FAC1601
Financial Accounting &
Reporting
Comprehensive Final
Exam Review
Q&A
2024
,1. Which IFRS standard addresses the presentation of financial
statements?
A) IFRS 10
B) IFRS 15
C) IAS 1
D) IAS 19
Correct Answer: C) IAS 1
Rationale: IAS 1 sets out the overall requirements for the
presentation of financial statements, guidelines for their structure,
and minimum requirements for their content.
2. An entity has changed its accounting policy, which has a
significant effect on its financial statements. According to IFRS,
how should this change be reflected?
A) Retrospectively in the financial statements
B) Prospectively from the date of the policy change
C) No adjustment is required
D) Only in the notes to the financial statements
Correct Answer: A) Retrospectively in the financial statements
Rationale: IAS 8 states that when a change in accounting policy is
applied, it should be applied retrospectively unless it is
impracticable to determine the period-specific effects or the
cumulative effect of the change.
3. Under IFRS, how are inventories required to be measured?
A) At fair value through profit or loss
B) At the lower of cost and net realizable value
C) At the higher of cost and net realizable value
D) At current replacement cost
Correct Answer: B) At the lower of cost and net realizable value
Rationale: IAS 2 requires inventories to be measured at the lower
of cost and net realizable value, which is the estimated selling
price in the ordinary course of business, less the estimated costs of
, completion and the estimated costs necessary to make the sale.
4. According to IFRS, which of the following is not a criterion for
recognizing revenue?
A) The entity has transferred significant risks and rewards of
ownership to the buyer.
B) The entity retains managerial involvement to the degree
usually associated with ownership.
C) The amount of revenue can be measured reliably.
D) It is probable that the economic benefits associated with the
transaction will flow to the entity.
Correct Answer: B) The entity retains managerial involvement to
the degree usually associated with ownership.
Rationale: IFRS 15 outlines that revenue is recognized when
control of the goods or services is transferred to the customer and
not merely when the entity retains managerial involvement.
5. When preparing financial statements, which of the following
assumptions is not made under the IFRS framework?
A) Going concern
B) Accrual basis
C) Consistency
D) Materiality
Correct Answer: D) Materiality
Rationale: Materiality is a concept within IFRS but it is not an
underlying assumption. The framework's assumptions include the
going concern premise, under which an entity is viewed as
continuing in business for the foreseeable future, and the accrual
basis of accounting, where transactions are recognized when they
occur (not necessarily when cash is received or paid). Consistency
refers to the use of the same accounting policies over time.
6. What is the purpose of the statement of changes in equity,
Financial Accounting &
Reporting
Comprehensive Final
Exam Review
Q&A
2024
,1. Which IFRS standard addresses the presentation of financial
statements?
A) IFRS 10
B) IFRS 15
C) IAS 1
D) IAS 19
Correct Answer: C) IAS 1
Rationale: IAS 1 sets out the overall requirements for the
presentation of financial statements, guidelines for their structure,
and minimum requirements for their content.
2. An entity has changed its accounting policy, which has a
significant effect on its financial statements. According to IFRS,
how should this change be reflected?
A) Retrospectively in the financial statements
B) Prospectively from the date of the policy change
C) No adjustment is required
D) Only in the notes to the financial statements
Correct Answer: A) Retrospectively in the financial statements
Rationale: IAS 8 states that when a change in accounting policy is
applied, it should be applied retrospectively unless it is
impracticable to determine the period-specific effects or the
cumulative effect of the change.
3. Under IFRS, how are inventories required to be measured?
A) At fair value through profit or loss
B) At the lower of cost and net realizable value
C) At the higher of cost and net realizable value
D) At current replacement cost
Correct Answer: B) At the lower of cost and net realizable value
Rationale: IAS 2 requires inventories to be measured at the lower
of cost and net realizable value, which is the estimated selling
price in the ordinary course of business, less the estimated costs of
, completion and the estimated costs necessary to make the sale.
4. According to IFRS, which of the following is not a criterion for
recognizing revenue?
A) The entity has transferred significant risks and rewards of
ownership to the buyer.
B) The entity retains managerial involvement to the degree
usually associated with ownership.
C) The amount of revenue can be measured reliably.
D) It is probable that the economic benefits associated with the
transaction will flow to the entity.
Correct Answer: B) The entity retains managerial involvement to
the degree usually associated with ownership.
Rationale: IFRS 15 outlines that revenue is recognized when
control of the goods or services is transferred to the customer and
not merely when the entity retains managerial involvement.
5. When preparing financial statements, which of the following
assumptions is not made under the IFRS framework?
A) Going concern
B) Accrual basis
C) Consistency
D) Materiality
Correct Answer: D) Materiality
Rationale: Materiality is a concept within IFRS but it is not an
underlying assumption. The framework's assumptions include the
going concern premise, under which an entity is viewed as
continuing in business for the foreseeable future, and the accrual
basis of accounting, where transactions are recognized when they
occur (not necessarily when cash is received or paid). Consistency
refers to the use of the same accounting policies over time.
6. What is the purpose of the statement of changes in equity,
