate at the reporting date

IAS 21 requires monetary items to be retranslated at the closing rate at the end of the reporting period.

Under IFRS 7, a sensitivity analysis for interest rate risk must show:

Answer: The effect of a reasonably possible change in rates on profit or loss and equity

IFRS 7 requires entities to disclose how a reasonably possible change in rates would affect reported results.

Which of the following is an enhancing qualitative characteristic under the IASB Conceptual Framework?

Answer: Comparability

Comparability, verifiability, timeliness, and understandability are enhancing qualitative characteristics.

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?

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.

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?

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.

Under IFRS 16, how does a lessee recognise most leases on its balance sheet at commencement?

Answer: As a right-of-use asset and a corresponding lease liability

IFRS 16 requires lessees to recognise a right-of-use asset and lease liability for virtually all leases.

Which IAS standard addresses accounting policies, changes in accounting estimates, and errors?

Answer: IAS 8

IAS 8 covers the selection and application of accounting policies, estimate changes, and prior period errors.

Which of the following is a non-monetary item under IAS 21?

Answer: Inventory measured at historical cost

Inventory measured at cost is non-monetary because it does not represent a right to receive a fixed or determinable number of currency units.

Which IFRS standard governs the presentation of financial statements?

Answer: IAS 1

IAS 1 Presentation of Financial Statements sets out the overall requirements for financial statements.