ACCOUNTING CHANGES & PRIOR PERIOD ERRORS

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.

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INTERIM REPORTING

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PAS 34 SEC

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who/which are
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 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS

MAY 2024 CPALE BATCH 95

PAS 1 – PRESENTATION OF FINANCIAL STATEMENTS

1. What is the objective of financial statements?

a. To provide information about the financial position, financial performance and changes in the
financial position useful to a wide range of users
b. To prepare a statement of financial position and statement of comprehensive income
c. To present relevant, reliable, comparable and understandable information
d. To prepare financial statements in accordance with all applicable standards

2. An entity shall present

a. The statement of financial position more prominently
b. The income statement more prominently
c. The statement of cash flows more prominently
d. Each statement with equal prominence

3. When an entity changes the end of the reporting period longer or shorter than one year, an entity shall
disclose all of the following, except
a. Period covered by the financial statements.
b. The reason for using a longer or shorter period.
c. The fact that amounts presented in the financial statements are not entirely comparable.
d. The fact that similar entities in the geographical area in which the entity operates have done so.

4. An entity must disclose comparative information for

a. The previous comparable period for all amounts reported.
b. The previous comparable period for all narrative and descriptive information.
c. The previous comparable period for all amounts reported, and for all narrative and descriptive
information when it is relevant to an understanding of the current period’s financial statements.
d. The previous two comparable periods for all amounts reported.

5. When the classification of items in the financial statements is changed, the entity
a. Must not reclassify the comparative amounts
b. Can choose whether or not to reclassify
c. Must reclassify the comparative amounts unless it is impracticable to do so.
d. Must reclassify current year amounts only.

6. In presenting a statement of financial position, an entity

a. Must make the current and noncurrent presentation.
b. Must present assets and liabilities in the order of liquidity.
c. Must choose either the current and noncurrent or the liquidity presentation.
d. Must make the current and noncurrent presentation except when a presentation based on liquidity
provides information that is reliable and more relevant.

7. An entity shall classify an asset as current under all of the following conditions, except
a. The entity expects to realize, or intends to sell or consume it within normal operating cycle.
b. The entity holds the asset primarily for the purpose of trading.
c. The entity expects to realize the asset within twelve months after the reporting period.
d. The asset is cash or cash equivalent restricted to settle a liability for more than twelve months after
the reporting period. Presentation
< must the
parallel purpose/intention
.

8. An entity shall classify a liability as current under all of the following conditions, except
a. The entity expects to settle the liability within the normal operating cycle.
b. The entity holds the liability primarily for the purpose of trading.
c. The liability is due to be settled within twelve months after the reporting period.
d. The entity has the right at the end of reporting period to defer settlement of the liability for at least
twelve months after the reporting period.

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9. When an entity breaches under a long-term loan agreement on or before the end of the reporting period
with the effect that the liability becomes payable on demand, the liability is classified as
a. Current under all circumstances
b. Noncurrent under all circumstances
c. Current if the lender agreed after the reporting period and before the issuance of the statements
not to demand payment as a consequence of the breach.
before

d. Noncurrent if the lender agreed after the end of the reporting period to provide a grace period for
on or

at least twelve months after the reporting period.

10. All of the following components of OCI should be reclassified to profit or loss, except
a. Gain and loss arising from translating the financial statements of a foreign operation.
b. Gain and loss on remeasuring debt investment at FVOCI.
c. The effective portion of gain or loss on hedging instrument in a cash flow hedge
d. Gain or loss on remeasuring equity investment at FVOCI. RE

11. The presentation of notes to financial statements in a systematic manner is mandatory, as far as practical.
What is the purpose of the notes to financial statements?
a. To provide disclosures required by IFRS.
b. To correct improper presentation in financial statements
c. To provide recognition of amounts not included in financial statements
d. To present management response to auditor comments

12. What is the “first item” presented in the notes to financial statements?
1st a. Statement of compliance with IFRS.

2nd b. Summary of significant accounting policies

and c. Supporting information for items presented in the financial statements

4th d. Other disclosures, including contingent liabilities and nonfinancial disclosures

13. An entity shall disclose in the summary of significant accounting policies

a. The measurement basis used
b. The measurement basis whether used or not
c. The measurement basis used and accounting policies applied
d. Neither measurement basis nor accounting policies applied

PAS 10 – EVENTS AFTER REPORTING PERIOD

14. Events after the end of the reporting period are favorable or unfavorable events that
a. Occur between the end of the reporting period and the date of the next annual financial statements.
b. Occur between the year-end and the date of the next interim or annual financial statements.
c. Occur between the year-end and the date when financial statements are authorized for issue.
d. Occur between the end of reporting period and the date of the next interim statements.

15. Financial statements are said to be authorized for issue when

a. The financial statements are filed with the SEC.
b. The shareholders approve the financial statements at their annual meeting.
c. The management is required to submit the financial statements to a supervisory body.
d. The management reviews the financial statements and authorizes them for issue.
BOD

16. An entity was sued in October 2024 for breach of contract, Based on the advice of council, the entity
Pre-existing
condition

recognized a P2,000,000 estimated lawsuit loss on December 31, 2024. The lawsuit was settled in
February 2025 in the amount of P2,200,000 before the 2024 financial statements were available for issue.
What is the appropriate accounting procedure for the 2024 statements? Adjusting = event

a. Recognize the P200,000 loss in the 2025 statements. Loss 200 , Go

b. Recognize the entire P2,200,000 loss in the 2024 statements. Provision 200 , m

c. Report P200,000 as retrospective adjustment to the 2024 statements

d. Recognize the entire P2,200,000 loss in the 2025 statements.

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17. On March 21, 2025, an entity issued its 2024 financial statements. On February 28, 2025, the entity’s
manufacturing plant was severely damaged by a storm and had to be shut down. Total property loss
amounted to P5,000,000. The amount of business disruption loss is unknown. How should the impact of
the storm be reflected in the 2024 financial statements?
> non adjusting event
a. Provide no information
b. Accrue and disclose the property loss but no accrual or disclosure of the business disruption loss
c. Do not accrue the property loss or the business discerption loss but disclose them in the notes to
financial statements
d. Accrue and disclose the property loss and the business disruption loss
Related parties

PAS 24 RELATED PARTY DISCLOSURES

with control of another party

= with significant influence over another party

> related party and another are

subject

to a common control

18. Related parties include all of the following, except Joint Venture

A ssociate

a. Parent, subsidiary and fellow subsidiaries

Control

Personnel as members

closeFamily
-

key management
spouse
Post Employment Benefit

b. Associate = dependents

c. Key management personnel and close family members of such individuals not related

0
A
-

d. Two venturers simply because they share joint control over a joint venture d

19. Close family members of an individual include all of the following, except
a. The individual’s spouse and children
b. Children of the individual’s spouse
c. Dependents of the individual or the individual’s spouse
d. Brother or sister of the individual

20. The minimum disclosures about related party transactions include all, except
a. The amount of the transaction
b. The amount of outstanding balance
c. Allowance for doubtful accounts related to outstanding balance
d. The amount of similar transaction with unrelated parties

21. Related party transactions include all, except

a. Transferred goods from inventory to subsidiary control is present

b. Sold an asset to the wife of the chief operating officer

c. Sold goods to another entity owned by daughter of the managing director
d. Took out a huge bank loan

22. Which is not a mandated disclosure about related party transactions?

a. Relationship between parent and subsidiaries.
b. Names of all associates that an entity has dealt with during the year.
c. Name of the entity’s parent and if different, the ultimate controlling party.
d. If neither the entity’s parent nor the ultimate controlling party produces financial statements
available for public use, then the name of the next most senior parent that does so.

PAS 8 – ACCOUNTING POLICIES, ESTIMATES AND ERRORS

23. Which is the first step within the hierarchy of guidance when selecting accounting policies?
1st a. Apply a standard from IFRS if it specifically relates to the transaction
and b. Apply the requirements in IFRS dealing with similar and related issue
3rd c. Consider the applicability of the definitions, recognition criteria and measurement concepts in the
Conceptual Framework
4th d. Consider the most recent pronouncements of other standard setting bodies

24. In the absence of an accounting standard that applies specifically to a transaction, what is most
authoritative source in developing an accounting policy? See #23

a. Apply the requirements in IFRS dealing with similar and related issue.
b. The definition, recognition criteria and measurement of asset, liability income and expense in the
Conceptual Framework.
c. Most recent pronouncement of other standard setting body.
d. Accounting literature and accepted industry practice.

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 Page 4

25. In determining which accounting policy is suitable, an entity should look into see #23

a. IFRS and IFRIC

b. IFRS and Conceptual Framework
c. IFRIC and Conceptual Framework
d. IFRS, IFRIC and Conceptual Framework

26. Which of the following is not treated as a change in accounting policy?

a. A change from FIFO inventory valuation to average cost
b. A change from cash basis to accrual basis of accounting error correction from non-GAAP-GAAP

c. A change from cost model to fair model in measuring investment property

d. A change to a new IFRS requirement

27. A change in accounting policy includes all of the following, except

a
a. The initial adoption of an accounting policy to carry asset at revalued amount
measurement b. The change from cost model to revaluation model in measuring property, plant and equipment
c. A change in the measurement basis
d. A change from one method of depreciation to a different method of depreciation
Caccounting estimate

28. When it is difficult to distinguish a change in an accounting policy from a change in an accounting
estimate, the change is treated as
a. Change in accounting estimate with appropriate disclosure
b. Change in accounting policy
c. Correction of an error
d. Initial adoption of an accounting policy

PFRS 5 DISCONTINUED OPERATION AND ASSET HELD FOR SALE

29. A noncurrent asset or disposal group shall be classified as held for sale when
a. The sale is highly probable.
b. The asset is available for immediate sale in the present condition.
c. The sale is probable and the asset is available for sale in the present condition.
d. The sale is highly probable and the asset is available for immediate sale in the present condition.

30.An entity shall classify a noncurrent asset as held for sale when
a. The carrying amount of the asset is recovered through a sale.
b. The carrying amount of the asset is recovered through continuing use.
PPE
c. The noncurrent asset is to be abandoned.
d. The noncurrent asset group is idle or retired from active use.
31. A noncurrent asset that is to be abandoned should not be classified as held for sale because
a. The carrying amount is recovered principally through continuing use.
b. It is difficult to value.
c. It is unlikely that the noncurrent asset will be sold within 12 months.
d. It is unlikely that there will be an active market for the noncurrent asset.

32. Which is not a criterion for an operation to be classified as discontinued?

a. The operation should represent a separate major line of business or geographical area.
b. The operation is part of a single plan to dispose of a separate major line of business or geographical
area.
c. The operation is a subsidiary acquired exclusively with a view to resale.
d. The operation must be sold within three months of the year-end. w/in I yo from
classification of HFS

33. Which is not required for component’s results to be classified as discontinued operations?
a. Management must have entered into a sale agreement
b. The component is available for immediate sale
c. The operation and cash flows of the component will be eliminated from the operations of the entity
as a result of the disposal
d. The entity will not have any significant continuing involvement in the operation of the component
after disposal

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 Page 5

PFRS 8 – OPERATING SEGMENT

34. Which quantitative threshold is not a requirement in qualifying a reportable segment?

a. The segment revenue, both external and internal, is 10% or more of the combined external and
internal revenue of all operating segments
b. The segment profit or loss is 10% or more of the greater between the combined profit of profitable
segments and combined loss of unprofitable segments
c. The segment assets are 10% or more of the combined assets of all operating segments
d. The segment liabilities are 10% or more of the combined liabilities of all operating segments

35. Which statement is not true with respect to a chief operating decision maker?
a. The term chief operating decision maker identifies a function and not necessarily a manager.
b. In some cases, the chief operating decision maker could be the chief operating officer.
c. The board of directors acting collectively could qualify as the chief operating decision maker.
d. The chief internal auditor who reports to the board of directors usually plays a very important role
and would generally qualify as chief operating decision maker
Lindependent function win the company
36. Which of the following statements about major customer disclosure is not true?
a. A major customer is defined as one providing revenue which amounts to 10% or more of the
combined external revenue of all operating segments.
b. The identities of major customers must be disclosed.
c. The entity shall disclose the total amount of revenue from major customers.
d. The entity shall disclose the identity of the segment reporting the revenue from major customers.
but no need to disclose

PAS 34 – INTERIM FINANCIAL REPORTING the amount

37. Interim financial reports should include as a minimum

a. A complete set of financial statements.
b. A condensed set of financial statements and selected notes.
c. A condensed statement of financial position and a condensed income statement.
d. A condensed statement of financial position and a condensed statement of cash flows.

38. Interim financial report shall be published

a. Once a year at anytime during the year
b. Within a month of the half year-end
c. On a quarterly basis
d. Whenever the entity wishes because interim reports are not required
-

Las to PAS34
39. An entity preparing interim financial statements should
a. Defer recognition of seasonal revenue Do refer recognize immediately full amount period incurred/earned
-
not , in in

b. Use the same accounting principles followed in preparing the latest annual financial statements
c. Allocate revenue and expenses evenly over the quarters, regardless of occurrence Depends of expenseon nature

d. Disregard temporary decreases in the market value of inventory GLCRV still

40. If an entity does not prepare interim reports

a. The year-end financial statements are deemed not to comply with IFRS.
b. The year-end compliance of financial statements with IFRS is not affected.
c. The year-end financial statements shall not be acceptable under local jurisdiction.
d. Interim financial reports must be included in year-end financial statements.

End

7238