Module-5

1. Short-term employee benefits do not include bonuses payable more than 12 months after the end of the period in which the related employee services are performed

a. True
c. False

2. An employer’s statement of financial position should show a liability equal to the expected amount payable in the following ___________ as a result of unused entitlement to non-accumulating short-term paid absences.

a. 6 months
b. 12 months
c. 24 months

3. Defined benefit plans are post-retirement benefit plans where the employer is not legally or constructively obliged to provide an agreed level of post-employment benefits

a. True
b. False

4. In the case of a defined benefit plan, the employer’s statement of financial position should show an asset or liability equal to the difference between the ________ of the defined benefit obligation at the end of the reporting period and the _________ of the plan assets at the end of the reporting period

a. present value, fair value
b. fair value, present value
c. net realizable value, net realizable value

5. In the case of a defined benefit plan, the expense shown in the employer’s statement of comprehensive income should normally include the present value of the current service cost for the reporting period, the interest income for the period, the interest cost for the period

a, False
b. True

6. The interest cost in relation to a defined benefit plan arises because the accumulated benefits which employees had earned at the end of the previous period are now one period closer to being paid. True or False?

a. True
b. False

7. In the case of a defined benefit plan, actuarial gains may arise because:

a. There are favourable differences between actuarial assumptions made at the end of the previous period and actual events which have occurred in the current period
b. Benefits paid during the period are less than employer contributions.
c. There are adverse differences between actuarial assumptions made at the end of the previous period and actual events which have occurred in the current period
d. Benefits paid during the period are less than employee contributions.

8. In the case of a defined benefit scheme, the items which must be shown in other comprehensive income in the statement of comprehensive income are:

a. Actuarial gains or losses and the return on plan assets (less interest income)
b. Actuarial gains or losses only
c. Return on plan assets only
d. Interest cost and interest income

9. A bonus which is not payable wholly before 12 months after the end of the period in which the related employee services are performedis always treated as a long-term employee benefit?

a. True
b. False

10. Redundancy payments to employees should be recognised as an expense in the employer’s ___________as soon as the employer is considering making those employees redundant.

a. Statement of profit & Loss
b. statement of comprehensive income
c. Statement of financial position

11. Which one of the following factors will be reflected in the amount of a short-term employee benefit obligation measured in accordance with IAS 19 Employee Benefits?

a. the risk-free interest rate
b. salary rates current at reporting date
c. salary rates that reflect the future sacrifice
d. interest rates on high-quality corporate bonds

12. According to IAS 19 Employee Benefits, measurement of the long-term employee benefit obligation should be based on

a. vested benefits at future salary rates.
b. vested benefits at current salary rates.
c. vested and non-vested benefits at future salary rates.
d. vested and non-vested benefits at current salary rates.

13. A long-term employee benefit obligation should reflect the amount which, if invested at measurement date, would provide the necessary pre-tax cash flows to pay the accrued obligation when expected to be settled. Where a deep market exists for all relevant financial instruments, IAS 19 requires that this amount is invested in

a. risk-free securities.
b. government bonds.
c. a portfolio of high-quality shares.
d. a portfolio of high-quality corporate bonds.

14. At 1 January 2008, the following values relate to a defined benefit plan: the fair value of the plan assets is USD180m; present value of the defined benefit; obligation is USD150m; and there are cumulative unrecognised actuarial gains of USD33m. At 31 December 2008, the following values relate to the defined benefit plan: fair value of the plan assets has risen by USD10m; the present value of the defined benefit obligation has risen by USD6m; and the actuarial gain for the period is USD10m. The average remaining working lives of the employees is unchanged at 10 years. The entity has decided to use the corridor approach in recognising actuarial gains and losses. What is the actuarial gain or loss that would be charged against profit or loss for the year?

a. USD2.4m
b. USD1.9m
c. USD1.7m
d. USD1.5m

15. An entity uses IFRS to prepare its financial statements but the defined benefit obligation has been calculated using assumptions that are different from IFRS. How should the entity measure its net pension liability?

a. The net present value of the defined benefit obligation less the fair value of the plan assets
b. The net present value of the defined benefit obligation, less the fair value of the plan assets, less the unrecognised past service costs. A review of the assumptions should also be undertaken to measure the obligation again
c. The net present value of the defined benefit obligation, less the fair value of plan assets, less the unrecognised past service costs
d. The value in the balance sheet will simply be used in the consolidated financial statements

16. Which of the following methods of recognition of actuarial gains and losses is not allowed by IAS 19?

a. Any systematic method that results in a faster recognition of actuarial gains and losses
b. Recognising actuarial gains and losses in full in the period in which they occur, outside profit or loss
c. 10 percent corridor approach
d. Carry forward in reserves indefinitely subject to assets ceiling test.

17. An entity operates a defined benefit plan that pays employees a pension based on number of years service. It has for many years increased the pension in the final year by the percentage increase in profits over the last two years of working life. How will pensions be calculated if employees retire in the current period?

a. Existing plan rules with no additional award
b. Existing plan rules plus the increase in profits over the last two years divided by the remaining service lives of the employees
c. Existing plan rules plus the increase in profits over the last year
d. Existing plan rules plus the increase in profits over the last two years

18. An entity operates a defined benefit pension plan and changes it on 1 January 2008 to a defined contribution plan. The defined benefit plan still relates to the past service but not future service. The net pension liability after the plan amendment is USD170m and the net pension liability before the amendment was USD220m. How should the entity account for this change?

a. It recognises a gain of USD50m over the remaining service lives of the employees
b. It recognises a gain of USD50m
c. It does not recognise a gain
d. It recognises the gain but applies the 10 percent corridor approach to it

19. An entity has decided to improve its defined benefit pension scheme by increasing the benefits payable when staff retire. As a result, the current defined benefit pension liability will increase by USD15m. The average remaining service lives of the employees is 15 years

a. Charged against profit or loss for the year
b. Should be recognised using the corridor approach
c. Charged against other reserves
d. Spread over the remaining working lives of the employees

20. An entity has identified the following business segments: Segment 1 has revenue of 70,000, all external. Its profit is 10,000 and its assets 50,000. Segment 2 has revenue of 35,000, of which 30,000 relates to sales to other segments of the entity. Its profit is 1,000 and is assets 4,500. Segment 3 has revenue of 13,000, all external. Its profit is 1,000 and its assets 5,000. Segment 4 has revenue of 12,500, all external. Its profit is 500 and its assets 3,000. All of the segments have different economic characteristics. Which, as a minimum, of the segments are reportable under IFRS 8?

a. Interest cost
b. Actual return on plan assets
c. Current service cost
d. The expected return of any plan assets

21. Which of the following methods of recognition of actuarial gains and losses is not allowed by IAS 19?

a. Any systematic method that results in a faster recognition of actuarial gains and losses
b. Recognising actuarial gains and losses in full in the period in which they occur, outside profit or loss
c. 10 percent corridor approach
d. Carry forward in reserves indefinitely subject to assets ceiling test

22. Under the terms of a company pension plan, the company contributes 5 percent of an employee’s salary to the plan. The employee is guaranteed a return of the contributions plus a terminal bonus of 20 percent by the employer. The plan would be classified as –

a. A defined contribution plan
b. A multi-employer plan
c. A termination benefit
d. A defined benefit plan

23. How should an entity determine the discount rate to be used to discount cash flows relating to plan assets?

a. By reference to market yields at the balance sheet date on high quality corporate bonds
b. By using local bank interest rates
c. By reviewing investment or actuarial risk
d. By taking into account the specific risk associated with the business

24. Which of the following methods of recognition of actuarial gains and losses is not allowed by IAS 19?

a. Any systematic method that results in a faster recognition of actuarial gains and losses
b. Recognising actuarial gains and losses in full in the period in which they occur, outside profit or loss
c. 10 percent corridor approach
d. Carry forward in reserves indefinitely subject to assets ceiling test

25. Which of the following events will cause a change in a defined benefit obligation?

a. Changes in the proportion of employees taking early retirement
b. All of these answers
c. Changes in the benefits which will occur in the future
d. Changes in the discount rate used to calculate defined benefit liabilities

26. Short-term employee benefits do not include:

a. Benefits in kind
b. Short-term sick pay
c. Bonuses payable more than 12 months after the end of the period in which the related employee services are performed
d. Employer's social security contributions

27. An employer’s statement of financial position should show a liability equal to the expected amount payable in the following 12 months as a result of unused entitlement to non-accumulating short-term paid absences. True or False?

a. True
b. False

28. Defined benefit plans are post-retirement benefit plans where:

a. The risk that benefits will be less than expected falls upon the employees
b. The employer is legally or constructively obliged to provide an agreed level of post-employment benefits
c. The employer is legally obliged to provide an agreed level of post-employment benefits
d. The employer pays an agreed level of contributions into the pension fund each year and is not obliged to make any further contributions

29. In the case of a defined benefit plan, the employer’s statement of financial position should show:

a. An asset equal to the cost of the plan assets at the end of the reporting period
b. A liability equal to the undiscounted defined benefit obligation at the end of the reporting period
c. An asset or liability equal to the difference between the present value of the defined benefit obligation at the end of the reporting period and the cost of the plan assets at the end of the reporting period
d. An asset or liability equal to the difference between the present value of the defined benefit obligation at the end of the reporting period and the fair value of the plan assets at the end of the reporting period

30. In the case of a defined benefit plan, the expense shown in the employer’s statement of comprehensive income should normally include:

a. The interest cost for the period
b. The interest income for the period
c. The present value of the current service cost for the reporting period
d. All of the above

31. The interest cost in relation to a defined benefit plan arises because the accumulated benefits which employees had earned at the end of the previous period are now one period closer to being paid. True or False?

a. True
b. False

32. In the case of a defined benefit plan, actuarial gains may arise because:

a. There are favourable differences between actuarial assumptions made at the end of the previous period and actual events which have occurred in the current period
b. Benefits paid during the period are less than employer contributions.
c. There are adverse differences between actuarial assumptions made at the end of the previous period and actual events which have occurred in the current period
d. Benefits paid during the period are less than employee contributions.

33. In the case of a defined benefit scheme, the items which must be shown in other comprehensive income in the statement of comprehensive income are:

a. Actuarial gains or losses only
b. Return on plan assets only
c. Actuarial gains or losses and the return on plan assets (less interest income)
d. Interest cost and interest income

34. Which of the following items is always treated as a long-term employee benefit?

a. Employee wages and salaries
b. A company car provided for an employee's use
c. A bonus which is not payable wholly before 12 months after the end of the period in which the related employee services are performed
d. A bonus payable wholly before 12 months after the end of the period in which the related employee services are performed

35. Redundancy payments to employees should be recognised as an expense in the employer’s statement of comprehensive income as soon as the employer is considering making those employees redundant. True or False?

a. True
b. False

36. An entity shall recognise the expected cost of short-term employee benefits in the form of compensated absences as follows:

a. in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and in the case of non-accumulating compensated absences, when the absences occur
b. in the case of accumulating compensated absences, when the absences occur; and in the case of non-accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences

37. When an employee has rendered service to an entity during an accounting period, the entity shall recognise the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service:

a. as a liability (accrued expense)
b. as an asset (prepaid expense)
c. either as an asset or as a liability

38. An entity has 100 employees, who are each entitled to five working days of paid sick leave for each year. Unused sick leave may be carried forward for one calendar year. Sick leave is taken first out of the current year’s entitlement and then out of any balance brought forward from the previous year (a LIFO basis). At 30 December 20X1, the average unused entitlement is two days per employee. The entity expects, based on past experience which is expected to continue, that 92 employees will take no more than five days of paid sick leave in 20X2 and that the remaining eight employees will take an average of six and a half days each. Therefore, the entity should recognises a liability equal to:

a. 500 days of sick pay
b. 5 days of sick pay
c. 6 and half days of sick pay
d. 12 days of sick pay

39. An entity should recognises the cost of profit-sharing and bonus plans :

a. as a distribution of profit
b. as an expense

40. The net defined benefit cost shall be recognised in the separate or individual financial statements of the group entity that is legally the sponsoring employer for the plan:

a. If and only if there is a contractual agreement or stated policy for charging the net defined benefit cost for the plan as a whole measured in accordance with IAS 19 to individual group entities
b. If and only if there is no contractual agreement or stated policy for charging the net defined benefit cost for the plan as a whole measured in accordance with IAS 19 to individual group entities

41. IAS 19 Employee Benefits recently amended in the year

a. 2010
b. 2011
c. 2012
d, 2016

42. IAS 19 not applies to

a. Wages and salaries
b. Profit Sharing and bonuses
c. retirement benefits
d. None of these

43. Short-term employee benefits are those expected to be settled wholly before____

a. 6 Months
b. 12 Months
c. 18 Months
d. 3 Months

44. An employee may provide services to an entity on a __________.

a. full-time or part-time
b. permanent or temporary basis
c. casual basis
d. All of the above

45. Which of the following statements define “the net defined benefit liability”?

a. The deficit or surplus, adjusted for any effect of limiting a net defined benefit asset to the asset ceiling
b. The present value, without deducting any plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and prior periods
c. The present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan
d. The change during the period in the net defined benefit liability that arises from the passage of time.

46. Actuarial gains and losses are changes in the present value of the defined benefit obligation resulting from:

a. Actuarial gains and losses and any change in the effect of the asset ceiling
b. Actuarial gains and losses and the return on plan assets, excluding amounts included in net interest on the net defined benefit liability
c. Experience adjustments and the effects of changes in actuarial assumptions
d. Experience adjustments and any costs of managing plan assets

47. Under which of the following circumstances does “present obligation” exist?

a. The entity has recorded this obligation in its financial statements
b. The entity has no realistic alternative but to make the payments
c. The entity has intentions to make the payments
d. All of the above

48. Which of the following transactions involving the issuance of shares does not come within the definition of a “share-based” payment under IFRS 2?

a. Employee share purchase plans.
b. Employee share option plans.
c. Share-based payment relating to an acquisition of a subsidiary.
d. Share appreciation rights.

49. Which of the following is true regarding the requirements of IFRS 2?

a. Private companies are exempt.
b. “Small” companies are exempt.
c. Subsidiaries using their parent entity’s shares as consideration for goods and services are exempt.
d. There are no exemptions from IFRS 2.

50. Equity is increased by $3 million, inventory is increased by $3 million; the inventory value is expensed on sale on December 31, 2015.Which of the following is true regarding the requirements of IFRS2?

a. Equity is increased by $3 million, inventory is increased by $3 million; the inventory value is expensed on sale on December 31, 2015.
b. Equity is increased by $3.2 million, inventory is increased by $3.2 million; the inventory value is expensed on sale on December 31, 2015.
c. Equity is increased by $3 million, inventory is increased by $3 million; the inventory value is expensed over the two years to December 31, 2015.
d. Equity is increased by $3.2 million, inventory is increased by $3.2 million; the inventory value is expensed over the two years to December 31, 2015.

51. An entity issues fully paid shares to 200 employees on December 31, 20X4. Normally shares issued to employees vest over a two-year period, but these shares have been given as a bonus to the employees because of their exceptional performance during the year. The shares have a market value of $500,000 on December 31, 20X4, and an average fair value for the year of $600,000. What amount would be expensed in the income statement for the above share-based payment transaction?

a. $600,000
b. $500,000
c. $300,000
d. $250,000

52. An entity grants 1,000 share options to each of its five directors on July 1, 20X4. The options vest on June 30, 20X8. The fair value of each option on July 1, 2004, is $5, and it is anticipated that all of the share options will vest on June 30, 20X8. What will be the accounting entry in the financial statements for the year ended June 30, 20X5?

a. Increase equity $25,000, increase in expense income statement $25,000.
b. Increase equity $5,000, increase in expense income statement $5,000.
c. Increase equity $6,250, increase in expense income statement $6,250.
d. Increase equity zero, increase in expense income statement zero.

53. On 1 June 20X1 Bridget Ltd (Bridget) acquired an item of plant for an agreed consideration of 1000 of its own shares. The plant was received on 1 June 20X1 and the obligation to transfer shares was to be settled on 1 August 20X1. The fair value of the plant was $10 000 on 1 June 20X1. Bridget’s share price was $8 on 1 June 20X1 and $9 on 30 June 20X1. In accordance with IFRS 2 Share-based Payment Bridget should

a. remeasure the equity to $9000 on 30 June 20X1.
b. initially recognise the plant and equity at $8000 on 1 June 20X1.
c. make no entry in relation to the transaction until 1 August 20X1.
d. initially recognise the plant and equity at $10 000 on 1 June 20X1.

54. IFRS 2 applies to share-based payment transactions in which an entity __________ goods or services.

a. Acquires
b. Receives
c. Transfers
d. Delivers
e. A and B
f. C and D

55. Which of the following events are outside the scope of IFRS 2?

a. Equity instruments issued in a business combination in exchange for control of the acquiree
b. Equity instruments granted to employees of the acquiree in their capacity as employees
c. Cancellation, replacement or other modification of share-based payment arrangements because of a business combination or other equity restructuring
d. All of the above

56. How shall an entity recognise the goods or services received or acquired in a share-based payment transaction, which do not qualify for recognition as assets?

a. As a liability
b. As expenses
c. As equity
d. As deferred assets

57. When shall an entity remeasure the liability for cash-settled transactions?

a. At the end of each reporting period until the liability is settled
b. At the liability grant date
c. At the liability vesting date
d. At the date of final settlement of the liability

58. If the modification increases the FV of the option – what do you do with this increase?

a. Spread over the vesting period
b. Ignore the increase

59. What do you do if the option is cancelled?

a. All outstanding into the income statement
b. Reverse all entries

60. If the service date approach, adapted from IAS 19 Employee Benefits, were adopted, would the cumulative expense for the following equity-settled share option issued on 1 January 20X1 and vesting on 31 December 20X2 be over the life of the option? Fair value 1 January 20X1 = $600, Fair value 31 December 20X1 = $800, Fair value 31 December 20X2 = $900

a. $800
b. $850
c. $600
d. $900

61. What value should be applied to share-based payment transactions with third parties?

a. Fair value of the option at the grant date
b. Fair value of the goods received
c. Fair value of the option at the reporting date
d. Estimated fair value of the option at the vesting date

62. Which of the following items is not covered within IFRS 2 Share-based payment?

a. Equity-settled schemes
b. Defined benefit pension schemes
c. Cash-settled schemes
d. Transactions with third parties

63. How should a bonus paid to employees based on the price of an entities shares be accounted for under IFRS 2 Share-based payment?

a. A cash-settled share-based payment transaction
b. An equity-settled share-based payment transaction
c. Outside the scope of IFRS 2
d. A transaction with third parties

64. Which of the following is not a criticism of the grant date fair value model?

a. It provides less relevant information as it is based on calculations which do not reflect the value of option to be given
b. It makes little sense when there is no intrinsic value to an option
c. Fair value of options is difficult to calculate as too much judgement is required
d. It is less consistent with other elements of IFRS 2

65. What value should be applied to equity-settled share-based payment schemes?

a. Fair value of the goods received
b. Estimated fair value of the option at the vesting date
c. Fair value of the option at the grant date
d. Fair value of the option at the reporting date

66. What would the cumulative expense for the following equity-settled share option issued on 1 January 20X1 and vesting on 31 December 20X2 be over the life of the option? Fair value 1 January 20X1 = $600, Fair value 31 December 20X1 = $800, Fair value 31 December 20X2 = $900

a. $800
b. $600
c. $900
d. $850

67. Which, if any, of the following statements is correct? Statement 1 – The grant date fair value model will produce figures with greater volatility than the reporting date fair value model, or Statement 2 – The grant date fair value model is an approximation of the value of the service received from employees rather than the value of the option to be given

a. Both statements are correct
b. Statement 1 only is correct
c. Statement 2 only is correct
d. Neither statement is correct

68. What value should be applied to cash-settled share-based payment schemes?

a. Fair value of the option at the grant date
b. Fair value of the goods received
c. Fair value of the option at the reporting date
d. Estimated fair value of the option at the vesting date

69. Which of the following represents a reason for the current usage of the grant date fair value model?

a. Equity amounts should not be remeasured in the financial statements following initial recognition
b. The usage of the grant date fair value model is more consistent with the treatment used in IAS 19 Employee Benefits
c. The fair value of the option is much easier to calculate at the grant date than any other date
d. The grant date fair value gives the most accurate reflection of the value of the option to be given

70. The double entry for a cash-settled share-based payment transaction is:

a. Dr Profit or loss/Asset Cr Liabilities
b. Cr Liabilities Dr Profit or loss/Asset
c. Dr SOCI Cr Liabilities

71. The entity remeasures the fair value of the liability arising under a cash settled scheme at each reporting date.

a. present value
b. fair value

72. In accounting for equity-settled share-based payments, the fair value is fixed at:

a. The vesting date
b. The grant date
c. The payment date

73. The fair value of each SAR comprises:

a. the intrinsic value together with its time value
b. the time value
c. the intrinsic value
d. none of the above

74. An entity may modify the terms of an equity-settled share-based payment scheme so that it becomes classified as a cash-settled scheme.

a. True
b. False

75. Some entities enter into share-based payment transactions that give the counterparty the choice of settling in cash or in equity instruments. In this case, the entity has granted a compound instrument that:

a. is not allowed to be split accounted
b. must be split accounted
c. option to use split accounting or not

76. Which of the following is not a criticism of the grant date fair value model?

a. It provides less relevant information as it is based on calculations which do not reflect the value of option to be given
b. It makes little sense when there is no intrinsic value to an option
c. Fair value of options is difficult to calculate as too much judgement is required
d. It is less consistent with other elements of IFRS 2

77. What value should be applied to equity-settled share-based payment schemes?

a. Fair value of the goods received
b. Estimated fair value of the option at the vesting date
c. Fair value of the option at the grant date
d. Fair value of the option at the reporting date

78. A subsidiary might receive goods or services from employees or suppliers but the parent (or another entity in the group) might issue equity or cash settled share-based payments as consideration

a. False
b. True

79. Non-market based conditions must be taken into account in determining whether an expense should be recognised in a reporting period.

a. True
b. False

80. As per IFRS 2 General scope principle following which is exempted

a. Business Communication
b. Financial Instrument
c. Both A and B
d. none of these

Module-5

Tishadz December 4, 2020

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