TOA QUIZZER 5

Multiple Choice 7. It is a benefit plan under which an entity pays a

Identify the choice that best completes the statement or answers the question.
fixed contribution into a separate fund and will
____ 1. These are all forms of consideration given by an have no legal or constructive obligation to pay
entity in exchange for service rendered by further contribution if the fund becomes
employees. insufficient to pay employee benefits.
a. Employee benefits c. Fringe benefit a. Postemployment benefit c. Defined benefit plan
b. Employee compensation d. Salaries and wages plan
b. Defined contribution plan d. Multi-employer plan

____ 2. Short-term employee benefits include all of the

8. Which is incorrect concerning the recognition and
following, except
measurement of a defined contribution plan?
a. Wages, salaries and social security contributions.
b. Short-term compensated absences. a. The contribution shall be recognized as expense in
c. Profit-sharing and bonuses payable in more than the period it is payable.
twelve months after the end of the period in which b. Any unpaid contribution at the end of the period shall
the employees render the related service. be recognized as accrued liability.
d. Nonmonetary benefits for current employees, such c. Any excess contribution shall be recognized as
as medical care, housing, car and free and prepaid expense but only to the extent that the
subsidized goods. prepayment will lead to a reduction in future
payments or a cash refund.
d. An entity shall not disclose the amount recognized
as expense for a defined contribution plan.
____ 3. These are compensated absences that are carried
forward and can be used in future periods and the
employees are entitled to a cash payment for 9. Which is incorrect concerning the recognition and
unused entitlement on leaving the entity. measurement of a defined benefit plan?
a. Accumulating and c. Nonaccumulating and a. Actuarial assumptions are required to measure the
vesting vesting obligation and expense and there is a possibility of
b. Accumulating and d. Nonaccumulating and actuarial gains and losses.
nonvesting nonvesting b. The obligation is measured on a discounted basis.
c. The defined benefit plan must be fully funded.
d. The expense recognized for a defined benefit plan is
____ 4. Post-employment employee benefits include all of not necessarily the amount of contribution due for
the period.
the following, except
a. Nonmonetary benefits such as housing, car and free
or subsidized goods.
b. Retirement benefits, such as pensions. 10. What is the mandated method of determining the
c. Postemployment life insurance present value of the defined benefit obligation?
d. Postemployment medical care a. Projected unit credit c. Individual level premium
method method
b. Entry age normal d. Aggregate method
____ 5. The entity retains the obligation for the payment method
of retirement benefits without the establishment
of a separate fund. 11. It is the increase in the present value of the
a. Contributory plan c. Funded plan
b. Noncontributory plan d. Unfunded plan defined benefit obligation resulting from
employee service in the current period.
a. Current service cost c. Past service cost
____ 6. Under a defined contribution plan b. Interest cost d. Unrecognized actuarial
I. The entity’s legal or constructive obligation is limited loss
to the amount it agrees to contribute to the fund.
II. The entity’s obligation is to provide the
agreed benefits to current and former
employees.
a. I only c. Both I and II
b. II only d. Neither I nor II
____ 12. These are assets held by an entity, the fund itself,
that is legally separate from the reporting entity
and exists solely to pay or fund employee
benefits. 17.
a. Plan assets c. Retirement fund
b. Trust fund d. Pension assets
____ 13. Plan assets are assets held by a long-term benefit
fund that satisfies all of the following conditions,
except
a. The fund is legally separate from the reporting entity.
b. The assets of the fund are to be used only to settle 18.
the employee benefit obligation.
c. The assets in the fund can be returned to the entity
even if the remaining assets of the fund are not
sufficient to meet the plan’s obligation.
d. The assets are not available to the reporting entity’s
creditors even in bankruptcy.
____ 14. It is an insurance policy issued by an insurer that
19.
is not a related party of the reporting entity and
the proceeds of the policy can be used only to pay
or fund employee benefits under a defined
benefit plan.
a. Qualifying insurance c. Annuity
policy
b. Aggregate policy d. Unconditional insurance
policy
____ 15. Which is incorrect concerning return on plan
assets?
a. The actual return on plan assets is one component 20.
of the expense recognized in the income statement.
b. The difference between the expected return and
actual return on plan assets is an actuarial gain or
loss.
c. The expected return on plan assets is based on
market expectations, at the beginning of the period,
for returns over the entire life of the related
obligation.
d. In determining the expected and actual return on
plan assets, an entity shall deduct expected
21. Which is incorrect concerning the basic accounting
administration costs not included in actuarial
assumptions in measuring defined benefit obligation,
and tax payable by the plan itself.
____ 16. The amount recognized as liability in the statements of
financial position shall be the net total of the following
amounts (choose the incorrect one)
a. The present value of the projected benefit obligation
at balance sheet date
b. Plus any actuarial gains, less any actuarial losses,
not yet recognized
c. Plus any past service cost not yet recognized
d. Minus the fair value of plan assets at balance sheet
date
It is the excess of the fair value of the plan assets
over the present value of the defined benefit
obligation.
a. Surplus c. Accrued benefit cost
b. Projected benefit d. Accumulated benefit
obligation obligation
It is the increase in present value of the defined
benefit obligation for employee service in prior
periods, resulting in the current period from the
introduction or amendment of a defined benefit
plan.
a. Current service cost c. Past service cost
b. Interest cost d. Employee benefit cost
Which is correct concerning amortization of past
service cost?
I. The past service cost shall be expensed
immediately when additional benefits vest
immediately.
II. If the benefits are not vested, the past service
cost is amortized on a straight line basis
over the period until the benefits become
vested.
a. I only c. Both I and II
b. II only d. Neither I nor II
The vested benefits
a. Are employee benefits that are not conditional on
future employment.
b. Are benefits to be paid to the retired employees in
the current period.
c. Are benefits to be paid to the retired employees in
the subsequent year.
d. Are benefits accumulated in the hands of a trustee.
considerations for a defined benefit plan?
a. The fair value of plan assets is the source of fund
set aside in meeting future benefit payments.
b. The projected benefit obligation is the present value
of expected future payments required to settle the
obligation arising from employee service in the
current and prior periods.
c. If the fair value of plan assets is more than the
projected benefit obligation, the plan is overfunded
and there is prepaid benefit cost.
d. The fair value of plan assets is classified as
noncurrent asset and the projected benefit obligation
is classified as noncurrent liability in the statement of
 financial position. quality bonds.
b. Stated rate on high quality bonds.
c. Market yield at the end of reporting period on
____ 22. These are the entity’s best estimates of the government bonds.
d. Stated rate on government bonds.
variables that will determine the ultimate cost of
providing postemployment benefits.
a. Actuarial assumptions c. Financial assumptions 27. These are employee benefits that are payable as a
b. Demographic d. Actuarial computations
assumptions result of an entity’s decision to terminate an
employee’s employment before the normal
retirement date, or an employee’s decision to
____ 23. Which statement is correct concerning actuarial gains
and losses?
accept voluntary redundancy in exchange for
I. Actuarial gains and losses comprise of experience those benefits.
adjustments and the effects of changes in a. Termination benefits
actuarial assumptions. b. Short-term benefits
II. Actuarial gains and losses may result from c. Long-term benefits
d. Postemployment benefits
increases or decreases in either the present
value of defined benefit obligation or the
fair value of any related plan assets. 28. The gain or loss on curtailment or settlement shall
a. I only c. Both I and II be
b. II only d. Neither I nor II a. Recognized when the curtailment or settlement
occurs.
b. Recognized in other comprehensive income.
____ 24. What is the so called “corridor” in the recognition c. Deferred and amortized over the average remaining
of actuarial gains and losses? service period of the covered employees.
a. 10% of the present value of the defined benefit d. Treated as a change in accounting policy.
obligation or 10% of the fair value of plan assets at
the beginning of the year, whichever is higher.
b. 10% of the present value of the defined benefit 29. Any transition loss on first adopting PAS 19 shall be
obligation or 10% of the fair value of the plan assets recognized
at the beginning of the year, whichever is lower. I. As expense immediately
c. 10% of the present value of the defined benefit II. As expense over a maximum of 5 years
obligation or 10% of the fair value of plan assets at a. I only c. Either I or II irrevocably
the end of the year, whichever is higher. b. II only d. Either I or II revocably
d. 10% of the present value of the defined benefit
obligation or 10% of the fair value of plan assets at
the end of the year, whichever is lower. 30. Any transition gain on first adopting PAS 19 shall
be
a. Recognized in income immediately
____ 25. Which statement is incorrect concerning actuarial b. Deferred and amortized over a maximum of 5 years
assumptions for a defined benefit plan? c. Credited to retained earnings
a. Actuarial assumptions shall be biased and mutually d. Credited to equity
compatible
b. Actuarial assumptions comprise of demographic and
financial assumptions.
c. The discount rate is equal to the market yield at the
end of reporting period on high quality bonds, or if
there are no such bonds, the market yield on
government bonds.
d. Postemployment benefit obligations shall be
measured on a basis that reflects estimated future
salarry increases.

____ 26. The discount rate used in making actuarial

assumptions shall be determined by reference to
a. Market yield at the end of reporting period on high
____ 31. An entity contributes to an industrial pension plan
that provides a pension arrangement for its
employees. A large number of other employers
also contibute to the pension plan and the entity
makes contribution in respect of each employee.
These contributions are kept separate from
corporate assets and are used together with any
investment income to purchase annuities for
retired employees. The only obligation of the
entity is to pay the annual contribution. This
pension scheme is
a. Multiemployer plan and a defined contribution
scheme
b. Multiemployer plan and a defined benefit scheme
c. Defined contribution plan only
d. Defined benefit plan only
____ 32. An entity has decided to improve its defined
benefit pension scheme. The benefit payable shall
be determined by reference to 60 years of service
rather than 65 years of service. As a result, the
defined benefit pension liability would increase.
The average remaining service period of the
employees is 10 years. What is the treatment of
the increase in the pension liability in the financial
statements?
a. The past service cost shall be charged against
retained earnings.
b. The past service cost shall be charged against profit
or loss for the year.
c. The past service cost shall be spread over the
remaining service period of the employees.
d. The past service cost shall bot be recognized.
____ 33. An entity uses Philippine Financial Reporting
Standards to prepare its financial statements but
the defined benefit obligation has been calculated
using assumptions that are different from PFRS.
The financial statements of the entity also do not
take into account unrecognized past service cost.
How would the entity measure its net pension
liability?
a. The net present value of the defined benefit
obligation less the fair value of the plan assets.
b. The net present value of the defined benefit
obligation less the fair value of plan assets less the
unrecognized past service cost.
c. The net present value of the defined benefit
obligation less the fair value of the plan assets less
the unrecognized past service cost and in addition, a
review of the assumptions shall be undertaken to
remeasure the obligation.
d. The value in the entity’s statement of financial
position will simply be used in the consolidated
financial statements.
34. An entity operates a defined benefit pension plan and
changes it at the beginning of the current year to a
defined contribution plan. The net pension liability after
the plan amendment is less than the net pension
liability before the plan amendment. How should
the entity account for this change?
a. The entity shall recognize a gain.
b. The entity does not recognize a gain.
c. The entity shall recognize a gain over the remaining
service period of the employees.
d. The entity shall recognize the gain but applies the
10% corridor approach.
35. An entity operates a defined benefit plan that
pays employees an annual benefit based on the
number of years of service. The annual payment
does allow the employer to vary the final benefit.
Over the last five years, the entity has used his
flexibility to increase employee’s pension by the
current growth in earnings per share. How will
employees’ benefit be calculated if they retire in
the current period?
a. It will be based on the existing plan rules plus the
additional award.
b. It will be based on the existing plan rules plus the
current rate of growth in earnings per share.
c. It will be based on the plan rules plus the current
rate of inflation.
d. It will be based on the plan rules plus the increase in
earnings per share anticipated over the remaining
service period of the employees.
36. Which of these events will not cause a change in a
defined benefit obligation?
a. Changes in mortality rate or the proportion of
employees taking early retirement.
b. Changes in the estimated salaries or benefits that
will occur in the future.
c. Changes in the estimated employee turnover.
d. Changes in the expected rate of return on plan
assets.
37. Which of the following terms best describes
benefits which are payable as a result of an
entity’s decision to end an employee’s
employment before the normal retirement date?
a. Postemployment benefits c. Termination benefits
b. Defined contribution d. Defined benefit plans
plans
____ 38. Which of the following statements best describes
“other long-term employee benefits”?
a. Benefits that are not due to be settled within twelve
months at the end of the period in which the service
is rendered.
b. Benefits that are due to be settled within twelve
months at the end of the period in which the service
is rendered.
c. Benefits payable as a result of an entity’s decision to
end an employee’s employment before the normal
retirement date.
d. Benefits which are payable after completion of
employment.
____ 39. Which of the following items should be included in plan
assets?
I. Assets held by a long-term employee benefit fund.
II. Qualifying insurance policies.
a. I only c. Both I and II
b. II only d. Neither I nor II
____ 40. Under which category should lump sum benefit
expressed as a certain percent of the final salary
for each year of services and actuarial gains can
be accounted for?
a. Lump sum benefit should be accounted for under
defined benefit plans. Actuarial gains should be
accounted for under defined benefit plans.
b. Lump sum benefit should be accounted for under
short-term employee benefits. Actuarial gains should
be accounted for under defined benefit plans.
c. Lump sum benefit should be accounted for under
defined benefit plans. Actuarial gains should be
accounted for under defined contribution plans.
d. Lump sum benefit should be accounted for under
short-term employee benefits. Actuarial gains should
be accounted for under defined contribution plans.
____ 41. The report of a defined contribution plan shall contain
I. A statement of net assets available for benefits.
II. A description of the funding policy.
a. I only c. Both I and II
b. II only d. Either I or II
____ 42. The report of a defined benefit plan shall contain
I. A statement showing net assets available for
benefits, the present value of promised benefits and
the resuliting excess or deficit.
II. A statement of net assets available for benefits
including a note disclosing the present value
of promised benefits.
a. I only c. Both I and II
b. II only d. Either I or II
43. Retirement benefit plan investments shall be
carried at
a. Fair value c. Not realize value
b. Historical cost less d. Value in use
impairment
44. In rare circumtances, when a retirement benefit
plan has attributes of both defined contribution
plan and defined benefit plan, it is deemed
a. Defined benefit plan
b. Defined contribution plan
c. Neither defined benefit plan nor defined contribution
plan
d. Both defined benefit plan and defined contribution
plan
45. In the case of a defined benefit plan, PAS 26
a. Makes it incumbent upon the plan to obtain an
annual actuarial valuation.
b. Does not make it incumbent upon the plan to obtain
an annual actuarial valuation
c. Allows the plan to estimate the present value of
future benefits based on valuation done by other
similar plans.
d. Allows the plan to add a percentage based on
consumer price index to the previous year’s
valuation of actuarial valuation.
46. PAS 26 Accounting and reporting by retirement benefit
plans shall be applied to which of the following?
a. The costs to entities of employee retirement benefits
b. Report to individuals on their future retirement
benefits
c. The financial statements relating to an actuarial
business
d. The general purpose financial reports of pension
schemes
47. Which of the following may be disclosed in the
financial report of a defined benefit plan but
would not be shown in the financial report of a
defined contribution plan?
a. Government bonds held
b. Actuarial present value of promised retirement
benefits
c. Employee contributions
d. Employer contributions
48. An employer sponsoring a defined benefit
pension plan must report a liability in the
statement of financial position equal to
 a. The current year pension cost that was not funded.
b. The difference between the fair value of plan assets
and the accumulated benefit obligation.
c. The difference between the accumulated benefit
obligation and the projected benefit obligation.
d. The difference between the fair value of plan assets
and the projected benefit obligation.
____ 49. Which statement characterizes defined
contribution plans?
a. They are more complex in construction than defined
benefit plans.
b. The employer’s obligation is satisfied by making the
appropriate amount of periodic contribution.
c. The investment risk is borne by the employer.
d. Contribution are made in equal amounts by
employer and employees.
____ 50. Which of the following components should not be
included in the calculation of net pension cost
recognized for a period by an employer
sponsoring a defined benefit plan?
a. Expected return on plan assets
b. Amortization of unrecognized past service cost
c. Interest cost
d. Contribution to the fund
____ 51. Unrecognized past service cost can be amortized
based on which of the following methods?
a. Straight line method using any systematic and
rational approach
b. Straight line method based on the average
remaining service period of the qualified employees
c. Interest method using the actuary’s discount rate
d. Service method based on the average remaining
service period of the qualified employees
____ 52. If the actual return onplan assets exceeds the
expected return for the period the difference is
a. A deferred loss
b. A deferred gain
c. Recognized as a loss in the current period
d. Recognized as a gain in the current period
____ 53. The components of net periodic pension expense that
involve delayed recognition are
a. Interest cost, past service cost, transition cost and
expected return on plan assets.
b. Service cost, transition cost, and gains and losses.
c. Gains and losses, transition cost and past service
cost.
d. Transition cost, past service cost and expected
return on plan assets.
required for the
54. Which of the following criteria is not
recognition of a liability for compensated
absences?
a. The amount of the obligation must be estimable.
b. Payment of the obligation must be probable.
c. Payment of the obligation will require the use of
current assets.
d. The compensation either vests with the employee or
can be carried forward to subsequent years.
55. An employer’s obligation for postretirement health
benefits that are expected to be provided to an
employee must be fully accrued by the date the
a. Employee is fully eligible for benefits
b. Employee retires
c. Benefits are utilized
d. Benefits are paid
56. The projected benefit obligation is the measure of
obligation that
a. Can no longer be used under GAAP as an estimate
for reporting the service cost component of pension
expense.
b. Is not an allowable estimate for reporting the service
cost component of pension expense for defined
benefit plan.
c. Is one of several allowable estimates for reporting
the service cost component of pension expense.
d. Is the only allowable estimate for reporting the
service cost component of pension expense.
57. The conclusion relating to the computation of the
service cost component of pension expense is that
a. The projected benefit obligation computed using
future salary levels provides a reasonable measure
of present pension obligation and expense.
b. The projected benefit obligation computed using
present salary levels provides a reasonable
measure of present pension obligation and expense.
c. The projected benefit obligation computed using
present salary levels provides a reasonable
measure of future pension obligation and expense.
d. The projected benefit obligation computed using
future salary levels provides a reasonable measure
of future pension obligation and expense.
58. These are transactions in which the entity receives goods or
services as consideration for equity instruments of the entity,
including shares and share options.
a. Equity settled share-based payment transactions
b. Cash settled share-based payment transactions
c. Equity payment transactions
d. Cash payment transactions
 64. It is the date on which the entity and another party agree to a
share-based payment arrangement, being when the entity and
____ 59. These are transactions in which the entity acquires goods or the counterparty have a shared understanding of the terms and
services by insuring liabilities to the supplier of those goods conditions of the arrangement.
or services for amounts that are based on the price of the
entity’s shares and other equity instruments. a. Grant date c. Exercise date
b. Measurement date d. Balance sheet date
a. Equity transactions
b. Cash payment transactions
c. Purchase transactions 65. What is the date on which the fair value of the equity
d. Cash settled share-based payment transactions instrument granted is measured?

a. Measurement date c. Exercise date

____ 60. For equity share based payment transactions, the entity shall b. Grant date d. Balance date
measure the goods or services received and the corresponding
increase in equity
66. For transactions with employees and others providing similar
I. Directly, at the fair value of the goods or services services, the fair value of the equity instrument granted is
received. measured on

II. Indirectly, be reference to the fair value of the equity a. Exercise date c. Balance sheet date
instruments granted, if the fair value of the goods or b. Grant date d. Beginning of the year of
services received cannot be estimated reliably. grant

a. I only c. Both I and II

b. II only d. Neither I nor II 67. Which of the following transactions involving the issuance of
shares does not come within the definition of a “share-based”
payment under PFRS 2?
____ 61. For cash settled share-based payments transactions, an entity
shall measure the goods or services received and the liability a. Employee share purchase plans.
incurred at the b. Employee share option plans.
c. Share-based payment relating to an acquisition of a
a. Fair value of the goods and services received subbsidiary.
b. Fair value of the liability d. Share appreciation rights.
c. Either the fair value of the good or services received or
the fair value of the liability
d. Neither the fair value of the goods or services received 68. Which of the following is true regarding the requirements of
bor the fair value of the liability PFRS 2?

a. Private entities are exempt.

____ 62. For cash settled shared-based payment transactions, until the b. “Small” entities are exempt.
liability is settled, the entity is required to remeasure the fair c. Subsidiaries using their parent entity’s shares as
value of the liability at each reporting date and at the date of consideration for goods and services are exempt.
settlement and any changes in fair value are d. There are no exemptions from PFRS 2.

a. Included in profit or loss

b. Included in retained earnings 69. Many shares and most share options are not traded in an
c. Treated as component other comprehensive income active market. Therefore, it is often difficult to arrive at a fair
d. Not recognized value of the equity instrument being issued. Which of the
following option valuation techniques should not be used as a
measure of fair value in the first instance?
____ 63. It is the difference between the fair value of the shares to
which the counterparty has the right to subscribe and the price a. Black-Scholes model c. Monte-Carlo model
the counterparty is required to pay for those shares b. Binomial model d. Intrinsic value

a. Fair value c. Market value

b. Intrinsic value d. Book value 70. In what circumtances is compensation expense immediately
recognized under a share option plan?

a. In all circumtances
b. In circumtances when the option are exercisable within
two years for services rendered over the next two years.
 c. In circumtances when the options are granted for prior
service and the options are immediately exercisable.
d. In no circumtances is compensation expense immediately
recognized.

____ 71. An entity has entered into a contract with another entity which
will supply a range of services. The payment for those
services will be in cash and based upon the price of the
entity’s ordinary shares on completion of the contract. In
accordance with PFRS 2, what type of share-based payment
transaction does this represent?

a. Asset-settled share-based payment transaction

b. Liability-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Equity-settled share-based payments transaction

____ 72. The entity has issued a range of share options to employees.
In accordance with PFRS 2, what type of share-based
payment transaction does this represent?

a. Asset-settled share-based payment transaction

b. Equity-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Liability-sttled share-based payment transaction

____ 73. How should an entity recognize the change in the fair value of
the liability in respect of a cash-settled share-based payment
transaction?

a. Should not recognize in the financial statements but

disclose in the notes
b. Should recognize in the statement of changes in equity
c. Should recognize in other comprehensive income
d. Should recognize in profit or loss

____ 74. Under PFRS 2, a cash-settled share-based payment

transaction will increase which of the following?

a. A current asset c. Equity

b. A noncurrent asset d. A liability

____ 75. The following statements relate to share options granted to

employees in exchange for their services. What statement is
true?

I. The services received shall be measured at the fair value

of the employees’ services.

II. Fair value shall be measured at the date the options vest.

a. I only c. Both I and II

b. II only d. Neither I nor II
TOA QUIZZER 5 29. C
Answer Section 60. C
30. A
MULTIPLE CHOICE 61. B
31. A
1. A 62. A
32. B
2. C 63. B
33. C
3. A 64. A
34. A
4. A 65. A
35. B
5. D 66. B
36. D
6. A 67. C
37. C
7. B 68. D
38. A
8. D 69. D
39. C
9. C 70. C
40. A
10. A 71. C
41. C
11. A 72. B
42. D
12. A 73. D
43. A
13. C 74. D
44. A
14. A 75. D
45. B
15. A
46. D
16. C
47. B
17. A
48. D
18. C
49. B
19. C
50. D
20. A
51. B
21. D
52. B
22. A
53. C
23. C
54. C
24. A
55. A
25. A
56. D
26. A
57. A
27. A
58. A
28. A
59. D