PFRS for Small and Medium-sized Entities

Welcome to your PFRS for Small and Medium-sized Entities Quiz!

Please answer the questions and submit it at the end of the quiz. This quiz has the following properties

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Mode: Multiple Choices
Number of questions to take (from many in the database): 25 items
Order: Ramdon questions
Scoring: 1 point each, zero-based rating!
Retake: Yes

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[ Financial Statement Presentation ]

If the changes to the equity of an entity during the periods for which financial statements are presented arise only from profit or loss, payment of dividends, corrections of prior period errors, and changes in accounting policy:

(a) the entity presents the income statement but not the statement of changes in equity.

(b) the entity presents the statement of comprehensive income but not the statement of changes in equity.

(d) the entity presents the statement of comprehensive income and the statement of changes in equity.

(e) the entity presents a single statement of income and retained earnings.

(f) the entity may present the statement/s listed in either (c), (d) or (e).

[ Small and Medium-sized Entities ]

In which of the following situations can an entity that does not have public accountability claim compliance with the IFRS for SMEs in its financial statements?

The entity prepares its financial statements in accordance with local GAAP that is substantially the same as the IFRS for SMEs.

The entity prepares its financial statements in accordance with local GAAP that is, except in name, word-for-word the same as the IFRS for SMEs.

The entity prepares its financial statements in accordance with the IFRS for SMEs.

In both cases (b) and (c) above.

[ Concepts and Pervasive Principles ]

Which of the descriptions below best describes the qualitative characteristic ‘reliability’?

(a) Information is reliable when it is measured precisely (ie little or no uncertainty in measurement)

(b) Information is reliable when it is measured at historical costs

(d) Information is reliable when it is free from material error and bias and represents faithfully that which it either purports to represent or could reasonably be expected to represent

[ Small and Medium-sized Entities ]

Which of the following entities must not describe its financial statements as being in compliance with the IFRS for SMEs even if it is required by law to prepare its financial statements in accordance with the IFRS for SMEs?

(a) an entity whose shares are traded in a public market (eg a local securities exchange).

(b) an entity whose debt instruments (but not its shares) are traded in a public market (eg a local securities exchange).

(c) an entity that is in the process of issuing its shares for trading in a public market (eg a local securities exchange).

(d) an entity that is in the process of issuing its debt instruments (but not its shares) for trading in a public market (eg a local securities exchange).

(e) cases (a) and (b) above.

(f) cases (a)–(d) above.

[ Statement of Financial Position ]

Liabilities that an entity expects to settle in its normal operating cycle are:

(a) classified as non-current liabilities

(b) classified as current or non-current liabilities in accordance with other criteria

(d) classified as either current on non-current liabilities depending on the company policy

[ Concepts and Pervasive Principles ]

The qualitative characteristic ‘prudence’ implies that in preparing financial statements management should

(a) have a bias toward understating assets and income and overstating liabilities and expenses

(b) have a bias toward overstating assets and income and understating liabilities and expenses

(d) if permitted to do so, use full IFRSs rather than the IFRS for SMEs

[ Concepts and Pervasive Principles ]

The accrual basis of accounting that underlies financial information prepared in accordance with the IFRS for SMEs:

(a) specifies that expenses are recognised as an expense in the period in which the income they generate is recognised (a matching concept)

(b) specifies that an entity must be conservative in its accounting (ie understate assets and income and overstate liabilities and expenses)

(c) specifies that an element (asset, liability, equity, income and expense) is recognised when it satisfies the definition and recognition criteria for an element

(d) specifies that management discretion determines the timing of the recognition of income and expenses

[ Concepts and Pervasive Principles ]

An entity made an unusually high profit for the year ended 31 December 20X7 because it negotiated a significantly lower cost price for its main raw material at a time when the selling price of its products was rising sharply. Management does not want to make public the unusually high profit because they believe that knowledge of the entity’s profitability would result in their customers seeking to negotiate lower selling prices when purchasing goods from the entity. Consequently, management would like to decrease profit for the year by recognising a provision for unforeseen possible expenses.

(a) Because creation of the provision is prudent, it is acceptable accounting

(b) Because creation of the provision is common practice in the jurisdiction in which the entity operates, it is acceptable accounting

(d) Because they do not satisfy the definition of a liability, the entity cannot create a provision for unforeseen possible expenses

[ Concepts and Pervasive Principles ]

One of the criteria that must be satisfied for a liability to be recognised in an entity’s financial statements is that it must be probable that future economic benefits will flow from the entity. Which of the following statements is true?

(a) Probable always means the cash outflow is more likely than not (ie a greater than 50 per cent chance that the outflow of economic benefits will occur)

(b) Probable always means there is a greater than zero per cent probability that the cash outflow will occur

(c) The meaning of probable is not specified in Section 2. Its meaning is specified in other sections of the IFRS for SMEs. For example, when measuring an item at fair value (eg derivatives, see section 12) probable means a greater than zero per cent probability. However, when measuring a provision in accordance with Section 21 Provisions and Contingencies, probable means more likely than not

(d) none of the above

[ Concepts and Pervasive Principles ]

Rather than distributing its excess cash to its shareholders an entity acquired a rare painting. The painting is held for capital appreciation rather than for: (a) use in the production or supply of goods or services or for administrative purposes; or (b) sale in the ordinary course of business.. The IFRS for SMEs does not explicitly specify how to account for investments in paintings. How should the entity account for its investment in the painting?

(a) Because the IFRS for SMEs does not explicitly specify how to account for an investment in a painting, on initial recognition the entity would recognise the expenditure on the painting as an expense in profit or loss.

(b) Because the carrying amount of the painting will be recovered through capital appreciation (or possibly rental to others), the relevant information that users’ of the entity’s financial statements would want about the painting is its current market value. Consequently, by analogy to the accounting specified for investment property (see Section 16 Investment Property) the entity should initially measure the painting at cost and thereafter at fair value, with changes in fair value being recognised in profit or loss.

(c) Same as (b). However, if the fair value of the painting cannot be measured reliably without undue cost or effort on an ongoing basis then, by analogy to Section 17 Property, Plant and Equipment (which includes investment property whose fair value cannot be determined reliably without undue cost or effort on an ongoing basis) the entity would account for the painting using the cost-depreciation-impairment model.

(d) Because the IFRS for SMEs does not explicitly specify how to account for an investment in a painting the entity must, in accordance with paragraph 2.46, measure the painting asset at its historical cost and subsequently, in accordance with paragraph 2.49, measure it at cost less impairment.

[ Concepts and Pervasive Principles ]

Which of the following is not an element for which there is a concept in Section 2?

(a) Asset

(b) Liability

(d) Expense

(e) Other comprehensive income

[ Small and Medium-sized Entities ]

the entity is a subsidiary whose parent uses full IFRSs.

the entity is an associate of an investor that uses full IFRSs.

the entity is a jointly controlled entity whose venturers (investors) use full IFRSs.

cases (a), (b) and (c) above.

none of the cases (a)–(c) above.

[ Financial Statement Presentation ]

Fair presentation requires a faithful representation of the effect of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in Section 2.

Fair presentation, in accordance with the IFRS for SMEs, is presumed to result from:

(a) compliance with the IFRS for SMEs by an entity that has public accountability.

(b) compliance with the IFRS for SMEs, with additional disclosures where necessary, by an entity that has public accountability.

(d) compliance with the IFRS for SMEs, with additional disclosures where necessary, by an entity that does not have public accountability.

[ Financial Statement Presentation ]

Items of dissimilar nature or function:

(a) must always be presented separately in financial statements.

(b) must not be presented separately in financial statements (ie must be aggregated in the financial statements).

(d) either separately presented or aggregated depending on the accounting policy of the entity

[ Concepts and Pervasive Principles ]

Expenses are recognised in comprehensive income (ie profit or loss or other comprehensive income)

(a) using the matching bases (ie on the basis of a direct association between the costs incurred and the earning of specific items of income)

(b) using an accrual basis of accounting

(d) at the discretion of the owners of the entity

[ Financial Statement Presentation ]

Materiality depends on:

(a) the nature of the omission or misstatement.

(b) the size of the omission or misstatement.

(d) None of the above

[ Concepts and Pervasive Principles ]

Recognition criteria determine when to recognise an item. Measurement is determining the monetary amounts at which to measure an item. Uncertainties about the extent of future cash flows:

(a) Only affect the decision about whether to recognise the item

(b) Only affect the estimation of the amount at which to measure the item

(d) Could not affect any decisions about both the recognition and the measurement of that item

[ Financial Statement Presentation ]

When the classification of items in its financial statements is changed, the entity:

(a) must not reclassify the comparative amounts.

(b) can choose whether to reclassify the comparative amounts.

(d) none of the above

[ Statement of Financial Position ]

In accordance with the IFRS for SMEs, an entity must present additional line items in a statement of financial position when:

(a) such presentation is relevant to an understanding of the entity’s financial position.

(b) such presentation is a generally accepted practice in the sector in which the entity operates.

(d) such presentation is required by those charged with governance and the auditors of the entity

[ Small and Medium-sized Entities ]

an entity that holds assets in a fiduciary capacity for a broad group of outsiders as its primary business (eg a bank).

an entity that operates two divisions in each of its retail outlets—a supermarket and a bank (which holds assets in a fiduciary capacity for a broad group of outsiders)). Both divisions are primary businesses of the entity.

an entity that operates primarily as supermarket chain. However, it also enters into insurance contacts (as the insurer) with its customers. The entity’s short-term insurance and life insurance operations are small relative to the size of its supermarket operations and are operated from the entity’s supermarkets.

an entity holds assets in a fiduciary capacity for a broad group of outsiders for reasons incidental to a primary business (eg a law firm that is legally required to hold in trust advances from its clients for legal services to be rendered).

cases (a), (b) and (c) above.

cases (a)–(d) above.

[ Statement of Financial Position ]

In accordance with the IFRS for SMEs, in presenting a statement of financial position, an entity:

(a) must make the current/non-current presentation distinction.

(b) must present assets and liabilities in order of liquidity.

(c) must choose either the current/non-current or the liquidity presentation formats (ie a ‘free’ choice of presentation format).

(d) must make the current/non-current presentation distinction except when a presentation based on liquidity provides information that is reliable and more relevant.

[ Statement of Financial Position ]

Section 4 Statement of Financial Position of the IFRS for SMEs:

(a) prescribes information to be presented in a statement of financial position.

(b) prescribes the sequence or format in which items are to be presented in the statement of financial position.

(c) does not permit the presentation of the additional line items, headings and subtotals in the statement of financial position in addition to those set out in paragraph 4.2.

(d) prescribes the recognition and measurement criteria for real accounts.

[ Concepts and Pervasive Principles ]

Materiality depends on:

(a) the size of the item

(b) the nature of the item

(d) the requirements of the regulators

(e) all of the above

[ Concepts and Pervasive Principles ]

Which qualitative characteristics are fundamental to general purpose financial information?

(a) relevance and reliability

(b) relevance and comparability

(d) prudence and comparability

[ Financial Statement Presentation ]

In which of the following situations can an entity that does not have public accountability claim compliance with the IFRS for SMEs in its financial statements:

(a) The entity prepares its financial statements in accordance with local GAAP that has substantially converged with the IFRS for SMEs.

(b) The entity prepares its financial statements in accordance with local GAAP that is, except in name, word-for-word the same as the IFRS for SMEs.

(d) In both cases (b) and (c) above.