CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ

MULTIPLE CHOICE - SMEs

1. The IASB defines SMEs as entities that
a. Do not have public accountability.
b. Have public accountability and publish general purpose financial statements for external users.
c. Do not publish general purpose financial statements for external users.
d. Do not have public accountability and publish general purpose financial statements for external
users.
2. Which description accurately describes the definition of an SME used by the IASB?
a. Entities that have no public accountability
b. Entities that have a specified number of employees
c. Entities that have a certain statement of financial position total
d. Entities that have a certain annual turnover
3. Which entity has no public accountability?
a. An entity whose shares are traded in a public market.
b. An entity whose debt instruments but not its shares are traded in a public market.
c. An entity whose shares and debt instruments are traded in an “over-the-counter market”.
d. An entity that is not in the process of issuing its shares and debt instruments for trading in a
public market.
4. Which approach has the IASB taken in developing IFRS for SMEs?
a. The exemptions given to smaller entities are prescribed in the mainstream accounting standards
b. GAAP for SMEs is to be developed on a national basis
c. The standard is an independently developed set of standards
d. The standard is a simplified self-contained set of accounting principles based on full IFRS
5. In the Philippines, which entity cannot be considered an SME?
a. A nonpublicly accountable entity with total assets between P3,000,000 and P350,000,000 OR
total liabilities between P3,000,000 and P250,000,000
b. An entity that is not in the process of filing its financial statements for the purpose of issuing any
class of instruments in a public market
c. An entity that is not a holder of a secondary license issued by a regulatory agency
d. A public utility
6. Which can be considered SME?
a. Bank and finance company
b. Insurance company and investment house
c. Pre-need company and securities broker
d. None of these can be considered SME
7. Entities with total assets or total liabilities below the floor threshold of P3,000,000 are known as
a. Micro-business entities
b. Macro-business entities
c. Medium-sized entities
d. Small entities
8. Which topic is not addressed in IFRS for SMEs?
a. Earnings per share
b. Interim and segment reporting
c. Asset held for sale and discontinued operation
d. All of these are not addressed in IFRS for SMEs
9. What is the considered significant change that requires transition to IFRS for SMEs?
a. 20% or more of total assets or total liabilities
b. 50% or more of total assets or total liabilities
c. 10% or more of total assets or total liabilities
d. No quantitative threshold
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10. If an SME that uses the IFRS for SMEs in the current year breaches the ceiling of the size criteria at
the end of the current year, the entity is
a. Required to transition to full IFRS at the current year-end.
b. Required to transition to full IFRS at the current year-end if the event that caused the change is
significant and continuing.
c. Required to transition to full IFRS in the next year if the event that caused the change is
significant and continuing
d. Not required to transition to full IFRS.
11. The statement of financial position at the date of transition to IFRS for SMEs is described as
a. Provisional statement of financial position
b. Closing statement of financial position
c. Opening statement of financial position
d. Originating statement of financial position

12. If the first time adopter adopts IFRS for SMEs on December 31,2021 on a comparative basis, what
is the date of transition to IFRS for SMEs?
a. December 31, 2021
b. December 31, 2020
c. January 1, 2020
d. January 1, 2019
13. All of the following can be done by a first-time adopter of IFRS for SMEs in the opening statement
of financial position, except
a. Recognize all assets and liabilities whose recognition is required by IFRS for SMEs.
b. Recognize all assets and liabilities required by full IFRS even if the IFRS for SMEs does not
require such recognition.
c. Reclassify items that it recognized under a previous accounting framework as one type of asset,
liability or equity but a different type of asset, liability or equity under IFRS for SMEs.
d. Apply IFRS for SMEs in measuring all recognized assets and liabilities.
14. A nonpublicly accountable entity must make an explicit and unreserved statement of compliance
with the IFRS for SMEs
a. If the entity complies with all the requirements of IFRS for SMEs.
b. If the entity complies with the vast majority of the requirements of IFRS for SMEs.
c. If the entity complies with the US GAAP.
d. If the entity complies with full IFRS.

15. A nonpublicly accountable entity can claim compliance with IFRS for SMEs when the entity
I. Complies with local tax requirements that are substantially the same as IFRS for SMEs.
II. Complies with local tax requirements that are, except in name, word for word the same as IFRS
for SMEs.
III. Complies with all the requirements of IFRS for SMEs.
IV. Complies with full IFRS
a. I and III
b. II and III
c. II, III and IV
d. III and IV
16. Which statement suitably describes the nature of the compliance with the Standard?
a. The accounting practices used are a mix of full IFRS and IFRS for SMEs
b. The accounting practices used are a mix of local GAAP and IFRS for SMEs
c. The accounting practices used are a mix of full IFRS and local GAAP
d. The SME has followed IFRS for SMEs in its entirety.
17. Which component of OCI of an SME is reclassified to profit or loss?
a. Translation gain or loss from foreign operation
b. Actuarial gain or loss
c. Revaluation surplus of property, plant and equipment
d. Change in fair value of hedging instrument
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18. Inventories of an SME shall be measured at
a. Cost
b. Lower of cost and estimated selling price less cost to complete and sell
c. Lower of fair value and estimated selling price less cost to complete and sell
d. Fair value

19. Under IFRS for SMEs, if the selling price less cost to complete and sell is lower than cost of
inventory, the writedown is recognized
a. As an impairment loss
b. As component of cost of goods sold
c. As other expense
d. Directly in retained earnings

20. All of the following are considered basic financial instruments, except
a. Cash and demand and fixed term bank deposit
b. Bonds payable and other similar debt investment
c. Accounts and notes receivable
d. Investment in convertible preference shares

21. All of the following are considered basic financial instruments, except
a. Accounts payable in local and foreign currency
b. Derivative contract
c. Loans from subsidiaries or associates due on demand
d. Loans from bank and other third parties.

22. Which can be considered basic financial instruments?

a. Investments in subsidiaries, associates and joint ventures
b. Leases
c. Share-based compensation
d. None of these can be considered basic financial instruments

23. Which statement is true about subsequent measurement of basic financial instruments?
a. Basic debt instruments are measured at amortized cost using the effective interest method.
b. Investments in nonputtable ordinary shares are measured at FVPL if the shares are publicly
traded or if the fair value can be measured reliably.
c. Investments in nonconvertible and nonputtable preference shares which are not publicly
traded or whose fair value cannot be measured reliably are measured at cost less impairment.
d. All of these statements are true.

24. Which statement reflects the accounting for financial instruments under IFRS for SMEs?
a. All financial instruments must be measured at fair value
b. Reversal of an impairment loss is not allowed
c. All amortized cost instruments must be tested for impairment
d. All financial instruments must be measured at amortized cost

25. An SME shall account for investments in associates after initial recognition using
a. Cost model for all investments in associates.
b. Fair value model for all investments in associates.
c. Cost model, equity method or fair value model and using the same accounting policy for all
investments in associates.
d. Cost model, equity method or fair value model and the model can be elected on an investment
by investment basis.

26. Transaction cost related to investment in associate shall be expensed outright under
a. Cost method
b. Equity method
c. Fair value model
d. Cost model, equity method and fair value model

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27. Under the cost model, the investment in associate is subsequently measured at
a. Cost
b. Cost less accumulated impairment loss
c. Fair value
d. Fair value less accumulated impairment loss
28. Under the fair value model, the investment in associate is subsequently measured at
a. Equity
b. Cost
c. Fair value less transaction cost
d. Fair value
29. Investments in associate must be tested for impairment under
a. Cost model, equity method and fair value model
b. Cost model and equity method
c. Cost model and fair value model
d. Equity method and fair value model
30. An SME must measure an investment property after initial recognition
a. At fair value or using the cost model and same accounting policy for all investment property.
b. At fair value or using the cost model elected item by item.
c. At fair value.
d. At fair value for property whose fair value can be measured reliably without undue cost or effort
on an ongoing basis.
31. The investment property is measured under the cost model if fair value cannot be determined
reliably without undue cost and effort. In such a case, how is the investment property presented?
a. Property, plant and equipment
b. Separate class of property, plant and equipment
c. Investment property with no distinction
d. Separate line item as investment property at cost less accumulated depreciation and impairment.
32. An SME shall measure property, plant and equipment after initial recognition using
a. Cost model
b. Revaluation model
c. Either cost model or revaluation model
d. Either cost model or fair value model
33. Which statement is true about government grant related to an SME?
a. A grant that does not impose conditions is recognized in income when the grant proceeds are
receivable.
b. A grant that imposes conditions is recognized in income only when the conditions are met.
c. Grant received before the recognition criteria is satisfied is recognized as liability.
d. All of these statements are true about government grant of an SME.
34. Under the IFRS for SMEs, all borrowing costs must be
a. Expensed in the period incurred
b. Capitalized as part of the cost of the qualifying asset
c. Either expensed or capitalized
d. Neither expensed nor capitalized
35. An SME must measure intangible assets after initial recognition using
a. Cost model
b. Fair value model
c. Revaluation model
d. Either cost model or revaluation model
36. Which accounting treatment is not allowable under IFRS for SMEs?
a. Weighted average method for inventory
b. Equity method for associates
c. Revaluation model for intangible assets
d. Deferred tax asset and deferred tax liability
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37. Under IFRS for SMEs, what is the treatment of goodwill?
a. Not amortized
b. Tested for impairment at least annually
c. Amortized over a maximum of 5 years
d. Amortized based on the best estimate of management not exceeding 10 years and tested for
impairment at least annually
38. Under IFRS for SMEs, past service costs are
a. Expensed immediately as component of employee benefit expense
b. Deferred and amortized over the service period
c. Expensed immediately as a separate line item
d. Not recognized
39. Specialized activities of an SME include all of the following, except
a. Agriculture
b. Service concession
c. Exploration and evaluation of mineral resources
d. Insurance
40. Exploration expenditure incurred by an SME in exploration and evaluation activities is classified as
a. Property, plant and equipment
b. Intangible asset
c. Either tangible asset or intangible asset
d. Investment
41. On the part of the private operator, the infrastructure asset in a service concession shall be recognized
as
a. Property, plant and equipment
b. Financial asset
c. Either financial asset or intangible asset
d. Intangible asset
42. When the private operator in a service concession has a guaranteed or unconditional contractual
right to receive a specified amount of cash over the life of the arrangement, the infrastructure asset
is recognized as
a. Financial asset
b. Intangible asset
c. Property, planted equipment
d. Investment
43. When the private operator in a service concession has a right to charge fees for the use of the asset,
the infrastructure asset is recognized as
a. Financial asset
b. Intangible asset
c. Property, plant and equipment
d. Investment
44. The reconciliation of equity under the previous reporting framework to the equity under IFRS for
SMEs is made at
a. The date of transition to IFRS for SMEs.
b. The end of current reporting period.
c. The date of transition to IFRS for SMEs and at the end of latest reporting period.
d. The end of the preceding comparative period.
45. The reconciliation of profit or loss under the previous reporting framework to the profit or loss
under IFRS for SMEs is made at
a. The date of transition to PFRS for SMEs
b. The end of current reporting period
c. The end of the latest reporting period.
d. No reconciliation of profit or loss is made.
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