Free CPA Financial Reporting Exam Flashcards

Recognition must provide relevant information and a faithful representation, with benefits that justify costs. Apply the specific IFRS requirement first: the Framework guides reasoning but cannot override a Standard.

AUD 44,000: 40,000 + 3,000 + 2,000 − 1,000. Under IFRS 16, the right-of-use asset includes the lease liability plus specified costs and prepayments, less incentives; it need not equal the liability.

To other comprehensive income as part of remeasurements of the net defined benefit liability or asset. They are not later recycled to profit or loss; this treatment differs from service cost and net interest.

The equity award uses grant-date fair value of the instruments without updating that fair value later. The cash-settled liability is remeasured at each reporting date and settlement, with fair-value changes in profit or loss. Vesting-condition adjustments still matter.

AUD 18,000 in profit or loss. The fair value model remeasures investment property at each reporting date and does not depreciate it; the gain is not an IAS 16 revaluation surplus in OCI.

Statements of financial position, profit or loss and OCI, changes in equity, and cash flows, plus notes and comparative information. An additional opening comparative statement of financial position is required in specified retrospective-restatement or reclassification cases.

Prospectively in the current period and future periods affected. New information changes an estimate; it does not justify restating prior periods as though the earlier reasonable estimate were an error.

AUD 145,000: 100,000 + 30,000 + 5,000 + 20,000 − 10,000. The changes-in-equity statement distinguishes comprehensive income from owner contributions and distributions.

As an adjusting event, providing evidence about a condition existing at the reporting date. Update the year-end receivable measurement. A material event caused entirely by new post-year-end conditions instead needs disclosure without adjusting year-end amounts.

AUD 45,000: 40,000 + 8,000 − 6,000 + 3,000. Add back noncash depreciation, subtract cash tied up in receivables and add the operating expenses not yet paid. This is before tax payments.

Identify components that undertake business activities capable of earning revenue and incurring expenses, whose results the chief operating decision maker regularly reviews for resource allocation and performance, and for which discrete financial information exists. Segments follow this internal management view.

No. Laws and regulators generally decide who must publish and when. IAS 34 governs an interim report claiming IFRS compliance, including minimum statements and notes, consistent accounting policies and measurement on a year-to-date basis.

Identify the customer contract; identify distinct performance obligations; determine the transaction price; allocate it using relative stand-alone selling prices; recognise revenue as control transfers for each obligation. Billing or cash receipt alone does not establish revenue.

AUD 600: 900 × 800 ÷ (800 + 400). The remaining AUD 300 is allocated to support. Allocation uses relative stand-alone prices; each amount becomes revenue only when its performance obligation is satisfied.

When any one criterion is met: the customer receives and consumes benefits as performance occurs; controls the asset being created or enhanced; or the asset has no alternative use to the seller and the seller has an enforceable right to payment for work to date.

There must be a present legal or constructive obligation from a past event, a probable resource outflow and a reliable estimate. Otherwise assess contingent-liability disclosure, normally required unless outflow is remote. Discount a provision when the time-value effect is material.

It becomes a recognised asset, because it is no longer contingent. Before that, a probable inflow warrants contingent-asset disclosure but not recognition. This higher recognition threshold prevents recognising uncertain gains.

AUD 58,800: taxable profit = 200,000 + 8,000 − 12,000 = 196,000; 196,000 × 30%. Current tax follows taxable profit under the stated law, not simply accounting profit multiplied by the rate.

An AUD 12,000 deferred tax asset. The liability’s tax base is 40,000 − 40,000 = zero; the AUD 40,000 deductible temporary difference gives 40,000 × 30%. Recognition also depends on IAS 12’s conditions.

An AUD 9,000 deferred tax liability: (80,000 − 50,000) × 30%. Recovering the carrying amount leaves AUD 30,000 more taxable benefits than available tax deductions.

No. It changes the relationship between accounting profit and taxable profit, but there is no deduction or taxable reversal in a future period. Include its current-tax effect in the tax reconciliation instead of creating deferred tax.

AUD 18,000: 60,000 × 30%. The unrecognised potential benefit is AUD 12,000. IAS 12 limits recognition to probable utilisation; recent losses require convincing supporting evidence rather than automatic recognition of the entire balance.

AUD 35,000: revaluation 50,000 less deferred tax liability 15,000. IAS 12 generally records the tax consequence where the underlying item is recorded, so this deferred tax charge belongs in OCI.

No. IAS 12 prohibits discounting deferred tax assets and liabilities. The rule still applies when the underlying asset or liability was itself measured using discounted cash flows.

The rate expected to apply when the asset is recovered or liability settled, based on tax law enacted or substantively enacted by the reporting date. The expected manner of recovery or settlement can affect both rate and tax base.

AUD 59,800: 58,800 + (7,000 − 4,000) − (5,000 − 3,000). A DTL increase adds deferred tax expense; a DTA increase adds deferred tax income. OCI, equity and acquisition tax effects would require separate treatment.

Power over the investee, exposure or rights to variable returns, and the ability to use that power to affect those returns. A voting percentage is evidence, not a substitute for assessing all three elements.

IFRS 3 uses the date control is obtained. Signing an agreement does not itself prove that substantive decision-making power and the other control elements have transferred.

AUD 80,000: 480,000 + 120,000 − 520,000. Including fair-value NCI recognises goodwill for both parent and NCI; use amounts measured under the acquisition requirements, including relevant deferred tax.

AUD 64,000: NCI = 20% × 520,000 = 104,000; goodwill = 480,000 + 104,000 − 520,000. The proportionate option applies to present ownership interests entitled to proportionate net assets on liquidation; it recognises only the parent’s goodwill.

An AUD 30,000 bargain-purchase gain in profit or loss. Do not immediately book a negative-goodwill asset: first reassess the acquisition amounts, including assets, liabilities and consideration.

No. Expense acquisition advisory costs as services are received. Costs of issuing debt or equity follow the applicable financial-instrument rules instead; distinguish those from advisory fees and from an asset purchase outside IFRS 3.

100%. Consolidation presents the group as one economic entity, so the entire intragroup receivable and payable disappear. NCI changes attribution of equity and results, not the amount of the internal balance eliminated.

AUD 1,500: (15,000 − 12,000) × 50%. Reduce consolidated inventory and group profit by that amount. Eliminate the internal sales and purchases separately; only profit in inventory still held within the group remains unrealised.

AUD 10,000: initial gain = 12,000; excess annual depreciation = 12,000 ÷ 6 = 2,000; remaining gain = 10,000. Eliminate the gain and reverse excess depreciation so the group continues its original carrying-value path.

AUD 20,000: 25% × 80,000. Use adjusted post-acquisition results, not unadjusted standalone profit. IFRS 10 allocates profit or loss and each OCI component to parent owners and NCI, even if NCI becomes negative.

AUD 212,000: 200,000 + 30% × 60,000 − 30% × 20,000. The share of profit raises the investment; dividends reduce it rather than creating a second profit recognition.

A joint operation gives the parties rights to assets and obligations for liabilities, so operators recognise the relevant assets, liabilities, revenue and expenses. A joint venture gives rights to net assets and is generally accounted for using the equity method.

Amortised cost. Both the hold-to-collect business model and solely-payments-of-principal-and-interest cash-flow test must be met. Interest uses the effective interest method and an expected-credit-loss allowance applies.

Fair value through OCI. Interest, impairment and relevant foreign-exchange effects enter profit or loss; other fair-value changes enter OCI. Accumulated OCI is reclassified to profit or loss on derecognition, unlike the equity FVOCI election.

They are not recycled to profit or loss; a transfer within equity is permitted. The election is irrevocable at initial recognition for eligible equity investments neither held for trading nor acquisition contingent consideration.

AUD 600: 20,000 × 1% + 5,000 × 8%. These receivables use lifetime ECL from initial recognition under the simplified approach. Do not replace the forward-looking lifetime rates with unadjusted historical losses.

AUD 8,000: proceeds 100,000 less liability fair value 92,000. IAS 32 measures the liability component first and assigns the residual to equity; it does not measure both components independently and then scale them.

Remove the relevant amount from the reserve and include it in the inventory’s initial cost. This basis adjustment is not a reclassification adjustment through profit or loss. Hedge ineffectiveness is recognised in profit or loss separately.

Explain exposure to credit, liquidity and market risk from financial instruments, including how the risks are managed and relevant quantitative information. Disclosure supports understanding of risk and the instruments’ significance; it does not replace recognition and measurement under IFRS 9.

AUD 9,000: recoverable amount = max(83,000, 79,000) = 83,000; loss = 92,000 − 83,000. Use the higher recovery measure, not their average or the lower figure.

The smallest identifiable group of assets generating cash inflows largely independent of inflows from other assets or groups. Use that unit when an individual asset’s recoverable amount cannot be determined; organisational labels alone do not establish a CGU.

Write off AUD 30,000 goodwill first; allocate the remaining AUD 20,000 as AUD 8,000 and AUD 12,000 (80:120). Other assets cannot fall below the highest of measurable fair value less disposal costs, determinable value in use and zero.

AUD 18,000: raise it only to min(85,000, 78,000) = 78,000. IAS 36 caps reversals at the carrying amount that would exist without the prior loss. An impairment loss on goodwill is never reversed.

Goodwill, intangible assets with indefinite useful lives, and intangible assets not yet available for use. Also test when impairment indicators arise; finite-life assets generally require a recoverable-amount test when indicators exist.