Testbank

to accompany

Applying International
Accounting Standards
by
Alfredson, Leo, Picker, Pacter & Radford
Prepared by
Victoria Wise

John Wiley & Sons Australia, Ltd 2005

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CHAPTER 13 Principles of disclosure IAS 1, IAS 8 and IAS 10

Question 1
If an item of income is not material, then the manner of presenting that information, or whether
or not it is disclosed:
A
B
C
D

will have an impact on the economic decisions of users;

should not affect the economic decisions of users;
should not be included in the determination of profit or loss for the period;
will be included directly in retained earnings.

Question 2
The level of rounding used in the financial statements refers to:
A
B
C
D

the truncation of the amounts presented;

the abbreviation of words used;
the shortening of the notes by removing comparative numbers;
the presentation of a concise financial report rather than a full financial report.

Question 3
IAS 1 Presentation of Financial Statements, requires that an entity must disclose the following
information in its financial statements:
A description of the entitys operations
The legal form of the entity
The name of the entitys ultimate parent
The address of the registered office

A
B
C
D

I
No
No
No
No

II
III
Yes No
Yes Yes
Yes No
Yes Yes

I;
II;
III;
IV.

Question 4
The following statement:

Applying International Accounting Standards Chapter 13

IV
Yes
Yes
No
Yes

-3the specific principles, bases, conventions, rules and practices applied by an entity in
preparing and presenting financial statements
provided in IAS 8, defines:
A
B
C
D

IAS accounting standards;

accounting estimates;
management judgements;
accounting policies.

Question 5
The qualitative characteristic of Reliability of financial information means that the information
is:
I.
II.
III.
IV.
V.
A
B
C
D

Representationally faithful.
Neutral.
Prudent.
Costless.
Complete in all material respects.

I, III and V only;

II, III and IV only;
I, III and IV only;
I, II, III and V only.

Question 6
An accounting policy:
A
B
C
D

comprises the principles applied in preparing the financial statements;

is a judgment applied in deciding whether to recognise a transaction;
is the application of judgment in deciding on the measurement of an item;
is the judgement used in deciding on whether to disclose a particular item.

Question 7
The initial application of a policy to revalue assets in accordance with IAS 16 Property, Plant
and Equipment, or with IAS 38 Intangible Assets, must:
A
B
C

must be accounted for as a change in accounting policy;

must not be accounted for as a change in accounting policy;
may be accounted for in accordance with the requirements of the IAS Framework;

Applying International Accounting Standards Chapter 13

-4D

must be treated as an extraordinary event.

Question 8
When an entity makes a voluntary change to its accounting policies that has an effect on the
current period, it is required to disclose:
I.
II.
III.
IV.
A
B
C
D

The reasons why the change will provide more relevant information.
The amount of the adjustment for each financial statement line item affected.
The nature of the change.
The reasons why the previous policy no longer provides reliable information.

I, II, and III only;

II, III and IV only;
I, II and III only;
III and IV only.

Question 9
If a change in accounting estimates affects balance sheet items, IAS 8 Accounting Policies,
Changes in Accounting Estimates, and Errors, requires that the following disclosures be made:
I.
II.
III.
IV.
A
B
C
D

The nature of the change.

The amount of the change that has an effect in the current period.
The amount of the change that affects future periods.
The effect of the change on comparative numbers.

I, II, III and IV;

I, III and IV only;
II, III and IV only;
I, II and III only.

Question 10
Where a material error occurs in the recording process, an adjustment:
A
B
C
D

must be made to the prior period comparative balances;

may be recognised directly in retained earnings;
may be deferred and recognised in a later accounting period;
is not necessary, but the item must be fully explained in the notes to the financial
statements.

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Question 11
Type 1 events that provide evidence of conditions that existed at the balance sheet date are given
the following treatment:
A
B
C
D

note disclosure only, in the financial statements;

recognition in the financial statements;
adjustment in the cash flow statement;
ratification by shareholders at an annual meeting.

Question 12
Type II events that are indicative of conditions that arose after the balance sheet date are given
the following treatment:
A
B
C
D

recognition in the income statement;

recognition in the balance sheet;
recognition in the cash flow statement;
note disclosure in the financial statements.

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ANSWERS
1

10

11

12

Applying International Accounting Standards Chapter 13