Free Practice Questions for Myanmar CPA Part I

Explanation: According to the Conceptual Framework, Relevance and Faithful Representation are the two fundamental qualitative characteristics of useful financial information. Information must be capable of making a difference in user decisions (relevance) and must accurately depict what it purports to represent (faithful representation). Comparability, verifiability, timeliness, and understandability are enhancing qualitative characteristics.

Explanation: Under IAS 2 / MFRS 2, inventory cost includes purchase price (net of trade discounts), import duties, transport, handling, and other directly attributable costs. Trade discount of 5% reduces 12,000,000 MMK by 600,000 MMK to 11,400,000 MMK. Under modern standard practice, settlement discounts taken (2% of 11,400,000 MMK = 228,000 MMK) reduce purchase cost, yielding net purchase price of 11,172,000 MMK. Adding freight-in (400,000 MMK) and import duties (600,000 MMK) yields total cost of 12,172,000 MMK.

Explanation: Original annual depreciation = (50,000,000 - 5,000,000) / 5 = 9,000,000 MMK per year. Accumulated depreciation at 31 December 2024 (2 years) = 18,000,000 MMK. Carrying amount at 1 January 2025 = 50,000,000 - 18,000,000 = 32,000,000 MMK. Under IAS 8, changes in accounting estimates (useful life and residual value) are accounted for prospectively. Revised annual depreciation for 2025 = (Carrying amount 32,000,000 - Revised residual 2,000,000) / Remaining useful life 4 = 30,000,000 / 4 = 7,500,000 MMK.

Explanation: IAS 38 strictly prohibits the capitalization of research costs, internally generated brands, mastheads, customer lists, and staff training expenditures; all must be expensed as incurred. An internally generated intangible asset arising from the development phase is capitalized only when the entity can demonstrate all six criteria: technical feasibility, intention to complete, ability to use or sell, generation of probable future economic benefits, availability of adequate resources, and reliable expenditure measurement.

Explanation: Under IAS 37, a provision is recognized when there is a present legal or constructive obligation from a past event, an outflow of economic benefits is probable (more likely than not, i.e., >50%), and a reliable estimate can be made. Here, liability is probable (75%). For a single obligation (a discrete legal lawsuit), the most likely outcome (the individual most likely outcome of 40,000,000 MMK) is generally the best estimate, not the expected value (which is used for large populations of items like product warranties).

Explanation: Under IFRS 15's five-step model, the transaction price must be allocated to distinct performance obligations based on relative standalone selling prices. Total standalone selling prices = 480,000 MMK + 240,000 MMK = 720,000 MMK. The smartphone represents 480,000 / 720,000 = 2/3 (66.67%) of total standalone value. The allocated transaction price to the smartphone is (480,000 / 720,000) * 600,000 MMK = 400,000 MMK. Because control of the phone transfers on 1 January 2025, 400,000 MMK is recognized as revenue on that date.

Explanation: Under IFRS 16, the initial lease liability equals the present value of lease payments: 10,000,000 MMK * 2.4869 = 24,869,000 MMK. The right-of-use (ROU) asset is measured at the initial lease liability amount plus any initial direct costs incurred by the lessee (500,000 MMK) and lease payments made at or before commencement, less lease incentives received. Therefore, Initial ROU Asset = 24,869,000 MMK + 500,000 MMK = 25,369,000 MMK.

Explanation: The corrected cash book balance adjusts for items already processed by the bank but not yet entered into the entity's ledger cash book: Initial Cash Book balance = 15,200,000 MMK + Customer direct transfer (1,800,000 MMK) - Bank charges (150,000 MMK) = 16,850,000 MMK. Unpresented cheques and uncredited lodgements are timing differences that explain the discrepancy between the corrected cash book balance and the bank statement balance, but they do not alter the internal cash book balance.

Explanation: Operating cash flows under indirect method: Profit before tax = 85,000,000 MMK. Adjust for non-cash and non-operating items: + Depreciation (12,000,000 MMK) - Gain on disposal (3,000,000 MMK) = Operating profit before working capital changes of 94,000,000 MMK. Working capital adjustments: - Increase in trade receivables (5,000,000 MMK) - Increase in inventory (4,000,000 MMK) + Increase in trade payables (6,000,000 MMK) = Cash generated from operations of 91,000,000 MMK. Less income tax paid (14,000,000 MMK) = Net cash from operating activities of 77,000,000 MMK.

Explanation: Average inventory = (18,000,000 + 22,000,000) / 2 = 20,000,000 MMK. Inventory turnover period = (Average Inventory / COGS) * 360 = (20,000,000 / 120,000,000) * 360 = 60 days. Average receivables = (26,000,000 + 34,000,000) / 2 = 30,000,000 MMK. Receivables collection period = (Average Receivables / Credit Sales) * 360 = (30,000,000 / 180,000,000) * 360 = 60 days.