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CPA Australia Financial Reporting Quick Fire Quiz 1 & 2 (Knowledge Equity) (ANSWERS & WORKINGS)
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CPA Australia Financial Reporting Quick Fire Quiz 1 & 2
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1FR – Quick Fire Quiz 1 Module: 1 > 1.1 The Role of Financial Reporting > Interaction
between financial reporting and the regulatory environment - who
1. Which one of the following correctly highlights when an must prepare general purpose financial reports? > Page: 8
asset or liability become derecognised?
A. When it is relocated to another party. 5. Which one of the following leads to a contract modification
B. When the net asset balance is a nil balance. being accounted for as a separate contract?
C. When it fails to meet the definition of an asset or liability.
D. When there is a cash inflow or outflow as a result of the A. When the scope of the contract increases but not the
asset or liability. price.
B. When the price of the contract increases but not the
Answer: scope.
C. When it fails to meet the definition of an asset or liability. C. When the contract changes but the scope or the price do
C is correct. not change.
D. When the scope of the contract increases and the price
Module: 1 > 1.4 The elements of financial statements > also increases based on stand-alone prices.
Derecognition of assets and liabilities > Page: 26
Answer:
2. Which one of the following correctly calculates the tax D. When the scope of the contract increases and the price
base of revenue received in advance? also increases based on stand-alone prices.
D is correct.
A. Carrying amount - future deductible amounts
B. Carrying amount - amount of revenue not taxable in Module: 3 > Part: A > 3.1 Recognition of revenue > Identify the
future contract(s) with the customer > Page: 124
C. Carrying amount + future deductible amounts - future
taxable amounts 6. Which one of the following is not an enhancing qualitative
D. Carrying amount - future deductible amounts + future characteristic?
taxable amounts
A. Comparability
Answer: B. Consistency
B. Carrying amount - amount of revenue not taxable in future C. Verifiability
B is correct. D. Understandability
Module: 4 > Part: A > 4.3 Deferred tax > Step 1: Determining the Answer:
tax base of assets and liabilities > Figure 4.4 > Page: 170 B. Consistency
B is correct.
3. Under IFRS 15, which one of the following is correct Module: 1 > 1.3 Qualitative characteristics of useful financial
regarding how costs should be treated if they are information > Enhancing qualitative characteristics > Page: 18
recoverable?
A. They should be expensed. 7. Which one of the following is correct in relation to
B. They should be recognised as an asset. recognising a deferred tax liability?
C. They should be amortised over the life of the contract.
D. Only capitalise if they are not incremental costs.
A. They must always be recognised for all taxable losses.
Answer: B. Deferred tax liability on Goodwill should not be
B. They should be recognised as an asset. recognised.
B is correct. C. They must always be recognised for all deductible
temporary differences.
Module: 3 > Part: A > 3.2 Contract costs > Incremental costs of D. If the initial carrying amount and tax base vary then a
obtaining a contract > Page: 137-138 temporary difference must be recognised.
4. Which one of the following entities is included in the Tier 1 Answer:
group under the two-tier model of general-purpose financial B. Deferred tax liability on Goodwill should not be
reporting? recognised.
A. Listed entities B is correct.
B. Those that holds assets in a fiduciary capacity.
C. Profit-making entities with public accountability. Module: 4 > 4.4 Recognition of deferred tax liabilities > Initial
D. Entities with revenue/income of over $50 million. recognition of goodwill arising from a business combination >
Page: 180
Answer:
C. Profit-making entities with public accountability.
C is correct.
, 2
8. Which one of the following describes a benefit that arises if
an employer is required to pay any unused benefits to the Module: 3 > Part: C > 3.8 Contingent assets > Table 3.1 > Page:
employee when they leave their employment? 153
A. Vesting benefit 12. Which one of the following is used to calculate cash
B. Non-vesting benefit receipts from customers?
C. Accumulating benefit
D. Non-accumulating benefit A. Opening balance of trade receivables + sales revenue -
bad debts written off - closing balance of trade
Answer: receivables
A. Vesting benefit B. Sales revenue + closing balance of trade receivables -
A is correct. bad debts written off - opening balance of trade
receivables
Module: 1 > 1.6 Application of measurement principles in the C. Sales revenue - opening balance of trade receivables -
international financial reporting standards > Employee benefits > bad debts written off + closing balance of trade
Page: 45 receivables
D. Opening balance of trade receivables + sales revenue +
9. Which one of the following methods describes the use of closing balance of trade receivables - bad debts written
the sum of probability-weighted amounts? off
A. The expected-value method Answer:
B. The variable consideration method A. Opening balance of trade receivables + sales revenue - bad
C. The most likely amount method debts written off - closing balance of trade receivables
D. The performance obligation method
A is correct.
Answer:
A. The expected-value method Module: 2 > Part: E > 2.17 Common methods adopted on how to
prepare a statement of cash flows > Formula > Page: 105
A is correct.
13. Which one of the following basis is used when an entity is
Module: 3 > Part: A > 3.1 Recognition of revenue > Determine the not a going concern?
transaction price of the contract > Page: 128
A. Fair value basis
10. According to IAS 8, Which one of the following desribes B. Value in use basis
how a change of accounting estimate is recognised? C. Net book value basis
D. Net realisable value
A. Prospectively
B. Retrospectively Answer:
C. Must not be recognised in the financial statements. D. Net realisable value
D. Must only be recognised in the notes to the financial D is correct.
statements.
Module: 1 > 1.2 The conceptual framework for financial reporting >
Answer: Page: 15
A. Prospectively
A is correct. 14. Which one of the following is an adjusting event?
Module: 2 > Part: A > 2.3 Revision of accounting estimates and A. A change in tax rates announced after the reporting
correction of errors > Changes in accounting estimates > Page: 74 period date.
B. Plans to shut down a major business unit are announced
11. Which one of the following is correct in relation to a after the reporting period.
contingent asset? C. A major fire that causes destruction of production plant
that occurs after the reporting period.
A. It can only be recognised if it is a possible asset. D. A court case that had been underway before the end of
B. It can only be disclosed in the notes if the future events the year is settled after the end of the reporting period.
are certain.
C. It can only be disclosed in the notes if the entity controls Answer:
the possible asset. D. A court case that had been underway before the end of the
D. It can only be disclosed when the inflow of economic year is settled after the end of the reporting period
benefits is probable.
D is correct.
Answer:
D. It can only be disclosed when the inflow of economic Module: 2 > Part: A > 2.4 Events after the reporting date >
benefits is probable Adjusting events > Page: 77
D is correct.
, 3
15. Which one of the following is correct? Module: 2 > Part: A > 2.1 Complete set of financial statements >
Figure 2.1 > Page: 63
A. A taxable temporary difference will always lead to a DTA
B. A deductible temporary difference will always lead to a 19. Under IAS 37, which one of the following is the best
DTA being recognised measure where a single obligation is being measured?
C. A taxable temporary difference will arise when the tax
base of a liability is lower than the carrying amount A. The expected value
D. A taxable temporary difference will arise when the tax B. Most likely outcome
base of an asset is lower than the carrying amount C. The most frequent value
D. weighted possible outcomes
Answer:
D. A taxable temporary difference will arise when the tax base Answer:
of an asset is lower than the carrying amount B. Most likely outcome
D is correct. B is correct.
Module: 4 > Part: A > 4.3 Deferred tax > Step 3: Measure deferred Module: 3 > Part: B > 3.5 Measurement of provisions > Page: 146
tax assets and deferred tax liabilities > Figure 4.6 > Page: 173
20. Which one of the following is not a criteria for classifying
16. Which one of the following is an underlying assumption of an asset as a current asset?
general purpose financial reporting?
A. It is cash or a cash equivalent.
A. Fair value B. The asset is held for non-trading purposes.
B. Accrual basis C. It is expected to be realised within the entity's normal
C. Historical cost operating cycle.
D. Faithful representation D. It expects to realise the asset within 12 months after the
reporting period.
Answer:
B. Accrual basis Answer:
B is correct. B. The asset is held for non-trading purposes
B is correct.
Module: 1 > 1.2 The conceptual framework for financial reporting >
Principles established in the conceptual framework > Page: 15 Module: 2 > Part: D > 2.12 Presentation of assets and liabilities >
Current assets and crurrent liabilities > Page: 95
17. Which one of the following correctly describes where
gains or losses on property revaluations are usually shown in
the statement of changes in equity? 21. Which one of the following defines relevance in the
context of the conceptual framework?
A. Share capital
B. Reserves A. Information that can aid in decision-making.
C. Retained Earnings B. Information is large enough to influence decision making.
D. OCI - Other comprehensive income C. Information that represents what it purports to represent.
D. All the information that should be included has been
Answer: included.
B. Reserves
B is correct. Answer:
A. Information that can aid in decision-making.
Module: 2 > Part: C > 2.10 IAS 1 Presentation of financial A is correct.
statements: Disclosures of changes in equity > Table 2.2 > Page:
93 Module: 1 > 1.3 Qualitative characteristics of useful financial
information > Fundamental qualitative characteristics > Figure 1.3
18. Which one of the following is not included as part of a > Page: 16
complete set of financial statements under IAS 1?
A. Statement of cash flows
B. Statement of changes in equity
C. Statement of changes in other comprehensive income
D. Statement of profit or loss and other comprehensive
income
Answer:
C . Statement of changes in other comprehensive income
C is correct.
, 4
22. Which one of the following is not a suitable estimation 25. Which one of the following is classified in OCI but can be
method for allocating the transaction price to each subsequently reclassified to the profit or loss?
performance obligation?
A. Finance expenses
A. The indirect method B. Income received in advance
B. The residual approach C. Gains or losses on the translation of financial statements
C. The expected cost plus a margin approach of a foreign operation.
D. The adjusted market assessment approach D. Revaluation gains that arise from the application of fair
. value measurement to plant.
Answer:
A. The indirect method Answer:
A is correct. C, Gains or losses on the translation of financial statements
of a foreign operation.
Module: 3 > Part: A > 3.1 Recognition of revenue > Allocate the
transaction price to each performance obligation > Page: 133 C is correct.
23. Which one of the following correctly identifies how cash Module: 2 > Part: B > 2.8 IAS 1 - Disclosures and classifications >
flows from interest or dividends are allowed to be classified? Two statements ( a statement of p&l and a statement of
comprehensive income > Table 2.1 > Page: 88-89
A. Only investing cash flows
B. Only financing cash flows
C. Only operating cash flows
D. Investing or financing or operating cash flows
Answer: 26. Which one of the following is used to calculate dividends
D. Investing or financing or operating cash flows paid?
D is correct. A. Opening balance of final dividend payable + interim &
final dividends - closing balance of final dividend payable
Module: 2 > Part: E > 2.16 Information to be disclosed > B. Closing balance of final dividend payable + interim & final
Classification of cash flows > Page: 103 dividends - opening balance of final dividend payable
C. Opening balance of final dividend payable - interim &
24. Which one of the following correctly identifies the aim of final dividend - closing balance of final dividend payable
the disclosure requirements relating to IAS 37? D. Opening balance of final dividend payable + interim
dividend - final dividend - closing balance of final dividend
A. To ensure that liabibilities are separately identified from payable
provisions.
B. To ensure that sufficient and appropriate audit evidence
exists to justify provisions. Answer:
C. To highlight the degree of uncertainty applied in preparing A. Opening balance of final dividend payable + interim & final
the financial statements. dividends - closing balance of final dividend payable
D. To reduce the ability of the entity to use provisions as a
means of earnings management. A is correct.
Answer: Module: 2 > Part: E > 2.17 Common methods adopted on how to
D. To reduce the ability of the entity to use provisions as a prepare a statement of cash flows > Formula > Page: 105
means of earnings management.
D is correct.
Module: 3 > Part: B > 3.6 IAS 37 Provisions, contingent liabilities
and contingent assets: disclosure > Provisions > Page: 148
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