ACA Accounting (IFRS/UK GAAP) 1 — Questions and Answers
Question 1: Under IAS 16, which cost model allows an asset to be carried at fair value less accumulated depreciation?
- Cost model
- Revaluation model (Correct answer)
- Fair value model
- Historical cost model
Correct answer: Revaluation model
IAS 16 permits the revaluation model, where assets are carried at revalued amount (fair value) less subsequent accumulated depreciation and impairment losses.
Question 2: Under UK GAAP (FRS 102), goodwill arising on acquisition must be:
- Capitalised and amortised over its useful life (Correct answer)
- Written off immediately to reserves
- Capitalised and tested for impairment only
- Expensed to profit or loss immediately
Correct answer: Capitalised and amortised over its useful life
FRS 102 requires goodwill to be capitalised and amortised systematically over its useful economic life, unlike IFRS 3 which prohibits amortisation.
Question 3: Which IFRS standard governs the recognition and measurement of financial instruments for most entities?
- IAS 39
- IFRS 9 (Correct answer)
- IFRS 7
- IAS 32
Correct answer: IFRS 9
IFRS 9 replaced IAS 39 and now governs classification, measurement, impairment, and hedge accounting for financial instruments.
Question 4: Under IAS 2, inventories must be measured at:
- The higher of cost and net realisable value
- The lower of cost and net realisable value (Correct answer)
- Fair value less costs to sell
- Replacement cost
Correct answer: The lower of cost and net realisable value
IAS 2 requires inventories to be stated at the lower of cost and net realisable value, recognising any write-down to NRV in profit or loss.
Question 5: A finance lease under IFRS 16 requires the lessee to recognise:
- Only a lease liability on the balance sheet
- Only a right-of-use asset on the balance sheet
- Both a right-of-use asset and a lease liability (Correct answer)
- An operating expense only
Correct answer: Both a right-of-use asset and a lease liability
IFRS 16 eliminated the distinction for lessees; virtually all leases require recognition of both a right-of-use asset and a corresponding lease liability.
Question 6: Under IAS 36, an impairment loss is recognised when an asset's carrying amount exceeds its:
- Net realisable value
- Replacement cost
- Recoverable amount (Correct answer)
- Historical cost
Correct answer: Recoverable amount
IAS 36 requires an impairment loss when carrying amount exceeds recoverable amount, which is the higher of fair value less costs of disposal and value in use.
ACA Accounting (IFRS/UK GAAP) 1
Under IAS 16, which cost model allows an asset to be carried at fair value less accumulated depreciation?