Liabilities
Content
Which ONE of the following
statements best describes the
term 'liability'?
A. An excess of equity over current
assets
B. Resources to meet financial
commitments as they fall due
C. The residual interest in the assets of
the entity after deducting all its
liabilities
D. A present obligation of the entity
arising from past events
D
• The correct answer is "A present
obligation of the entity arising from
past
• events", as defined in para 49(b) of
the Framework.
Are the following statements true or
false, according to IAS1 Presentation
offinancial statements?
(1) Dividends paid should be
recognised in the statement of
comprehensive income.
(2) A loss on disposal of assets should
be recognised in the statement of
changes in equity.
Statement (1) Statement (2)
A False
False
B False
True
C True
False
D True
True
A
• A loss on disposal of assets is recognised
in the statement of comprehensive
• income because IAS16 Property, plant
and equipment does not permit
• otherwise (IAS1 para 88).
• Dividends paid are recognised in the
statement of changes in equity (IAS1
• para 106).
The Oakes Company has a loan due for
repayment in six months' time, but
Oakes has the option to refinance for
repayment two years later. Oakes
plans to refinance this loan.
In which section of its statement of
financial position should this loan be
presented, according to IAS1
Presentation of financial statements?
(select one answer)
A Current liabilities
B Current assets
C Non-current liabilities
D Non-current assets
C
• Because Oakes both has the right to
roll over the loan beyond 12 months
for
• the end of the reporting period and
intends to roll it over, it should be
• presented as a non-current liability
per para 73 of IAS1.
Which TWO of the following should be
taken into account when determining
the cost of inventories per IAS2
Inventories?
A Storage costs of part-finished goods
B Trade discounts
C Recoverable purchase taxes
D Administrative costs
A&B
• The correct answers are trade
discounts (deduct these from
purchase costs)
• and storage costs for part-finished
(but not finished) goods.
• See IAS2 paras 11 and 16.
best describes the carrying amount of
an asset?
A The cost (or an amount substituted
for cost) of the asset less its residual
value
B The amount at which the asset is
recognized in the statement of
financial position after deducting any
accumulated depreciation and
accumulated impairment losses
C The higher of the asset's net selling
price and its value in use
D The fair value of the asset at the
date of a revaluation less any
B
The correct answer is "The amount …
in the statement of financial position …
after accumulated depreciation and …
impairment losses".
IAS16 para 6 defines the carrying
amount.
Which ONE of the following statements
best describes the term 'depreciation'?
A The systematic allocation of an
asset's cost less residual value over its
useful life
B The removal of an asset from an
entity's statement of financial position
C The amount by which the
recoverable amount of an asset
exceeds its carrying amount
D The amount by which the carrying
amount of an asset exceeds its
recoverable amount
• A
• "The systematic allocation of an
asset's cost…" is the correct answer.
• See IAS16 para 6 for definitions.
The Mirror Company classified a non-current asset
accounted for under the cost model as held for sale
on 31 December 20X6. Because no offers were
received at an acceptable price, Mirror decided on 1
July 20X7 not to sell the asset, but to continue to
use it. In accordance with IFRS5 Non-current assets
held for sale and discontinued operations, the asset
should be measured on 1 July 20X7 at (select one
answer)
A the lower of its carrying amount and its
recoverable amount
B the higher of its carrying amount and its
recoverable amount
C the lower of its carrying amount on the basis that
it had never been classified as held for sale and its
recoverable amount
D the higher of its carrying amount on the basis that
it had never been classified as held for
sale and
its recoverable amount
• C
• IFRS5 para 27 in effect requires an
entity ceasing to classify an asset as
held
• for sale to remeasure it as if it had
never been held for sale, subject to
an
• impairment test (the recoverable
amount test) at that date.
statements best describes the
term 'liability'?
A. An excess of equity over current
assets
B. Resources to meet financial
commitments as they fall due
C. The residual interest in the assets of
the entity after deducting all its
liabilities
D. A present obligation of the entity
arising from past events
D
• The correct answer is "A present
obligation of the entity arising from
past
• events", as defined in para 49(b) of
the Framework.
Are the following statements true or
false, according to IAS1 Presentation
offinancial statements?
(1) Dividends paid should be
recognised in the statement of
comprehensive income.
(2) A loss on disposal of assets should
be recognised in the statement of
changes in equity.
Statement (1) Statement (2)
A False
False
B False
True
C True
False
D True
True
A
• A loss on disposal of assets is recognised
in the statement of comprehensive
• income because IAS16 Property, plant
and equipment does not permit
• otherwise (IAS1 para 88).
• Dividends paid are recognised in the
statement of changes in equity (IAS1
• para 106).
The Oakes Company has a loan due for
repayment in six months' time, but
Oakes has the option to refinance for
repayment two years later. Oakes
plans to refinance this loan.
In which section of its statement of
financial position should this loan be
presented, according to IAS1
Presentation of financial statements?
(select one answer)
A Current liabilities
B Current assets
C Non-current liabilities
D Non-current assets
C
• Because Oakes both has the right to
roll over the loan beyond 12 months
for
• the end of the reporting period and
intends to roll it over, it should be
• presented as a non-current liability
per para 73 of IAS1.
Which TWO of the following should be
taken into account when determining
the cost of inventories per IAS2
Inventories?
A Storage costs of part-finished goods
B Trade discounts
C Recoverable purchase taxes
D Administrative costs
A&B
• The correct answers are trade
discounts (deduct these from
purchase costs)
• and storage costs for part-finished
(but not finished) goods.
• See IAS2 paras 11 and 16.
best describes the carrying amount of
an asset?
A The cost (or an amount substituted
for cost) of the asset less its residual
value
B The amount at which the asset is
recognized in the statement of
financial position after deducting any
accumulated depreciation and
accumulated impairment losses
C The higher of the asset's net selling
price and its value in use
D The fair value of the asset at the
date of a revaluation less any
B
The correct answer is "The amount …
in the statement of financial position …
after accumulated depreciation and …
impairment losses".
IAS16 para 6 defines the carrying
amount.
Which ONE of the following statements
best describes the term 'depreciation'?
A The systematic allocation of an
asset's cost less residual value over its
useful life
B The removal of an asset from an
entity's statement of financial position
C The amount by which the
recoverable amount of an asset
exceeds its carrying amount
D The amount by which the carrying
amount of an asset exceeds its
recoverable amount
• A
• "The systematic allocation of an
asset's cost…" is the correct answer.
• See IAS16 para 6 for definitions.
The Mirror Company classified a non-current asset
accounted for under the cost model as held for sale
on 31 December 20X6. Because no offers were
received at an acceptable price, Mirror decided on 1
July 20X7 not to sell the asset, but to continue to
use it. In accordance with IFRS5 Non-current assets
held for sale and discontinued operations, the asset
should be measured on 1 July 20X7 at (select one
answer)
A the lower of its carrying amount and its
recoverable amount
B the higher of its carrying amount and its
recoverable amount
C the lower of its carrying amount on the basis that
it had never been classified as held for sale and its
recoverable amount
D the higher of its carrying amount on the basis that
it had never been classified as held for
sale and
its recoverable amount
• C
• IFRS5 para 27 in effect requires an
entity ceasing to classify an asset as
held
• for sale to remeasure it as if it had
never been held for sale, subject to
an
• impairment test (the recoverable
amount test) at that date.
