PFR 1-1

1. The Conceptual Framework identifies an underlying assumption in preparing financial statements. This is

2. Which of the following is not a purpose of the IASB’s Conceptual Framework?

3. Which of the following is not a fundamental characteristic identified in the conceptual framework?

4. How does the Conceptual Framework define an asset?

5. In accordance with the International Standard Board’s “The Conceptual Framework for Financial Reporting”, which of the following is not a measurement basis of financial statements?

6. In accordance with the Conceptual Framework which of the following is/are true in relation to the enhancing characteristic of comparability?

1          Comparability requires uniformity

2          Permitting alternative accounting treatments for the same economic phenomenon enhances comparability

7. Which of the following would be classified as a liability?

8. In accordance with the International Standard Board’s “The Conceptual Framework for Financial Reporting”, what is the definition of income?

9. The responsibility of issuing guidance on the application of IFRSs and reviewing new financial reporting issues, is the responsibility of which of the following bodies?

10. The International Accounting Standards Board adopts a due process for the preparation of a new International Financial Reporting Standard (IFRS). What is the next step following the revised Exposure Draft?

11. Which TWO of the following statements regarding systems of regulation of accounting are true?

1 A principles-based system requires the exercise of more judgment in application than a rules-based system.

2 A rules-based system will tend to give rise to a larger number of accounting standards than a principles-based system.

3 A principles-based system will require more detailed regulations than a rules-based system.

4 A principles-based system seeks to cover every eventuality.

12. The ‘physical capital maintenance’ concept states that profit is the increase in the physical productive capacity of the business over the period. This concept is applied in:

13. BAC Systems acquired an item of plant on 1 October 2018 at a cost of $1,000,000. It has a useful life of ten years (straight-line depreciation) and an estimated residual value of 20% of its historical cost or current cost as appropriate. As at 30 September 2020, the manufacturer of the plant still makes the same item of plant and its current price is $1,200,000.

What is the correct carrying amount to be shown in the statement of financial position of BAC Systems as at 30 September 2020 under historical cost and current cost?

14. Which of the following statements is an advantage of using the Value in Use method of accounting?

15. Overstatement of profits can arise during periods of inflation. This then leads to a number of other consequences. Which of the following is NOT a likely consequence of overstatement of profits?