ACCA SBR Exam Questions with Correct Answers
What if not followed IAS or IFRS? - Answer-Not True and Fair
= UNETHICAL
Why PRINCIPLES not RULES? - Answer-Principles harder to circumvent
Why have a FRAMEWORK? - Answer-Provides guidances for standards setters
Gives guidance where no standard...
ACCA SBR Exam Questions with Correct Answers What if not followed IAS or IFRS? - Answer -Not True and Fair = UNETHICAL Why PRINCIPLES not RULES? - Answer -Principles harder to circumvent Why have a FRAMEWORK? - Answer -Provides guidances for standards setters Gives guidance where no standards exist Helps all parties with intrerpretation 2 x Useful qualities of financial information - Answer -RELEVANCE = Influences Decisions FAITHFUL REPRESENTATION = Complete, Neutral, No Errors What does RELEVANCE offer? - Answer -PREDICTIVE VALUE CONFIRMATORY VALUE 4 X Qualities of FAITHFUL REPRESENTATION - Answer -TIMELY UNDERSTANDABLE VERIFIABLE COMPARABLE What are framework criticisms? - Answer -accounts are historic - focus on timeliness Some assets not recognised: - internal goodwill Estimates = subjective = reduces comparability Disclosures = cluttered / generic Cashflows >>>>>>>>> - Answer - What are three parts of a cashflow? - Answer -Operations - Day-to-day operations Investing - Long term assets Financing - Equity, Loans Where do TAXES go? - Answer -Operating Activities Where does LOAN INCOME go? - Answer -Financing Where does SALE OF ASSETS go? - Answer -Investing Describe the INDIRECT METHOD for Operating Activities - Answer -*Profit before TAX* Add: Adjust for Finance Costs (Not Ops) Less: Adjust for Investment Income (Not ops) --------------------------------- *Profit from Operations* Add: Depreciation (Not Cash) Less: Gains on Disposals (Non Cash) ------------------------------------------ *Operating Profit before working capital changes* Inventories ( -/+) Receivables ( -/+) Payables (+/ -) ---------------------------------------- *Cash generated from Operations* Less: Taxes Paid Less: Interest Paid ----------------------------------------- *Net Cash from Operations* Method for Investing Activities - Answer -Less: Additions of PPE - Use T Account Add: Proceeds of PPE Sale - Use T Account Add: Interest Received Add Dividends Received Less: Purchase of Investments ------------------ *Net Cash from Investment* Method for Finance Activities - Answer -Add: Proceeds for Share Issue Add: Proceeds from Long -Term Borrowing Less: Dividends Paid --------------------------- *Net Cash from Finance* NB: Do NOT include INTEREST PAID (in Operations) What are Cash and Cash Equivalents? - Answer -Cash on Hand Cash at Bank Short Term Investments ------------------ Cash & Cash Equivalents What is a subsidiary? - Answer -Control 1. Power to DIRECT >50% voting rights 2. EXPOSURE to variable returns (Equity) 3. Use Power to Affect Returns Substance > Legal Form Can appoint Directors Can make resoluitions NB Or... Has contracts with others giving control Holds < 50% of voting rights, but remainder widely distributed Holds potential voting rights (eg Convertible) What is an Associate? What accounting should be used? - Answer -SIGNIFICANT INFLUENCE Power to PARTICIPATE 20-50% Share Capital NB Or... Representation on the board Participation in policy making process Material transaction between the two entities Interchange of managerial personnel Provision of essential technical information Use EQUITY ACCOUNTING -SFP -SPLOCI NB: No NCI for Associates !!!!! What is the treatment for mid -year acquisition? - Answer -Remove Retained Earnings before Acquisition What is the treatment for Subsidiary Net Assets? - Answer -Check reporting Date Equity Shares (reporting date) Share Premium (reporting date) Retained Earnings (Aq date) PUP S - Seller (Reporting date) FV Adj (At Aquisition/Reporting) Make adjustments on Group Statements Pup - Inventory FV - PPE/wherever What is the treatment for Goodwill - Answer -FV of Consideration NCI at Aq Less: Net assets at Aq Goodwill at Aq (P) Goodwill at Aq (NCI) Less: Impairments to Date -------------------- = GOODWILL >>> Recognition - Answer - When should something be recognised? - Answer -*Meet the definition of:* -asset/liability -income/expense -equity *Be probable* *Be reliably measurable* *NB For intangibles:* -Identifiable -Separable (sold separately) Define: Asset Liability Equity Income Expense - Answer -Asset
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