IFRS Standards: The Quiz

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IFRS Standards: The Quiz - Quiz

You will be asked to answer 10 true-false questions selected randomly from a pool of over 200 questions. The questions are based on the information in the 2017 edition of ‘Pocket Guide to IFRS® Standards:The Global Financial Reporting Language’ (the “Guide”). For most questions, the answer is contained directly in the Guide. For some questions, the Guide includes enough information to enable an ‘educated guess’ at the answer.
In answering the questions:
-- assume that the amounts involved are material,
-- assume normal circumstances rather than a possible exceptional case, and
-- base your answer on the latest Read moreversion of full IFRS Standards unless the question specifically asks about the IFRS for SMEs® Standard.
You will be able to review your answers before final submission. After you submit your answers, you will immediately get a grade and be shown the correct answers. If you quit before answering all 10 questions, you will not be graded.

The questions and answers have not been reviewed or approved by the International Accounting Standards Board or IFRS Foundation and should not be relied on as an official interpretation of IFRS Standards.

Entire quiz © Copyright IFRS Foundation. All rights reserved.
By taking this quiz you consent to the IFRS Foundation processing and storing any personal details you provide in accordance with the Foundation's Terms and Conditions and Privacy and Cookies Policy on its website.

Questions and Answers
  • 1. 

    The mission of the IFRS Foundation and the International Accounting Standards Board is to develop, in the public interest, high quality accounting standards that countries can use as the basis for designing their own national standards.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The goal is one single set of global accounting standards, rather than multiple sets of national standards.

    Rate this question:

  • 2. 

    The European Union Accounting Regulation requires that all European companies whose securities trade in a regulated securities market must use IFRS Standards as adopted by the EU in their consolidated financial statements.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    You can find the Regulation here: http://ec.europa.eu/internal_market/accounting/legal_framework/regulations_adopting_ias/index_en.htm

    Rate this question:

  • 3. 

    The IFRS Foundation decides which countries must use IFRS Standards.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Legislators and/or regulators in each jurisdiction decide which accounting standards best serve the capital markets in that jurisdiction.

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  • 4. 

    Because it is not possible to make a reliable estimate of the fair value of share options when they are granted to employees, under IFRS Standards, an expense is recognised and measured when the employee exercises the option.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Under IFRS 2 Share-based Payment, an expense is recognised and measured when the option is granted.

    Rate this question:

  • 5. 

    Under IFRS Standards, only companies with public accountability (listed companies and financial institutions) must present a cash flow statement.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    A statement of cash flows is part of a complete set of IFRS financial statements for all companies, including unlisted companies.

    Rate this question:

  • 6. 

    IFRS Standards require all companies whose securities are publicly traded and that use IFRS Standards to prepare a full or condensed set of interim financial statements at least half-yearly. 

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    IAS 34 Interim Financial Reporting does not specify which entities must publish an interim financial report. That is generally a matter for laws and government regulations. IAS 34 applies if an entity publishes an interim financial report described as conforming to IFRS Standards.

    Rate this question:

  • 7. 

    More than 100 jurisdictions currently require IFRS Standards for all or most domestic listed companies.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

    Rate this question:

  • 8. 

    The Trustees of the IFRS Foundation appoint the members of the International Accounting Standards Board.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Yes, as provided in the Constitution of the IFRS Foundation.

    Rate this question:

  • 9. 

    IASB meetings are closed to the public, but summaries of all decisions are published.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    IASB meetings are open to public observation and are webcast. Summaries of all decisions are also published.

    Rate this question:

  • 10. 

    IFRS Standards provide the financial information for public capital markets covering over half of the world’s GDP.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Analysis of IFRS jurisdictions by GDP shows that capital market investors and lenders in jurisdictions with 57 per cent of the world’s GDP receive IFRS financial statements.

    Rate this question:

  • 11. 

    Approximately 150 people are on the staff of the International Accounting Standards Board and IFRS Foundation.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The statement is true because it states that approximately 150 people are on the staff of the International Accounting Standards Board and IFRS Foundation. This indicates that there is a staff of around 150 individuals working for these organizations, suggesting that the statement is correct.

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  • 12. 

    A contingent liability is not recognised in the statement of financial position.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    A contingent liability is not recognised in the statement of financial position. However, unless the possibility of an outflow of economic resources is remote, a contingent liability is disclosed in the notes.

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  • 13. 

    Under IFRS Standards, financial assets and financial liabilities are offset (netted in the statement of financial position) only when the entity has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or realise the asset and settle the liability simultaneously.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See IAS 32 Financial Instruments: Presentation.

    Rate this question:

  • 14. 

    The comment letters that the International Accounting Standards Board receives on discussion documents and Exposure Drafts are public documents, available on the IFRS Foundation website.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The links are on the individual project pages. The 'Work Plan' has one page with links to all projects since 2006.

    Rate this question:

  • 15. 

    The members of the International Accounting Standards Board serve as representatives of the individual accounting standard-setting boards from their home countries.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Board members serve as expert individuals, not as representatives of any external organisations.

    Rate this question:

  • 16. 

    Under IFRS 16 Leases, issued in 2016, a lessee’s contractual obligations under all material leases longer than one year are shown as liabilities in the lessee’s balance sheet.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee recognises a right-of-use asset, representing its right to use the underlying leased asset, and a lease liability, representing its obligation to make lease payments.

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  • 17. 

    Under IFRS Standards, all borrowing costs are charged to expense when incurred.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Under IAS 23 Borrowing Costs, borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognised as an expense.

    Rate this question:

  • 18. 

    Under IFRS Standards, when one company (the parent) controls another company (the subsidiary), the parent is required to prepare consolidated financial statements (with limited exceptions).

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    This is the core principle in IFRS 10 Consolidated Financial Statements.

    Rate this question:

  • 19. 

    Under IFRS Standards, all investments in equity securities are measured at fair value in the statement of financial position, with changes in those fair values from period to period reflected in the measurement of profit or loss.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Under IFRS Standards, some investments in equity securities are measured at fair value with changes in fair value reflected as other comprehensive income, not in profit or loss.

    Rate this question:

  • 20. 

    The International Accounting Standards Board has a public consultation on its agenda of projects once every three years.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See the IASB Due Process Handbook, available on its website.

    Rate this question:

  • 21. 

    One of the International Accounting Standards Board's responsibilities is to enforce the implementation of IFRS Standards to ensure that the objective of high quality financial reporting is achieved.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Enforcement of implementation of IFRS Standards is primarily the responsibility of national regulators, professional bodies, and auditors -- not the International Accounting Standards Board.

    Rate this question:

  • 22. 

    If a country does not have a stock exchange, it does not benefit from IFRS Standards.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    IFRS Standards (including the IFRS for SMEs Standard) are designed to provide relevant and reliable information for all investment, lending, and credit decisions, not just investment decisions by stock exchange investors. Many non-public companies use IFRS Standards.

    Rate this question:

  • 23. 

    Many academic studies of the use of IFRS Standards have concluded that IFRS Standards have improved efficiency of capital markets or promoted cross-border investment.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    For example, see Ann Tarca, 'The Case for Global Accounting Standards: Arguments and Evidence'. http://www.ifrs.org/Use-around-the-world/Documents/Case-for-Global-Accounting-Standards-Arguments-and-Evidence.pdf.

    Rate this question:

  • 24. 

    The IFRS Foundation has found that most countries in the world have modified IFRS Standards before adopting IFRS Standards as their national standards.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    To the contrary, the IFRS Foundation's study found that jurisdictions made very few modifications to IFRS Standards, and the few that were made were generally regarded as temporary steps in the jurisdiction’s plans to adopt IFRS Standards.

    Rate this question:

  • 25. 

    Most European countries have their own national accounting standards, making it difficult for investors to compare financial information reported by listed companies across borders.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    By a Regulation adopted by the European Union (EU), all European companies whose securities trade in a regulated market in Europe must use IFRS Standards as adopted by the EU in their consolidated financial statements, not national standards.

    Rate this question:

  • 26. 

    Under IFRS Standards, a company must disclose information about its relationships and transactions with related parties and about compensation of key management personnel.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See IAS 24 Related Party Disclosures.

    Rate this question:

  • 27. 

    The IFRS for SMEs Standard is used mainly in Asia and Africa but not used much in Central America, South America, or the Caribbean.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The IFRS for SMEs Standard has been widely adopted throughout the world, including in most countries of Central America, South America, and the Caribbean.

    Rate this question:

  • 28. 

    In a 2012 report, the Trustees of the IFRS Foundation reaffirmed their belief that a single set of IFRS Standards is in the best interests of the global economy.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The report is on the IFRS Foundation's website. Go to 'About us' then 'IFRS Foundation' then 'Governance and oversight' then 'Strategy Review '.

    Rate this question:

  • 29. 

    A foreign (non-US) company listed on the New York Stock Exchange is permitted to use IFRS Standards rather than US GAAP for filings in the US.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    This is true, and a reconciliation to US GAAP amounts is not required. Around 500 foreign companies use IFRS Standards in the United States.

    Rate this question:

  • 30. 

    The profiles of IFRS adoption on the IFRS Foundation's website show widespread global adoption of IFRS Standards, with very few local modifications.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

    Rate this question:

  • 31. 

    Most of the listed companies on the main board of the stock exchange in Switzerland use IFRS Standards.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See the profiles on use of IFRS Standards in jurisdictions around the world on the IFRS Foundation's website: www.ifrs.org then click on 'Who Uses IFRS?'

    Rate this question:

  • 32. 

    The use of IFRS Standards by American companies listed on the New York Stock Exchange is permitted but not required.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    In the United States, only foreign (non-US) companies whose securities trade in the US are permitted to use IFRS Standards. Domestic American companies must use US GAAP.

    Rate this question:

  • 33. 

    In most countries that have adopted IFRS Standards, the auditor’s report states that the financial statements comply with national accounting standards rather than IFRS Standards.  The fact that national standards have been converged with IFRS Standards is explained in a note to the financial statements.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    In most countries that have adopted IFRS Standards, the auditor's report states that financial statements comply with IFRS Standards rather than with national standards.

    Rate this question:

  • 34. 

    The IFRS for SMEs Standard has the same principles for recognising and measuring assets, liabilities, income, and expense as are in full IFRS Standards.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Some principles for recognising and measuring assets, liabilities, income and expense in full IFRS Standards have been modified (simplified) in the IFRS for SMEs Standard.

    Rate this question:

  • 35. 

    The International Accounting Standards Board’s main office is in Brussels.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The International Accounting Standards Board's main office is in London.

    Rate this question:

  • 36. 

    The requirements in IFRS Standards (Standards and mandatory application guidance) are available for free download on the IFRS Foundation's website.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The requirements in IFRS Standards (Standards and mandatory application guidance) are available for free download on the IFRS Foundation's website.

    Rate this question:

  • 37. 

    Because the International Accounting Standards Board operates in the public interest, its Standards are not subject to copyright, and anyone is free to republish them or use them in other ways.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    IFRS Standards are the proprietary copyright material of the IFRS Foundation. While the Standards are available for free download on the IFRS Foundation's website, they may not be duplicated or posted on other websites except with the explicit agreement of the IFRS Foundation.

    Rate this question:

  • 38. 

    In assessing impairment under IFRS Standards, if the value in use of an individual asset cannot be determined, recoverable amount is determined for the smallest group of assets that includes the individual asset and that generates independent cash flows (cash-generating unit).

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See IAS 36 Impairment of Assets.

    Rate this question:

  • 39. 

    Lenders, creditors, and other users of the financial statements of small and medium-sized entities (SMEs) are primarily interested in information about cash flows, liquidity, and solvency, rather than information that helps them forecast an SME’s earnings or share price.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See the Basis for Conclusions to the IFRS for SMEs Standard.

    Rate this question:

  • 40. 

    In most countries where IFRS Standards are required for listed companies, different accounting standards are required for banks and insurance companies.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    This is true in a few countries, but in the majority of IFRS jurisdictions IFRS Standards are required for banks and insurance companies as well as for other listed companies.

    Rate this question:

  • 41. 

    Under IFRS Standards, an entity may present its financial statements in any currency even if that currency is not the one in which the entity gets most of its revenues and incurs most of its expenses.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See IAS 21 The Effects of Changes in Foreign Exchange Rates.

    Rate this question:

  • 42. 

    Under IFRS Standards, the objective of financial reporting is to provide financial information about a company that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to that company.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See Chapter 1 'The objective of financial reporting' in The Conceptual Framework for Financial Reporting.

    Rate this question:

  • 43. 

    Very few countries have simply said that IFRS Standards are their national accounting standards without the need for ‘endorsement’ of each individual new or amended IFRS Standard. Rather, most countries consider each individual new or amended IFRS Standard to decide whether to endorse it for use in those countries.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    The majority of jurisdictions that have adopted IFRS Standards do not need to endorse each individual new or amended IFRS Standard. The original adoption of IFRS Standards in those jurisdictions also includes new or amended IFRS Standards.

    Rate this question:

  • 44. 

    The IFRS for SMEs Standard is a stand-alone Standard in the sense that a small company using it is not required to also look to the requirements of full IFRS Standards in preparing its financial statements.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The IFRS for SMEs Standard is a stand-alone Standard.

    Rate this question:

  • 45. 

    Full IFRS Standards are numbered sequentially as they are issued (IFRS 1, IFRS 2, IFRS 3, etc), while sections of the IFRS for SMEs Standard are sequenced by topic.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The explanation for the given correct answer is that full IFRS Standards are indeed numbered sequentially as they are issued, such as IFRS 1, IFRS 2, IFRS 3, etc. On the other hand, sections of the IFRS for SMEs Standard are sequenced by topic. This means that the numbering system for the two standards is different, with full IFRS Standards following a sequential numbering and IFRS for SMEs Standard following a topical sequencing. Therefore, the statement "Full IFRS Standards are numbered sequentially as they are issued, while sections of the IFRS for SMEs Standard are sequenced by topic" is true.

    Rate this question:

  • 46. 

    Under IFRS Standards, most biological (agricultural) assets other than bearer plants are measured at fair value at each reporting date, with fair value changes recognised in profit or loss.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See IAS 41 Agriculture.

    Rate this question:

  • 47. 

    At the end of each reporting period an entity must translate foreign currency monetary items (such as cash, investments, and accounts receivable and payable) at the closing exchange rate (the rate at the end of the reporting period).

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See IAS 21 The Effects of Changes in Foreign Exchange Rates.

    Rate this question:

  • 48. 

    Under IFRS Standards, investments in real estate held for rental to others (such as an office building or shopping centre) must be shown in the statement of financial position (balance sheet) at fair value at each reporting date, with fair value changes recognised in profit or loss.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    IAS 40 Investment Property allows companies to elect one of two methods of accounting for investment property: (a) the fair value through profit or loss model (by which investment property is shown in the balance sheet at fair value) and (b) the cost-depreciation-impairment model (by which investment property is shown in the balance sheet at cost less accumulated depreciation and impairment, but fair value is disclosed in the notes).

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  • 49. 

    Under IFRS Standards, if a company builds an office building for its own use, it may account for the building at historical cost less accumulated depreciation and impairment losses, with depreciation and impairment losses recognised in profit or loss.

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    See IAS 16 Property, Plant and Equipment. This building is not investment property.

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  • 50. 

    Because of the difficulties of getting prior period information, a company adopting IFRS Standards for the first time is not required to restate any prior year comparative figures.

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    A company adopting IFRS Standards for the first time is required to restate at least one prior year, but IFRS 1 First-time Adoption of IFRS provides exceptions and simplifications because of restatement difficulties.

    Rate this question:

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