Mindanao State University - General Santos

COURSE TITLE - ACCTG 001

PROBLEM 4: FOR CLASSROOM DISCUSSION

Scope

1)PAS 1 applies to which of the following?

 

1. 1. The preparation and presentation of general purpose financial statements.

 

1. 2. The recognition and measurement of specific assets, liabilities, income and expenses.

1. 3. The disclosure requirements for specific transactions and other events.

 

1. 4. All of these.

 

General features

2. In 20x3, Entity A makes a retrospective application of an accounting policy that has a material effect on the information in the statement of financial position as at the beginning of the preceding period. Entity A wishes to provide comparative information in addition to the minimum requirement of PAS 1, i.e., Entity A will be presenting its 20x3 financial statements together with the 20x2 and 20x1 financial statements. In this case, the additional statement of financial position required by the PAS 1 will be dated
   1. as at January 1, 20x1.                                                      c. as at January 1, 20x3.

 

1. 2. as at January 1, 20x2.                                                      d.       for the period ended 20x1.

 

 

3. Entity A wants to change the presentation of, and the classification of some items in, its financial statements. Which of the following statements is incorrect?
   1. Entity A can make the change if it is required by a PFRS.

 

1. 2. Entity A can make the change if the change is expected to result in reliable and more relevant information to the users of its financial statements.
   3. Entity A may be required to provide an additional balance sheet dated as at the beginning of the preceding period.
   4. Entity A can make the change only if it makes an irrevocable promise not to make another change within the next five years.

 

 

4. The financial statement of Entity A shows line items described as “Other current assets,” “Other noncurrent liabilities,” and “Miscellaneous expenses.” Which of the following is correct?
   1. Entity A considers the items included in these line items as dissimilar and cannot be included in material classes of similar items and are also individually immaterial to warrant separate presentation.
   2. Entity A considers the items included in these line items as individually material but with dissimilar nature or function.

1. 3. Entity A considers the items included in these line items as comprising a material class of similar items.
   4. This manner of presenting items in unacceptable under PAS 1.

 

Complete set of financial statements

5. According to PAS 1, a complete set of financial statements includes which of the following?
   1. Income tax return

 

1. 2. Director’s reports

 

1. 3. Notes

 

1. 4. All of these

 

Additional Statement of financial position

6. PAS 1, requires an entity to present an additional statement of financial position as at the beginning of the preceding period when an entity makes any of the following, except
   1. the retrospective application of an accounting policy.

 

1. 2. the retrospective restatement of items in the financial statements.

 

1. 3. the reclassification of items in the financial statements.

 

1. 4. the prospective application of a change in accounting estimate.

 

Statement of financial position

7. The statement of financial position of which of the following entities does not show current and noncurrent distinctions among assets and liabilities?
   1. Banks and other financial institutions

 

1. 2. Mining companies

 

1. 3. Trading enterprises

 

1. 4. Manufacturing firms

 

 

8. The principles of PAS 1 in relation to the classification of liabilities as current or noncurrent favor the current classification. PAS 1 provides stricter conditions for

classifying liabilities as noncurrent. Which of the following statements best reflects a valid reason?

1. 1. Noncurrent liabilities are usually more material in terms of size compared to current liabilities.
   2. Most primary users are concerned more with an entity’s current liabilities when making economic decisions because of the shorter duration of time before they cause an outflow of economic resources.
   3. The stricter conditions for noncurrent classification address the potential misuse of classification in order to present favorably the entity’s liquidity.
   4. All of these.

 

Statement of profit or loss and other comprehensive income

9. Which of the following is not an acceptable method of presenting income and expenses?
   1. Presenting income and expenses that affect profit or loss and those that are components of other comprehensive income in a single statement.
   2. Presenting an income statement in addition to a statement that presents comprehensive income.
   3. Presenting income statement alone without a statement that presents comprehensive income.
   4. All of those are acceptable methods of presentation.

 

 

10. This method of presenting expenses is more difficult to apply but has the potential of providing more relevant information to users. Its downside, however, is that it involves considerable judgment and may require arbitrary allocations.
    1. Nature of expense                                                          c. Classified presentation

 

1. 2. Function of expense                                                      d. Based on liquidity

 

Notes

11. Which of the following is not a purpose of the notes?

 

1. 1. to present information about the basis of preparation of the financial statements and the specific accounting policies