Question 1

A statement of changes in Equity is mandatory under both IFRS and ASPE.

Accepted Answer

False

Question 2

Under IFRS,balance sheet items may be classified as current/non-current or by order of liquidity (or reverse liquidity).

Accepted Answer

This statement is true. Under IFRS, balance sheet items can be classified either as current or non-current assets/liabilities, or by order of liquidity (also known as reverse liquidity).

Question 3

Owners' Equity items are classified and presented based on time to maturity.

Accepted Answer

Owners' Equity items are not classified and presented based on time to maturity. They are typically presented in the order of permanence or seniority, with preferred stock and other non-current equity items listed above common stock and retained earnings.

Question 4

The balance sheet reports on the operations of the company for a given period of time.

Accepted Answer

The income statement reports on the operations of the company for a given period of time, while the balance sheet reports on the company's financial position at a specific point in time.

Question 5

A statement of compliance and summary of significant accounting policies are often among the first notes to be disclosed in annual report.

Accepted Answer

A statement of compliance and summary of significant accounting policies are typically included as part of the notes to the financial statements at the beginning of an annual report.

Question 6

A restriction on Retained Earnings is usually the result of a contractual or legal obligation and is intended to limit the amount of dividends paid.

Accepted Answer

The answer of A restriction on Retained Earnings is usually...

Question 7

Liabilities such as contingent liabilities that are not probable,or are probable but not measurable,do not qualify for recognition in the financial statements.

Accepted Answer

Liabilities such as contingent liabilities can only be recognized in financial statements if they are both probable and can be measured reliably. If either of these criteria is not met, the liability cannot be recognized on the balance sheet.

Question 8

Monetary assets should be disclosed at their fair value on the Balance Sheet.

Accepted Answer

According to accounting standards, monetary assets should be disclosed at their fair value on the Balance Sheet.

Question 9

For financial statement purposes,a company's operating cycle is deemed to be at least one year.

Accepted Answer

The answer of For financial statement purposes,a company's operating cycle...

Question 10

The Return on Assets (ROA) and Return on Equity (ROE) ratios measure a company's liquidity.

Accepted Answer

The ROA and ROE ratios do not measure a company's liquidity. ROA measures how efficiently a company is using its assets to generate profits, while ROE measures the return that shareholders are getting on their investment in the company. Both ratios are used to assess a company's profitability and financial performance.

Question 11

Biological assets,Investment Properties and Provisions must all be shown separately under IFRS (wherever applicable) but not under ASPE.

Accepted Answer

Under IFRS, biological assets, investment properties, and provisions need to be shown separately in financial statements, but under ASPE, it is not mandatory.

Question 12

Deferred Income Tax Assets and Liabilities must be presented as non-current under IFRS.

Accepted Answer

According to IAS 1 Presentation of Financial Statements, deferred tax assets and liabilities must be presented as non-current in the statement of financial position unless they are expected to be settled within twelve months after the reporting period or the entity's normal operating cycle, whichever is longer.

Question 13

Current liabilities are short-term liabilities whose liquidation is reasonably expected to require the use of current assets or the creation of other current liabilities.

Accepted Answer

Current liabilities are typically obligations that are due within one year or less and are expected to be paid off using current assets or by creating additional current liabilities. Examples of current liabilities include accounts payable, accrued expenses, and short-term loans.

Question 14

The close family of a company's president owns a small (insignificant) amount of the company's shares.The president's family is deemed to be related parties and these holdings should be disclosed.

Accepted Answer

The answer of The close family of a company's president...

Question 15

Monetary items are usually fixed in amount while non-monetary items are not.

Accepted Answer

Monetary items are usually fixed in amount, such as cash, accounts receivable, and accounts payable, while non-monetary items, such as inventory and property, plant, and equipment, may fluctuate in value over time.

Question 16

By grouping assets in decreasing order of liquidity,the accounts receivable account will almost always be the first item on the balance sheet.

Accepted Answer

The first item on the balance sheet is typically cash and cash equivalents, as they are the most liquid assets. Accounts receivable is listed after cash and cash equivalents.

Question 17

In financial reporting it is improper to offset current assets with current liabilities unless there is a legal right of offset.

Accepted Answer

According to generally accepted accounting principles (GAAP), current assets and current liabilities should not be offset on financial statements unless there is a legal right of offset, such as in the case of certain types of bank accounts or derivative contracts. Otherwise, they should be presented separately on the balance sheet to provide a clear picture of the company's liquidity and financial health.

Question 18

Guarantees are always recorded as liabilities in the financial statements.

Accepted Answer

Guarantees are not always recorded as liabilities in the financial statements. They are recognized as liabilities only when it is probable that the guarantor will have to fulfill the guarantee and the amount can be reasonably estimated.

Question 19

Assets must be presented before liabilities and equities under IFRS.

Accepted Answer

The answer of Assets must be presented before liabilities and...

Question 20

A long-term bond payable is reported on the balance sheet at its maturity amount plus any unamortized premium or minus any unamortized discount.

Accepted Answer

A long-term bond payable is reported on the balance sheet at its maturity amount, which includes both the face value of the bond and any remaining premium or discount that has not yet been amortized. If the bond was issued at a premium, the premium is subtracted from the face value to arrive at the carrying amount. If the bond was issued at a discount, the discount is added to the face value to arrive at the carrying amount. Over time, the premium or discount is amortized and gradually reduces to zero, at which point the carrying amount equals the face value.

Quiz 4: Statements of Financial Position and Changes in Equity; Disclosure Notes