Question 1

Discovery of an error from a prior period corrected retrospectively is an example of an item reportable under other comprehensive income.

Accepted Answer

Discovery of an error from a prior period corrected retrospectively is an example of a reclassification adjustment reported under other comprehensive income.

Question 2

A statement displaying components of profit or loss is referred to in IAS 1 as a(n):
A)profit and loss statement.
B)statement of income.
C)income statement.
D)statement of profit and loss.

Accepted Answer

D

Question 3

The choice between reporting expenses by nature or by function is extremely important,as different net profit figures are derived depending upon the choice made.

Accepted Answer

The choice between reporting expenses by nature or by function does not affect the net profit figure, as it is merely a presentation choice in the income statement. The total expenses remain the same, only the way they are classified and presented changes.

Question 4

As part of the process of international harmonisation,standard setters have removed the need for professional judgment to be exercised in respect of expenses; all discretion that once existed has been removed.

Accepted Answer

This statement is false. Standard setters have not removed the need for professional judgment in respect of expenses. While there are standardized accounting practices, there may be certain expenses or circumstances that require professional judgment to be exercised. Additionally, different countries and jurisdictions may have different rules and regulations regarding expenses, which also requires professional judgment to be exercised.

Question 5

Changes in accounting policy are to be made retrospectively or prospectively,depending upon the background to the change.

Accepted Answer

Changes in accounting policy may be applied retrospectively or prospectively depending on the circumstances of the change, such as the reason for the change and the impact on the financial statements.

Question 6

An entity shall recognise all items of income and expense in a period in profit or loss unless an International Financial Reporting Standard requires or permits otherwise.

Accepted Answer

This is in accordance with International Accounting Standard (IAS) 1 Presentation of Financial Statements, which requires entities to recognise income and expenses in their profit or loss statement unless a specific standard allows or requires otherwise.

Question 7

IAS 1 requires profit or loss and the total comprehensive income for the period reported on the face of the statement of comprehensive income to be disaggregated between the non-controlling interest and the owners of the parent.

Accepted Answer

This statement is true according to International Accounting Standard 1 (IAS 1) which specifies that the profit or loss and total comprehensive income for the period should be presented on the face of the statement of comprehensive income, disaggregated between the non-controlling interest and the owners of the parent. This helps to provide users of financial statements with more detailed information about the performance and financial position of the reporting entity, particularly in cases where there are minority interests in subsidiaries or joint ventures.

Question 8

Profit is a measure of financial performance and therefore may not truly reflect the success or otherwise of an organisation.

Accepted Answer

Profit only measures the financial aspect of an organization and does not take into account other factors such as customer satisfaction, employee engagement, and social responsibility. Therefore, an organization may have high profits but still be considered unsuccessful in terms of overall performance.

Question 9

IAS 1 permits an entity to present all items of income and expense recognised in a period to be presented in either the statement of comprehensive income or the statement of profit and loss.

Accepted Answer

The answer of IAS 1 permits an entity to present...

Question 10

IAS 1 permits entities to present the components of other comprehensive income either before tax effects (gross presentation)or after their related tax effects (net presentation).

Accepted Answer

This statement is true. IAS 1 allows for both gross and net presentation of components of other comprehensive income.

Question 11

All disclosure requirements that relate to an entity's profit or loss are included in IAS 1.
FALSE

Accepted Answer

The answer of All disclosure requirements that relate to an...

Question 12

In establishing the classification of items in the statement of profit and loss,the size of an item is an appropriate basis for establishing a separate classification (by nature or function)for it.

Accepted Answer

The size of an item is not an appropriate basis for establishing a separate classification in the statement of profit and loss. The proper basis for classification is either by nature or by function. By nature means grouping transactions according to their characteristics, such as revenue or expenses. By function means grouping according to their purpose, such as operating expenses or financing expenses.

Question 13

By focusing only on the statement of profit and loss,we do not obtain a full picture of all the gains and losses that may have occurred for an entity during the period.

Accepted Answer

The statement of profit and loss only reflects the financial performance of an entity during a specific period, but it does not provide information on other gains and losses that may have been incurred, such as changes in the value of assets or liabilities, foreign exchange gains or losses, or other comprehensive income items. Therefore, it is important to review other financial statements and disclosures to obtain a full picture of an entity's financial performance and position.

Question 14

Comprehensive income includes dividend payments to shareholders.

Accepted Answer

Comprehensive income is the change in equity during a period from transactions and other events and circumstances from non-owner sources. It includes items such as unrealized gains or losses on investments or translation adjustments from foreign currency transactions. Dividend payments are distributions of earnings to shareholders and do not constitute comprehensive income.

Question 15

The statement of profit or loss (income statement)under IAS 1 is designed to report all revenues and expenses to determine profit or loss.

Accepted Answer

The answer of The statement of profit or loss (income...

Question 16

Under IAS 1 additional line items,headings and subtotals:
A)are precluded as they provide unnecessary information that may confuse the user.
B)shall be presented on the face of the statement when such presentation is relevant to an understanding of the entity's financial performance.
C)shall be presented on the face of the statement when such items can be measured reliably and it is probable these events will occur.
D)will only be included in the notes to the statement of profit and loss if they are relevant to an understanding of the entity's financial performance.

Accepted Answer

Under IAS 1, additional line items, headings, and subtotals shall be presented on the face of the statement when such presentation is relevant to an understanding of the entity's financial performance. This means that if the information is necessary for the user to understand the financial performance of the entity, it should be included on the statement. Therefore, option B is the correct answer. Options A, C, and D are incorrect as they provide either incorrect or incomplete information about the requirements of IAS 1.

Question 17

IAS 8 requires all errors that relate to prior reporting periods to be corrected by adjusting the opening balance of retained earnings and restating comparative information.

Accepted Answer

This is a correct statement according to International Accounting Standard 8 (IAS 8) - Accounting Policies, Changes in Accounting Estimates and Errors. The standard requires that if an error is identified in a prior reporting period, the correction should be made by adjusting the opening balance of retained earnings in the earliest comparative period presented and restating comparative information.

Question 18

An item must be outside the ordinary operations of the business or be of a non-recurring nature to be classified as an extraordinary item under IAS 1.

Accepted Answer

IAS 1 does not allow the classification of any items as extraordinary. All items are considered part of the ordinary activities of the business.

Question 19

IFRS 2 requires that the fair value of the option issued as a share-based payment to an employee,be determined and this value be deemed to be the cost of the options.

Accepted Answer

This is correct. IFRS 2 requires that the fair value of the option issued as a share-based payment to an employee be determined and this value be deemed to be the cost of the options. This requirement ensures that companies report the economic cost of these transactions accurately in their financial statements.

Question 20

All adjustments to equity other than those related to transactions with owners in their capacity as owners are disclosed in the statement of comprehensive income (IAS 1).

Accepted Answer

The answer of All adjustments to equity other than those...

Quiz 14: The Statement of Comprehensive Income and Statement of Changes in Equity