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March 21, 2009.
Effective for the Group for the financial year beginning March 22, 2009:
• Revised IAS 1, Presentation of Financial Statements, amendments to IAS 1 relating to the disclosure of puttable instruments and obligations arising on
liquidation
• Revised IAS 27, Consolidated and Separate Financial Statements relating to the cost of an investment on first-time adoption
• Amendments to IAS 32, Financial Instruments: Presentation relating to puttable instruments and obligations arising on liquidation
• Amendment to IFRS 2, Share-Based Payment
• Amendment to IFRS 7, Financial Instruments: Disclosures
• IFRS 8, Operating Segments
• IFRIC 13, Customer Loyalty Programs
• IFRIC 14, IAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction
MULTIPLE-CHOICE QUESTIONS
1. XYZ Inc. changes its method of valuation of inventories from weighted-average method to first-in, first-out (FIFO) method. XYZ Inc. should account for this
change as
a. A change in estimate and account for it prospectively.
b. A change in accounting policy and account for it prospectively.
c. A change in accounting policy and account for it retrospectively.
d. Account for it as a correction of an error and account for it retrospectively.
2. Change in accounting policy does not include
a. Change in useful life from ten years to seven years.
b. Change of method of valuation of inventory from FIFO to weighted-average.
c. Change of method of valuation of inventory from weighted-average to FIFO.
d. Change from the practice (convention) of paying as Christmas bonus one month’s salary to staff before the end of the year to the new practice of paying onehalf
month’s salary only.
3. When a public shareholding company changes an accounting policy voluntarily, it has to
a. Inform shareholders prior to taking the decision.
b. Account for it retrospectively.
c. Treat the effect of the change as an extraordinary item.
d. Treat it prospectively and adjust the effect of the change in the current period and future periods.
4. When it is difficult to distinguish between a change of estimate and a change in accounting policy, then an entity should
a. Treat the entire change as a change in estimate with appropriate disclosure.
b. Apportion, on a reasonable basis, the relative amounts of change in estimate and the change in accounting policy and treat each one accordingly.
c. Treat the entire change as a change in accounting policy.
d. Since this change is a mixture of two types of changes, it is best if it is ignored in the year of the change; the entity should then wait for the following year to
see how the change develops and then treat it accordingly.
5. When an independent valuation expert advises an entity that the salvage value of its plant and machinery had drastically changed and thus the change is material, the
entity should
a. Retrospectively change the depreciation charge based on the revised salvage value.
b. Change the depreciation charge and treat it as a correction of an error.
c. Change the annual depreciation for the current year and future years.
d. Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expected to be
recovered in future.
6. An entity wishes to accelerate its depreciation policy because of changes in the useful life of the asset. How should the change be dealt with?
a. By retrospective restatement.
b. By retrospective application.
c. By prospective application.
d. By disclosure of an error.
7. In determining which accounting policy is suitable for the preparation of the financial statements, an entity should look to
a. IFRS only.
b. IFRICs only.
c. The Framework only.
d. IFRS, IFRICs and the Framework.
8. Where it is impracticable to determine the period-specific effects of the change on comparative information for one or more prior periods presented, the retrospective
application or restatement is applied
a. Retrospectively only to the extent that it is practicable.
b. Prospectively only to the extent that it is practicable.
c. Retrospectively to the extent that estimates can be made.
d. Prospectively to the extent estimates can be made.
9. Applying a requirement of a Standard or Interpretation is “impracticable” when the entity cannot apply it after making every effort to do so. Which of the following
is not included in the definition of “impracticable”?
a. The effects of the retrospective application are not determinable.
b. The retrospective application requires assumptions about what management’s intentions would have been at the time.
c. The retrospective application requires significant estimates of amounts.