IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

Chapter 27 / Interim Financial Reporting (l A S 34)

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MULTIPLE-CHOICE QUESTIONS 1. Under lAS 34, interim financial reports should be published

(c) Additional disclosure in the accounting pol– ICy note. (d) No additional disclosure. Answer: (b) 7. An entity is preparing half-yearly financial infor– mation in line with lAS 34. The period to be covered by the financial statements is the six months to June 30, 20X7. A new IFRS has been published that is effective for periods beginning on or after Jan– uary I, 20X7 . The entity must adopt the [FRS (a) In the financial statements for the year to December 3 1, 20X7, only. (b) In its interim financial statements to June 30, 20X7, only. (c) In its interim financial stateme nts to June 30. 20X7, and its annual financial statements to December 31, 20X7 . (d) At its own discretion. Answer: (c) 8. An entity operates in the travel industry and in– curs c.o~ts unevenly through the financial year. Advertising costs of $2 million were incurred on March I, 20X7, and staff bonuses are paid at year-end based on sales. Staff bonuses are expec ted to be around $20 million for the year; of that sum, $3 mil– lion would relate to the period endin g March 3 1, 20X7. What costs should be included in the entity' s quarterly financial report to March 31. 20X7 ? (a) Advertising costs $2 million; staff bonuses $5 million. (b) Advertising costs $0.5 million; staff bonuses $5 million. (c) Advertising cos ts $2 million; staff bonuses $3 million. (d) Advertising costs $0.5 million; staff bonuses $3 million. Answer: (c) 9. An entity prepares quarterly interim financial reports in accordance with lAS 34. The entity sells electncal goods, and normally 5% of customers claim on their warranty. The provision in the first quarter was calculated as 5% of sales to date, which was $ 10 million. However, in the second quarter, a design fault was found and warranty claims were expected to be 10% for the whole of the year. Sales in the second quarter were $ 15 million. What would be the provi– sion charged in the second quarter' s interim financial statements? (a) $750,000 (b) $ 1.25 million. (c) $ 1.5 million. (d) $2 million. Answer: (d) [10% of ($10 + $15) - (5% of $10»), that is, $2 million

(a) Once a year at any time in that year. (b) Within a month of the half-year-end. (c) On a quarterly basis. (d) Whenever the entity wishes.

Answer: (d) 2. The IASB encourages publicly traded entities to provide interim financial reports (a) At least at the end of the half-year and within 60 days of the end of the interim pe– riod. (b) Within a month of the half-year-end. (c) On a quarterly basis. (d) Whenever the entity wishes. Answer: (a) 3. If an entity does not prepare interim financial reports, then (a) The year-end financial statements are deemed not to comply with IFRS. (b) The year-end financial statements' compli– ance with IFRS is not affected. (c) The year-end financial statements will not be acceptab le under local legislation. (d) Interim financial reports should be included in the year-end financial statements. Answer: (b) 4. Interim financial reports should include as a minimum (a) A complete set of financial statements com– plying with lAS I. (b) A condensed set of financial statements and selected notes. (c) A balance sheet and income statement only. (d) A conde nsed balance sheet, income state- ment, and cash flow statement only. Answer: (b) 5. lAS 34 states a presumpti on that anyone reading mtenrn financial reports will (a) Understand all International Financial Re– porting Standards. (b) Have access to the records of the entity. (c) Have access to the most recent annual report. (d) Not make decisions based on the report. Answer: (c) 6. An entity owns a number of farms that harvest produce seasonally. Approximately 80% of the en– tity's sales are in the period August to October. Be– cause the entity's business is seasonal, lAS 34 sug– gests (a) Additional notes be written in the interim re– ports about the seasonal nature of the business. (b) Disclosure of financial information for the latest and comparative 12-month period in addition to the interim report.