Which TWO of the following statements are true about the guideline and content of

the Conceptual Framework for Financial Reporting of the International Accounting

Standards Board?
2 points
The principles contained in the Conceptual Framework cannot override the accounting
treatment of any IFRS Accounting Standar
The Conceptual Framework states that information must be relevant and comparable in
order to be useful
The Conceptual Framework is not an IFRS Accounting Standard
The Conceptual Framework uses a rules-based approach rather than principles-based
approach
Delci Co is considering the following potential assets for inclusion in its
statement of financial position.

Indicate which one of the following should be recognised as an intangible asset .

2 points
A brand name developed by Delci Co worth $10m
$2.5m spent on new equipment to develop a new successful product
$3m paid to acquire the brand name Legins
$0.5m spent on training staff to operate new equipmen
Orange Co acquired 12,000 shares in Red Co on 1 June 20X5 at a cost of $8.10 per
share. Orange Co incurred transaction costs of $12,000 for this purchase of shares.
Orange Co elected to measure these shares at fair value through other comprehensive
income.

At 31 December 20X5, the fair value of the Red Co shares had fallen to $7.80 per
share and selling costs were expected to be 5%.

How is the investment in Red Co shares measured in Orange Co’s separate statement
of financial position at 31 December 20X5?

$______

2 points
109200
On 1 April 20X4, Watch Co acquired 65% of Fellow Co's ordinary share capital. The
fair values of the net assets of Fellow Co at the date of acquisition were equal to
their carrying amounts, with the exception of a provision, which had a carrying
amount of $35,000 below the fair value.

Watch Co elected to measure non-controlling interests at acquisition at fair value.

What is the impact on goodwill at acquisition of the fair value adjustment required
in respect of the provision?

2 points
Increase by $22,750
Decrease by $22,750
Increase by $35,000
Decrease by $35,000
Which TWO of the following statements are correct in relation to intangible assets?
2 points
IAS 38 requires the revaluation of intangible assets where a company has chosen to
apply the revaluation model to property, plant and equipment.
A change to the IAS 38 revaluation model from the IAS 38 cost model is a change in
accounting policy that is accounted for prospectively.
IAS 38 permits the revaluation of intangible assets only if there is an active
market for such assets.
IAS 38 requires that the initial recognition of intangible assets is at fair value.
On 18 July 20X3, Gomer Co commenced work on the construction of a significant asset
for one of its customers. Construction is scheduled to run for two years, and the
total contract price is $80m.

At 31 December 20X3, the following details are obtained in relation to the

contract:

• The contract was assessed to be 50% complete.

• Amounts invoiced to the customer totalled $27.2m.

• Amounts received from the customer totalled $12.8m.

• Invoices are raised and settled on a quarterly basis.

What is the total amount that should be included in the statement of financial
position as at 31 December 20X3 as a contract asset for the construction?

$____m

2 points
27.2
On 1 October 20X5, Bermuda Co issued an 8% $60 million convertible loan note at
par. It is redeemable on 30 September 20X8 at par or it may be converted into
equity shares of Bermuda on the basis of 100 new shares for each $200 of loan note.
Interest is payable at the end of each year. An equivalent loan note without the
conversion option would have carried an interest rate of 10%.

The present value of $1 receivable at the end of each year, based on discount rates
of 8% and 10% are:

DISCOUNT FACTORS : 8% 10%

End of Year :

1 0.93 0.91
2 0.86 0.83
3 0.79 0.75
Cumulative 2.58 2.49

What will be the finance cost in the statement of profit or loss of Bermuda for the
year ended 30 September 20X6 (to the nearest $'000)?

2 points
5695
Jora Co has decided to apply the revaluation model to properties for the first time
from 31 December 20X6.

At that date, details relating to its two properties were as follows:

Carrying amount Fair value

$'000 $'000

Head Office 50,200 50,900

Factory 31,500 31,300

What is the total gain to be recognised as a revaluation surplus in other
comprehensive income at 31 December 20X6?

2 points
$0
$200,000
$500,000
$700,000
Fern Co holds 40% of the ordinary shares in Birch Co and has investments in
subsidiaries. In the year ended 31 December 20X3, Fern Co sold goods to Birch Co
for £240,000, charging a mark-up of 50%. Birch Co held a quarter of these goods in
stock at the year end. Which statement is correct?
2 points
An unrealised profit of £12,000 is debited to cost of sales
A credit entry of £8,000 is made to inventory to reduce the carrying amount.
The unrealised profit of £8,000 is credited to the carrying amount of the
investment in Birch Co
The unrealised profit of £12,000 is credited to the share of profits of Birch Co in
consolidated profit or loss.
Which of the following statements relating to government grants is correct?
2 points
A grant related to income is recognised immediately in the statement of profit or
loss when it is received.
Grants related to assets should always be recognised as deferred income.
The repayment of a grant recognised as deferred income never impacts the statement
of profit or loss
An interest free loan provided by a government is accounted for as a government
grant.
Pencil Co. purchased 80% of Sky Co.'s shares on 1 July 20X5. At the date of
acquisition, goodwill was measured at $60,000 and the non-controlling interest was
measured at fair value. At the acquisition date, Pencil Co concluded that property,
plant and equipment with a remaining life of ten years had a fair value of
$1,800,000 in excess of its carrying amount. Sky Co did not incorporate this fair
value adjustment into its individual financial statements. On 31 December 20X5,
goodwill was tested for impairment and found to be fully impaired. For the year
ended 31 December 20X5, Sky Co reported a profit for the year of $1,200,000.

What is the Pencil Group profit for the year ended 31 December 20X5 that is
attributable to non-controlling interests ?

2 points
$96,000
$72,000
$90,000
210,000
Gamer Co has a 70% owned subsidiary, Consol Co. Consol Co sold goods to Gamer Co
for $360,000 at a mark-up of 25% on cost during the year ended 30 June 20X5. One-
third of these goods remained unsold as at 30 June 20X5.

What is the debit adjustment to be made to group retained earnings to reflect the
unrealised profit in inventory at 30 June 20X5?

2 points
$72,000
$16,800
$7,200
$24,000
Nile Co sold a machine to a European company and agreed to invoice in Euro (€). The
sale was made on 1 May 20X2 for €11.88 million. Half of the outstanding balance was
received on 1 June 20X2 and the rest is due on 1 September 20X2.

The exchange rate was as follows:

1 May 20X2 €0.90 to $1

1 June 20X2 €0.80 to $1

30 June 20X2 €0.88 to $1

1 September 20X2 €0.82 to $1

What exchange gain is recognised in the financial statements of Nile Co in the year
ended 30 June 20X2?

2 points
Which of the following are CORRECT according to IAS 33 Earnings per share?

1. A potential ordinary share is a financial instrument or other contract that may

entitle its holder to ordinary shares

2. Dilution is an increase in earnings per share or decrease in loss per share

assuming the potential ordinary shares are converted

3. Where there is a bonus issue in the current period the basic EPS of the previous
period is adjusted retrospectively when presented as a comparative.

2 points
1 and 2 only
2 and 3 only
1 and 3 only
1, 2 and 3
Which of the following events which occur after the reporting date of a company but
before the financial statements are authorised for issue is an adjusting event in
accordance with IAS 10 Events after the Reporting Period?
2 points
An announcement by the company of plan to discontinue an operation
The implementation of major restructuring plan
A change in the tax rate announced after the reporting date, but affecting the
current tax liability
The determination of the sale proceeds of an item of plant sold before the year end