MCQs on FINANCIAL REPORTING UNDER INDIAN ACCOUNTING STANDARDS (IND AS) Part No. 2

Q.1:- Using fair value concept, company measure and report the value of certain assets and liabilities on the basis their ______ fair market price:

• Actual or estimated
• Estimated
• Market
• Actual

Q.2:- An entity shall disclose and consistently flow its policy for determining when transfer between level of the……. are deemed to have occurred in accordance with Ind AS 113:

• Fair value accounting
• Fair Value hierarchy
• Fair value chain
• Fair value principle

Q.3:- Ind AS 113 Appendix A notes that transport costs are: *

• The costs that would be incurred to transport an asset from its current location to its market whether principal or minor.
• None of these
• The costs that would be incurred to transport an asset from its current location to its principal (or most advantageous) market.
• A and C

Q.4:- An entity has losses in its operations and would need immediate cash to fund its operations. Hence to get immediate cash it sold one of its property appearing in the books at depreciated value of Rs. 8,50,000. The property is sold at a price of Rs. 8,00,000. However, the normal market price of the same property is Rs. 10,00,000. What would be the fair value of the property as per Ind AS 113?

• Rs. 10,00,000
• Rs. 10,00,000 less Rs. 8,00,000
• Rs. 8,00,000
• Rs. 8,50,000

Q.5:- valuation technique that_____.

• is most relevant for the given situation
• maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs
• minimizes the use of relevant observable inputs and minimizes the use of unobservable inputs -
• none of the above

Q.6:- The fair value hierarchy gives the lowest priority to:

• Unquoted prices
• Observable inputs
• Quoted prices
• Unobservable inputs

Q.7:- A primary advantage of _______accounting is that it provide accurate assets and liability valuation on a going basis to the user of the companies reported financial information:

• Double Entry
• Adjustment
• Fair Value
• Book Keeping

Q.8:- _______ is an adjustment to exchange trade pricing for information:

• Level 2
• Level 4
• Level 1
• Level 3

Q.9:- In acquisition accounting fair value of quoted investment should be based upon:

• Cost paid
• Sale value
• Market Price
• Best Price.

Q.10:- Fair value is a:

• Market specific Measurement
• Entity specific Measurement
• Assets Specific Measurement
• All of the Above.

Q.11:- Highest and best use is one of the premises in valuation of which assets:

• Tangible Assets
• Financial assets
• Non-financial assets
• All of the above

Q.12:- The objective of using a……. is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date undercurrent market conditions:

• Fair value accounting
• Valuation technique
• Market approach
• Cost approach

Q.13:- Ind AS 36 shall be applied in accounting for the impairment of all assets, other than:

• financial assets that are within the scope of Ind AS 109
• biological assets related to agricultural activity within the scope of Ind AS 41 Agriculture
• assets arising from employee benefits
• All the above

Q.14:- How often should goodwill acquired in a business combination be tested for impairment?

• Whenever there are internal indications of impairment
• Every year
• Never
• Whenever there are external indications of impairment

Q.15:- What Adjustment are required to the Level 2 on the fair value as per Ind AS 113?

• The extent to which inputs relate to items that are comparable to the asset or liability
• The volume or level or activity in the markets within which the inputs are observed
• The condition or location of the asset
• All of the above

Q.16:- Matrix pricing is a example of………:

• Cost approach
• Market approach
• Income approach
• Fair value approach

Q.17:- On consolidation total of fair value of assets less than purchase consideration:

• Capital reserve
• Goodwill
• Profit
• Value of business

Q.18:- The ______ uses the discount rate which is derived from observed rates of return for comparable assets or liabilities that are traded in the market:

• Expected present value technique
• Present value techniques
• Discount rate adjustment technique
• Cash flow technique

Q.19:- When measuring the fair value of a liability, an entity shall take into account the effect of which of the following risk.

• Credit risk
• Non-performance risk
• Market risk
• All of the above

Q.20:- Discounted cash flow is a example of………:

• Market approach
• Cost approach
• Fair value approach
• Income approach

Q.21:- Fair value measurement is not applicable on …………...

• Non-financial liability
• Financial liability
• Cash flow measurement
• Entity's own equity instrument

Q.22:- Ind AS 113 Appendix A notes that highest and best use (HBU) is:

• The use of a financial asset by market participants that would maximise the value of the financial asset or the group of financial assets and liabilities within which the financial asset would be used.’
• None of the these
• The use of a non-financial asset by market participants that would maximise the value of the asset or the group of assets and liabilities (e.g. a business) within which the asset would be used.’
• A and B

Q.23:- Ind AS 36 shall be applied in accounting for the impairment of all assets, other than:

• associates, as defined in Ind AS 28
• joint ventures, as defined in Ind AS 111
• subsidiaries, as defined in Ind AS 110
• None of the above

Q.24:- An asset's carrying amount is £25,000. Its fair value less costs of disposal is £15,000 and its value in use is £19,000. There is an impairment loss of:

• £6,000
• £nil
• £10,000
• £4,000

Q.25:- At the beginning of this financial period, the balance sheet of Brambilla& Co. showed motor vehicles at cost for Rs. 20,000 and accumulated depreciation amounting to Rs. 7,200. Depreciation is at 20% per annum using the diminishing balance method. The carrying value of motor vehicles in the balance sheet at the end of this financial year, after allowing for this year's depreciation will be:

• Rs. 8,800
• Rs. 11,520
• Rs. 10,240
• Rs. 12,800

Q.26:- Pronto Pack Ltd sells its old packaging machine for € 300 on 31 December 2005. The machine was bought during the year ended 31 December 2000 for € 10,000. Depreciation on plant and machinery is charged at 20% on a straight-line basis. The gain on disposal is:

• € 2,300
• € 300
• € 3,700
• € 300

Q.27:- Which of the following statements best describes the term 'impairment loss'?

• The removal of an asset from an enterprise's balance sheet
• The amount by which the carrying value of an asset exceeds its recoverable amount
• The systematic allocation of an asset's cost less residual value over its useful life
• The amount by which the recoverable amount of an asset exceeds its carrying value

Q.28:- Credit risk is the risk that

• The fair value of a financial asset or liability will fluctuate because of changes in exchange rates
• The fair value of a financial asset or liability will fluctuate because of changes in interest rates
• One party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation
• An entity will encounter difficulty in meeting its obligations associated with financial liabilities

Q.29:- An entity acquires a financial asset for CU100 plus a purchase commission of CU2 that is measured at FVTOCI. Initially, the entity recognises the asset at CU102. The reporting period ends one day later, when the quoted market price of the asset is CU100. If the asset were sold, a commission of CU3 would be paid. On that date, the entity measures the asset at CU100 (without regard to the possible commission on sale) and recognises a loss of CU2 in other comprehensive income. If the financial asset is measured at FVTOCI, the transaction costs:

• are recognised in profit or loss immediately on initial recognition
• are amortised to profit or loss using the effective interest method
• remain in equity and are not subsequently reclassified to profit or loss
• remain in equity and are not subsequently reclassified to profit or loss

Q.30:- A financial instrument is:

• A type of liability
• A type of contract
• A type of asset or liability
• A type of asset

Q.31:- The carrying value of furniture and fittings at 1 October 2004 was € 20,976, being cost of € 35,672 less accumulated depreciation and impairment losses of € 14,696. During the year, fittings costing € 2,972 were purchased. Depreciation is charged on the diminishing balance basis at 15% per annum. The depreciation charge, to the nearest €, for the year ended 30 September 2005 would be:

• € 5,810
• € 3,118
• € 3,592
• € 2,650

Q.32:- An impairment loss is:

• The amount by which the recoverable amount of an asset exceeds its written down value
• The amount by which the carrying amount of an asset exceeds its market value
• The amount by which the recoverable amount of an asset exceeds its carrying amount
• The amount by which the carrying amount of an asset exceeds its recoverable amount

Q.33:- Which one is not a main feature of lair value?

• Reliability is the primary characteristics required in financial statement
• Understandability is the secondary characteristics required in financial statement
• Relevance Is the secondary characteristics required in financial statement
• Relevance is the primary characteristics required in financial statement

Q.34:- Fair value should be determined based on the ______i. e. the price to sell the asset or to transfer the liability in ______

• Entry price, Orderly transaction
• Exit Price, Orderly transaction\
• Transaction Price, Related party transaction
• Transaction price, Orderly transaction

Q.35:- ………..is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date:

• Cost price
• Market price
• Fair value
• Purchase Price

Q.36:- The ______convert future amount to a single current amount:

• Market approach
• Cost approach
• Fair value approach
• Income approach

Q.37:- The fair value hierarchy gives the highest priority to ______, in active markets for identical assets or liabilities Level 1 inputs):

• Unobservable inputs
• Observable inputs
• Quoted prices
• Unquoted prices

Q.38:- Multiple valuation technique will be appropriate:

• Valuing a start-up entity
• Valuing an assets and liability using quoted price in an active market for identical assets or liabilities.
• Valuing a cash generating unit
• All of the above

Q.39:- Fair value hierarchy categories into:

• Three levels
• Four levels
• Five levels
• Two levels

Q.40:- For each class of assets and liabilities not measured at _______in the balance sheet but for which the fair value is disclosed, an entity shall disclosed the information required by paragraph 93 (b) (d) :

• Market Value
• agreed value
• Fair value
• Cost

Q.41:- Which of the following is not a characteristic of "small and medium sized company (SMC) as per the Companies (Accounting Standards) Amendment Rules, 2016?

• which is not a holding or subsidiary company of a company which is not a small and medium-sized company.
• whose equity or debt securities are listed or are not in the process of listing on any stock exchange, whether in India or outside India;
• which does not have borrowings (including public deposits) in excess of rupees ten crore at any time during the immediately preceding accounting year
• which is not a bank, financial institution or an insurance company;

Q.42:- While calculating value in use in your cash flow estimations, you shall include:

• Cash inflows and cash outflows from financing activities.
• Income tax receipts and payments.
• Cash outflows expected to arise from improving or enhancing the asset’s performance.
• None of the above

Q.43:- Charging depreciation of PPE to the income statement is an attempt to:

• Comply with the prudence concept
• Reduce profits and dividends
• Spread the cost of the assets over their estimated useful life
• Ensure that sufficient funds are available to replace the assets

Q.44:- According to IAS 38 - 'Intangible assets', the recognition criteria for an item asset include which one of the following conditions?

• It is probable that future economic benefits will arise from its use
• Its cost can be measured reliably
• It is an integral part of the enterprise
• It must be measured at cost

Q.45:- While calculating value in use in your cash flow estimations, you shall include:

• Cash inflows and cash outflows from financing activities.
• Income tax receipts and payments.
• Cash outflows expected to arise from improving or enhancing the asset’s performance.
• None of the above

Q.46:- After initial recognition, held-to-maturity investments (e.g. loan stocks which the entity holding the stocks intends to hold until maturity) should normally be measured at

• Original cost
• Fair value or amortised cost
• Amortised cost
• Fair value

Q.47:- Entity W acquires a zero coupon bond that was originally issued by Entity X. The terms of the bond require repayment of CU10 million by Entity X in 3 years and is not prepayable. The terms of the bond do not include a contractual interest rate. Entity W as can classify this asset as: *

• Amortised Cost
• FVTPL
• FVTCOI
• None of above

Q.48:- Which of the Following Ind AS deals with the Fair Value Measurement

• 230
• 104
• 115
• 113

Q.49:- An entity shall us ……….that are appropriate in the circumstance and for which sufficient data are available to measure fair value maximize the use of relevant observable input and minimize the use unobservable input:

• Cost approach
• Valuation technique
• Market approach
• Fair value accounting

Q.50:- Which technique of valuation is most appropriate in valuing cash generating unit?

• Multiple valuation techniques
• DCF Valuation technique
• Single valuation technique
• All of the above