Presentation of Financial Statements – Test Bank | 11e

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Testbank

to accompany

Accounting

11^th edition

by

Hoggett et al.

© John Wiley & Sons Australia, Ltd 2020

Chapter 17: Presentation of financial statements

Multiple-choice questions

1. An entity defined as a 'disclosing entity' under the Corporations Act must prepare interim financial reports. The minimum content of an interim financial report, under IAS 34/ AASB 134, must include:

a. a condensed statement of financial position, a condensed statement of profit or loss and other comprehensive income, a condensed statement of changes in equity, a condensed statement of cash flows and selected notes.

b. a condensed statement of financial position, a condensed statement of profit or loss and other comprehensive income, and a condensed statement of changes in equity.

c. a condensed statement of financial position, a condensed statement of comprehensive income and selected notes.

d. a condensed statement of financial position, a condensed statement of profit or loss, a condensed statement of cash flows and selected notes.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards

2. Which statement concerning AASB 1053 Application of Tiers of Australian Accounting Standards is not true?

a. In effect only publicly accountable entities will be required to report using full Australian accounting standards.

b. Entities classed as Tier 2 will have their financial disclosure requirements in relation to the accounting standards reduced.

c. The reporting burden on the majority of disclosing Australian entities is reduced.

d. Entities classed as Tier 1 will have their financial disclosure requirements increased.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

3. The accounting standard that specifies the correct presentation of financial statements is:

a. IAS 1/AASB 101.

b. IAS 20/AASB 120.

c. AASB 1039.

d. AASB 1004.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

4. The Corporations Act requires the financial statements and notes to provide information that is:

a. the balance of probabilities.

b. true and fair..

c. beyond a reasonable doubt.

d. materiality

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

5. As set out in IAS 1/AASB 101 there is a general requirement that the financial
statements must provide comparative and corresponding financial disclosures for:

a. the previous financial year.

b. the previous reporting period.

c. the previous five years.

d. the previous three years.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

6. Under the Corporations Act 2001 a set of financial statements to be included in the annual financial report are:

a. those specified in the accounting standards.

b. a statement of financial position, profit and loss statement and statement of cash flows.

c. a statement of financial position, profit and loss statement, statement of cash flows and a director's report

d. a statement of financial position, profit and loss statement, statement of cash flows, director's report and an audit report.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

7. In IAS 1/AASB 101 Presentation of Financial Statements, what is an acceptable alternative title for the statement of profit or loss and other comprehensive income?

a. Financial statement

b. Profit and loss statement

c. Statement of comprehensive income

d. Balance sheet

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

8. The major difference between the financial statements of a company and those of a sole trader or partnership is with:

a. equity.

b. liabilities.

c. liabilities and assets.

d. assets.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

9. Which of the following are general reporting requirements for companies required under IAS 1/AASB 101?
I. The domicile and legal form of the entity
II. Description of the entity's principal activities
III. The country of incorporation
IV. The name of the ultimate parent entity
V. The address of the registered office

a. I, II, III, IV and V

b. II, III and IV only

c. I, II, IV and V only

d. III, IV and V only

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

10. Which of the following is not required by the Corporations Act to be included in the annual financial report of a company?

a. Summary of significant accounting policies

b. A directors' report

c. A directors' declaration

d. A five-year summary

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

11. A statement of financial performance prepared for internal use would normally disclose expense and revenue items than one prepared for external use.

a. varied

b. less

c. more

d. the same

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

12. AASB 1039 specifies the minimum contents required for:

a. concise financial reports.

b. interim financial reports.

c. a statement of changes in equity.

d. a disclosing entity.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

13. The period of time represented by a concise financial report is:

a. six months.

b. full financial year.

c. nine months.

d. three months.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

14. Under AASB 1039 and the Corporations Act which of the following must be included in a concise financial report?
I. Sales revenue
II. Dividends paid and declared
III. Details of significant new events arising after reporting date

a. I, II and III

b. I and II only

c. None

d. II and III only

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

15. IAS 34/AASB 134 Interim Financial Reporting specifies that an interim report required to be prepared by a disclosing entity is for:

a. a period shorter than a full reporting period.

b. each quarter-year.

c. nine months.

d. each half-year.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

16. Which of the following is not one of the general reporting requirements of IAS 1/AASB 101 as it applies to Australia?

a. Comparative information for the preceding reporting period.

b. The level of rounding used in presenting the amounts.

c. The name and address of each shareholder must be disclosed.

d. The reports must be in English.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

17. Under AASB 1039 and the Corporations Act, which of the following does not have to be included in a concise financial report?

a. Statement of changes in equity

b. Directors report

c. A copy of any qualification in the auditor's report

d. Notes to the financial statements

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

18. An interim financial report prepared by a disclosing entity is required to include which of the following statements?
I. Condensed statement of cash flows
II. Condensed statement of changes in equity
III. Condensed statement of financial position
IV. Condensed statement of profit or loss and other comprehensive income

a. I and II only

b. I, II, III and IV

c. III and IV only

d. II, III and IV only

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

19. Under the Corporations Act, a 'disclosing entity' must prepare a half-yearly financial report in addition to an annual report. Which of the following are 'disclosing entities'?
I. A borrowing corporation
II. A company listed on the securities exchange
III. A company raising funds through a prospectus

a. II and III only

b. I and III only

c. None

d. I, II and III

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

20. The Corporations Act 2001 requires the annual report to include the financial statements that are specified as:

a. a statement of financial position, profit and loss statement, statement of cash flows, director's report, an audit report and a statement of comprehensive income.

b. a statement of financial position, profit and loss statement, statement of cash flows and a director's report.

c. a statement of financial position, profit and loss statement, statement of cash flows and note 1 to the statements.

d. those required by the accounting standards.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

21. IAS 1/AASB 101 specifies that a complete set of financial statements comprises which of the following?
I. Statement of cash flows
II. Statement of changes in equity
III. Statement of financial position
IV. Statement of profit or loss and other comprehensive income
V. Notes comprising a summary of accounting policies and other explanatory information.

a. I, II, III, IV only

b. I, II, and III only

c. III, IV and V only

d. II, III and IV only

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.
Feedback. V incorrect: requirement is for notes, comprising significant accounting policies and other explanatory information.

22. IAS 1/AASB 101 is titled:

a. Presentation of Financial Statements.

b. Disclosure of Financial Performance and Position.

c. Information to be disclosed in Financial Reports.

d. General Purpose Financial Reports.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

23. The Corporations Act requires the presentation of general purpose financial statements to include the following in the annual financial report except for:

a. a directors' report.

b. a set of financial statements.

c. a concise report.

d. a directors' declaration.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

24. The specific requirements for concise financial reports are detailed in which accounting standard?

a. IAS 34/AASB 134.

b. AASB 1001.

c. IAS 1/AASB 101.

d. AASB 1039.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

25. Which of the following statements is incorrect?

a. AASB 1039 Concise Financial Reports has an equivalent international standard..

b. Shareholders who receive a concise report can request a full report.

c. Except for concise reports prepared for listed companies each financial statement must be accompanied by some discussion and analysis.

d. The concise report must comply with the accounting standards

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

26. According to AASB 1039, in order to provide clear information to shareholders, the concise financial report must disclose which of the following?
I. Gross profit
II. Dividends per share
III. Earnings per share
IV. The capitalisation ratio
V. Changes in accounting policies

a. II and V

b. I, II and III

c. II, III and V

d. III and IV

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

27. Accounting standard AASB 1053 Application of Tiers of Australian Accounting Standards became mandatory in:

a. 2016.

b. 2015.

c. 2014.

d. 2010.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

28. Which statement concerning AASB1053 is correct?

a. All entities would be classified as Tier 1, Tier 2 or Tier 3.

b. Entities classed as Tier 3 will have their financial disclosure requirements increased.

c. The standard does not apply to not-for-profit private sector entities and most public sector entities.

d. It is also referred to as the reduced disclosure requirements standard.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

29. Which of the following areas have a major difference in accounting treatment by sole traders and partnerships and accounting treatment by companies?
I. Accounting for GST
II. Accounting for equity
III. Distributions to owners
IV. Accumulation of profits
V. Accounting for inventory
VI. Accounting for income tax

a. III, V and VI

b. I, IV and V

c. I, II and III

d. II, III, IV and VI

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

30. The current version of IAS 1/AASB 101 allows which alternative title for the statement of profit or loss and other comprehensive income for the period?

a. Statement of assets and liabilities

b. Statement of financial position

c. Profit or loss

d. Statement of comprehensive income

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

31. Which of the following statements about concise financial reports is correct?

a. A company must apply to ASIC if they want the right to issue concise reports rather than full reports.

b. A company has the right to send a concise report to the shareholder unless the shareholder requests a full report.

c. Concise reports do not have to include a statement of changes in equity.

d. A full report must be sent to the shareholder unless they request a concise report.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards

32. Which of the following entities would be classified as Tier 2 under AASB 1053 Application of Tiers of Australian Accounting Standards, and thus be given relief from some reporting requirements?
I. Not-for-profit private sector entities
II. Most public sector entities
III. Small proprietary companies

a. I, II and III

b. I and III only

c. I and II only

d. II and III only

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.

33. According to AASB 1039, how many of the following disclosures must be made in a concise financial report in order to provide clear information to shareholders?
· Graphs of profits for the last five years
· Details of any changes in accounting policies or estimates
· The amount of dividends paid and dividends declared
· That the report is an extract only from the full financial report

a. 4

b. 3

c. 2

d. 1

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards.
Feedback: Not the first.

34. Under AASB 1039 and the Corporations Act, which of the following does not have to be included in a concise financial report?

a. Notes to the financial statements

b. Statement by the auditor

c. Statement of cash flows

d. Statement of changes in equity

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards

35. Which of the following statements concerning concise financial reports are true?
I. There is a charge to the shareholder for requesting a full financial report but the concise report is free.
II. If a shareholder accepts a concise financial report they cannot also request a full report.
III. Must be drawn up in accordance with accounting standards.
IV. The financial statements in the concise report need not comply with all the accounting standards.

a. III only

b. I and IV

c. II and IV

d. I and III

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards

36. Interim reports are required to be prepared by a disclosing entity:

a. for any period shorter than a full reporting period.

b. each three months.

c. each half-year.

d. every nine months.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards

37. Under the Corporations Act, which of the following is not necessarily a disclosing entity?

a. A borrowing corporation

b. A corporation that raises funds via a prospectus

c. A public company

d. A stock exchange listed company

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards

38. AASB 1039 suggests that some discussion and analysis should accompany concise reports. Which of the following is a suggested discussion item for the statement of cash flows?

a. Relationship between debt and equity.

b. Causes of significant changes in issued capital.

c. Main influences of the costs of operations.

d. Repayment and servicing of any borrowings.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards

39. As set out in IAS 1/AASB 101, the following are general requirements that apply to annual reports except for:

a. The reporting date or period covered by each financial statement must be included.

b. There must be a description of the entity's operations and its principal activities.

c. A list of all the accounting standards followed must be included.

d. Comparative figures for the previous reporting period must be disclosed.

General Feedback:

Learning objective 17.1: discuss the general reporting requirements imposed by the Corporations Act 2001 and the accounting standards

40. The correct heading on a statement of profit or loss and other comprehensive income made up for a twelve-month period to 30 June 2023 is:

a. for the year ended 30 June 2023

b. as at 30 June 2023

c. for the period ended 30 June 2023

d. 30th June 2023

General Feedback:

Learning objective 17.2: demonstrate the external reporting requirements for a statement of profit or loss and other comprehensive income for a company.

41. Which approach is contained in IAS 1/AASB 101, requiring all income and expenses to be included in the determination of profit?

a. the comprehensive profit approach.

b. the all-inclusive profit approach.

c. the reporting method approach.

d. the operating approach.

General Feedback:

Learning objective 17.2: demonstrate the external reporting requirements for a statement of profit or loss and other comprehensive income for a company.

42. Excluding other comprehensive income in the definition of profit, which of the following is not included in the calculation of a company's profit or loss?

a. Gain on the sale of fixed assets

b. Adjustments from translation of the financial statements of a foreign operation

c. Dividends received

d. Expense on the impairment of assets held

General Feedback:

Learning objective 17.2: demonstrate the external reporting requirements for a statement of profit or loss and other comprehensive income for a company.

43. Which accounting standards are specific to the nature and disclosure of income?

a. IAS 1/AASB 101; IAS 15/AASB 15

b. IAS 16/AASB 116; IAS 7/AASB 107

c. IAS 7/AASB 107; IAS 18/AASB 118

d. IAS 1/AASB 101; IAS 7/AASB 107

General Feedback:

Learning objective 17.2: demonstrate the external reporting requirements for a statement of profit or loss and other comprehensive income for a company.

44. The approach contained in IAS 1/AASB 101 to determine a company's profit or loss is:

a. the operational approach.

b. the profit or loss approach.

c. the new approach.

d. the all-inclusive profit approach.

General Feedback:

Learning objective 17.2: demonstrate the external reporting requirements for a statement of profit or loss and other comprehensive income for a company.

45. Under the accounting standards, which of the following is not typically included in other comprehensive income?

a. Adjustments from translation of the financial statements of a foreign operation.

b. Upward revaluations of non-current assets requiring adjustment to a revaluation surplus.

c. Downward revaluations of non-current assets, not requiring adjustment to a revaluation surplus.

d. Gains or losses on remeasuring investments in equity instruments.

General Feedback:

Learning objective 17.2: demonstrate the external reporting requirements for a statement of profit or loss and other comprehensive income for a company.

46. When might borrowing costs not appear in a statement of comprehensive income?

a. If borrowing costs are directly attributable to the acquisition, construction or production of a qualifying asset.

b. If they relate to research expenditure.

c. If they are less than five percent of total expenses.

d. If they result from a negatively geared project.

General Feedback:

Learning objective 17.2: demonstrate the external reporting requirements for a statement of profit or loss and other comprehensive income for a company.

47. AASB 15 suggests which of the following as appropriate categories for the aggregation of revenues?
I. Geographical region
II. Type of goods or services
III. Duration of contract
IV. Type of customers

a. II and IV only

b. I, III and IV only

c. I, II and IV only

d. I, II, III and IV

General Feedback:

Learning objective 17.2: demonstrate the external reporting requirements for a statement of profit or loss and other comprehensive income for a company.

48. Which of the following expenses do not require separate disclosure under the accounting standards in the statement of profit or loss and other comprehensive income or in the notes attached to the statement?

a. Various standards require all of these be disclosed separately

b. Interest paid

c. Bad and doubtful debts

d. Impairment expenses of non-current assets

General Feedback:

Learning objective 17.2: demonstrate the external reporting requirements for a statement of profit or loss and other comprehensive income for a company.

49. Under IAS 1/AASB 101, expenses classified into the following groups: cost of sales; selling expenses; administrative expenses; and finance expenses; are classified by:

a. tangibility.

b. nature.

c. liquidity.

d. function.

General Feedback:

Learning objective 17.2: demonstrate the external reporting requirements for a statement of profit or loss and other comprehensive income for a company.

50. An alternative name for the statement of financial position is:

a. Financial balances statement

b. Balance sheet

c. Statement of financial performance

d. Financial performance statement

General Feedback:

Learning objective 17.3: demonstrate the external reporting requirements for a statement of financial position for a company.

51. Under IAS 1/AASB 101 which of the following is most likely to be classified as a non-current asset?

a. Long-term borrowings

b. Deferred tax

c. Goodwill

d. Inventories

General Feedback:

Learning objective 17.3: demonstrate the external reporting requirements for a statement of financial position for a company.

52. The correct heading on a statement of financial position prepared for 30 June 2023 is:

a. for the period ended 30 June 2023

b. 30th June 2023

c. for the year ended 30 June 2023

d. as at 30 June 2023

General Feedback:

Learning objective 17.3: demonstrate the external reporting requirements for a statement of financial position for a company.

53. IAS 1/AASB 101 prescribes which format for the statement of financial position?

a. No one format is prescribed

b. Equity = assets - liabilities

c. Assets = equity + liabilities

d. Assets - liabilities = equity

General Feedback:

Learning objective 17.3: demonstrate the external reporting requirements for a statement of financial position for a company.

54. Under IAS 1/AASB 101, which of the following statements concerning the statement of financial position is correct?

a. All assets and liabilities must be classified as current or non-current (unless a liquidity presentation is more appropriate).

b. The statement has a prescribed format.

c. The statement must begin with the assets section.

d. Movements in reserves must be shown on the face of the statement.

General Feedback:

Learning objective 17.3: demonstrate the external reporting requirements for a statement of financial position for a company.

55. In the heading for a statement of financial position made up to 31 December 2024 the date must be stated as:

a. For the reporting period ended 31 December 2024

b. For the year ended 31 December 2024

c. 31 December 2024

d. As at 31 December 2024

General Feedback:

Learning objective 17.3: demonstrate the external reporting requirements for a statement of financial position for a company.

56. IAS 1/AASB 101 specifies that the statement of changes in equity must disclose how many of the following items?
· Total comprehensive income for the period.
· A reconciliation between carrying amount at the beginning and end of the period for each item of equity.
· Contributions by and distributions to owners, disclosed separately.

a. 3

b. 2

c. 1

d. 0

General Feedback:

Learning objective 17.4: demonstrate the external reporting requirements for a statement of changes in equity for a company.

57. Which of the following statements concerning the statement of changes in equity is correct?

a. It provides a link between the statement of profit or loss and other comprehensive income and the statement of cash flows.

b. It is only required to report the ending balances of each category of equity.

c. It is only required to be prepared by disclosing entities.

d. It provides a link between the statement of profit or loss and other comprehensive income and the statement of financial position.

General Feedback:

Learning objective 17.4: demonstrate the external reporting requirements for a statement of changes in equity for a company.

58. Under IAS 1/AASB 101, the statement of changes in equity is:

a. not required to separately disclose transfers to reserves from retained profits as they do not change total equity.

b. only required to reconcile the opening and closing balance of total equity, not the individual equity components.

c. only required to show changes in retained earnings, not changes in share capital.

d. an additional financial report that each entity is required to supply to its external users.

General Feedback:

Learning objective 17.4: demonstrate the external reporting requirements for a statement of changes in equity for a company.

59. Under the simplest sample format provided in the Implementation Guidance accompanying IAS 1/AASB 101, the final line in the statement of profit or loss and other comprehensive income is:

a. profit/loss and other comprehensive income for the period.

b. profit/loss for the period.

c. profit/loss after tax and comprehensive income.

d. total comprehensive income for the period.

General Feedback:

Learning objective 17.5: prepare the financial statements as required for general purpose financial reporting.

60. Which of the following expenses normally appearing in an internally prepared statement of financial performance are required to be separately disclosed in an external statement of financial performance prepared to conform to the requirements of the accounting standards?
· Advertising
· Insurance
· Telephone

a. Insurance only

b. Advertising only

c. None

d. All of these expenses

General Feedback:

Learning objective 17.5: prepare the financial statements as required for general purpose financial reporting.

61. Which of the following expenses do not require separate disclosure in an external statement prepared to conform to the requirements of the accounting standards?
I. Freight outwards
II. Finance costs
III. Utilities expenses
IV. Printing and stationery expenses

a. I, III and IV

b. II and IV

c. I, II, III and IV

d. II, III and IV

General Feedback:

Learning objective 17.5: prepare the financial statements as required for general purpose financial reporting.

62. How many of the following expenses that would normally appear in an internally prepared profit and loss statement are required to be separately disclosed in an external statement prepared to conform to the requirements of the accounting standards?
· Cleaning
· Salaries and wages
· Telephone expense
· Repairs and maintenance

a. 4

b. 3

c. 2

d. 1

General Feedback:

Learning objective 17.5: prepare the financial statements as required for general purpose financial reporting.
Feedback: Salaries and wages would be disclosed

63. Expenses classified by nature would not include:

a. Impairment expenses.

b. depreciation and amortisation expenses.

c. bad debts expense.

d. finance costs.

General Feedback:

Learning objective 17.5: prepare the financial statements as required for general purpose financial reporting.

64. The most commonly preferred term used for owner's equity in a company statement of financial position is:

a. shareholder's equity.

b. shareholder's funds.

c. equity.

d. share capital and reserves.

General Feedback:

Learning objective 17.5: prepare the financial statements as required for general purpose financial reporting.