Republic of the Philippines

JOSE RIZAL MEMORIAL STATE UNIVERSITY

The Premier University in Zamboanga del Norte
Gov. Guading Adaza St., Sta. Cruz, Dapitan City
Province of Zamboanga del Norte Registration No. 62Q17082

CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS

PFRS 8 to 17

1. PFRS 8 requires which of the following approaches in identifying operating segments?

a. manager’s approach b. gentle approach c. direct approach d. management approach

2. According to PFRS 8, a reportable operating segment is one which

a. Management uses in making decisions about operating matters
b. Results from aggregation of two or more segments and qualify under any of the quantitative thresholds
c. Either a or b
d. None of these

3. Which of the following is not among the quantitative thresholds under PFRS 8?
a. At least 10% of total revenues (external and internal)
b. At least 10% of the higher of total profits of segments reporting profits and total losses of segments reporting
losses, in absolute amount
c. At least 10% of total assets (inclusive of intersegment receivables)
d. At least 10% of total revenues (external only)

4. Segment A qualifies under the 10% test of total revenues but not on the profit or loss and total assets tests. Segment A
a. is not a reportable segment
b. is nonetheless included in the “all other segments” category
c. may be reported as a separate segment
d. all of these

5. According to PFRS 8, disclosures for major customer shall be provided if revenues from transactions with a single
external customer amount to
a. At least 75% of the entity’s external and internal revenues
b. At least 75% of the entity’s external revenues
c. 10% or more of the entity’s external revenues
d. less than 10% of the entity’s external revenues

6. An operating segment is a component of an entity

I. That engages in business activities from which it may earn revenue and incur expenses, including revenue and
expenses relating to transactions with other components of the same entity.
II. Whose operating results are regularly reviewed by the entity’s chief operating decision maker to make decisions
about resources to be allocated to the segment and assess its performance.
III. For which discrete information is available.
a. I only b. II only c. I and III only d. I, II and III

7. What is the function of the chief operating decision maker?

a. To allocate resources to the operating segments only.
b. To assess the performance of the operating segments only.
c. To provide information to financial statement users about operating segments.
d. To allocate resources to the operating segments and assess the performance of operating segments.

8. Operating segments are identified on the basis of internal reports about components of an entity that are regularly
reviewed by a chief operating decision maker in order to allocate resources to the segment and assess its performance.
a. Management approach c. Matrix approach
b. Risk and reward approach d. Geographical segment approach

9. Operating segments that do not meet any of the quantitative thresholds

a. Cannot be considered reportable.
b. May be considered reportable and separately disclosed if management believes that information about the
segment would be useful to the users of the financial statements.
c. May be considered reportable and separately disclosed if the information is for internal use only.
d. May be considered reportable and separately disclosed if this is the practice within the economic environment in
which the entity operates.

10. An operating segment is reportable when

I. The segment external and internal revenue is 10% or more of the combined external and internal revenue of all
operating segments.
II. The segment profit or loss is 10% or more of the greater between the combined profit of all operating segments
that reported profit and the combined loss of all operating segments that reported a loss.
III. The assets of the segment are 10% or more of the total assets of all operating segments.
a. I and II only b. I and III only c. II and III only d. I, II and III

11. Which is true concerning the 75% overall size test for operating segments?
a. The total external and internal revenue of all reportable segments is 75% or more of the entity’s external revenue.
 b. The total external revenue of all reportable segments is 75% or more of the entity’s external and internal revenue.
c. The total external revenue of all reportable segments is 75% or more of the entity’s external revenue.
d. The total internal revenue of all reportable segments is 75% or more of the entity’s internal revenue.

12. An entity shall disclose for each period in relation to a reportable operating segment which of the following?
I. General information about the operating segment.
II. Information about segment profit or loss, including specified revenue and expenses included in profit or loss,
segment assets and segment liabilities.
III. Reconciliations of total segment revenue, total segment profit or loss, total segment assets and total segment
liabilities to the corresponding amounts in the entity’s financial statements.
a. I only b. I and II only c. I and III only d. I, II and III

13. An entity shall disclose which of the following general information?

I. Factors used to identify the entity’s reportable segments, including the basis of organization.
II. Types of products and services from which each reportable segment derives its revenue.
a. I only b. II only c. Both I and II d. Neither I nor II

14. An entity shall disclose for each reportable segment all of the following specified amounts included in the measure of
profit or loss, except
a. Revenue from external customers
b. Revenue from transactions with other operating segments of the same entity
c. Interest revenue and interest expense shown separately
d. Gain on sale of investments

15. An entity shall disclose for each reportable segment all of the following specified amounts included in the measure of
profit or loss, except
a. Depreciation and amortization
b. The entity’s interest in the profit or loss of associates and joint ventures accounted for equity method
c. Income tax expense
d. General corporate expenses

16. An entity shall disclose for each reportable segment which of the following specified amounts that are included in the
measure of segment assets?
a. The amount of investment in associates and joint ventures accounted for by the equity method
b. Financial instruments
c. Deferred tax assets
d. Postemployment benefit assets

17. Entity-wide disclosures include all of the following, except

a. Information about products and services c. Information about major customers
b. Information about geographical areas d. Information about intersegment sales

18. Which of the following statements about major customer disclosure is true?
I. A major customer is defined as one providing revenue which amounts to 10% or more of the combined external
revenue of all operating segments.
II. The identities of major customers need not be disclosed.
a. I only b. II only c. Both I and II d. Neither I nor II

19. Which of the following may not be considered as the chief operating decision maker of an entity?
a. chief executive officer b. executive committee c. chief operating officer d. shareholders

20. PFRS 8 applies to

a. Separate or individual FS b. Consolidated FS c. Both I and II d. Neither I nor II

21. A financial instrument is any contract that gives rise to

a. A financial asset
b. A financial liability
c. A financial asset of one entity and a financial liability of another entity
d. A financial asset of one entity and a financial liability or equity instrument of another entity

22. A financial liability

a. Must be classified as noncurrent liability
b. Is a contractual obligation to deliver cash or another financial asset to another entity
c. Is a contractual obligation to exchange financial assets of financial liabilities with another entity under conditions
that are potentially favorable to the entity
d. Is a contractual obligation to deliver cash or any asset to another entity

23. What are the conditions for offsetting financial asset and financial liability?
a. A legal right of offset
b. A legal right of offset and an intention to settle net or simultaneously
c. The existence of a clearing mechanism for net settlement and an expectation of net settlement
d. A netting agreement and an expectation of net settlement

24. Which of the following is not a relevant consideration whether to derecognize a financial liability?
 a. Whether the obligation has been discharged
b. Whether the obligation has been canceled
c. Whether the obligation has expired
d. Whether substantially all the risks and rewards of ownership have been transferred

25. Which of the following financial instruments would not be classified as financial liability?
a. A preference share that must be redeemed by the issuer for cash on future date
b. A contract for the delivery of as many of the entity’s ordinary shares as are equal in value to a fixed amount of cash
on a future date
c. A written call option that gives the holder the right to purchase a fixed number of the entity’s ordinary shares in
return for a fixed price
d. An issued perpetual debt instrument

26. In which of the following circumstances is derecognition of financial asset not appropriate?
a. The contractual rights to the cash flows of the financial asset have expired.
b. The financial asset has been transferred and substantially all the risks and rewards of ownership of the transferred
asset have also been transferred.
c. The financial asset has been transferred and the entity has retained substantially all the risks and rewards of
ownership of the transferred asset.
d. The financial asset has been transferred and the entity has neither retained nor transferred substantially all the
risks and rewards of ownership of the transferred asset but the entity has lost control of the transferred asset.

27. Which of the following information is not required to be disclosed about exposure to risks arising from financial
instruments?
a. Qualitative and quantitative information about market risk.
b. Qualitative and quantitative information about credit risk.
c. Qualitative and quantitative information about operational risk.
d. Qualitative and quantitative information about liquidity risk.

28. Liquidity risk is defined as

a. The risk that an entity will encounter difficulty in meeting obligations associated with financial liability.
b. The risk that an entity will encounter in disposing a financial asset due to lack of market liquidity.
c. The risk that an entity will encounter in meeting cash flow needs due to cash flow problems.
d. The risk that an entity’s cash inflows will not be sufficient to meet the entity’s cash outflows.

29. Which of the following best describes credit risk?

a. The risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge
an obligation.
b. The risk that an entity will encounter difficulty in meeting obligations associated with financial liability.
c. The risk that the fair value associated with an instrument will vary due to change in the counterparty’s credit
rating.
d. The risk that an entity’s credit facilities will be withdraw due to cash flow sensitivities.

30. If it is not practicable to estimate the fair value of an financial instrument, which of the following should be disclosed?
a. Information pertinent to estimating the fair value of the financial instrument.
b. The reason it is not practicable to estimate fair value.
c. Information pertinent to estimating the fair value of financial instrument and the reason it is not practicable to
estimate fair value.
d. No disclosure is required.

31. Disclosure of credit risk of financial instrument does not include

a. The amount of accounting loss that the entity would incur should any party to the financial instrument fail to
perform.
b. The policy of requiring collateral.
c. The class of financial instrument held.
d. The specific names of the parties associated with the financial instrument.

32. Which of the following is not a characteristic of a financial asset held for trading?
a. It is acquired principally for the purpose of selling or repurchasing in the near term.
b. On initial recognition, it is part of a portfolio of financial assets that are managed together and for which there is
evidence of a recent actual pattern of short-term profit taking.
c. It is a derivative that is not designated as an effective hedging instrument.
d. It is a derivative that is designated as an effective hedging instrument.

33. As a rule, transaction costs that are directly attributable to the acquisition of a financial asset shall be
a. Capitalized as cost of the financial asset
b. Expensed when incurred
c. Charged to retained earnings
d. Included as a component of other comprehensive income

34. If the financial asset is measured at fair value through profit or loss, transaction costs directly attributable to the
acquisition shall be
a. Capitalized as cost of the financial asset
b. Expensed immediately when incurred
c. Deferred an amortized over a reasonable period
 d. Included as component of other comprehensive income

35. Depending on the business model for managing financial assets, and entity shall classify financial assets subsequent to
initial recognition at
a. Fair value through profit or loss
b. Amortized cost
c. Fair value through other comprehensive income
d. All of theses are used in measuring financial assets

36. Equity investments irrevocably accounted for at fair value through other comprehensive income are
a. Nontrading investments of less than 20%
b. Trading investments of less than 20%
c. Investments of between 20% and 50%
d. Investments of more than 50%

37. Debt investments that meet the business model and contractual cash flow tests are reported at
a. Amortized cost
b. Fair value
c. The lower of amortized cost and fair value
d. Net realizable value

38. Debt investments not held for collection are reported at

a. Amortized cost
b. Fair value
c. The lower of amortized cost and fair value
d. Net realizable value

39. PFRS requires entities to measure financial assets based on all the following, except
a. The entity’s business model for managing financial assets.
b. Whether the financial asset is a debt or equity investment.
c. The contractual cash flow characteristics of the financial asset.
d. All of the choices are PFRS requirements.

40. Debt investments that meet the business model and contractual cash flow tests are reported at
a. Net realizable value
b. Fair value
c. Amortized cost
d. The lower of amortized cost or fair value

41. What is the correct valuation approach for financial assets?

a. Not held for collection at fair value and held for collection at fair value.
b. Not held for collection at amortized cost and held for collection at amortized cost.
c. Not held for collection at fair value and held for collection at amortized cost.
d. Not held for collection at amortized cost and held for collection at fair value.

42. Debt investments that are reported at amortized cost are

a. Managed and evaluated based on a documented risk-management strategy
b. Trading debt investments
c. Held for collection debt investments
d. All of the above are correct

43. Which of the following statement is correct in regard to trading investments?

a. Trading investments are held with the intention of selling them in a short period of time.
b. Unrealized holding gains and losses are reported as part of net income.
c. Any discount or premium is not amortized.
d. All of these statements are correct.

44. An entity may make an irrevocable election to present in other comprehensive income changes in fair value of
a. An investment in equity instrument that is held for trading.
b. An investment in equity instrument that is not held for trading
c. A financial asset measured at amortized cost
d. A financial asset measured at fair value through profit or loss.

45. Equity investments accounted for by recognizing unrealized holding gains or losses as component of other
comprehensive income are
a. Nontrading where an entity has holdings of less than 20%.
b. Trading investments where an entity has holdings of less than 20%.
c. Investments where an entity has holdings of between 20% and 50%.
d. Investments where an entity has holdings of more than 50%.

46. A debt investment asset shall be measured subsequently at amortized cost

a. By irrevocable designation
b. When the debt investment is managed and evaluated on a document risk-management strategy.
c. When the debt investment is held for trading
d. When the business model is to collect contractual cash flows that are sorely payments of principal and interest.
47. Amortized cost is the initial recognition amount of the investment minus
a. Repayments and net of any reduction for uncollectibility.
b. Cumulative amortization an net of any reduction for uncollectibility.
c. Repayments plus or minus cumulative amortization and net of any reduction for uncollectibility.
d. Repayments plus or minus cumulative amortization.

48. A debt investment shall be measured at fair value through other comprehensive income
a. When the debt investment is held for trading.
b. When the debt investment is not held for trading.
c. By irrevocable designation
d. When the business model is to collect contractual cash flows that are solely payments of principal and interest
and also to sell the financial asset.

49. Which statement is correct about the effective interest method of amortization?
a. The effective-interest method applied to debt investments is different from that applied to bonds payable.
b. Amortization of discount decreases from period to period.
c. Amortization of premium decreases from period to period.
d. The effective interest method applies the effective interest rate to the beginning carrying amount for each interest
period.

50. Under the fair value option, an entity may

a. Irrevocably designate a debt investment as measured at fair value through profit or loss even if the amortized cost
measurement is satisfied.
b. Irrevocably designate a debt investment as measured at fair value through other comprehensive income.
c. Revocably designate a debt investment as measured at fair value through profit or loss even if the amortized cost
measurement is satisfied.
d. Designate all instruments as measured at fair value through profit or loss.

51. Under PFRS, the fair value option

a. Must be applied to all instruments the entity holds.
b. May be selected as a valuation method at any time during the first two years of ownership.
c. Reports all gains and losses in income.
d. All of the choices are correct.

52. The fair value option allows an entity to

a. Record income when the fair value of its investment increases.
b. Value its debt investments at fair value in some years but not other years.
c. Report most financial instruments at fair value by recording gains and losses as separate component of
shareholders’ equity.
d. All of the above are true of the fair value option.

53. Entities account for transfers of investments between categories

a. Prospectively, at the end of the reporting period after the change in the business model.
b. Prospectively, at the beginning of the period after the change in the business model.
c. Retroactively, at the end of the period after the change in the business model.
d. Retroactively, at the beginning of the period after the change in the business model.

54. Transfers between categories

a. Result in entities omitting recognition of fair value in the year of the transfer.
b. Are accounted for at fair value for all transfers.
c. Are considered unrecognized if transferred out of held for collection into fair value.
d. Always result in an impact on net income.

55. When a debt investment at amortized cost is reclassified to FVPL, the difference between the previous carrying amount
and fair value at reclassification date is
a. Recognized in profit or loss
b. Not recognized
c. Recognized in other comprehensive income
d. Included in retained earnings

56. Which statement is true when a debt investment at FVPL is reclassified to amortized cost?
a. The new carrying amount at amortized cost is equal to fair value on reclassification date.
b. A new effective rate is computed based on the fair value at reclassification date.
c. Interest income is determined using the effective interest method.
d. All of these statements are true for reclassification from FVPL to amortized cost.

57. Which statement is true when a debt investment at amortized cost is reclassified to FVOCI?
a. The debt investment is measured at fair value at reclassification date.
b. The difference between the previous carrying amount and fair value at reclassification date is recognized in other
comprehensive income.
c. The original effective rate is not adjusted.
d. All of these statements are true.

59. Which statement is true when a debt investment at FVOCI is reclassified to amortized cost?
a. The fair value at reclassification date becomes the new carrying amount.
 b. The cumulative gain or loss previously recognized in OCI is removed from equity and adjusted against the fair
value at reclassification date.
c. The original effective rate is not adjusted.
d. All of these statements are true.

60. Which statement is true when a debt investment at FVPL is reclassified to FVOCI?
a. The new carrying amount is equal to fair value at reclassification date.
b. A new effective rate is computed based on the fair value at reclassification date.
c. Interest income is determined using the effective interest method.
d. All of these statements are true for a reclassification from FVPL to FVOCI.

61. Which statement is true when a financial asset at FVOCI is reclassified to FVPL?
a. The financial asset continues to be measured at fair value.
b. The fair value at reclassification date becomes the new carrying amount.
c. The cumulative gain or loss previously recognized in OCI is reclassified to profit or loss.
d. All of these statements are true.

62. What financial assets are assessed for impairment?

a. Equity investments at FVPL
b. Equity investments at FVOCI
c. Debt investments at FVPL
d. Debt investments at amortized cost and debt investments at FVOCI

63. Impairments of debt investments are

a. Based on discounted contractual cash flows.
b. Recognized as component of other comprehensive income.
c. Based on fair value for nontrading investments and on negotiated value for held for collection investments.
d. Evaluated at each reporting date for every held for collection investment.

64. Under PFRS, an entity

a. Should evaluate every investment for impairment.
b. Accounts for an impairment as an unrealized loss as part of other comprehensive income.
c. Calculates the impairment loss on debt investments as the difference between the carrying amount plus accrued
interest and the expected discounted future cash flows.
d. All of the choices are correct.

65 . Kale Co. purchased bonds at a discount on the open market as an investment and intends to hold these bonds to
maturity. Kale does not elect the fair value option for the bonds. Kale should account for these bonds at
a. Cost
b. Amortized cost
c. Fair value
d. Lower of cost or market

66. Fair value of an asset should be based upon

a. The replacement cost of an asset
b. The price that would be received to sell the asset at the measurement date
c. The original cost of the asset
d. The price that would be paid to acquire the asset

67. Which of the following describes a principal market for establishing fair value of an asset?
a. The market that has the greatest volume and level of activity for the asset.
b. Any broker or dealer market
c. The most observable market
d. The market in which the amount received would be maximized

68. Which statement is true for measuring an asset at fair value?

a. The price of the asset should be adjusted for transaction cost.
b. The fair value of the asset should be adjusted for cost of disposal.
c. The fair value is based upon an entry price to purchase the asset.
d. The price should be adjusted for cost to transport the asset to the principal market.

69. Which of the following is an assumption used in fair value measurement?

a. The asset must be in-use
b. The asset must be considered in-exchange
c. The most conservative estimate must be used
d. The asset is in the highest and best use

70. Which of the following would meet the qualifications as market participants?
a. A liquidation market in which sellers are compelled to sell.
b. A subsidiary of the reporting unit interested in purchasing assets similar to those being valued.
c. An independent entity that is knowledgeable about the asset.
d. A broker or dealer that wishes to establish new market for the asset.

71. The fair value at initial recognition is

a. The price paid to acquire the asset
 b. The price paid to acquire the asset less transaction cost
c. The price paid to transfer or sell the asset
d. The carrying amount of the asset acquired

72. Which of the following is not a valuation technique used in fair value measurement?
a. Income approach
b. Residual value approach
c. Market approach
d. Cost approach

73. The market approach for measuring fair value requires which if the following?
a. Present value of future cash flows
b. Prices and other relevant information of transactions from identical or comparable assets
c. The price to replace the service capacity of the asset
d. The weighted average of the present value of future cash flows

74. It is a transaction or other event in which an acquirer obtains control of one or more businesses.
A. Business combination
B. Merger
C. Consolidation
D. Intercorporate directorship

75. This is defined as an integrated set of activities and assets that is capable of being conducted and managed for the
purpose of providing a return directly to investors or other owners, members or participants.
A. Business
B. Transaction
C. Isolated event
D. Undertaking

76. Which of the following accounting methods must be applied to all business combinations?
A. Pooling method
B. Equity method
C. Proportionate consolidation
D. Acquisition method

77. This is defined as “the entity that obtains control of the acquiree”.
A. Acquirer
B. Investor
C. Parent
D. Subsidiary

78. It is the power to govern the financial and operating policies of an entity or business so as to obtain benefits from its
activities.
A. Significant influence
B. Undue influence
C. Control
D. Managerial dependence

79. An acquirer might obtain control of an acquire in all of the following, except
A. By transferring cash, cash equivalents and other assets
B. By issuing equity interests
C. By contract alone, even without consideration
D. By acquiring interest in a joint venture

80. A business combination may be structured in all of the following, except

A. One or more businesses become subsidiaries of an acquirer
B. One entity transfers its net assets to another entity
C. A group of former owners of one of the combining entities obtains control of the combined entity
D. An entity acquires assets that are not a business.

81. It is a business combination in which all of the combining entities or businesses are ultimately controlled by the same
party or parties both before and after the combination and the control is not transitory.
A. Business combination involving entities under common control
B. Business combination involving entities under diversified control
C. Full business combination
D. Business reorganization

82. What is the term for the business combination where all combining entities transfer their net
assets to a newly formed entity?
A. True merger
B. Legal merger
C. “Roll up” or ”put together” transaction
D. Spin off

83. This is defined as holders of equity interest of investor-owned entities, or members and participants in mutual entities.
 A. Shareholders
B. Investors
C. Owners
D. Participants

84. The application of the acquisition method of accounting for a business combination requires all of the following (choose
the incorrect one)
A. Identifying the acquirer
B. Determining the acquisition date
C. Recognizing and measuring the identifiable assets acquired, the liabilities assumed and any noncontrolling
interest in acquiree.
D. Not recognizing goodwill or gain from bargain purchase

85. Which statement is incorrect concerning an acquirer?

A. In a business combination effected by transferring cash or other assets, the acquirer is usually the entity that
transfers the cash or other assets.
B. In a business combination effected by issuing equity interest, the acquirer is usually the entity that issues the
equity interest.
C. The acquirer is usually the combining entity whose relative size is significantly greater than that of the
combining entity or entities.
D. If a new entity is formed to issue equity interests to effect a business combination, the new entity
formed is necessarily the acquirer.

86. The following statements relate to an acquisition date of a business combination. Which statement is incorrect?
A. The acquisition date is the date on which an acquirer obtains control over the acquiree.
B. The acquisition date is normally the “closing date”, meaning the date on which the acquirer legally transfers
the consideration, acquires the assets and assumes the liabilities of the acquire.
C. Where several dates are key to a business combination, the date on which control passes is the acquisition
date.
D. The acquisition date can never precede the closing date.

87. The following statements relate to recognition and measurement of a business combination. Which statement is
correct?
I. As of the acquisition date, the acquirer shall recognize, separately from goodwill, the identifiable assets
acquired, the liabilities assumed and any noncontrolling interest in the acquiree.
II. The acquirer shall measure the identifiable assets acquired and the liabilities assumed at their acquisition-date
fair value.
A. I only
B. II only
C. Both I and II
D. Neither I nor II

88. A parent entity is acquiring a majority holding in an entity whose shares are dealt in on a recognized market. Under
PFRS 3, which of the following measurement bases may be used in measuring the noncontrolling interest at the
acquisition date?
I. Fair value of the noncontrolling interest in the acquiree
II. A proportionate share of the acquiree’s identifiable net assets.
A. I only
B. II only
C. Both I and II
D. Neither I nor II

89. The consideration transferred in a business combination shall be measured at

A. Fair value
B. Carrying amount
C. Fair value determined by the acquirer
D. Transaction value

90. An acquirer holds 30% equity interest in an acquiree and subsequently purchases another 25% equity interest in order
to gain control. This transaction is known as
A. Business combination of entities under common control
B. Business combination achieved in stages
C. Business combination by installment
D. Step by step acquisition

91. In a business combination achieved in stages, the acquirer shall

A. Not remeasure the previously held equity interest.
B. Remeasure the previously held interest at fair value with any resulting gain or loss included in profit
or loss.
C. Remeasure the previously held interest at fair value with any resulting gain or loss included in other
comprehensive income.
D. Remeasure the previously held interest at fair value with any resulting gain or loss included in retained
earnings.
92. In a business combination, goodwill is measured as the excess of
A. The consideration transferred over the identifiable net assets acquired.
B. The total of the consideration transferred and the amount of any noncontrolling interest in the acquiree over
the identifiable net assets acquired.
C. The total of the consideration received and the fair value of the previously held interest in the acquiree over
the identifiable net assets acquired.
D. The total consideration received, the amount of any noncontrolling interest in the acquiree and the
fair value of previously held interest in the acquiree over the identifiable net assets acquired.

93. In a business combination, any “gain on bargain purchase” shall

A. Be recognized in profit or loss.
B. Be recognized in other comprehensive income.
C. Be recognized in retained earnings.
D. Not be recognized.

94. The acquisition-related costs in a business combination to be expensed immediately include all of the following, except
A. Professional and consulting fees
B. Finder’s fees
C. Costs of maintaining an internal acquisition department
D. Costs of issuing debt securities

95. It is the equity in a subsidiary not attributable directly to a parent.

A. Controlling interest
B. Subsidiary interest
C. Noncontrolling interest
D. Residual interest

96. The following statements relate to a contingent consideration in a business combination. Which statement is correct?
I - The acquirer shall recognize the acquisition-date fair value of any contingent consideration as part of the
consideration transferred in a business combination.

II - The acquirer shall not recognize the acquisition-date fair value of any contingent consideration as part of the
consideration transferred in a business combination.
A. I only
B. II only
C. Both I and II
D. Neither I nor II

97. The acquirer shall classify the obligation to pay the contingent consideration as
A. Financial liability only
B. Equity only
C. Either financial liability or equity in accordance with PAS 32
D. Neither financial liability nor equity

98. In the final settlement of the contingent consideration classified as equity, the amount
A. Shall not be remeasured but instead recognized as part of equity.
B. Shall be remeasured at fair value with any gain or loss included in profit or loss.
C. Shall be remeasured at fair value with any gain or loss included in retained earnings.
D. Shall be remeasured at fair value with any gain or loss included in other comprehensive income.

99. In the final settlement of the contingent consideration classified as financial liability, the amount
A. Shall not be remeasured.
B. Shall be remeasured at fair value with any gain or loss included in profit or loss.
C. Shall be remeasured at fair value with any gain or loss included in retained earnings.
D. Shall be remeasured at fair value with any gain or loss included in other comprehensive income.

100. Consolidated financial statements are

I. The financial statements of a group presented as those of a single economic entity.
II. Those presented by a parent, an investor in an associate, or a venture in jointly controlled entity, in which the
investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported
results and net assets of the investee.
A. I only
B. II only
C. Both I and II
D. Neither I nor II

101. A “group” for consolidation purposes is

A. A parent and all its subsidiaries.
B. An entity that has one or more subsidiaries.
C. An entity, including an unincorporated entity such as partnership that is controlled by another entity.
D. An entity that obtains control other entities or businesses.

102. It is the entity that has one or more subsidiaries.

A. Investor
 B. Parent
C. Associate
D. Affiliate

103. It is the equity in a subsidiary not attributable directly or indirectly to a parent.

A. Controlling interest
B. Subsidiary interest
C. Noncontrolling interest
D. Residual interest

104. Which of the following is not a valid condition that will exempt an entity from preparing consolidated financial
statements?
A. The parent entity is a wholly owned subsidiary of another entity.
B. The parent entity’s debt or equity capital is not traded on the stock exchange.
C. The ultimate parent entity produces consolidated financial statements available for public use that comply
with PFRS.
D. The parent entity is in the process of filing its financial statements with a securities commission.

105. A subsidiary shall be excluded from consolidation when

A. The investor is a venture capital organization, mutual fund, unit trust or similar entity.
B. The business activities of the subsidiary are dissimilar from those of the other entities within the group.
C. The subsidiary is acquired with the intention to dispose of it within twelve months from date of
acquisition.
D. The subsidiary is operating under severe long-term restrictions that significantly impair its ability to transfer
funds to the parent.

106. Which of the following subsidiaries should be deconsolidated?

A. A subsidiary that has been previously excluded from consolidation and is not disposed of within the 12-
month period.
B. A subsidiary with severe restriction on the repatriation of dividends to the parent.
C. Two subsidiaries located in one country that are individually immaterial but collectively material.
D. None of the subsidiaries mentioned.

107. Control is presumed to exist when the parent owns directly or indirectly through subsidiaries
A. More than half of the equity of an entity.
B. More than half of the ordinary shares of an entity.
C. More than half of the preference and ordinary shares of an entity
D. More than half of the voting power of an entity.

108. Control exists even if the parent owns half or less of the voting power of an entity where there is (choose the incorrect
one)
A. Power over more than half of the voting rights by virtue of an agreement with other investors.
B. Power to govern the financial and operating policies of the entity under a statute or an agreement.
C. Power to appoint or remove the key officers an employees of the entity.
D. Power to cast the majority of votes at meetings of the board of directors or equivalent governing body.

109. Noncontrolling interest shall be presented in the consolidated statement of financial position
A. Separately from liabilities and the parent shareholders’ equity.
B. Within equity, separately from the parent shareholders’ equity.
C. As noncurrent liability
D. As component of the parent shareholders’ equity

110. When a parent loses control of a subsidiary, the investment in subsidiary retained by the investor
A. Shall continue to be accounted for a investment in subsidiary
B. Shall be accounted for an investment property
C. Shall be accounted for in accordance with PAS 39 on the measurement of financial asset
D. Shall be accounted for as nonmarketable equity security.

111. What is the initial measurement of an investment in subsidiary retained by the investor when control is lost?
A. Fair value at the date when control is lost
B. Fair value at the beginning of the reporting period
C. Carrying amount at the date when control is lost
D. Carrying amount at the beginning of the reporting period

112. When separate financial statements are prepared, investments in subsidiaries shall be accounted for at
A. Cost
B. In accordance with PAS 39 on measurement of financial asset
C. Either at cost or in accordance with PAS 39 on measurement of financial asset
D. Neither at cost nor in accordance with PAS 39 on measurement of financial asset

113. The following statements relate to consolidated financial statements. Which statement is incorrect?
A. A parent shall present consolidated financial statements in which it consolidates its investments in
subsidiaries.
B. Consolidated financial statements shall include all subsidiaries of the parent.
 C. A subsidiary is excluded from consolidation if the investor is a venture capital organization, mutual
fund, unit trust or similar entity.
D. A subsidiary is not excluded from consolidation even if its business activities are dissimilar from those of the
other entities within the group.

114. A parent is not required to present consolidated financial statements under all of the following conditions, except
A. When the parent is itself a wholly-owned subsidiary, or is partially-owned subsidiary and its owners do not
object to the parent not presenting consolidated financial statements.
B. When the parent’s debt and equity instruments are not traded in public market.
C. When the parent has filed or it is in the process of filing its financial statements with SEC for the
purpose of issuing any class of instruments in a public market.
D. When the ultimate or any intermediate parent of the parent produces consolidated financial statements for
public use that comply with PFRS.

115. A parent loses control of a subsidiary (choose the incorrect one)

A. When there is change in absolute or relative ownership level.
B. When a subsidiary becomes subject to the control of a government, court, administrator or regulator.
C. When the loss of control is the result of a contractual agreement.
D. When the subsidiary is operating under severe long-term restrictions that impair its ability to
transfer funds to the parent.

116. If a parent loses control of a subsidiary (choose the incorrect one)

A. The parent shall derecognize the assets and liabilities of the subsidiary at their carrying amounts.
B. The parent shall not derecognize the carrying amount of any noncontrolling interest in the former
subsidiary.
C. Any gain or loss arising from the recognition shall be included in profit or loss.
D. Any amounts that have been recognized in other comprehensive income in relation to the subsidiary shall be
reclassified to profit or loss or retained earnings in accordance with relevant accounting standard.

117. Where there is a change in a parent’s ownership interest in a subsidiary that does not result in a loss of control (choose
the incorrect one)
A. The change shall be accounted for as an equity transaction.
B. The carrying amounts of the controlling and noncontrolling interests shall be adjusted to reflect the change
in the level of ownership.
C. Any difference between the consideration received and the amount of adjustment of the noncontrolling
interest shall be recognized directly in equity.
D. Any difference between the consideration received and the amount of adjustment of the
noncontrolling interests shall be recognized in other comprehensive income.

118. Which is incorrect concerning the preparation of consolidated financial statements?

A. The financial statements of the parent ant its subsidiaries shall be consolidated on a line by line basis by
adding together like items of assets, liabilities, equity, income and expenses.
B. Intragroup balances, transactions, income and expenses shall be eliminated in full.
C. When the reporting dates of the parent and a subsidiary are different, the difference shall be no more
than six months.
D. Consolidated financial statements shall be prepared using uniform accounting policies for like transactions
and other events in similar circumstances.

119. Which is incorrect concerning the cost method of accounting?

A. The investment is recognized at cost.
B. The investor recognizes income from the investment only to the extent that the investor receives
distributions from accumulated profits of the investee arising after the date of acquisition.
C. Distributions received in excess of profits after acquisition are regarded as a recovery of investment and are
recognized as a reduction of the cost of the investment.
D. The investment is initially recorded at cost and any changes in value of the investment at each
reporting date are recognized in profit or loss.

120. Which is within the scope of PFRS 15?

a. Lease
b. Insurance contract
c. Financial instrument
d. All of these are beyond the scope of PFRS 15

121. Which statement is true about a contract?

a. A contract is an agreement between two or more parties that creates enforceable rights and obligations.
b. Enforceability of the right and obligations in a contract is a matter of law.
c. A contract can be in writing, oral or implied by customary business practice.
d. All of these statements are true about a contract.

122. A contract with a customer must meet all of the following criteria, except
a. The contract is approved by all parties.
b. The rights and obligations of the parties and payment terms are identified.
c. The contract has commercial substance.
d. It is not probable that the consideration will be collected.
123. A performance obligation is
a. A promise to deliver a distinct good in a contract with a customer.
b. A promise to deliver an indistinct good in a contract with a customer.
c. The consideration to which an entity is expected to be entitled.
d. An executed contract.

124. The transaction price is allocated to the performance obligations based on relative
a. Stand-alone selling price
b. Fair value
c. Adjusted market price
d. Residual value

125. When shall an entity recognized revenue from contract with a customer?
a. When it is probable that future economic benefits will flow to the entity.
b. When or as the entity satisfies the performance obligation by transferring control of a good or service to a
customer.
c. When the entity collected the consideration from the customer.
d. When the entity and the customer signed the contract.

126. Revenue shall be recognized at a point in time under all of the following, except
a. The customer has legal title to the asset
b. The customer has physical possession of the asset.
c. The entity has not transferred the significant risk and reward of ownership
d. The entity has the right to receive payment for the asset

127. What is the core principle of PFRS 15?

a. Revenue is recognized when earned
b. Revenue is recognized at a point in time or over time.
c. Revenue is recognized when collected
d. Revenue is recognized in a manner that depicts the transfer of good or service to a customer and the revenue
reflects the consideration to which an entity expects to be entitled.

128. The revenue recognition in accordance with the core principle is applied following
a. Four-step model
b. Five-step model
c. Three-step model
d. Any model

129. Under PFRS, a lessee is required to recognize

a. Right of use asset and lease liability
b. Right of use asset but not lease liability
c. Lease liability but not right of use asset
d. Neither right of use asset nor lease liability

130. A short-term lease is defined as

a. Twelve months or less
b. Six months or less
c. Twelve-month lease with a purchase option
d. Two-year lease with option to terminate

131. A right of use asset is initially measured at

a. Cost
b. Fair value
c. Current cost
d. Present value of expected cash inflows

132. The cost of right of use asset comprises all, except

a. The present value of lease payments
b. Lease payment made to lessor on or before commencement date
c. Initial direct cost incurred by lessee
d. Estimated cost of dismantling and restoring the underlying asset for which the lessee has no present obligation

133. The right of use asset is reported as

a. Noncurrent as separate line item
b. Property, plant and equipment
c. Intangible asset
d. Investment property

134. A lease liability is measured at

a. The absolute amount of lease payments
b. The present value of lease payments
c. The present value of fixed lease payments
d. The fair value of the underlying asset

135. The lease payments include all of the following, except

 a. Fixed lease payments
b. Variable lease payments
c. Leasehold improvement
d. Residual value guarantee of the lessee

136. Net investment in a sales type lease is equal to

a. Gross investment in the lease less unearned finance income
b. Cost of the leased asset
c. The minimum lease payments
d. The minimum lease payments less unguaranteed residual value

137. These are incremental costs that are directly attributable to negotiating and arranging a lease.
a. Transaction costs
b. Costs of services
c. Initial direct costs
d. Executory costs

138. Which statements characterizes an operating lease?

a. The lessee records depreciation and interest.
b. The lessee records the lease obligation related to the leased asset.
c. The lessor transfer title of the leased property to the lessee for the duration of the lease term.
d. The lessor records depreciation and lease revenue.

139. The appropriate valuation of an operating lease in the statement of financial position of the lessee is
a. Zero
b. The absolute sum of the lease payments
c. The present value of the sum of the lease payments discounted at an appropriate rate
d. The market value of the asset at the inception of the lease

140. Rent received in advance by the lessor in an operating lease shall be recognized as revenue
a. When received
b. At the lease inception
c. At the lease expiration
d. In the period specified by the lease

141. Under a direct financing lease, the excess of aggregate rentals over the cost of leased property shall be recognized as
interest income of the lessor
a. In increasing amounts during the lease term
b. In constant amounts during the lease term
c. In decreasing amounts during the lease term
d. After the cost of leased property has been fully recovered through rentals

142. The excess of the fair value of leased property at the inception of the lease over the carrying amount shall be recognized
by the dealer lessor as
a. Unearned income from a sales type lease
b. Unearned income from a direct financing lease
c. Manufacturer profit from a sales type lease
d. Manufacturer profit from a direct financing lease

143. The lease payments include all of the following, except

a. Fixed and variable lease payments
b. Termination penalties if the lease term reflects the exercise of termination option
c. Exercise price of purchase option that is not reasonably certain to be exercised
d. Residual value guarantee of the lessee

144. A lessee with a lease containing a purchase option that is reasonably certain to be exercised should depreciate the right
of use asset over
a. Useful life of the asset
b. Lease term
c. Useful life of the asset or the lease term, whichever is shorter
d. Useful life of the asset or the lease term, whichever is longer

145. If the residual value of an underlying asset is greater than the amount guaranteed by the lessee
a. The lessor pays the lessee for the difference.
b. The lessee recognizes a gain at the end of the lease term.
c. The lessee has no obligation related to the residual value.
d. The lessee pays the lessor to the difference.