DE LA SALLE LIPA

College of Business, Economics, Accountancy and Management

Accountancy Department
Theory of Accounts Reviewer
____________________________________________________________________________________________________________
COVERAGE: Updates on PAS/PFRS/IFRIC

Direction: Read and select the best answer for the following questions.
1.

This is formed by FRSC in order to prepare interpretations of PFRS for approval of by the FRSC and in the context of the Conceptual
Framework, to provide timely guidance on financial reporting issues not specifically addressed in current PFRS?
a. Interpretations Committee
b. Philippine Interpretations Committee
c. Standing Interpretations Committee
d. International Financial Reporting Interpretations Committee
2. What is the purpose of interpretations issued by PIC?
a. To replace and amend the current PAS/PFRS.
b. To serve as generally accepted auditing standards.
c. To replace the conceptual framework for financial reporting.
d. To give authoritative guidance on issues that are likely to receive divergent or unacceptable treatment because the accounting
standards do not provide specific and clearcut rules and guidelines.
3. The Philippine generally accepted accounting principles comprises the following, except
a. Philippine Standards on Auditing (PSAs) and Philippine Standards on Review Engagements (PSREs)
b. Philippine Financial Reporting Standards
c. Philippine Accounting Standards
d. Philippine Interpretations
4. How many statement of financial positions shall an entity present in its comparative statement of financial positions if an applies an
accounting policy retrospectively, or makes a retrospective restatement of items in its financial statements or when it reclassifies items in
its financial statements?
a. Two statements
b. Three statements
c. Four statements
d. Five statements
5. The following are the instances when an entity shall prepare or present additional statement of financial position or a third statement of financial
position as at the beginning of the earliest comparative period, except
a. When the entity applies a change in accounting estimate prospectively.
b. When the entity applies a change in accounting policy retrospectively.
c. When the entity restates a prior period error retrospectively
d. When the entity reclassifies to profit or loss in the current period items that were recognized in OCI in the current or previous periods.
5. These are amounts reclassified to profit or loss in the current period that were recognized in other comprehensive income in the current
and previous periods.
a. Cumulative effect of change in accounting policy
b. Reclassification adjustments
c. Retroactive adjustments
d. Prospective adjustments
6. These are the items which are presented as components of Other Comprehensive Income in the Statement of Comprehensive Income,
except
a. Unrealized holding gain or loss on changes of Financial Assets at Fair Value Through OCI or Available for Sale Securities
b. Unrealized holding gain or loss on changes of Financial Assets/Liability at Fair Value Through P/L or Trading Securities which are
not due to credit risk
c. Translation debit or credit of Investment in Foreign Operation
d. Net remeasurement gain/loss or Actuarial Gain or Loss of Defined Benefit Plan
e. Revaluation Surplus
f. Unrealized holding gain or loss on changes of derivatives designated as cash flow hedge particularly the effective portion

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7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

Which of the following components of Other Comprehensive Income in the Statement of Comprehensive Income have reclassification
adjustments?
a. Unrealized holding gain or loss on changes of Financial Assets at Fair Value Through OCI or Available for Sale Securities
b. Unrealized holding gain or loss on changes of Financial Assets/Liability at Fair Value Through P/L or Trading Securities which are
not due to credit risk
c. Net remeasurement gain/loss or Actuarial Gain or Loss of Defined Benefit Plan
d. Revaluation Surplus
e. Translation debit or credit of Investment in Foreign Operation
f. Unrealized holding gain or loss on changes of derivatives designated as cash flow hedge particularly the effective portion
The following statements concerning the impairment of accounts receivable are correct, except
a. A financial asset or group of assets is impaired if there is objective evidence of impairment as a result of one or more loss events
having a negative impact on the estimated cash flows of the financial asset can be measured reliably.
b. Individually significant accounts receivable should be considered for impairment collectively with other accounts and if impaired,
the impairment loss is recognized.
c. Accounts receivable not individually significant should be collectively assessed for impairment.
d. Accounts receivable not considered impaired should be included with other accounts receivable with similar credit-risk
characteristics and collectively assessed for impairment.
The following are loss events that may indicate objective evidence of impairment, except
a. Increase in the estimated future cash flows from a group of financial assets since initial recognition, although the increase cannot
yet be identified with the individual financial assets in the group.
b. Disappearance of an active market for the financial asset because of financial difficulty.
c. Significant financial difficulty of the issuer or obligor and breach of contract such as default or delinquency in interest or principal
payment.
d. Probability that the borrower will enter bankruptcy or other financial reorganization.
Which of the following statements is incorrect concerning notes receivable discounting?
a. If the discounting is conditional sale, the note receivable discounted account is credited for the face of the note receivable sold.
b. If the discounting is absolute sale, the note receivable account is credited for the face of the note receivable sold.
c. If the discounting is secured borrowing, the liability account is credited for the face of the note receivable discounted.
d. If the discounted is secured borrowing, there is gain/(loss) on discounting.
PFRS 9 provides that at initial recognition, an entity shall measure a financial asset not at fair value through profit or loss at
a. Fair value plus transaction costs that are directly attributable to the acquisition of the financial asset
b. Amortized cost
c. Fair value
d. Present value
PFRS 9 provides that transactions costs that are directly attributable to the acquisition of the financial asset at fair value through profit or
loss shall be
a. Capitalized as cost of the financial asset
b. Expensed outright
c. Amortized using the term
d. Charged to share premium account
Under PFRS 9, an entity shall measure a financial asset subsequently at fair value or amortized cost depending on the entitys
a. Industry
b. Business model for managing financial assets
c. Accounting policy
d. Performance
Which of the following statements concerning PFRS 9 is incorrect?
a. If the business model is to hold investments in order to realize fair value changes, the subsequent measurement financial assets
is at fair value.
b. If the business model is to hold investment in order to collect contractual cash flows, the subsequent measurement of financial
asset is at amortized cost.
c. Both A and B
d. Neither A nor B
The following financial assets shall be classified and measured at fair value through profit or loss, except
a. Financial assets held for currently undetermined purpose.
b. Financial assets held for trading.
c. Financial assets that are irrevocable designated on initial recognition at fair value through profit or loss.
d. All other investment in quoted equity instruments.
PFRS 9 provides that a financial assets is held for trading if any of the following, except
a. It is acquired principally for the purpose of selling or repurchasing it in the near term.
b. On initial recognition, it is part of a portfolio of identified financial assets that are managed together and for which there is
evidence of a recent actual pattern of short-term profit taking.

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17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

c. It is a derivative asset for purposes of short-term profit on fluctuation on fair value.

d. It is a derivative that is a financial guarantee contract or a designated and an effective hedging instrument.
Which of the following statements concerning PFRS 9 provisions on FAFVOCI is incorrect?
a. An entity may make an election to present in OCI subsequent changes in fair value of an investment in equity instrument that is
not held for trading.
b. The designated or election to present in OCI subsequent changes in fair value of an investment in equity instrument is
irrevocable.
c. If the investment in equity instrument is held for trading, the election to present gain and loss in OCI is allowed.
d. If the investment in equity instrument is hold for trading, subsequent changes in fair value are always included in profit or loss.
The following rules concerning the measurement of financial assets under PFRS 9 are correct, except
a. Financial assets held for trading are measured at fair value through profit or loss.
b. Nontrading equity instrument or investments in shares can be measured at fair value through other comprehensive income by
irrevocable designation.
c. All other investment in quoted equity instruments are measured at fair value through profit or loss.
d. Debt investment held for collection are measured subsequently at amortized cost.
e. Debt investments not held for collection are measured subsequently at fair value.
f. Investments in unquoted equity instruments are measured at fair value.
PFRS 9 provides that on derecognition of a financial asset at fair value through profit or loss, the difference between the consideration
received and the carrying amount is recognized in
a. Other comprehensive income
b. Profit or loss
c. Cumulative effect in retained earnings
d. Share premium
PFRS 9 provides that on derecognition of a financial asset at fair value through other comprehensive income, the difference between the
consideration received and the carrying amount is recognized in
a. Other comprehensive income
b. Profit or loss
c. Directly to retained earnings
d. Share premium
PFRS 9 provides that on derecognition of a financial asset at fair value through other comprehensive income, the cumulative gain or loss
recognized in Other Comprehensive Income for the previous years shall be
a. Reclassified to profit or loss
b. Charged to share premium
c. Directly credited or debited to equity or retained earnings
d. Retroactively restated
PAS 28 does not cover investment on associate achieved in stages. By analogy, PFRS 3, par.42 provides that in a business combination
achieved in stages shall be treated
a. Retrospectively by adjusting the existing investment account and retained earnings, beginning
b. Prospectively by remeasuring the previously held equity interest at fair value and recognize the resulting gain or loss in profit or
loss.
c. Retrospectively as if it is a prior period error.
d. Prospectively by adding the newly acquired investment to the existing investment without any remeasurement.
Which of the following statements concerning investment in bonds receivable is correct?
a. Financial asset at amortized cost is measured initially at fair value.
b. Financial asset at fair value through profit or loss is measured initially at fair value plus transaction cost.
c. Financial asset at fair value through profit or loss is measured subsequenty at fair value.
d. Financial asset at amortized cost is subsequently measured at fair value plus transaction cost.
Agriculture: Bearer Plants (Amendments to PAS 16 and PAS 41) defines bearer plant as a living plant that meet all the following criteria,
except
a. It is used in the production or supply of agricultural produce.
b. It is expected to bear fruit for more than one period.
c. It has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.
d. It is an agricultural produce growing in bearer plants.
Which of the following statements concerning Bearer Plant amendments is incorrect?
a. Bearer plant will now be within the scope of PAS 16: Property, Plant and Equipment.
b. Agricultural produce growing on bearer plant will now be within the scope of PAS 16: Property, Plant and Equipment
c. Government grants relating to bearer plant will now be accounted for in accordance with PAS 20: Government Grants.
d. Entities will have the options to measure bearer plants subsequently using cost model or revaluation model.
Based on the amendment on bearer plants, they shall be measured initially and subsequently
a. Fair value less cost to sell and fair value less cost to sell

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b.

27.

28.

29.

30.

31.

32.

Historical cost and Cost less accumulated depreciation less accumulated impairment under cost model or Fair value or
depreciate replacement cost less subsequent depreciation and impairment under revaluation model
c. Historical cost and fair value less cost to sell
d. Fair value less cost to sell and Cost less accumulated depreciation less accumulated impairment
Which of the following statements concerning the amendments on bearer plants is correct?
a. Agricultural produce shall now be measured initially at historical cost and subsequently at cost less accumulated depreciation
less accumulated impairment.
b. Agricultural produce shall continue to be measured at fair value less cost to sell.
c. Agricultural produce shall continue to be measured together with the bearer plant.
d. Agricultural produce shall now be presented as noncurrent asset and covered by PAS 16.
Government grant related to bearer plant shall now be accounted for
a. Under PAS 41 as income from donation
b. Under PAS 20 either as deferred income and recognized in profit or loss on systematic basis over the useful life of the asset or
deduction to the cost of the bearer plant which will reduce the depreciation expense of the bearer plant on systematic basis over
the useful life of the asset
c. Under PAS 2 as cost of sales
d. Under PAS 38 as research and development cost
The unrealized holding loss on changes in financial asset at fair value through profit or loss due to credit risk shall be presented and not
due to credit risk shall be presented in
a. Both Profit or Loss
b. Both Other Comprehensive Income
c. Profit or loss and Other Comprehensive Income, respectively
d. Other Comprehensive Income and Profit or loss, respectively
PAS 20, par. 10 provides that the benefit of a government loan with a NIL or below-market rate of interest is treated as a government grant.
Par. 10A further provides that the government grant on a government loan with a NIL interest is measured at
a. Face value of the loans payable
b. Present value of the loans payable
c. Difference between the face value of the loan and present value of the loan
d. Difference between the nominal interest and effective interest
PAS 20, par.10 provides that government grant on a forgivable loan shall be realized as income from government grant
a. Over the life of the loan using effective interest method
b. Over the life of the loan using straight line method
c. Immediately at the date of the loan
d. Over the life of the loan using bond retirement method
The Philippine Interpretation Committee issued an interpretation on land and building acquired at a single cost. The following statements
are correct, except
a. If the old building is usable, the single cost is allocated tp land and building based on relative fair value while if the old building is
unusable, the single cost is allocated to land only.
b. If the usable old building is demolished immediately to make room for construction of a new building, any allocated carrying
amount of the usable old building is recognized as a loss if the new building is accounted for as PPE or investment property
while any allocated amount is capitalized as cost of the new building if the new building is accounted for as inventory.
c. If the usable old building is demolished immediately to make room for construction of a new building, the demolition cost minus
salvage value is capitalized as cost of the new building whether the new building is accounted for as PPE, Investment Property
or Inventory.
d. If the usable old building is demolished immediately to prepare the land for the intended use, the demolition cost minus salvage
value is capitalized as cost of the land.
e. If the usable old building is acquired and used in a prior period but demolished in the current period to make room for the
construction of a new building, the carrying amount of the old building is capitalized as a cost of new building whether the new
building is PPE, Investment Property or Inventory.
f. If the usable old building is acquired and used in a prior period but demolished in the current period to make room for the
construction of a new building, the net demolition cost is capitalized as a cost of new building whether the new building is PPE,
Investment Property or Inventory.
g. If the usable old building is acquired and used in a prior period but demolished in the current period to make room for the
construction of a new building, any payments to tenants of old building to induce them to vacate the old building is capitalized as
a cost of new building whether the new building is PPE, Investment Property or Inventory.

33. PAS 9R enumerates the following as components of employee benefit expenses as part of profit or loss, except
a. Past Service Cost fully recognized
b. Current service cost fully recognized

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34.

35.

36.

37.

38.

39.

40.

41.

42.

c. Interest cost PBO, beginning times discount rate

d. Actual return on plant assets
e. Expected return on plan assets FVPA, beginning times discount rate
f. Interest on effect of asset ceiling Effect of asset ceiling, beginning times discount rate
PAS 9R enumerates the following as causes of net remeasurement gain/(loss) a.k.a. actuarial gain or loss part of OCI, except
a. Difference between actual return on plan asset and expected return on plan asset
b. Increase or decrease in PBO due to changes in actuarial assumptions or difference between projected benefit obligation and the
actual benefit obligation
c. Amortization of past service cost
d. Remainder of Increase or decrease in effect of asset ceiling after removing the interest on effect of asset ceiling
PAS 9R requires what method for accounting for of net remeasurement gain/(loss) a.k.a. actuarial gain or loss?
a. Corridor approach as part of profit or loss to be amortized using the service lives of employees
b. Full recognition approach as part of OCI
c. Retrospectively as cumulative adjustment in retained earnings, beginning
d. Retrospectively as restatement of prior period error
PAS 9R par. 64 provides that if the FVPA is more than PBO, the plan is overfunded and the prepaid benefit cost is called as a surplus. The
PBC or surplus must not exceed the asset ceiling which is the
a. Total of current service cost and past service cost
b. Present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the
plan discounted using the discount rate in the measurement of the defined benefit plan.
c. Total of interest cost and expected return on plan asset
d. Difference between actual return and expected return on plan asset
PAS 19 par. 8 provides that any change in the effect of asset ceiling shall be presented in
a. Profit or loss as part of employee benefit expense
b. OCI as part of net remeasurement gain/(loss) or actuarial gain or loss
c. Statement of changes in equity as cumulative effect of retained earnings
d. OCI as part of remeasurement gain/(loss) or actuarial gain or loss after excluding the interest on the effect of asset ceiling which
shall be part of employee benefit expense in profit or loss.
Under the transitional provisions of PAS 19R, par. 173 provides that an entity shall apply this amendment to PAS 19
a. Prospectively by adjustment in the profit or loss
b. Retrospectively by adjusting the beginning retaining earnings and prepaid/accrued benefit cost
c. By the companys chosen application
d. By retrospective restatement of prior period error
PFRS 9, par. 5.3.1 provides that after initial recognition, a financial liability such as loans payable, notes payable or bonds payable shall be
measured subsequently at
a. Amortized cost using the effective interest method
b. At fair value through profit or loss if the financial liability is designated irrevocably as measured at fair value through profit or loss
c. Either A or B
d. Neither A nor B
PFRS 9 provides that a financial liability classified at fair value through profit or loss shall be measured initially and subsequently at
a. Fair value and fair value
b. Fair value minus transaction cost and fair value
c. Fair value and amortized cost
d. Fair value minus transaction cost and amortized cost
PFRS 9 provides that a financial liability classified at amortized cost shall be measured initially and subsequently at
a. Fair value and fair value
b. Fair value minus transaction cost and fair value
c. Fair value and amortized cost
d. Fair value minus transaction cost and amortized cost
Property Dividends declared by the company or noncurrent asset to be distributed to shareholders as property dividend shall be governed
by what standards when it comes to classification, measurement and presentation?
a. PFRS 5
b. PAS 16
c. PAS 40
d. PAS 41

43. PFRS 5, par 15A provides that an entity shall measure a noncurrent asset classified for distribution to owners or property dividends at
a. Fair value
b. Lower of carrying amount or fair value less cost to distribute
c. Lower of carrying amount or recoverable amount

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d. Recoverable amount or fair value, whichever is higher

44. Application guidance 32 of PAS 32 provides than on conversion of convertible instrument at maturity, the entity shall
a. Recognize a gain or loss on conversion at maturity
b. Derecognize the liability component and recognize it as equity without gain or loss but balancing it to share premium.
c. Recognize a change in accounting policy
d. Recognize a prior period error
45. Animals and pets used in Zoo Company shall be accounted for under
a. PAS 16: Property, Plant and Equipment
b. PAS 41: Agriculture
c. PAS 2: Inventory
d. PAS 38: Intangible Assets

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