MCQs on FINANCIAL REPORTING UNDER INDIAN ACCOUNTING STANDARDS (IND AS) Part No. 3

Q.1:- Which of the following is an assumption of a fair value measurement that the transaction to sell the asset or transfer the liability takes place either?

• In the absence of a principal market, in the most advantageous market for the asset or liability
• In the principal market for the asset or liability
• Both (a) and (b)
• Only (a)

Q.2:- As per Ind AS 113, an, an orderly transaction is:

• A sale in current market condition
• Distress sale
• Sale due to liquidation
• All of the above

Q.3:- Ind AS '113 applies to:

• Share-based payment transactions within the scope of Ind AS 102
• Measurements that have some similarities to fair value but are not fair value such as net realizable value in Ind AS 2, or value in use in Ind AS 36
• When another Ind AS requires or permits fair value measurements or disclosures about fair value measurements
• Leasing transactions within the scope of Ind AS 17

Q.4:- Under acquisition accounting fair value of asset will be the:

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

Q.5:- To account properly for……… several adjustment are necessary:

• Change in interest rate
• Change in fair value
• Change in Market
• Change in cost

Q.6:- A fair value measurement of a non-financial asset considers a market participant s ability to generate economic benefits by using the asset in its

• Highest and best use
• Economic Use
• Commercial use
• None of the above

Q.7:- Which technique of valuation is most appropriate in valuing an asset or a liability using quoted prices in an active market for identical assets or liabilities'?

• Multiple valuation technique
• Fair market valuation technique
• Single valuation technique
• All of the above

Q.8:- The______ uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets and liabilities such as a business:

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

Q.9:- Which one of the following statements best describes the 'carrying value' of an asset?

• The higher of the asset's value in use and its recoverable amount
• The higher of the asset's NRV and its value in use
• The amount at which the asset is recognised in the balance sheet after deducting any accumulated depreciation and accumulated impairment losses
• The cost of the asset less its residual value

Q.10:- The carrying value of PPE at 1 July 2004 was € 15,780 (cost € 20,580 and accumulated depreciation € 4,800). During the year to 30 June 2005 PPE costing € 4,530 were purchased. The depreciation policy is to charge depreciation at 20% on all assets held at the year end on the diminishing balance basis. Accumulated depreciation for the balance sheet as at 30 June 2005 would be:

• € 8,862
• € 10,782
• € 9,822
• € 12,978

Q.11:- According to IAS 38 - 'Intangible assets', amortisation of an intangible asset with a finite useful life should commence when

• It is first recognised as an asset
• It is available for use
• The cost can be identified with reasonable certainty
• It is probable it will generate future economic benefits

Q.12:- When the depreciated cost of a tangible asset is higher than its recoverable amount:

• The tangible asset must be reported at its fair value
• An unrealised gain must be accounted for
• An impairment loss should be recognised as expense in the income statement immediately
• An impairment loss should be recognised only if the NRV is higher than the value in use

Q.13:- According to IAS 36 - 'Impairment of Assets', which two of the following are relevant in determining a non-current asset's 'value in use'?

• The carrying value of the asset
• The future annual depreciation charge on the asset
• The expected future cash flows from the asset
• None of the above is correct

Q.14:- The amortised cost of a financial asset is equal to:

• The fair value of the asset
• The amount at which the asset was originally recognised, plus interest earned to date, less repayments received to date
• The amount at which the asset was originally recognised
• The amount at which the asset was originally recognised, plus interest earned to date

Q.15:- When is control said to be established:-

• Ability to appoint directors to the board
• Potential Voting Rights
• Equity Shareholding
• All the above

Q.16:- If entity owns directly/indirectly more than 50% of voting rights control is presumed UNLESS clearly proven that it is NOT control. Sometime control exists even if there is less than 50 of voting rights exists. State which of the followings are examples of control even if voting power is less than 50%:

• Power to govern financial and operating policies under statute/agreement;
• Power to cast majority of votes at meetings of board of directors (or equivalent) that controls the entity.
• Power over >50% of voting rights by virtue of an agreement with other investors;
• All the above

Q.17:- When is control said to be established:-

• Control Agreement
• Defacto Control
• Special Purpose Entities
• All the above

Q.18:- When is control said to be established:-

• Ability to appoint directors to the board
• Potential Voting Rights
• Equity Shareholding
• All the above

Q.19:- If entity owns directly/indirectly more than 50% of voting rights control is presumed UNLESS clearly proven that it is NOT control. Sometime control exists even if there is less than 50 of voting rights exists. State which of the followings are examples of control even if voting power is less than 50%: *

• Power to govern financial and operating policies under statute/agreement;
• Power to remove/appoint majority members of board of directors (or equivalent) that controls the entity;
• Power over >50% of voting rights by virtue of an agreement with other investors;
• All the above

Q.20:- Company A purchased 100% interest of Company B. Company B is being sued over a personal injury allegedly caused by a faulty product. The claimant is suing for CU1 million in damages. The acquiree’s management acknowledge that the product was faulty and may have caused injury. However, they strongly dispute the level of damages being claimed. The acquiree’s legal advisers estimate such claims are usually settled for between 100,000 and 250,000.

• Company A will need to estimate the fair value of the liability which may involve weighting possible outcomes within the expected range using their associated probabilities.
• The obligation need be recognised
• The obligation need not be recognised
• All the above