FCCA FCCA Financial Reporting and Standards 2

Question 1

Which IFRS standard addresses financial instruments, covering classification, measurement, and impairment?

Accepted Answer

IFRS 9

Answer

IFRS 9 (Financial Instruments) covers the classification and measurement of financial assets and liabilities, as well as the expected credit loss impairment model.

Question 2

Under the IFRS conceptual framework, which qualitative characteristic ensures that financial information represents what it purports to represent?

Accepted Answer

Faithful representation

Answer

Faithful representation means that financial information is complete, neutral, and free from error, accurately depicting the economic phenomena it describes.

Question 3

A US company reports a deferred tax liability. This arises most commonly due to which situation?

Accepted Answer

When tax depreciation exceeds accounting depreciation in the current year

Answer

A deferred tax liability typically arises when accelerated tax depreciation exceeds book depreciation, creating a temporary difference that will reverse in future periods.

Question 4

Under IFRS, inventory is measured at which amount on the balance sheet?

Accepted Answer

The lower of cost or net realizable value

Answer

IAS 2 (Inventories) requires inventory to be measured at the lower of cost and net realizable value, applying the conservatism (prudence) principle.

Question 5

Which method of inventory cost flow is NOT permitted under IFRS but IS permitted under US GAAP?

Accepted Answer

LIFO (Last-In, First-Out)

Answer

LIFO (Last-In, First-Out) is prohibited under IAS 2 (IFRS) but is an accepted inventory costing method under US GAAP.

FCCA - Fellow of the Association of Chartered Certified Accountants Practice Test

FCCA - Fellow of the Association of Chartered Certified Accountants Practice Test

FCCA FCCA Financial Reporting and Standards 2