Question

Question 1. Under IAS 1 an entity must present a statement of profit or loss and other comprehensive income. Which of the following statements is true in respect of the other comprehensive income section?

1) Items should be grouped into those that may subsequently be reclassified to profit or loss and those that will not subsequently be reclassified to profit or loss.

2) All items must be shown inclusive of income tax

3) Extraordinary items should be listed separately with details of the nature of the item disclosed in the notes.

All of the above

1 and 2 only

2 only

1 only

Question 2. According to IAS 7 Statement of cash flows where can interest paid be classified in the cash flow statement?

Financing activities

Investing activities

Operating activities

Financing or operating activities

Question 3. Which of the following statements about the IFRS for SMEs Standard are correct?
1. Companies may only use the Standard if they meet prescribed size limits
2. The IFRS for SMEs Standard cannot be applied by insurance companies
3. The IFRS for SMEs Standard may be adopted by jurisdictions that have not adopted full IFRS Standards

1 and 2

2 and 3

1 and 3

All of them

Answer 1

Solution :

1) 1 only

Statement 1 is given in the standard - Hence True.

Statement 2 says, "All line items" must be shown. IAS 1 prescribes minimum line items that should be reflected in the financial statements - revenue, finance costs, tax expense, etc. Hence, not all the line items is required to be presented, only the minimum line items as prescribed by the IAS 1 should be shown.

Statement 3 is wrong. As per IAS 1, items cannot be classified as extraordinary items and classified separately in the financial statements or even in the notes.

  2) Financing or operating activities

IAS 7 gives an option to classify interest paid as either financing or as operating activities.

3) 2 and 3

Statement 1 says the IFRS adoption is based on the size limits. The given statement is wrong. The size is not the limiting factor for the adoption of IFRS.

Statement 2 & 3 are correct. IFRS cannot be adopted by entities that have public accountability. Insurance companies hold assets in the fiduciary capacity & hence has the public responsibility.