Question 1

All expenses from operating activities must be classified according to either their nature or function:

Accepted Answer

False

Question 2

Comprehensive income includes dividend payments to shareholders.

Accepted Answer

Comprehensive income includes all gains and losses affecting a company's equity during a period, except for dividend payments to shareholders. Dividend payments are not included in comprehensive income because they represent a distribution of profits to the owners of the company.

Question 3

By focusing only on the income statement, 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 income statement only captures the revenues and expenses of an entity during a specific period and does not provide information on other gains and losses such as those related to investments, changes in market value of assets, or currency fluctuations. Therefore, it is not sufficient to obtain a full picture of an entity's financial performance.

Question 4

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

Accepted Answer

While standard setters have worked towards achieving greater consistency and comparability in financial reporting, they have not removed the need for professional judgement completely. Professional judgement is still required in various areas, including the recognition, measurement, and disclosure of expenses.

Question 5

According to AASB 101, the income statement provides a total profit figure to which opening retained earnings is added and from which dividends are deducteD.

Accepted Answer

According to AASB 101, the income statement provides information about the financial performance of an entity during the reporting period, but it does not provide a total profit figure. The statement of comprehensive income provides a subtotal of profit or loss for the period, but this is not the total profit figure. Additionally, dividends are not deducted from this subtotal or from the opening retained earnings. Dividends are typically declared and subtracted from the retained earnings balance separately, outside of the income statement.

Question 6

If the exercise (strike) price of a call option is greater than the current share price, the option is said to be 'in-the-money':

Accepted Answer

If the exercise (strike) price of a call option is greater than the current share price, the option is said to be 'out-of-the-money'. If the exercise price is lower than the current share price, the option is said to be 'in-the-money'.

Question 7

The income statement under AASB 101 is designed to report all revenues and expenses to determine profit or loss.

Accepted Answer

The answer of The income statement under AASB 101 is...

Question 8

All disclosure requirements that relate to an entity's profit or loss are included in AASB 101:

Accepted Answer

AASB 101 covers the presentation of financial statements and provides guidelines on their structure and minimum requirements for their content, not all specific disclosure requirements related to profit or loss, which may be covered under other standards.

Question 9

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

Accepted Answer

Profit can be influenced by a variety of factors such as accounting methods used, timing of sales and expenses, and one-time events such as large investments or unexpected losses. Additionally, profit does not necessarily reflect non-financial factors such as customer satisfaction, employee morale, or social and environmental impact. Therefore, profit alone may not provide a complete picture of an organization's success.

Question 10

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 11

Total comprehensive income for the year is profit for the year plus comprehensive income.

Accepted Answer

Total comprehensive income includes both gains and losses that are not included in the calculation of net profit, such as changes in the value of investments or foreign exchange gains/losses. Therefore, total comprehensive income for the year is profit for the year plus any other comprehensive income.

Question 12

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 (AASB 101):

Accepted Answer

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

Question 13

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 AASB 101:

Accepted Answer

According to AASB 101, 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. Therefore, the statement is true.

Question 14

AASB 101 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

AASB 101 does permit entities to present the components of other comprehensive income either before tax effects (gross presentation) or after their related tax effects (net presentation).

Question 15

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

Accepted Answer

This statement is true. Corrections of errors from prior periods, if material, must be reported retrospectively as a prior period adjustment in the financial statements. The adjustment is reported in the statement of retained earnings for that period rather than in the income statement. The impact of the adjustment is also shown as an adjustment to beginning retained earnings in the current period. This is an example of a reportable item under other comprehensive income.

Question 16

In establishing the classification of items in the income statement, 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 income statement. Classification should be based on the nature or function of the item.

Question 17

The income statement satisfies the requirements of the Corporations Act 2001 for a 'profit and loss statement':

Accepted Answer

The income statement provides information about a company's revenues, expenses, and profits, thus fulfilling the requirement of the Corporations Act 2001 for a 'profit and loss statement'.

Question 18

AASB 101 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

AASB 101 does require the disaggregation of profit or loss and total comprehensive income between non-controlling interest and owners of the parent on the face of the statement of comprehensive income.

Question 19

AASB 101 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 income statement.

Accepted Answer

The answer of AASB 101 permits an entity to present...

Question 20

AASB 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

AASB 2 requires the fair value of share-based payment options issued to employees to be determined and recognized as the cost of the options.

Quiz 17: The Statement of Comprehensive Income and Statement of Changes in E