Applying IFRS Standards 4th Edition Ruth Picker – Test Bank

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Testbank

 

 

 

to accompany

 

Applying IFRS® Standards 4e

Ruth Picker, Kerry Clark, John Dunn, David Kolitz, Gilad Livne, Janice Loftus, Leo van der Tas

 

 

 

 

 

 

Prepared by

John Sweeting, Emma Holmes and Elisabetta Barone

 

 

 

 

 

 

 

John Wiley & Sons, Ltd 2016

 

CHAPTER 5

Provisions, contingent liabilities and contingent assets

Learning Objectives

 

5.1       Describe the background to IAS 37

5.2       Identify which items are included within the scope of the standard

5.3       Outline the concept of a provision

5.4       Discuss how to distinguish provisions from other liabilities

5.5       Outline the concept of a contingent liability

5.6       Describe how to distinguish a provision from a contingent liability

5.7       Explain when a provision should be recognised

5.8       Explain how a provision, once recognised, should be measured

5.9       Apply the definitions, recognition and measurement criteria for provisions and contingent liabilities to practical situations

5.10     Outline the concept of a contingent asset

5.11     Describe the disclosure requirements for provisions, contingent liabilities and contingent assets

5.12     Compare the requirements of IFRS 3 regarding contingent liabilities with those of IAS 37

5.13     Explain the expected future developments for IAS 37.

 

Multiple Choice Questions

 

 

  1. Provisions in relation to which of the following balances are within the scope of IAS 37?

Learning Objective 5.2 Identify which items are included within the scope of the standard

*a.        warranties

  1. employee benefits
  2. financial instruments
  3. operating leases

 

 

  1. The uncertainty that exists in relation to provisions is one of:

Learning Objective 5.3 Outline the concept of a provision

  1. timing
  2. amount
  3. timing and amount

*d.        timing or amount

 

 

  1. Which of the following is an example of a provision falling within the scope of IAS 37?

Learning Objective 5.4  Discuss how to distinguish provisions from other liabilities

  1. accruals

*b.        onerous contracts

  1. employee benefits
  2. future operating losses

 

 

  1. An event that gives rise to a present obligation, but which cannot be measured with sufficient reliability is an example of a:

Learning Objective 5.5 Outline the concept of a contingent liability

  1. liability
  2. accrual
  3. provision

*d.          contingent liability

 

 

  1. Entity A has provided a bank guarantee to a bank in relation to a loan provided to entity B. Entity B is solvent and shows no signs of defaulting on the loan.  The treatment of the bank guarantee in the records of entity A is to:

Learning Objective 5.6 Describe how to distinguish a provision from a contingent liability

  1. recognise a liability
  2. recognise a provision

*c.        recognise a contingent liability

  1. do nothing

 

  1. Provisions shall be recognised when:

 

I           an entity has a present obligation

II it is possible that an outflow of resources will be required to settle the obligation

III            the amount of the obligation can be reliably estimated

IV           there has been a past event

 

Learning Objective 5.7 Explain when a provision should be recognised

  1. I, II and III
  2. II, III and IV

*c.          I, III and IV

  1. I, II and IV

 

 

  1. Liabilities which fail the recognition criteria and where the possibility of an outflow is remote should:

Learning Objective 5.7 Explain when a provision should be recognised

  1. be recognised as an accrual
  2. be recognised as a provision
  3. be recognised as a contingent liability

*d.        not be recognised in the financial statement at all

 

 

  1. JayJay Limited estimated that the future cash outflows relating to settlement of warranty obligations would be as follows:

In 1 year   $40 000

In 2 years $50 000

In 3 years $60 000.

A government rate for bonds with similar terms is 6%.  What is the present value of the total expected future cash outflow?

Learning Objective 5.8 Explain how a provision, once recognised, should be measured

*a.          $132 563;

  1. $140 510;
  2. $150 000;
  3. $159 000.

 

 

  1. According to IAS 37, when providing for the future, a future event such as the clean-up of a contaminated site, gains and other cash inflows that are expected to arise on the sale of asset related to the clean-up, must be treated as follows:

Learning Objective 5.8 Explain how a provision, once recognised, should be measured

  1. set-off against the provision for the clean-up;

*b.          measured separately of the provision;

  1. recognised directly in equity in the period in which the cash inflows arose;
  2. recognised as a deferred asset.

 

  1. Purcell Limited is a manufacturer of swimming pools and provides its customers with warranties at the time of sale. The warranty applies for three years from the date of sale.  Past experience shows that there will be some claims under the warranties.  The appropriate treatment of this item under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, is to:

Learning Objective 5.8 Explain how a provision, once recognised, should be measured

  1. disclose in the notes, but do not recognise in the financial statements;

*b.          recognise the best estimate of costs as a provision;

  1. charge the costs directly to profit or loss in the period in which the economic outflows occur;
  2. transfer the expected amount of the warranty from retained earnings to a special reserve account in equity.

 

 

  1. A railway company is required, under law, to overhaul its rail-tracks every three years as a safety measure. The appropriate treatment of this event for the purposes of preparing financial statements is:

Learning Objective 5.9 Apply the definitions, recognition and measurement criteria for provisions and contingent liabilities to practical situations

  1. recognise as a provision for future maintenance costs;

*b.     estimate the future maintenance costs and charge as depreciation over the next three years;

  1. disclose in the notes as a contingent liability, but do not recognise;
  2. estimate the future cash outflows and discount to determine the amount to be recognised as a deferred liability.

 

 

  1. The following is statement made in IAS 37:

a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it’.

This statement provides a definition of:

Learning Objective 5.9 Apply the definitions, recognition and measurement criteria for provisions and contingent liabilities to practical situations

*a.          an onerous contract;

  1. a deferred liability;
  2. a future operating loss;
  3. a present obligation.

 

 

  1. McCann Limited announced its plans for a major restructuring of its operations. Under IAS 37, the entity is able to:

Learning Objective 5.9 Apply the definitions, recognition and measurement criteria for provisions and contingent liabilities to practical situations

  1. capitalise all direct and indirect restructuring costs;
  2. set up a provision for the best estimate of all restructuring costs;

*c.     provide only for restructuring costs that are directly and necessarily caused by the restructuring;

  1. provide for restructuring costs that are associated with the ongoing activities of the entity.

 

 

  1. According to IAS 37, the appropriate accounting treatment for future operating losses is to:

Learning Objective 5.9 Apply the definitions, recognition and measurement criteria for provisions and contingent liabilities to practical situations

  1. determine a reasonable estimate of the cost and provide for the future liability;
  2. determine the cost and charge it directly against retained earnings;

*c.          not recognise such items in the financial statements;

  1. measure on the basis of estimated future cash flows.

 

 

  1. The following statement, contained in IAS 37, defines:

‘a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity’

Learning Objective 5.10 Outline the concept of a contingent asset

  1. a deferred liability;
  2. a contingent liability;
  3. a deferred asset;

*d.          a contingent asset.

 

  1. At balance sheet date, Raschella Limited was awaiting the final details of a court case for damages awarded in its favour. The amount and possible receipt of damages is unknown and will not be decided until the court sits again in several months’ time.  How is this event dealt with in the preparation of the financial statements?

Learning Objective 5.10 Outline the concept of a contingent asset

  1. do not recognise or disclose in the financial statements as the possibility of receiving damages is remote;
  2. recognise as an asset in the financial statements as the receipt of damages is probable;

*c.     disclose in the notes to the financial statements as it is possible that the entity will receive the damages and the court decision is out of its control;

  1. recognise as a deferred asset in the statement of financial position and re-classify as a non-current asset when the court decision is known.

 

  1. According to IAS 37, the appropriate treatment for a contingent asset in the financial statements of an entity is:

Learning Objective 5.10 Outline the concept of a contingent asset

*a.     disclosure of information in the notes, but do not recognise in the financial statements;

  1. recognition in the financial statements, and note disclosure;
  2. recognition in the financial statements, but no further disclosure in the notes;
  3. do not recognise in the financial statements, and do not disclose in the notes.

 

 

  1. In respect to a contingent liability, IAS 37 requires disclosure of

Learning Objective 5.11 Describe the disclosure requirements for provisions, contingent liabilities and contingent assets

  1. any increase in the contingent liability during the period;

*b.          an estimate of its financial effect;

  1. the carrying amount at the beginning and end of the period;
  2. an indication of the uncertainties about the amount or timing of expected outflows.

 

 

  1. For each class of provision, an entity is required by IAS 37 to disclose the following information:

 

I  The carrying amount at the beginning and end of the period.

II Amounts incurred and charged against the provision during the period.

III            Comparative information.

IV           Unused amounts reversed during the period.

V Additional provisions made during the period.

 

Learning Objective 5.11 Describe the disclosure requirements for provisions, contingent liabilities and contingent assets

*a.          I, II, IV and V only;

  1. I, II, and III only;
  2. II, III and IV only;
  3. I, III, IV and V only.

 

 

  1. The June 2005 Exposure Draft issued in relation to proposed changes to IAS 37:

Learning Objective 5.13 Explain the expected future developments for IAS 37

  1. will be issued as a standard applicable for reporting periods ending on or after 1 June 2014
  2. has been withdrawn by the IASB

*c.          is still under consideration by the IASB

  1. is already applicable

 

  1. Which of the following is not within the scope of IAS 37?

Learning Objective 5.2 Identify which items are included within the scope of the standard.

  1. The treatment of future operating losses
  2. The treatment of contingent assets

*c.        The treatment of restructuring provisions arising from a business combination

  1. The treatment of onerous contracts

 

 

  1. An example of where an entity has a present obligation is:

Learning Objective 5.3 Outline the concept of a provision.

*a.          a public announcement made by an entity’s management to undertake restructuring.

  1. a recommendation from the HR manager to the Board as to the level of bonuses to be paid at year end.
  2. a historical pattern of performing a major overhaul of machinery every two years.
  3. the declaration of a dividend by directors which is required to be ratified at a meeting of shareholders

 

 

  1. Which of the following statements is correct?

Learning Objective 5.3 Outline the concept of a provision.

  1. A present obligation is an example of a legal obligation.
  2. A legal obligation is an example of a constructive obligation.
  3. A constructive obligation is an example of an equitable obligation.

*d.        An equitable obligation is an example of a present obligation.

 

 

  1. Which of the following statements is correct?

Learning Objective 5.4 Discuss how to distinguish provisions from other liabilities.

*a.        a provision is a class of liabilities

  1. a contingent liability is a class of liabilities
  2. a provision is a class of contingent liabilities
  3. contingent liabilities and provisions are classes of liabilities

 

 

  1. A contingent liability is defined as a:
   I II III IV
possible obligation that arises from past events Yes Yes No No
possible obligation whose existence will be confirmed by the occurrence of an uncertain future event

 

Yes No Yes No

Learning Objective 5.5 Outline the concept of a contingent liability.

*a.          I;

  1. II;
  2. III;
  3. IV.

 

  1. Contingent liabilities are:

Learning Objective 5.6 Describe how to distinguish a provision from a contingent liability.

  1. recognised in the financial statements unless the possibility of an outflow in settlement is remote.

*b.     recognised in the notes to the financial statements unless the possibility of an outflow in settlement is remote.

  1. recognised in the notes to the financial statements because the possibility of an outflow in settlement is remote.
  2. not recognised in the notes to the financial statements because the possibility of an outflow in settlement is remote.

 

 

  1. An entity sells goods under warranty and past experience shows that minor defects account for 10% of sales and major defects account for 2% of sales. If all minor defects were repaired the warranty cost would be €300 000, and if all major defects were repaired the warranty cost would be €800 000.  The expected value of the warranty cost is:

Learning Objective 5.8 explain how a provision, once recognised, should be measured.

  1. €0;
  2. €22 000;

*c.          €46 000;

  1. €86 000.

 

 

  1. The costs under an onerous contract are measured using which valuation method?

Learning Objective 5.9 Apply the definitions, recognition and measurement criteria for provisions and contingent liabilities to practical situations.

  1. the lower of cost or net market value;

*b.     the lower of the cost of fulfilling the contract and the penalties arising from failure to fulfil the contract;

  1. the present value method using a risk-free discount rate;
  2. the unavoidable costs of meeting the obligations discounted by reference to market yields at reporting date.

 

 

  1. Entities are not required to disclose which of the following in relation to provisions?

Learning Objective 5.11 Describe the disclosure requirements for provisions, contingent liabilities and contingent assets.

  1. carrying amounts of provisions at the beginning of the period
  2. amounts used during the period
  3. the effect of any change in the discount rate used

*d.        comparatives

 

  1. The June 2005 exposure draft issued in relation to IAS 37 proposed changes to:

 

I the name of the standard
II recognition and measurement criteria
III the definition of contingencies
IV the method of disclosure for provisions

 

Learning Objective 5.13 Explain the expected future developments for IAS 37.

*a.        I, II and III

  1. II, III and IV
  2. I, III and IV
  3. I, II and IV

 

 

 

 

Testbank

 

 

 

to accompany

 

Applying IFRS® Standards 4e

Ruth Picker, Kerry Clark, John Dunn, David Kolitz, Gilad Livne, Janice Loftus, Leo van der Tas

 

 

 

 

Prepared by

John Sweeting, Emma Holmes and Elisabetta Barone

 

 

 

 

 

 

 

John Wiley & Sons, Ltd 2016

 

Chapter 17

Statement of cash flows

Learning Objectives

17.1       Explain the purpose of a statement of cash flows and its usefulness

17.2       Explain the definition of cash and cash equivalents

17.3       Explain the classification of cash flow activities and classify cash inflows and outflows into operating, investing and financing activities

17.4       Contrast the direct and indirect methods of presenting net cash flows from operating activities

17.5       Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

17.6       Prepare other disclosures required or encouraged by IAS 7

 

Multiple choice

1.       Which of the following items must be separately disclosed in the Statement of Cash Flows?

  1. Dividends paid
  2. Interest received

III.     Dividends received

  1. Interest paid
  2. Auditor’s remuneration paid

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

*a.     I, II, III and IV only;

  1. II, III and IV only;
  2. I, II and V only;
  3. II, III, IV and V only.

 

 

  1. According to IAS 7 Statement of Cash Flows, which of the following items does NOT fall within the definition of cash?

Learning Objective 17.2 Explain the definition of cash and cash equivalents

  1. Bank notes and coins;
  2. Non-bank bills readily convertible to cash;
  3. An investment with a short maturity of, say, three months or less from the date of acquisition;

*d.          Trade receivables.

 

 

3.       Which of the following items is classified as part of ‘operating activities’ in the Statement of Cash Flows?

Learning Objective 17.3 Explain the classification of cash flow activities and classify cash inflows and outflows into operating, investing and financing activities

  1. Depreciation of non-current assets;

*b.          Receipts from customers from the sale of goods;

  1. Bad debts expense;
  2. Proceeds from the sale of non-current assets.

 

 

  1. The following item is classified as part of ‘investing activities’ in the Statement of Cash Flows:

Learning Objective 17.3 Explain the classification of cash flow activities and classify cash inflows and outflows into operating, investing and financing activities

  1. depreciation of non-current assets;
  2. interest received from investments;

*c.          acquisition of non-current assets;

  1. proceeds from an issue of shares.

 

 

 

5.       The following item is classified as a ‘financing activity’ in the Statement of Cash Flows:

Learning Objective 17.3 Explain the classification of cash flow activities and classify cash inflows and outflows into operating, investing and financing activities

  1. interest paid on debentures;
  2. cash received from trade receivables;

*c.          cash payment on redemption of the company’s debentures;

  1. cash payment to purchase debentures of another entity.

 

 

  1. Operating activities on a Statement of Cash Flows are generally associated with:

Learning Objective 17.3 Explain the classification of cash flow activities and classify cash inflows and outflows into operating, investing and financing activities

  1. movements in non-current liabilities of an entity;

*b.          revenues and expenses of an entity;

  1. acquisitions of non-current assets of an entity;
  2. changes in equity of an entity.

 

 

  1. Items classified as ‘financing activities’ on an entity’s Statement of Cash Flows are usually associated with:

Learning Objective 17.3 Explain the classification of cash flow activities and classify cash inflows and outflows into operating, investing and financing activities

*a.          movements in non-current liabilities and equity;

  1. sales of goods and services by the entity;
  2. disposal of non-current assets;
  3. purchase of shares by the entity.

 

 

  1. Which of the following cash flow activities are regarded as investing cash flows?

Learning Objective 17.3 Explain the classification of cash flow activities and classify cash inflows and outflows into operating, investing and financing activities

  1. income taxes paid;
  2. interest paid;

*c.     acquisition of subsidiary net of cash acquired;

  1. proceeds from issue of debentures.

 

 

9.       Brett Limited had a net profit after tax of $850 000 for the financial year. Included in this profit was:

  • Depreciation expense of $120 000
  • Gain on disposal of investments of $28 000

Also, Trade Receivables increased by $39 000 and Inventories decreased by $12 000. The cash flow from operating activities during the year was:

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

  1. $731 000;
  2. $785 000;

*c.     $915 000;

  1. $969 000.

 

10.     The following information was extracted from the records of Ustinof Limited:

  • Opening balance of Equipment: $360 000
  • Closing balance of Equipment: $400 000
  • Cost of new Equipment: $80 000
  • Proceeds from disposal of Equipment: $6000 (Cost $40 000; Carrying amount $10000)

The total cash flows from investing activities is equal to:

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

  1. $40 000 cash outflow;

*b.          $74 000 cash outflow;

  1. $76 000 cash outflow;
  2. $80 000 cash outflow.

 

 

Use the following information to answer questions 11 to 13

 

A company reported the following information for a financial year:

£

Profit from ordinary activities before income tax expense 72 000
Income tax expense 20 000
Depreciation expense 8 000
Issue of shares 40 000
Loan made to another company 6 000
Increase in trade receivables 1 000
Decrease in inventories 2 000
Cash received from loans receivable 4 000
Dividends paid 2 000

 

 

  1. What is the net cash inflow (outflow) from operating activities?

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

  1. £45 000;
  2. £59 000;
  3. £60 000;

*d.          £61 000.

 

12.     What is the net cash inflow (outflow) from investing activities?

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

  1. £2000 net cash inflow;
  2. £6000 net cash inflow;

*c.     £(2000) net cash outflow;

  1. £(4000) net cash outflow.

 

  1. What is the net cash inflow (outflow) from financing activities?

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

*a.          £38 000 net cash inflow;

  1. £40,000 net cash inflow;
  2. £42,000 net cash inflow;
  3. £(2000) net cash outflow.

 

 

  1. Which of the following items should be disclosed in a Statement of Cash Flows?

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

  1. Payment of dividends through a share investment scheme;
  2. Acquisition of an investment in a subsidiary for consideration consisting of an exchange of non-current assets and liabilities;

*c.     Proceeds from the issue of debentures;

  1. Refinancing of long-term debt.

 

 

  1. IAS 7 Statement of Cash Flows requires that investing and financing transactions that do NOT require the use of cash or cash equivalents should be:

Learning Objective 17.2 Explain the definition of cash and cash equivalents

*a.     excluded from a Statement of Cash Flows;

  1. included in a Statement of Cash Flows before operating, investing and financing activities;
  2. presented in the Statement of Cash Flows after operating activities and before investing and financing activities;
  3. presented in a Statement of Cash Flows after the operating, investing and financing activities have been presented.

 

 

  1. During the financial year Sugianto Limited had sales of £42 000. The opening balance of trade receivables was £9000, and the closing balance was £12 700. Bad debts amounting to £700 were written off during the period. The cash receipts from sales during the year amounted to:

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

*a.          £37 600;

  1. £39 000;
  2. £38 300;
  3. £45 700.

 

 

 

  1. Warner Limited had the following cash flows during a reporting period:
  • Acquisition of subsidiary, net of cash flows: €250 000
  • Dividends paid: €65 000
  • Repayment of borrowings: €90 000
  • Interest paid on borrowings: €57 000
  • Proceeds from disposal of plant: €215 000

What is the amount of the cash flows from financing activities of Warner Limited for the reporting period?

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

  1. Net cash inflow €155 000;

*b.     Net cash outflow           €155 000;

  1. Net cash inflow €212 000;
  2. Net cash outflow €212 000.

 

 

  1. During the financial year Marina Limited had sales of €720 000. The opening balance of trade receivables was €103 000, and the ending balance was €139 000. Bad debts of €34 000 were written off during the period. The cash receipts from customers during the year were equal to:

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

*a.          €650 000;

  1. €718 000;
  2. €722 000;
  3. €790 000.

 

 

  1. During the financial year, Cresswell Limited had cost of sales of €260 000. Opening and closing balances of inventory and trade payables are shown below:
                                         Opening balance                         Closing balance
  • Inventory €46 000                                       €55 000
  • Trade Payables €18 000                                       €26 000

A discount of €2000 for prompt payment was received. The amount of cash paid for goods purchased during the year was:

Learning Objective 17.5 Prepare a statement of cash flows and use a worksheet to prepare a statement of cash flows with more complex transactions

*a.          €259 000;

  1. €263 000;
  2. €275 000;
  3. €279 000.

 

 

 

  1. Katsis Limited had the following cash flows during the reporting period:
  • Acquisition of intangibles: €30 000
  • Proceeds from disposal of plant: €28 000
  • Receipts from customers: €832 000
  • Payments to suppliers: €593 000
  • Interest received: €17 600
  • Income taxes paid: €45 500

The net cash flows from operating activities was:

Learning Objective 17.3 Explain the classification of cash flow activities and classify cash inflows and outflows into operating, investing and financing activities

*a.          €211 100;

  1. €239 100;
  2. €256 600;
  3. €269 100.

 

 

  1. The basis of measurement used in the Statement of Cash Flows is:

Learning Objective 17.1 Explain the purpose of a statement of cash flows and its usefulness:

  1. accrual;

*b.          cash and cash equivalents;

  1. net present value;

d market value.

 

 

  1. An item or transaction will qualify for classification as a cash equivalent:

Learning Objective 17.2 Explain the definition of cash and cash equivalents:

  1. if it has a remaining term of more than three months but no more than six months
  2. its term to maturity is no greater than twelve months
  3. it has a fixed maturity date of greater than twelve months

*d.          only if it had a maturity of less than three months at the date of acquisition.

 

 

  1. Bank borrowings are ordinarily classified as:

Learning Objective 17.2 Explain the definition of cash and cash equivalents:

  1. operating activities, except for bank overdrafts that are repayable on demand and which form an integral part of an entity’s cash management;
  2. investing activities, except for bank overdrafts that are repayable on demand and which form an integral part of an entity’s cash management;
  3. financing activities, except for bank overdrafts that are repayable on demand;

*d      financing activities, except for bank overdrafts that are repayable on demand and which form an integral part of an entity’s cash management.

 

 

  1. For cash flow reporting purposes, operating activities include:

Learning Objective 17.3 Explain the classification of cash flow activities and classify cash inflows and outflows into operating, investing and financing activities

  1. buying and selling of non-current assets;
  2. incurring and extinguishing equity and debt;
  3. acquisition and disposal of investments;

*d.          activities not otherwise classified as financing and investing.

 

  1. Which of the following descriptions is the best for ‘cash flows from investing activities’? Those activities that relate to  __________________.

Learning Objective 17.3 Explain the classification of cash flow activities and classify cash inflows and outflows into operating, investing and financing activities

  1. changing the size or financial structure of an entity;
  2. altering the composition of the debt of an organisation;

*c.          the acquisition or disposal of non-current assets;

  1. restructuring the working capital components of a business.

 

 

  1. The Statement of Cash Flows presentation method that separates gross cash inflows from cash outflows is known as the:

Learning Objective 17.4 Contrast the direct and indirect methods of presenting net cash flows from operating activities:

  1. equity method;

*b.          direct method;

  1. set-off method;
  2. net method.

 

 

  1. Cash flows arising from the following operating, investing or financing activities may be reported on a net basis when:

Learning Objective 17.4 Contrast the direct and indirect methods of presenting net cash flows from operating activities:

  1. cash receipts and payments for items in which the turnover is slow, the amounts are large, and the maturities are short;
  2. cash receipts and payments for items in which the turnover is quick, the amounts small, and the maturities are short;

c.*     cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short;

  1. cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are long-term.

 

 

  1. Cash flows arising from each of the following activities of a financial institution may be reported on a net basis:

I         cash receipts and payments for the acceptance and repayment of deposits with a fixed maturity date

II        the placement of deposits with and withdrawal of deposits from other financial institutions

III       cash advances and loans made to customers and the repayment of those advances and loans

IV      cash receipts and payments for the acceptance and repayment of deposits with no fixed maturity date

Learning Objective 17.4 Contrast the direct and indirect methods of presenting net cash flows from operating activities:

  1. I , II and IV;
  2. II, III and IV;
  3. I, III and IV;

*d.     I, II and III.

 

29.       The components of cash and cash equivalents:

Learning Objective 17.6 Prepare other disclosures required or encouraged by IAS 7

  1. may be disclosed at the option of the entity and reconciled to amounts reported in the statement of financial position;
  2. must be disclosed and reconciled to amounts reported in the statement of comprehensive income;

*c.     must be disclosed and reconciled to amounts reported in the statement of financial position;

  1. must be disclosed and reconciled to amounts reported in the statement of changes in equity.

 

 

  1. IAS 7 encourages, but does NOT require, the disclosure of:

I         the amount of undrawn borrowing facilities that may be available for future operating activities and to settle capital commitments, indicating any restrictions on the use of these facilities

II        the aggregate amount of cash flows that represent increases in operating capacity separately from those cash flows that are required to maintain operating capacity

III       the amount of the cash flows arising from the operating, investing and financing activities of each reportable segment

IV      the name(s) of the entity’s banks

Learning Objective 17.6 Prepare other disclosures required or encouraged by IAS 7:

  1. I, II and IV;
  2. II, III and IV;
  3. I, III and IV;

*d.     I, II and III.

 

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