Financial Reporting and Analysis Flashcards
7 cards from real CIMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Reporting and Analysis flashcards as text
Which financial statement reports a company's assets, liabilities, and equity at a specific point in time?
Answer: Balance Sheet
The Balance Sheet (Statement of Financial Position) presents assets, liabilities, and equity as of a specific date.
Under IFRS, intangible assets acquired through a business combination are recognized at:
Answer: Fair value at the acquisition date
IFRS 3 requires intangible assets acquired in a business combination to be recognized at fair value at the acquisition date.
The current ratio is calculated as:
Answer: Current assets divided by current liabilities
The current ratio measures short-term liquidity by dividing current assets by current liabilities.
Deferred tax liabilities arise when:
Answer: Accounting profit exceeds taxable profit in the current period
Deferred tax liabilities arise when accounting profit exceeds taxable profit, creating a temporary difference that will reverse in future periods.
Which inventory valuation method is prohibited under IFRS?
Answer: Last-In, First-Out (LIFO)
IAS 2 prohibits the use of LIFO because it does not represent a reliable estimate of the actual flow of inventory items.
Return on Capital Employed (ROCE) is best defined as:
Answer: Operating profit divided by total assets minus current liabilities
ROCE measures operating efficiency by dividing operating (EBIT) profit by capital employed, which equals total assets minus current liabilities.
Under the effective interest rate method, bond discount amortization over time will:
Answer: Increase each period
As the carrying value of the bond increases over time, the interest expense (and thus discount amortization) grows each period under the effective interest method.