Julien CAPPELLE

Advanced Accounting: Collection of exams theory questions

December 2010
A. Revenue recognition

The interest income of an accounting period is recognized based on:

- The facial interest rate generated by the asset. FALSE
- The cash inflows generated by the asset. FALSE
- The effective yield generated by the asset. TRUE
- The prorata temporis method. TRUE

B. Property, Plant & Equipment

Under IAS 16 – Revaluation Model, the profit recorded in income statement on the sale of an asset
that had been subjected to a revaluation,

- Is always lower than when no revaluation has been recorded. FALSE

- Can be lower. TRUE
- Is always higher. FALSE
- Is the same. FALSE

C. Provisions

Upon receiving invoices materializing charges for which a provision has been recorded in the past, the
accounting entry (entries) is (are):

- Debit Provision Credit Trade or Other Payables. FALSE

- Debit Provision Credit Income – Use of provisions. TRUE
- Debit Provision Credit Expenses. FALSE
- Debit Expenses Credit Trade or Other Payables. TRUE
- Debit Expenses Credit Income – Reversal of provisions. FALSE

D. Accounting for business combinations and mergers

- Expenses directly attributable to the business combination (e.g. professional fees) are part of the Cost
of the Business Combination. FALSE
- Deferred taxes on the difference between fair values and carrying values are recorded by the
absorbing company in an asset deal. FALSE
- Deferred taxes on the difference between fair values and carrying values are recorded by the
absorbing company in an Acquisition Method merger. TRUE

E. Statement of Cash Flow

The following “negative cash” cases are handled as being part of Cash and Cash Equivalents:

- A bank overdraft that has been converted into a 6 months short term loan of which the maturity is 4
months away on closing (balance sheet) date. FALSE
- A 3-month roll over (renewable) credit the company has been renewing for 2 years, and intends to
further do so. FALSE
- An overdraft on bank account with reimbursement deadline of 80 days maximum, at the discretion of
the bank. TRUE

F. Intangibles

The following are possible cases for the company recognizing (recording) an intangible asset (in some
instances only when certain conditions are met):

- Internally generated brand. FALSE

- Internally generated goodwill. FALSE
- Internally generated publishing title. FALSE
- Internally generated customers’ data base. FALSE
- Internally initiated research activities. FALSE
- Internally initiated development activities. TRUE

G. Control

P owns 80% of company A shares, P owns 30% of company B Shares, P and A own respectively 15%
and 45% of company C shares. There is no shareholders agreement in relation with any of the
companies.

- P controls A and C. TRUE

H. Impairments

ABC is an international company. ABC’s trademark is carried at historical cost. The Directors are of
the opinion that the trademark has an indefinite useful life. Trademark is subject to annual impairment
at the end of the year. There are no active markets for the trademark. Depreciable tangible and
intangible assets are depreciated over a period ranging from 10 to 20 years.
At the end of year 1 the carrying value of the trademark was 100. The fair value and value in use was
50. At the end of year 2 the fair value and value in use is 120.

- At the end of year 2 the carrying value of the trade mark should be 100. TRUE

I. IFRS conceptual framework

- There are no minimum requirements for the content of the financial statements. FALSE
- There is a prescribed standard format for the financial statements. FALSE
- A summary of the significant accounting policies should be included in the notes to the financial
statements. TRUE

J. IFRS conceptual framework

- For the financial statements to be understandable by the users, highly complex information or
transactions should be excluded from the financial statements, or be presented in the notes only.
FALSE
- For the financial statements to be reliable the economic reality of a transaction must be reflected
irrespective of its legal qualification. TRUE
- Financial statements are not presented on a going concern basis but with previous year comparative
figures. FALSE
K. Translation of financial statements

The company functional currency is EUR. The company is part of a group of which the reporting
currency is USD. The company was incorporated at the end of June. The balance sheet items at the
end of December (date of consolidation) are as follows:
. Current assets: 100 EUR
. Shares capital: 150 EUR
. Retained Earnings: - 50 EUR (loss)

The exchange rates are the following:

. End of June: 1,5 USD/EUR
. Average for the second semester: 1,4 USD/EUR
. At the end of the year: 1,2 USD/EUR

- At the end of December the Cumulative Translation Reserve amounts to 35 (debit amount). TRUE

JANUARY 2011
A. IFRS conceptual framework

The following underlying assumptions or principles are always applicable in all circumstances:

- Accrual basis of accounting. TRUE

- Matching principle. TRUE
- Going concern principle. FALSE

B. IFRS compliance

A company applying IFRS:

- Has to apply all standards without exception. TRUE

- Can rectify inappropriate accounting by way of explanation or disclosure in the IFRS required notes
to the financial statements. FALSE
- Can deviate from a standard if another accounting treatment also gives a true and fair view. FALSE
- All of the above. FALSE

C. Foreign currency transactions (IAS 21)

For a European company keeping its accounting records in EUR and having purchases in foreign
currencies, inventories purchased in the past in foreign currency and still present as an asset on balance
sheet date can generate at that occasion:

- A realized exchange difference. FALSE

- An unrealized exchange difference. FALSE
- A translation gain or loss. FALSE
- All of the above. FALSE
- None of the above. TRUE

D. Consolidation and control

A Group is made of:

- The parent company + its subsidiaries. TRUE

- The parent company + its subsidiaries + its associate companies. FALSE
- The parent company + its subsidiaries + its associate companies + its interests (investments) in joint
ventures that do not have the form of a company. FALSE

E. Impairments

The amount of impairment of an asset is the unfavourable difference determined as follows:

- The difference between the carrying value (amount per books) and the recoverable amount. TRUE
- The difference between carrying value less costs to sell, and the value in use. FALSE
- The difference between the recoverable amount and the value in use. FALSE
- The difference between carrying value less costs to sell, and the fair value less costs to sell. FALSE

F. Revenue recognition (measurement)

The fair value could be:

- A quoted price. TRUE

- The amount for which an asset could be exchanged in a forced sale. FALSE
- The amount for which an asset could be exchanged between knowledgeable, willing parties in an
arm’s length transaction. TRUE
- The price for a fair trade transaction. TRUE

G. Property, Plant & Equipment

Investment properties are:

- Always measured at fair value. FALSE

- measured at the higher of fair value or acquisition cost. FALSE
- Always measured at acquisition cost. FALSE
- None of the above. TRUE

H. Provisions

A provision is always set up for:

- An onerous contract. TRUE

- A restructuring. FALSE
- Future operating losses. FALSE
- All of the above. FALSE

I. Accounting for business combinations and mergers

What are the specific issues in a business combination:

- The identification of the acquirer. FALSE

- The recognition of the acquiree’s identifiable assets, liabilities and contingent liabilities. FALSE
- The expenses directly attributable to the business combination (e.g. professional fees). FALSE
- All of the above. TRUE

J. Intangibles

Intangible assets:

- Are never amortised. FALSE

- Cannot be internally generated. FALSE
- Can be related to research activities. FALSE
- Can be related to development activities. TRUE

DECEMBER 2011
A. Revenue recognition

- Revenue generated by lease agreements is treated by IAS 18. FALSE

- Revenue is measured at the nominal amount of the invoice. FALSE
- Margin on long term contract is usually recognised based on the percentage of completion method.
TRUE
- All the above propositions are incorrect. FALSE

B. Provisions & contingencies

- Provisions need not to be discounted. FALSE

- A provision for restructuring is recognised when the decision is taken by the Board of
Directors. FALSE
- A provision is recognised for an onerous contract. TRUE

C. Intangible assets

- A brand can be recognised as an intangible asset when it is developed internally. FALSE

- Development costs can be recognised as an intangible asset. TRUE
- An intangible asset cannot be amortized, except if it is traded on an active market. FALSE

D. Lease

- Only contracts that take the legal form of a lease are included in the scope of IAS 17. FALSE
- The nature of the leased asset is not considered in the lease classification assessment. FALSE
- If the lease is a finance lease, the lessor continues recognising the leased asset in his financial
statements. FALSE
- All the above propositions are incorrect. TRUE

E. Impairment

- For a goodwill, an impairment review only needs to be performed when there is an indication of
impairment. FALSE
- If the fair value less costs to sell of an asset exceeds its carrying amount, it is not needed to compute
its value in use in the context of an impairment test. TRUE

F. Control

P owns 60% of company A shares, P owns 20% of company B Shares, A owns 40% of company B
shares. There is no shareholders agreement in relation with any of the companies.

- P’s percentage of interest in B is 44% and voting rights are 60%. TRUE

G. Consolidation method

P owns 60% of company A shares, P owns 20% of company B Shares, A owns 40% of company B
shares. There is no shareholders agreement in relation with any of the companies.

- B is consolidated using the full consolidation method. TRUE

H. Depreciation

P acquired a building for an amount of €10.000.000. Its useful life is 20 years and the residual value
€2.000.000. The annual straight line depreciation charge is

- €400.000. TRUE

I. Translation of financial statements

The company functional currency is EUR. The company is part of a group of which the reporting
currency is USD. The company was incorporated at the end of June. The balance sheet items at the
end of December (date of consolidation) are as follows:
. Current assets: 100 EUR
. Share capital: 50 EUR
. Retained Earnings: 50 EUR (credit balance)
The exchange rates are the following:
. End of June: 1,5 USD/EUR
. Average for the second semester: 1,4 USD/EUR
. At the end of December: 1,2 USD/EUR

- At the end of December the Cumulative Translation Reserve amounts to

25 (debit amount). TRUE

J. IFRS conceptual framework

- The full set of financial statements is made of a statement of financial position, a statement of
comprehensive income, a statement of changes in equity and a statement of cash flows. FALSE
- For the financial statements to be reliable the economic reality of a transaction must be reflected
irrespective of its legal qualification. TRUE
- Financial statements are not presented on a going concern basis but with previous year comparative
figures. FALSE

AUGUST 2012
A. Revenue Recognition

- Dividend income can be recorded as from the date the dividend can be collected from the paying
company or its bank. FALSE
- Dividend income is recorded when the shareholder’s right to receive payment is established. TRUE
- Dividend income is recorded, by prudence, upon its collection. FALSE

B. Fair Value

- Fair Value is the amount for which an asset could be exchanged between knowledgeable, willing
parties, in an arm’s length transaction. FALSE
- Fair Value is the amount for which an asset could be exchanged (or a liability settled) between
knowledgeable, willing parties, in an arm’s length transaction. TRUE
- Fair Value is the amount for which an asset could be exchanged between knowledgeable, willing
parties, in an arm’s length transaction, based on transaction values in an active trading market. FALSE

C. Deferred taxes

- Deferred taxes accounting and recognition are in the majority of cases favourable to the company in
terms of taxes cash payments planning. FALSE
- Deferred taxes accounting and recognition are in the majority of cases unfavourable to the company
in terms of taxes cash payments planning. FALSE
- Deferred taxes accounting and recognition have no impact on taxes cash payments due. TRUE

D. Long term contracts (IAS II)

When determining the expected gross margin on the contract,

- Direct costs include borrowing costs. TRUE

- Direct costs do not include borrowing costs. FALSE
- Once the gross margin estimate has been determined at the end of the first year, it cannot be adjusted
during the following years before the end of the contract. FALSE

E. IFRS Financial statements

- Inappropriate accounting treatment can be rectified by a disclosure or explanatory note. FALSE

- If management concludes that applying an IFRS requirement would be misleading, deviation from
IFRS is authorized, provided disclosure in a note is done. TRUE
- Deviation from IFRS is authorized when another treatment would also give a true and fair view.
FALSE

F. Control

P owns 70% of company A shares, P owns 20% of company B Shares, A owns 40% of company B
shares. There is no shareholders agreement in relation with any of the companies.

- P’s percentage of interest in B is 48% and voting rights are 60%. TRUE

G. Consolidation method

P owns 60% of company A shares, P owns 20% of company B Shares, A owns 40% of company B
shares. There is no shareholders agreement in relation with any of the companies.

- B is consolidated using the full consolidation method. TRUE

H. Depreciation

P acquired a building for an amount of €15.000.000. Its useful life is 30 years and the residual value
€3.000.000. The annual straight line depreciation charge is

- €400.000. TRUE

I. Translation of financial statements

The company functional currency is EUR. The company is part of a group of which the reporting
currency is USD. The company was incorporated at the end of June. The balance sheet items at the
end of December (date of consolidation) are as follows:
. Current assets: 50 EUR
. Share capital: 25 EUR
. Retained Earnings: 25 EUR (credit balance)

The exchange rates are the following:

. End of June: 1,5 USD/EUR
. Average for the second semester: 1,4 USD/EUR
. At the end of the December: 1,2 USD/EUR
- At the end of December the Cumulative Translation Reserve amounts to 12,5 (debit amount). TRUE

J. IFRS conceptual framework

- The full set of financial statements is made of a statement of financial position, a statement of
comprehensive income, a statement of changes in equity, a statement of cash flows and the notes.
TRUE
- For the financial statements to be reliable the legal qualification of a transaction must be reflected
irrespective of its economic reality. FALSE
- Financial statements are presented on a going concern basis but without previous year comparative
figures. FALSE

DECEMBER 2013
A. Conceptual Accounting Framework

Which of the following equations is a correct summary of the double entry accounting system
(assuming there are no direct movements of Equity like capital increase/decrease or dividend pay outs)
(and where A = total Assets and L = total Liabilities):

- Variation of L + Expenses = Variation of A + Income. FALSE

- Variation of A + Expenses = Variation of L + Income. TRUE
- Variation of A + Income = Variation of L – Expenses. FALSE
- Variation of A - Income = Variation of L + Expenses. FALSE

B. P.P.&E. held under finance lease

A lessee holds P.P.& E. under a finance lease ; the lessee applies IAS 16 (Cost Model). Which one of
the following statements is correct:

- The carrying value of P.P.&E. can be equal to the related finance lease liability only at inception of
the contract. TRUE
- The depreciation charge should be equal to the liability annual reimbursement. FALSE
- The total of interest expenses + depreciation charge should be an identical amount each year. FALSE

C. Foreign currency transactions (IAS 21)

The company issues a USD 100.000 sale invoice on October 31. Upon closing date (December 31)
this receivable has not been collected yet. It is collected on January 28.
The exchange rates have been as follows:
Oct. 31: 1, 38 USD/ 1 EUR
Dec. 31: 1, 41 USD / 1 EUR
Jan. 28: 1, 35 USD / 1 EUR
Which one of the following statements is correct:

- As at Dec. 31, the company records a financial expense of EUR 1.542, and on Jan. 28 a financial
income of EUR 3.152. TRUE

D. Consolidation methods

In the M group of companies, the shareholding relationships are as follows:

M owns 60 % of A; A owns 45 % of B; M owns 10 % of B; A third party owns the remaining 45 % of
B. A shareholders’ agreement is in force between A and the third party, whereby all key management
decisions and strategic options of B are decided jointly.
In the M group consolidation at the end of 2014, the following methods will have to be used:

- Full consolidation for A and Equity Method for B. TRUE

E. Provisions (IAS 37)

A company decides the closure of a business line, and to record a provision to cover the related direct
costs. It can do so, provided:

- A Board decision in respect of the closure has been formally taken. FALSE
- A Board decision has been formally taken + a detailed formal plan has been prepared detailing the
location and assets affected, the function and number employees affected, the calendar, and the
estimated expenses to be incurred. FALSE
- A Board decision has been formally taken + a detailed plan has been prepared as described under the
second proposition above, + an information to the parties and persons affected has been
communicated. TRUE

F. Accounting for business combinations

- All the identifiable assets acquired, the liabilities assumed and the non-controlling interest in the
acquiree are measured at fair value, less cost to sell as the case may be. FALSE
- Expenses directly attributable to the business combination (e.g. professional fees) are not part of the
cost of the business combination. TRUE
- Deferred taxes are recorded on the difference between fair values and carrying values of the
identifiable assets acquired, the liabilities assumed, including goodwill generated. FALSE

G. Intangible assets

The following are possible cases for the company recognizing (recording) an intangible asset (in some
instances only when certain conditions are met):

- Internally generated brand. FALSE

- Internally generated goodwill. FALSE
- Internally generated publishing title. FALSE
- Internally generated customers’ data base. FALSE
- Internally initiated research activities. FALSE
- Internally initiated development activities. TRUE
- None of the above. FALSE

H. Impairments

ABC is an international company. ABC’s trademark is carried at historical cost. The Directors are of
the opinion that the trademark has an indefinite useful life. Trademark is subject to annual impairment
at the end of the year. There are no active markets for the trademark.
At the end of year 1 the carrying value of the trademark was 100. The fair value and value in use was
120. At the end of year 2 the fair value and value in use is 50.

- At the end of year 2 the carrying value of the trade mark should be 50. TRUE

I. Statement of cash flows

- It is allowed to use the direct or the indirect method for the preparation of the Statement of cash
flows. TRUE
- Only cash flows from operating and investing activities are reported separately in the Statement of
cash flows. FALSE
- Changes in cash and cash equivalents during a period are not impacted by effect of changes in
foreign currency rates. FALSE

J. Revenue recognition

For long term construction contracts, the profit margin is recognized based on:

- The revenue that has already been billed. FALSE

- The costs that have already been incurred. TRUE
- The time spent by the architects and finance team on the construction project. FALSE

JANUARY 2014
A. Revenue recognition

Dividend income is recognized (recorded) by the beneficiary company:

- Upon cash collection of the dividend. FALSE

- Upon the moment the shareholder’s right to receive payment is established (i.e. the motion to issue a
dividend is approved by vote of the shareholders). TRUE
- Upon the moment the shareholder’s right to receive payment is actionable (i.e. as from the first day
of the period during which the dividend can be collected). FALSE

B. Foreign currency transactions (IAS 21)

Upon balance sheet date, non-monetary items that are carried on balance sheet at a fair market value
that is foreign currency denominated, are translated into reporting currency, using:

- The closing rate. FALSE

- The historical (purchase date) spot rate. FALSE
- The spot rate at the date of the latest fair value determination. TRUE

C. Business Combinations (IFRS 3R)

To determine the cost of the business combination, the following is taken into account:

- Future restructuring costs expected to occur as a result of the business

Combination. FALSE
- The costs of the acquirer’s Mergers & Acquisitions department. FALSE
- The nominal amount of deferred price payment tranches. FALSE
- The discounted amount of deferred price payment tranches. TRUE

D. Conceptual Framework

The following balance sheet item is not a monetary item:

- Consolidated trade receivables. FALSE

- Bank overdrafts. FALSE
- Accrued income & prepaid expenses. FALSE
- Deferred income. FALSE
- Non-controlling interests. TRUE
- None of the above. FALSE
E. Deferred taxation

Which of the following cases leads to deferred taxation accounting:

- Tax disallowed expenses i.e. expenses viewed by the tax authorities as not business related hence not
deductible from the taxable basis. FALSE
- Revenue generated by income that is not taxable since already subjected to income tax elsewhere
(e.g. dividend income coming from another company’s net after tax profit). FALSE
- Impairment on inventories, where the impairment charge will only be tax deductible when the loss is
realized upon sale or destruction. TRUE

F. Business combination (IFRS 3R)

In the case where the net fair value of the identifiable assets acquired and liabilities assumed exceeds
the consideration transferred:

- The excess is recognized as intangible asset. FALSE

- The excess is recognized as a liability. FALSE
- The excess is recognized directly in equity. FALSE
- The excess is recognized in profit and loss. TRUE

G. Provision (IAS 37)

- A provision is a liability. TRUE

- A provision is a non-present obligation resulting from a past event, the settlement of which will
result in an outflow of cash. FALSE
- A provision is a present obligation resulting from a future event, the settlement of which will result
in an outflow of cash. FALSE
- A provision is a present obligation resulting from a past event, the settlement of which will never
result in an outflow of cash or another outflow of resources embodying economic benefits. FALSE

H. Depreciation (IAS 16)

- Intangible and tangible assets are always depreciated. FALSE

- Only the goodwill resulting from a business combination under the pooling of interest method is
depreciated. FALSE
- Depreciation is computed based on the useful life of a tangible asset. TRUE
- Depreciation is driven by tax optimization. FALSE

I. Foreign currency transactions (IAS 21)

The company owns a USD 100.000 receivable on October 31 due to a sale occurring at the same date.
Its functional currency is the USD. Upon closing date (December 31) this receivable has not been
collected yet. It is collected on February 28.
The exchange rates have been as follows:
Oct. 31: 1 USD/ 1 EUR
Dec. 31: 1, 5 USD / 1 EUR
Feb. 28: 1 USD / 1 EUR
Which one of the following statements is correct:

- As at December 31, the company records a financial expense of EUR 50.000, and no financial
income or expense on February 28. FALSE
- As at December 31, the company records a financial income of EUR 50.000, and no financial income
or expense on February 28. FALSE
- As at December 31, the company records a financial income of EUR 50.000, and on February 28 a
financial expense for the same
Amount. FALSE
- None of the above. TRUE

J. Impairments

ABC is an international company. ABC’s recognized a goodwill on the acquisition of one of its
subsidiaries in 2010. At the end of 2013 the carrying value of the goodwill was 100. No impairment
has been recognized since the initial measurement. At 31 December 2013 (closing date), the fair value
and the value in use of the Cash Generating Unit on which the goodwill has been allocated were
respectively 90 and 110.

- An impairment should be recognized in profit and loss for 10. FALSE

- An impairment should be directly recognized in equity for 10. FALSE
- The goodwill should be valued at 110. FALSE
- No impairment should be recognized. TRUE

AUGUST 2014
A. Revenue recognition – Long term contracting

At year end, upon preparing the statement of financial position (balance sheet), the profit margin
recognized based on the % of completion method should be:

- Recorded in deduction of billings made. FALSE

- Included in Other Receivables if the year end inventory of Construction in Progress had a debit
balance. TRUE
- Added to Other Liabilities if the year end inventory of Construction in Progress had a credit balance.
FALSE
- None of the above. FALSE

B. Property, Plant & Equipment – Revaluation

When recording the revaluation of an asset which has been subjected to depreciation already, the asset
revaluation should be recorded

- By debiting the gross amount of the asset. FALSE

- By debiting the gross amount of the asset and crediting Revaluation Surplus in equity, and debiting
accumulated depreciation & crediting that amount to retained earnings. FALSE
- By first debiting the accumulated depreciation and then debiting the gross amount of the asset if still
needed. FALSE
- The company has the choice of method between the two first described above. TRUE

C. IAS 37 – Provisions and contingencies

A contingent GAIN is recorded:

- By deducting it from provision expenses. FALSE

- By recording an asset when the gain is irrevocably confirmed and secured. TRUE
- By recording an income upon and not before cash collection. FALSE
- By deducting it from the provision liabilities, if any, or, if none, by adding it to the Other Assets.
FALSE
D. Impairment of assets

An asset is impaired when:

- The fair value is lower than the value in use. FALSE

- The carrying amount is higher than the recoverable amount. TRUE
- The sale price less costs to sell is lower than the carrying amount. FALSE
- The value in use is lower than the sale price less costs to sell. FALSE

E. Depreciation of P.P.&E.

A depreciable asset is acquired at a cost of 3.600.000 EUR. Its estimated useful lifetime is 12 years,
and its estimated future residual value is 300.000 EUR. Its annual straight-line depreciation should be:

- 275.000 EUR. TRUE

F. Control

P owns 60% of company A shares, P owns 10% of company B Shares, A owns 60% of company B
shares. There is no shareholders agreement in relation with any of the companies.

- P’s percentage of interest in B is 46% and voting rights are 70%. TRUE

G. Consolidation method

P owns 40% of company A shares, P owns 50% of company B Shares, A owns 100% of company C
shares. There is no shareholders agreement in relation with any of the companies.

- A and B are consolidated by P using the equity method. TRUE

H. Translation of financial statements

The company functional currency is EUR. The company is part of a group of which the reporting
currency is USD. The company was incorporated at the end of June. The balance sheet items at the
end of December (date of consolidation) are as follows:
. Current assets: 100 EUR
. Share capital: 50 EUR
. Retained Earnings: 50 EUR (credit balance)
The exchange rates are the following:
. End of June: 1,3 USD/EUR
. Average for the second semester: 1,25 USD/EUR
. At the end of the December: 1,2 USD/EUR

- At the end of December the Cumulative Translation Reserve amounts to 7,5 (debit amount). TRUE

I. Deferred taxes

- Deferred taxes are computed on permanent differences. FALSE

- Deferred taxes are computed using next year enacted tax rate, when change is being expected for the
next year tax rate. TRUE
- There could be deferred tax on goodwill. FALSE

J. Long term receivables without interest rate associated to them

- Long term receivables are measured at value in use. FALSE

- Long term receivables are measured at present value. TRUE
- Long term receivables are not presented on the statement of financial position but on the statement of
comprehensive income. FALSE

DECEMBER 2014
A. Conceptual Accounting Framework

Which of the following equations is a correct summary of the double entry accounting system
(assuming there are no direct movements of Equity like capital increase/decrease or dividend pay-out):
- Variation of L + Expenses = Variation of A + Income. FALSE
- Variation of A + Expenses = Variation of L + Income. TRUE
- Variation of A – Expenses = Variation of L – Income. FALSE
- Variation of A – Income = Variation of L + Expenses. FALSE
- None of the above. FALSE

B. Property, Plant and Equipment and Finance Leases

A property developer which has a building constructed and puts it at disposal of a lessee by way of a
finance lease, carries from then on the building as a balance sheet asset:

- No more. TRUE

C. Property, Plant and Equipment – Depreciation

A depreciable equipment has a 5 years useful lifetime, and no residual value. Using the degressive
depreciation method, the equipment will be fully depreciated after:

- 4 years. TRUE

D. Impairment of assets

An individual asset that is not carried at a revalued amount and that has been subjected to an
impairment in prior years, now sees its recoverable amount increase back. Recording a reversal of the
previously recorded impairment is authorized:

- By debiting the asset and crediting income. FALSE

- By debiting the asset and crediting retained earnings. FALSE
- Same as the first described above, but in any event never for a goodwill asset. TRUE
- Same as second described above, but in any event never for a goodwill asset. FALSE
- Under no circumstances. FALSE

E. Consolidation – Joint control cases

- Joint control cannot exist unless there is equality between the shareholding %’s
(eg 50 % - 50 %, or 33 % - 33 % - 33%, etc.). FALSE
- Joint ventures are consolidated using the proportionate consolidation method. FALSE
- Joint operations are consolidated using the proportionate consolidation method. TRUE
- Joint operations are consolidated using the equity method. FALSE

F. Translation of financial statements

The company functional currency is EUR. The company is part of a group of which the reporting
currency is USD. The company was incorporated at the end of June. The balance sheet items at the
end of December (date of consolidation) are as follows:
. Current assets: 200 EUR
. Shares capital: 300 EUR
. Retained Earnings: - 100 EUR (loss)

The exchange rates are the following:

. End of June: 1,5 USD/EUR
. Average for the second semester: 1,4 USD/EUR
. At the end of the year: 1,2 USD/EUR

- At the end of December the Cumulative Translation Reserve amounts to 70 (debit amount). TRUE

G. Statement of cash flows

- Only the indirect method is allowed for the preparation of the Statement of cash flows. FALSE
- There is no minimum requirements for the presentation of the statement of cash flows. FALSE
- Changes in cash and cash equivalents during a period are impacted by effect of changes in foreign
currency rates. TRUE

H. Control

P owns 60% of company A shares, P owns 10% of company B shares, A owns 40% of company B
shares. There is no shareholders agreement in relation with any of the companies.

- P’s percentage of interest in B is 34% and voting rights are 50%. TRUE

I. Provisions & contingencies

- Provisions need to be discounted. FALSE

- A provision for restructuring is recognized when the decision is taken by the Board of Directors.
FALSE
- A provision is recognized for an onerous contract on a case by case basis. FALSE
- All of the above propositions are incorrect. TRUE

J. Deferred taxation

Which of the following cases leads to deferred taxation accounting:

- The recognition of a negative goodwill in a business combination. FALSE

- A permanent difference between the tax and reporting value of an asset. FALSE
- A taxable exceptional depreciation of an intangible asset in the local books. TRUE
- None of the above. FALSE

JANUARY 2015
A. Foreign currency transactions (IAS 21)

The company issues a USD 100.000 sale invoice on November 30.

Upon closing date (December 31) this receivable has not been collected yet. It is collected on February
28. The exchange rates have been as follows:
Nov. 30: 1, 40 USD/ 1 EUR
Dec. 31: 1, 25 USD / 1 EUR
Feb. 28: 1, 35 USD / 1 EUR
Which one of the following statements is correct (rounded amounts):
- As at Dec. 31, the company records a financial income of EUR 8.571, and on Feb. 28 a financial
expense of EUR 5.926. TRUE

B. Translation of financial statements

The company functional currency is EUR. The company is part of a group of which the reporting
currency is USD. The company was incorporated at the end of June. The balance sheet items at the
end of December (date of consolidation) are as follows:
. Current assets: 400 EUR
. Shares capital: 200 EUR
. Retained Earnings: 200 EUR

The exchange rates are the following:

. End of June: 1,5 USD/EUR
. Average for the second semester: 1,4 USD/EUR
. At the end of the year: 1,2 USD/EUR

- At the end of December the Cumulative Translation Reserve amounts to 100 (debit amount). TRUE

C. Control

P owns 80% of company A shares, P owns 5% of company B shares, A owns 60% of company B
shares. There is no shareholders agreement in relation with any of the companies.

- P’s percentage of interest in B is 53% and voting rights are 65%. TRUE

D. Deferred taxation

Which of the following cases leads to deferred taxation accounting:

- The recognition of a goodwill in a business combination. FALSE

- A permanent difference between the tax and reporting value of an asset. FALSE
- Under certain circumstances, the increase in value of a tangible asset compared to its tax basis value,
due to a price purchase allocation in a business combination. TRUE

E. Provisions & contingencies

- Provisions are never discounted. FALSE

- A provision for restructuring is recognised when the decision has been taken by the Board of
Directors and all the trade unions or employees representatives have been formally informed. TRUE
- A provision is recognised for an onerous contract on a case by case basis. FALSE
- All of the above propositions are incorrect. FALSE

F. Consolidation – Joint control concept

- Joint Operations are cases of either Joint Venture or Joint Control. FALSE
- All Joint Control cases are either Joint Ventures or Joint Operations. TRUE
- Joint Ventures are, by definition, also Joint Operations. FALSE
- Joint Operations are, by definition, also Joint Ventures. FALSE

G. Long term debt without interest attached to it

- Such long term debt is measured at its value in use. FALSE

- Such long term debt is measured at its present value. TRUE
- Such long term debt is not presented in the Statement of Financial Position but in the Statement of
Comprehensive Income. FALSE
- Such long term debt is not presented in the Statement of Financial Position but disclosed in the
explanatory Notes to the Financial Statements, including data as to what would have been a market
compliant interest rate and the thus resulting advantage for the company. FALSE

H. Conceptual Framework

The following is not a monetary item:

- Consolidated cash equivalents. FALSE

- Prepaid expenses. FALSE
- Bank overdrafts. FALSE
- Long term loan debts. FALSE
- Cumulative Translation Reserve. TRUE
- Consolidated other liabilities. FALSE

I. Impairment of assets

The following information regarding impairment relates to two non-current assets of a business:
Asset Carrying value Value in Use Fair Value less Costs to Sell
X 600 640 520
Y 400 380 350
What amount must be recorded as an impairment loss in relation with these two assets ?

- X: nil ; Y : 20. TRUE

J. P.P. & E. held under finance lease by a lessee

A lessee carries its P.P. & E. held under finance lease, using the IAS 16 – Revaluation Model.

- The total of annual depreciation expense + interest charge on the finance lease debt should be equal
to the annual reimbursement amount of finance lease debt. FALSE
- The P.P. & E. asset and the total (non-current and current) finance lease debt can only be equal at
inception of the finance lease. TRUE
- The total of annual depreciation expense + interest charge on the finance lease debt is a constant
amount during the entire duration of the finance lease contract. FALSE

AUGUST 2015
A. IFRS Compliance Rules

- An inappropriate accounting treatment can be corrected by way of a disclosure (Explanatory Note in

the annual report), provided it gives a true and fair description of the case. FALSE
- If the management concludes that applying IFRS would be misleading it can depart from IFRS,
provided full disclosure is done. TRUE
- Departure from IFRS is authorized when another accounting treatment than IFRS would also give a
true and fair view. FALSE

B. P.P.&E. held under finance lease

A condition for having a Finance Lease case relates to the duration of the lease. Which one of the
following statements is correct:

- The lease term should be for a minimum of 75 % of the asset economic lifetime. FALSE
- The lease term should be for a minimum of 80 % of the asset economic lifetime. FALSE
- The lease term should be for the major part of the asset economic lifetime. TRUE
- The lease term should be for a minimum of 90 % of the asset economic lifetime. FALSE

C. Foreign currency transactions (IAS 21)

A company has a ‘net investment’ in a foreign company as follows:

Assets:
. Financial investment in shares of the foreign company;
. Foreign currency denominated long term loan to that foreign company.
Liability:
. Long term foreign currency denominated borrowing, so financing the assets described above;
. Upon year end, the company will record its unrealized (translation) exchange gains and losses on the
long term monetary assets and liabilities as follows:

- Translation gains as financial income and translation losses as financial expenses. FALSE
- Gains and losses are recorded directly in equity in a Translation Reserve account. TRUE
- Based on the principle of prudence, gains are recorded as deferred income liabilities, and losses as
financial expenses. FALSE
- The management has the liberty of choice between the 3 methods described above. FALSE

D. Concept of Control

A control relationship between the investor and the investee is required for having a parent company-
subsidiary relationship. Which is the condition below that is NOT a requirement to have a control
relationship:

- Power over the investee, i.e. the investor has rights giving the ability to direct the key business
activities of the investee. FALSE
- Exposure, or rights, to variable returns from its involvement with the investee. FALSE
- Exposure, or rights (contractually or otherwise), to fixed pre-determined returns from its involvement
with the investee. TRUE
- Ability to use its power over the investee to affect the amount of the investor’s return. FALSE

E. Concept of Control

P owns 80% of company A shares, P owns 20% of company B Shares, A owns 51% of company B
shares. There is no shareholders agreement in relation with any of the companies.

- P’s percentage of interest in B is 60,8% and voting rights are 71%. TRUE

F. Consolidation method

P owns 19% of company A shares, P owns 50% of company B Shares, A owns 51% of company C
shares. There is no shareholders agreement in relation with any of the companies.

- A is not consolidated by P. TRUE

G. Non-controlling interests

IFRS 3 allows for different methods to measure the non-controlling interests. The non-controlling
interests could be measured:

- At the proportionate share of the net asset of the subsidiary at the date of acquisition. FALSE
- At the proportionate share of the net asset of the subsidiary at the date of acquisition plus the relevant
share of changes in the post-acquisition net assets of the acquired subsidiary. TRUE
- At the proportionate share of the net asset of the associate at the date of acquisition plus the relevant
share of changes in the post-acquisition net assets of the acquired associate. FALSE
- None of the above. FALSE

H. Deferred taxation

For the computation of deferred taxes, the tax rate to use is based on:

- The Deferral Method, whereby the tax rate of the period during which the timing difference item was
generated is used. FALSE
- The Liability Method, whereby the known tax rate of the future period(s) during which the timing
difference item will ‘reverse’ is used. TRUE
- The Deferral Method for deferred tax assets. FALSE
- The Liability Method for deferred tax liabilities. FALSE

I. Statement of cash flow

IAS 7 allows two methods for the preparation of the statement of cash flow being the direct method
and indirect method. The choice of the method will impact:

- The computation of cash flows from operating activities only. TRUE

- The computation of cash flows from investing and financing activities only. FALSE
- The computation of cash flows as a whole. FALSE

J. Impairment

There is an impairment of a goodwill, if:

- The recoverable amount of the cash generating unit to which the goodwill is related is less than the
carrying value of the cash generating unit. TRUE
- The fair value less cost to sell of the cash generating unit to which the goodwill is related is less than
the carrying value of the cash generating unit. FALSE
- The value in use of the cash generating unit to which the goodwill is related is less than the carrying
value of the cash generating unit. FALSE

DECEMBER 2015
A. IFRS compliance rules

The following element of the financial statements is the subject of a format of presentation defined and
imposed by the IFRS:

- Statement of Financial Position. FALSE

- Statement of Comprehensive Income. FALSE
- Statement of Cash Flows. FALSE
- Statement of Changes in Equity. FALSE
- None of the above. TRUE

B. P.P.& E. held under finance lease

The following is one of the 4 main indicators that the lease would be a finance lease:
- The present value of the minimum lease payments amounts to at least 85 % of the fair value of the
leased asset, at inception of the lease. FALSE
- The present value of the remaining minimum lease payments amounts to substantially all of the net
book value of the leased asset during the lease duration. FALSE
- The present value of the minimum lease payments amounts to at least substantially all of the fair
value of the leased asset, at inception of the lease. TRUE
- Same as the third above, but throughout the lease duration. FALSE

C. Foreign currency transactions

On November 30, the company enters into a 3-months forward foreign exchange purchase contract to
buy 300.000 GBP at the forward contract rate of 1,65 EUR/1 GBP.
On year end balance sheet date (December 31) the spot rate is 1,57 EUR/ 1 GBP.
On contract settlement date (February 28), the spot rate is 1,63 EUR/ 1 GBP.
On February 28, the company will record:

- An exchange income of EUR 18.000. TRUE

D. Business combinations

The following is NOT a way to achieve a business combination:

- Acquiring all assets and assuming all liabilities of the target entity. FALSE
- Acquiring a shareholding stake in an associate company, together with a call option to purchase a
majority stake. FALSE
- Effectuating a merger and recording it according to the Pooling of Interests Method. FALSE
- Acquiring a majority shareholding in a subsidiary, with a repurchase option enabling the minority
shareholders to buy back a majority. TRUE

E. Deferred tax accounting

The following item is a permanent difference, thus not leading to deferred tax accounting:

- A difference in depreciation duration between tax base and accounting base. FALSE
- Revaluation of an intangible asset. FALSE
- A provision expense tax deductible only when the cash outlay occurs. FALSE
- A tax disallowed expense, i.e. not tax deductible because of its nature. TRUE
- None of the above. FALSE

F. Revenue recognition

The interest income of an accounting period is recognized based on:

- The facial interest rate generated by the asset. FALSE

- The cash inflows generated by the asset. FALSE
- The effective yield generated by the asset. TRUE
- None of the above. FALSE

G. Provisions & contingencies

- Provisions need not to be discounted. FALSE

- A provision for restructuring is recognised when the decision is taken by the Board of Directors.
FALSE
- A provision is recognised for an onerous contract. TRUE
H. Fair Value

- Investment properties are never measured at fair value. FALSE

- Non controlling interest could be measured at fair value. TRUE
- Inventories cannot be measured at fair value. FALSE

I. Control

P owns 35% of company A shares, P owns 20% of company B shares, A owns 60% of company B
shares. There is no shareholders agreement in relation with any of the companies.

- P’s percentage of interest in B is 41% and voting rights are 20%. TRUE

J. Consolidation method

P owns 70% of company A shares, P owns 30% of company B Shares, A owns 50% of company B
shares. There is no shareholders agreement in relation with any of the companies.

- B is consolidated using the full consolidation method. TRUE

JANUARY 2016
A. IFRS compliance rules

The following element is not part of the financial statements as imposed by the IFRS:

- Statement of Financial Position. FALSE

- Statement of Comprehensive Income. FALSE
- Statement of Cash Flows. FALSE
- Statement of Changes in Equity. FALSE
- Any additional statement or disclosures deemed to be necessary according to management. TRUE

B. Leases

- Only contracts that take the legal form of a lease are included in the scope of IAS 17. FALSE
- The nature of the leased asset is not considered in the lease classification assessment. FALSE
- If the lease is a finance lease, the lessor continues recognising the leased asset in his financial
statements. FALSE
- All the above propositions are incorrect. TRUE

C. Intangible assets

- A brand can be recognised as an intangible asset when it has been purchased from an external party.
TRUE
- Research and development costs can be recognised as an intangible asset. FALSE
- An intangible asset cannot be amortized, except if it is traded on an active market. FALSE
- None of the propositions are correct. FALSE

D. Fair value

- Investment properties are never measured at fair value. FALSE

- Non controlling interest should be measured at fair value. FALSE
- Revenue is measured at the fair value of the consideration received or receivable. TRUE
- Inventories cannot be measured at fair value. FALSE
E. Depreciation

An asset was purchased for 3 million. At the date of purchase the asset had an estimated useful
economic life of 5 years and an estimated residual value of 2 million. What is the appropriate straight
line annual depreciation charge in respect of this asset ?

- 200.000. TRUE

F. IFRS compliance rules – Format of the Statement of Cash Flows

Interests paid are presented as disbursements being part of:

- Operating activities. FALSE

- Financing activities. FALSE
- Investing activities. FALSE
- Financing or Operating activities. FALSE
- Financing or Operating or Investing activities. TRUE

G. Conceptual framework and structural accounting relationships

Where T = Treasury (Cash), CA = Current Assets (excluding T), CL = Current Liabilities,

E = Equity, NCA = Non-Current Assets, and NCL = Non-Current Liabilities, the following equation is
correct:

. E + NCL + NCA = CA + CL + T. FALSE

. T = - NCA + E + NCL – CA + CL. TRUE
. NCA + NCL + T – E + CL = NCL + CA. FALSE
. – E + NCA – T = - NCL – CL + CA. FALSE

H. Control voting rights and percentage of interest

P owns 60 % of company A shares, P owns 10 % of company B shares, A owns 45 % of company B

shares, B owns 40 % of company C shares, P owns 15 % of company C shares. There is no
shareholders’ agreement in relation with any of the companies.

- P’s percentage of interest in C is 29, 8 % and voting rights are 55 %. TRUE

I. Provisions – IAS 37

A Contingent Liability situation leads to recording a provision when the following condition is met:

- Probability of asset outflow to settle. FALSE

- Reliable monetary measurement. FALSE
- Liability related to past operations and activities. FALSE
- Conditions 1 & 2 above together. FALSE
- All three conditions above together. TRUE

J. Merger of companies

The shares exchange ratio (new shares of the absorbing company issued in exchange for ‘old’ shares
of the absorbed company) when the merger is recorded in accordance with the IFRS Purchase Method
or the Pooling of Interests Method is:

- Always the same under the two methods. TRUE

- Can be the same under certain circumstances. FALSE
- Cannot be the same. FALSE

AUGUST 2016
A. Inventories of finished goods

These inventories should be stated at:

- Lower of cost or fair value. FALSE

- Lower of cost or value in use. FALSE
- Lower of cost or fair value less costs to sell. TRUE
- Cost i.e. direct & indirect production costs. FALSE

B. Business Combinations – Accounting for goodwill

The method specified for ‘negative goodwill’ accounting is:

- Recording a liability. FALSE

- Recording an asset. FALSE
- Crediting the income statement. TRUE
- Crediting equity reserves. FALSE

C. The following information regarding impairment relates to two non-current assets of a business:

Asset Carrying value Value in use Fair value less costs

to sell
X 350 420 330
Y 300 280 270
Accordingly, what amount must be recorded as an impairment loss in relation with these two assets?

- X: Nil; Y: 20. TRUE

D. Borrowing costs related to the acquisition of a P.P.& E. item

- Borrowing costs are recorded as financial charges as incurred. FALSE

- Borrowing costs are recorded as part of the acquisition cost of the P.P.& E. item, till such interest
expenses no more occur (i.e. till the loan has been reimbursed). FALSE
- Borrowing costs are recorded as part of the acquisition cost of the P.P. & E. item till the P.P.& E.
item is put in use, at which point in time such capitalized interest charges are then charged in full to
the income statement. FALSE
- Borrowing costs are recorded as part of the acquisition cost of the P.P.&E. item till the P.P. & E.
item is put in use, and then subsequently depreciated as part of the depreciation of that cost of the P.P.
& E. item. TRUE

E. Business combinations

Ancillary expenses (such as legal advice fees, audit & due diligence costs, etc.) incurred by the
acquirer are:

- Recorded as part of the acquisition cost of the investment, hence part of the computation basis of any
acquisition goodwill. FALSE
- Charged to the income statement of the acquirer. TRUE
- Directly charged against the equity reserves or retained earnings of the acquirer. FALSE
- Charged against the equity reserves or retained earnings of the combined entity, on the effective date
of combination. FALSE
F. IFRS Financial statements

A complete set of financial statements comprises:

- A statement of financial position as at the end of the period, a statement of profit or loss and other
comprehensive income for the period, a statement of changes in equity for the period, a statement of
cash flows for the period. FALSE
- A statement of financial position as at the end of the period, a statement of profit or loss and other
comprehensive income for the period, a statement of changes in equity for the period, a statement of
cash flows for the period and notes (comprising significant accounting policies and other explanatory
information). FALSE
- A statement of financial position as at the end of the period, a statement of profit or loss and other
comprehensive income for the period, a statement of changes in equity for the period, a statement of
cash flows for the period, notes (comprising significant accounting policies and other explanatory
information) and comparative information in respect of the preceding period. TRUE

G. Deferred taxes

An entity owns a machine. The machine has a net carried amount of 100. The tax base of the machine
is 70. The enacted tax rate is 30%. The differed tax in respect of the temporary difference is:

- A deferred tax liability for 9. TRUE

H. Consolidation method

P owns 50% of company A shares, P owns 30% of company B Shares, A owns 42% of company B
shares. There is no shareholders agreement in relation with any of the companies. P consolidates B
using:

- The full consolidation method. TRUE

I. Depreciation

P acquired a building for an amount of € 9.000.000. Its useful life is 30 years and the residual value
€6.000.000. The annual straight line depreciation charge is:

- €100.000. TRUE

J. Translation of financial statements

The company functional currency is USD. The company is part of a group of which the reporting
currency is EUR. The company was incorporated early January. The balance sheet items at the end of
June (date of consolidation) are as follows:
. Current assets: 150 USD
. Share capital: 120 USD
. Retained Earnings: 30 USD (credit balance)

The exchange rates are the following:

. End of June: 1,5 USD/EUR
. Average for the semester: 1,25 USD/EUR
. Early January: 1,2 USD/EUR

- At the end of June the Cumulative Translation Reserve amounts to 24 (debit amount). TRUE