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Exam 14: The Statement of Comprehensive Income and Statement of Changes in Equity

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Question 21

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Estimations are frequently made in the financial statements in relation to items such as bad debts,inventory obsolescence,an asset's useful life and the expected pattern of consumption of economic benefits of depreciable assets.The effect of these estimations on the financial statements is to:

A) increase the variability of profits.
B) make the statement unreliable.
C) reduce the relevance of the profit figures reported.
D) None of the given answers are correct.

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Question 22

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Changes in accounting policy are to be made retrospectively or prospectively,depending upon the background to the change.

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Question 23

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Which of the following statements is not in accordance with IAS 1 Presentation of Financial Statements with respect to the statement of comprehensive income?

When items of income and expense are material,and their nature and amount are separately disclosed,this could indicate the existence of:

Which of the following is not required to be shown on the face of the statement of comprehensive income?

Following are the items of income and expense recognised during the period by Gordon Field PlC: $\begin{array} { | l | l | } \hline \text { I }&\text { Gains and losses arising from translating the financial statements of a foreign } \\&\text { operation }\\\hline \text { II } & \text { Gains and losses on re-measuring available-for-sale financial assets } \\\hline \text { II } & \text { Gain on sale of property, plant and equipment } \\\hline V & \text { Actuarial losses on defined benefit pension plans } \\\hline V & \text { Prior period errors discovered } \\\hline V & \text { Prospective adjustment resulting from a change in accounting estimates } \\\hline\end{array}$ Which of the following combinations identify all items permitted in IAS 1 Presentation of Financial Statements to be presented under other comprehensive income?

By focusing only on the statement of profit and loss,we do not obtain a full picture of all the gains and losses that may have occurred for an entity during the period.

Discovery of an error from a prior period corrected retrospectively is an example of an item reportable under other comprehensive income.

Hicks' notion of income is that:

Profit is a measure of financial performance and therefore may not truly reflect the success or otherwise of an organisation.

The choice of classification between nature and function of expenses from ordinary activities depends on:

Which of the following would not be considered a 'prior period error' for the purposes of IAS 8?

The statement of changes in equity is required:

All adjustments to equity other than those related to transactions with owners in their capacity as owners are disclosed in the statement of comprehensive income (IAS 1).

An item must be outside the ordinary operations of the business or be of a non-recurring nature to be classified as an extraordinary item under IAS 1.

As part of the process of international harmonisation,standard setters have removed the need for professional judgment to be exercised in respect of expenses; all discretion that once existed has been removed.

IAS 8 requires all errors that relate to prior reporting periods to be corrected by adjusting the opening balance of retained earnings and restating comparative information.

A statement of comprehensive income that includes revenue,cost of sales,selling expenses,financial expenses would have been prepared using the:

IRFS 2 lists a number of factors that need to be considered when valuing an executive share option.They include:

When initial application of an International Financial Reporting Standard has an effect on the current period or any prior period,would have such an effect except that it is impracticable to determine the amount of the adjustment,or might have an effect on future periods,an entity shall disclose: