IFRS For SMEs 3

Question 1

Under IFRS for SMEs Section 20, how should a lessee classify all leases?

Accepted Answer

Leases are classified as finance or operating based on the transfer of risks and rewards

Answer

IFRS for SMEs retains the finance/operating lease distinction based on whether substantially all risks and rewards of ownership transfer to the lessee.

Question 2

When an SME acquires a subsidiary in a business combination, IFRS for SMEs Section 19 requires goodwill to be:

Accepted Answer

Amortized over its useful life, with a 10-year cap if life cannot be reliably estimated

Answer

Section 19 requires goodwill to be amortized over its useful life; if the useful life cannot be estimated reliably, a maximum of 10 years is used.

Question 3

Under IFRS for SMEs, an entity recognizes a provision when which of the following conditions is met?

Accepted Answer

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

Answer

Consistent with full IFRS, a provision is recognized when a present obligation exists, an outflow of resources is probable, and the amount can be reliably estimated.

Question 4

An SME sells goods with a right of return. Under IFRS for SMEs Section 23, revenue is recognized when:

Accepted Answer

The entity can reliably estimate returns and the other revenue recognition criteria are met

Answer

Revenue from goods sold with right of return is recognized when the entity can reliably estimate future returns and all other revenue recognition criteria are satisfied.

Question 5

Under IFRS for SMEs, which of the following is NOT a component of other comprehensive income (OCI)?

Accepted Answer

Fair value changes on financial assets at fair value through profit or loss

Answer

Fair value changes on financial assets measured at fair value through profit or loss are recognized in profit or loss, not in other comprehensive income.

(IFRS) International Financial Reporting Standards Practice Test

(IFRS) International Financial Reporting Standards Practice Test

IFRS For SMEs 3