CIMA Financial Reporting and Analysis 3

Question 1

Which of the following best describes a finance lease under IFRS 16?

Accepted Answer

A lease where the lessee obtains substantially all risks and rewards of ownership

Answer

Under IFRS 16, a finance lease transfers substantially all risks and rewards incidental to ownership of the underlying asset to the lessee.

Question 2

Goodwill arising from a business acquisition is subject to:

Accepted Answer

Annual impairment testing with no amortization under IFRS

Answer

Under IFRS 3 and IAS 36, goodwill is not amortized but must be tested for impairment at least annually.

Question 3

The debt-to-equity ratio of a company increases when:

Accepted Answer

The company takes on additional long-term debt

Answer

Taking on additional long-term debt increases the numerator (debt) while equity remains unchanged, thereby raising the debt-to-equity ratio.

Question 4

Under IAS 37, a provision should be recognized when:

Accepted Answer

A present obligation exists, an outflow is probable, and a reliable estimate can be made

Answer

IAS 37 requires a provision when there is a present obligation, a probable outflow of economic benefits, and a reliable estimate of the obligation amount.

Question 5

Vertical analysis of an income statement expresses each line item as a percentage of:

Accepted Answer

Revenue (sales)

Answer

In vertical (common-size) analysis of the income statement, each item is expressed as a percentage of total revenue to allow comparison across companies of different sizes.

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA - Chartered Institute of Management Accountants Aptitude Test Practice Test

CIMA Financial Reporting and Analysis 3