Test Bank for Intermediate Accounting Volume 2 8E Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel Chapter 12-22 Answers are at the End of Each Chapter

Test Bank for
Intermediate Accounting Volume 2 8E Thomas H. Beechy, Joan E. Conrod,
Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel
Chapter 12-22 Answers are at the End of Each Chapter

Chapter 12
Student name:__________
1) Conceptually, liabilities constitute a present obligation as a result of a past event and entail an
expected future sacrifice of assets or services.
⊚ true
⊚ false



2) Under ASPE, only legal obligations are recognized.
⊚ true
⊚ false



3) A reasonable expectation on the part of a company's stakeholders arising from a company's
past practices or behaviour may constitute a constructive obligation in certain instances.
⊚ true
⊚ false



4) A contingency may become a provision if the likelihood of the contingent event greatly
increases.
⊚ true
⊚ false



5) Under IFRS, most financial liabilities are valued at fair value.
⊚ true
⊚ false

,6) An improvement to a company's credit rating under IFRS will lead to a reduction in the
carrying amount of any financial liabilities and a gain being reported in OCI.
⊚ true
⊚ false



7) Loan guarantees are only recorded if they are likely to be paid.
⊚ true
⊚ false



8) Accrued liabilities made due to routine operating expenses are not normally discounted.
⊚ true
⊚ false



9) For a small population, the best estimate for the amount of a provision that must be
recognized is the expected value of the possible outcomes.
⊚ true
⊚ false



10) Under IFRS, provisions are always recorded at their expected value.
⊚ true
⊚ false



11) For a large population, the best estimate for the amount of a provision that must be
recognized is the most likely outcome with respect to the expected value and cumulative
probabilities.
⊚ true
⊚ false



12) Under ASPE, contingent liabilities which are more likely than not, are accrued at the lowest
end of the range.
⊚ true
⊚ false

,13) Contingent assets may be recorded under ASPE but not under IFRS.
⊚ true
⊚ false



14) Executory contracts seldom require a journal entry, while onerous contracts do.
⊚ true
⊚ false



15) Discounting is not required when the time value of money is immaterial or if the amount and
timing of cash flows is highly uncertain.
⊚ true
⊚ false



16) Financial liabilities are initially recognized at fair value and at cost, amortized cost or fair
value post-acquisition.
⊚ true
⊚ false



17) A company decides to relocate a group from a discontinued business segment to a division
with ongoing operations. The expenses incurred in doing so would qualify as a restructuring
charge.
⊚ true
⊚ false



18) Under the warranty expense approach, there should be no income statement effects for
warranty repairs performed after the year of sale (assuming that accrued warranty expenses
and expenditures equal one another).
⊚ true
⊚ false

, 19) Under the warranty revenue approach, there should be no income statement effects for
warranty repairs performed after the year of sale (assuming that accrued warranty expenses
and expenditures equal one another).
⊚ true
⊚ false



20) An onerous contract is one where the unavoidable costs of meeting the contract may or may
not exceed the benefits derived from the contract.
⊚ true
⊚ false



21) A lawsuit in progress wherein the defendant will probably be found guilty would likely be
accounted for as a provision.
⊚ true
⊚ false



22) Warranties provisions may arise from legal or constructive obligations.
⊚ true
⊚ false



23) Once a company has formally decided to restructure its operations, a provision must be made
for the restructuring.
⊚ true
⊚ false



24) Self-insurance costs for expected losses must never be provided for.
⊚ true
⊚ false



25) Current liabilities are usually discounted.
⊚ true
⊚ false