Question 1

IAS 15 was completely withdrawn with effect from January 1,2004

Accepted Answer

IAS 15, which dealt with Information Reflecting the Effects of Changing Prices, was withdrawn in 2003, but its effective withdrawal date was January 1, 2005, not 2004.

Question 2

The determination of the functional currency is covered by;&#10;A)IAS 15&#10;B)IAS 21&#10;C)IAS 22&#10;D)IAS 29

Accepted Answer

A

Question 3

One of the definitions of a hyperinflationary economy occurs when a population prefers to keep its wealth in cash.

Accepted Answer

Hyperinflationary economies are characterized by extremely high and typically accelerating inflation rates, not merely by a population's preference to keep wealth in cash. This preference might be a symptom of hyperinflation, as people might choose to hold assets in more stable forms than the local currency, but it is not a defining characteristic of hyperinflation itself.

Question 4

With regards to the owners' equity,at the first application of IAS 29 a general price index should be applied to;&#10;A)all elements of the owners' equity&#10;B)all elements of the owners' equity except the retained earnings&#10;C)all elements of the owners' equity except the retained earnings and any revaluation reserves&#10;D)all elements of the owners' equity except the retained earnings and any revaluation reserves and the share premium account.

Accepted Answer

When applying IAS 29 for the first time, a general price index should be applied to all elements of the owners' equity except the retained earnings and any revaluation reserves. Retained earnings are excluded because they have already been adjusted for inflation in previous accounting periods, while revaluation reserves are excluded because they have been more recently adjusted to fair value. Share premium accounts are also excluded as they are not subject to inflationary changes. Therefore, the correct choice is C.

Question 5

For items carried at revaluation amounts,the revalued amount is restated by applying the change in the price index from the acquisition date.

Accepted Answer

The revalued amount is typically adjusted based on the fair value at the date of revaluation, not by applying a price index from the acquisition date.

Question 6

A directive has no effect at entity level until incorporated into the relevant national law.

Accepted Answer

Directives are instructions that are given by the European Union to its member states, but they do not have direct legal effect on entities until they are incorporated into their national laws. This means that member states must adopt the necessary measures to comply with the directive within a specified time frame.

Question 7

The restated amount of a non-monetary item is reduced when it exceeds the amount recoverable from the items future use,sale or disposal

Accepted Answer

This is true according to the accounting standard IAS 36 Impairment of Assets. If the recoverable amount of a non-monetary asset (such as property, plant, and equipment) is less than its carrying amount, the asset must be impaired and its carrying value reduced to the recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and its value in use. If the value in use is less than the carrying amount, the asset must be impaired, and its carrying value reduced accordingly.

Question 8

IAS 15 was completely withdrawn with effect from;&#10;A)January 1,2003&#10;B)January 1,2004&#10;C)January 1,2005&#10;D)January 1,2006

Accepted Answer

IAS 15, which dealt with information reflecting the effects of changing prices, was withdrawn effective January 1, 2005.

Question 9

For an economy to be defined as hyperinflationary the cumulative inflation rate must approach,or exceed,100% for;&#10;A)2 years&#10;B)3 years&#10;C)4 years&#10;D)5 years

Accepted Answer

According to the International Accounting Standards (IAS) 29, a country's economy can be classified as hyperinflationary if the cumulative inflation rate over a three-year period approaches or exceeds 100%. Therefore, the correct choice is B, which states that the economy must have a cumulative inflation rate of 100% for three years.

Question 10

When an entity ceases to prepare their accounts in accordance with IAS 29 because the economy is no longer deemed to be hyperinflationary which of the following do they NOT need to disclose;&#10;A)the fact that the financial statements and the comparative figures have been restated for changes in the general purchasing power of the reporting currency and are stated in units of purchasing power at the balance sheet date.&#10;B)whether the underlying financial statements are based on historic costs or current costs&#10;C)the identity and level of the general price index used at the balance sheet date and the movement in this index during the current and previous reporting periods.&#10;D)a forecast of the economy & an indication of whether it will again be necessary to report under IAS 29 in the next five years

Accepted Answer

IAS 29 requires disclosure of the fact that financial statements have been restated for changes in purchasing power, the basis of the underlying financial statements (historic or current costs), and the identity and level of the price index used. It does not require entities to provide forecasts of the economy or indications of future reporting under IAS 29.

Deck 23: Changing Prices and Hyperinflationary Economies