E 32-1 - True or False
1. The statement of profit or loss is the primary source of information about an entity's
financial performance for the reporting period.
2. Income and expenses that arise on a historical cost measurement basis are included in the
statement of profit or loss.
3. PAS requires the single-statement approach of presenting all income and expenses
recognized in a period.
4. An entity is prohibited from presenting components of income and expense in the
statement of changes in equity.
5. PAS 1 requires disclosure of the results of operating activities as a line item in the income
statement.
6. PAS 1 requires subtotal for Earnings Before Interest and Tax (EBIT).
7. An entity may disclose items of income or expense as extraordinary items in the notes to
financial statements.
8. The effects of COVID-19 pandemic should be disclosed as extraordinary items.
9. The frequency of a transaction or other event should determine its presentation.
10. PAS 1 requires disclosure of the nature and amount of material items of income and
expense.
11. Any gain or loss on the remeasurement of a non-current asset classified as held for sale
that does not meet the definition of a discontinued operation shall be included in profit or
loss from continuing operations.
12. The amount of income from continuing operations and from discontinued operations
attributable to owners of the parent should be disclosed
13. Newly acquired subsidiaries that meet the criteria to be classified as held for sale should
always be classified as discontinued.
14. An entity shall present items of other comprehensive income net of related tax effects.
15. An entity shall disclose reclassification adjustments relating to components of other
comprehensive income.
16. An entity shall present reclassification adjustments in the statement of profit or loss and
other comprehensive income.
17. Reclassification adjustments arise on remeasurements of defined benefit plans
18. Amounts recognized in OCI not subsequently reclassified to profit loss shall be
transferred retained earnings.
19. An entity shall present an analysis of expenses recognized in profit or loss using a
classification based on their function:
20. An entity classifying expenses by function shall disclose additional information on the
nature of expenses.
Multiple Choice Theories
1. The primary source of information about financial performance of an entity is
a. Income
b. Expense
c. Profit or loss
d. Other comprehensive income
2. Which statement is incorrect regarding presentation of statement of profit or loss and
other comprehensive income?
a. An entity may use the title statement of comprehensive income instead of
statement of profit or loss and other comprehensive income'.
b. An entity may present the profit or loss section in a separate statement of profit or
loss.
c. If presented separately, the statement of profit or loss shall immediately precede
the statement presenting comprehensive income, which shall begin with profit or
loss.
d. An entity may present a single statement of profit or loss and other
comprehensive income, with profit or loss and other comprehensive income
presented in one section.
3. The statement of profit or loss and other comprehensive income shall present
a. Profit or loss b.
b. Total other comprehensive income
c. Comprehensive income for the period, being the total of profit orloss and other
comprehensive income
d. All of the above
4. Which of the following is required to be allocated to non-controlling interests and owners
of the parent in the statement of profit or loss and OCI?
a. Profit or loss for the period
b. Other comprehensive income for the period
c. Both a and b.
d. Neither a nor b
5. An entity presents an analysis of expenses using a classification based on:
a. The nature of expenses.
b. The function of expenses.
c. Either the nature of expenses or the function of expenses within the entity,
whichever provides information that is reliable and more relevant.
d. Either the nature of expenses or the function of expenses within the entity,
whichever the entity would prefer to present.
6. Separate line items in an analysis of expenses by nature include:
a. Purchases of materials, transport costs, employee benefits, depreciation,
extraordinary items.
b. Purchases of materials, distribution costs, administrative costs, employee benefits,
depreciation, taxes.
c. Depreciation, purchases of materials, employee benefits and advertising costs.
d. Cost of sales, administrative costs, transport costs, distribution costs etc.
7. Separate line items in an analysis of expenses by function include:
a. Purchases of materials, transport costs, employee benefits, depreciation,
extraordinary items.
b. Purchases of materials, distribution costs, administrative costs, employee benefits,
depreciation, taxes.
c. Depreciation, purchases of materials, employee benefits and advertising costs.
d. Cost of sales, administrative expenses, distribution expenses
8. An entity classifying expenses by function shall disclose additional information on the
nature of expenses. The minimum disclosure does not include
a. Depreciation
b. Employee benefits
c. Amortization
d. Advertising
9. The profit or loss section or the statement of profit or loss shall include the following line
items, except
a. Gains and losses on distribution of non-cash assets to owners.
b. Revenue, presenting separately interest revenue calculated using the effective
interest method
c. A single amount for the total of discontinued operations
d. Impairment losses (including reversals of impairment losses or impairment gains)
determined in accordance with PAS 36.
10. In accordance with PAS 1, the profit or loss section or the statement of profit or loss shall
include line item for gains and losses from derecognition of
a. Financial assets measured at fair value through profit or loss.
b. Financial assets measured at-fair value through other comprehensive income.
c. Financial assets measured at amortized cost.
d. All of these.
11. In accordance with PAS 1, which of the following gains or losses from reclassification of
financial assets need not be presented separately in the profit or loss section or the
statement of profit or loss?
a. Reclassification of financial assets out of the amortized cost measurement
category to FVTPL.
b. Reclassification of financial assets out of the FVTOCI measurement category to
FVTPL.
c. Reclassification of financial assets out of the FVTPL measurement category.
d. None of these.
12. In accordance with PAS 1, which of the following expenses need not be presented
separately in the profit or loss section or the statement of profit or loss?
a. Finance costs
b. Share of loss of associates
c. Tax expense
d. Depreciation expense
13. The profit or loss section or the statement of profit or loss shall include all of the
following line items, except
a. Revenue
b. Finance costs
c. Tax expense
d. Gain on sale of property, plant and equipment
14. The profit or-loss section or the statement of profit or loss shall include which of the
following line item?
a. Gains and losses arising from the derecognition of financial assets measured at
fair value.
b. Impairment losses (including reversals of impairment losses or impairment gains)
determined in accordance with PAS 36.
c. Share of the profit or loss of associates accounted for using the equity method.
d. All of the above.
15. Which of the following is shown in the Statement of Comprehensive Income net of
applicable income taxes?
a. Gain or loss on sale of plant assets
b. Cumulative effect of a change in accounting policies
c. Discontinued operations
d. Gain or loss arising from derecognition of financial assets measured at amortized
cost
16. A discontinued operation is a component of an entity that either has been disposed of or
is classified as held for sale, and:
a. Represents a separate major line of business or geographical area of operations.
b. Is part of a single coordinated plan to dispose of a separate major line of business
or geographical area of operations.
c. Is a subsidiary acquired exclusively with a view to resale.
d. Any of these.
17. Which statement is incorrect regarding other comprehensive income?
a. Other comprehensive income comprises items of income and expenses (including
reclassification adjustments) that are not recognized in profit or loss as required or
permitted by other PFRSs.
b. An entity may present items of other comprehensive income either net of related
tax effects or before related tax effects with one amount shown for the aggregate
amount of income tax relating to those items.
c. Reclassification adjustments are amounts reclassified to profit or loss in the
current period that were recognized in other comprehensive income in the current
or previous periods.
d. Reclassification adjustments arise on all items of other comprehensive income.
18. The other comprehensive income section shall present line items for amounts of other
comprehensive income in the period, classified by nature (including share of the other
comprehensive income of associates and joint ventures accounted for using the equity
method) and grouped into those that, in accordance with other PFRSs:
a. Will not be reclassified subsequently to profit or loss.
b. Will be
c. Both a and b.
d. Neither a nor b.
19. Reclassification adjustments do not arise
a. On disposal of debt instruments classified as financial assets at fair value through
OC
b. On disposal of a foreign operation
c. When some hedged forecast cash flow affects profit or loss.
d. On changes in revaluation surplus
20. The components of other comprehensive income include:
I. Changes in revaluation surplus
II. Remeasurements of defined benefit plans
III. Gains and losses arising from translating the financial statements of a foreign operation
IV. Gains and losses from investments in equity instruments classified as held for trading
V. Ineffective portion of gains and losses on hedging instruments in a cash flow hedge
VI. For particular liabilities designated as at fair value through profit or loss, the amount of
the change in fair value that is attributable to changes in the liability's credit risk
a. I, II, III, IV, V, and VI
b. I, II, III, V and VI
c. I, II, III, and VI
d. I, II and III