Which of the following conditions is not required to be satisfied to recognize revenue from the sale of goods? (Difficulty: Moderate)
The entity has transferred to the buyer the significant risks and rewards of ownership of the goods
The entity retains neither continuing managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold
The cash corresponding to the sale of goods has been collected
The amount of revenue can be measured reliably
A sale on credit of 100 CU takes place that carries a 100% chance that the seller will need to provide additional costs of 10 CU two years from the date of the sale. What is recorded in the balance sheet at the time of the sale? (Difficulty: Moderate)
Which of the following conditions does not need to be satisfied in order to reliably estimate the outcome of a transaction? (Difficulty: Moderate)
The amount of revenue that will be obtained upon completion can be measured reliably
The cash corresponding to the transaction has been collected
The stage or percentage of completion of the transaction at the end of the reporting period can be measured reliably
The costs incurred for the transaction and the costs to complete the transaction can be measured reliably
When the outcome of a transaction cannot be estimated reliably, and it is not probable that the costs incurred will be recovered, revenue should not be recognized, and the costs incurred should be recognized immediately as an expense. Which accounting principle is put into practice in this case? (Difficulty: Moderate)
Matching principle
Going concern principle
Principle of prudence
Accrual principle
Dividends should be recognized when the shareholders’ right to receive payment is established. This takes place: (Difficulty: Moderate)
When the books are closed
When the business is liquidated
When the board of directors decide to distribute dividends
When the decision to distribute dividends is made in the shareholders’ general meeting
Which of the following statements is false? (Difficulty: Moderate)
Permanent differences do not reverse themselves over time
In case of permanent differences, the accounting and tax approaches give the same after-tax income
Permanent differences have no future tax consequences
Permanent differences are linked to the differences in the timing of revenue and expense recognition between accounting and tax rules
In some countries, a latent gain on marketable securities is taxable in the period incurred, but is reported under financial accounting only at the time of the sale. What will be generated by this temporary difference? (Difficulty: Moderate)
Deferred tax liability
Deferred tax revenue
Deferred tax asset
Deferred tax expense
Taxes payable accounting consists in ignoring a temporary difference; it recognizes income tax expense in the financial statements for shareholders as identical to the income tax payable. There is no link between the tax recognized and the triggering event and thus this principle is in opposition to the ______ (Difficulty: Easy)
Principle of prudence
Accrual principle
Going concern principle
Matching principle
The ‘completed contract method’ and the ‘percentage of completion method’ are both used for the recognition of income pertaining to a long-term contract. When do these methods imply that potential losses on a contract are recognized? (Difficulty: Moderate)
When they incurred
At the end of the contract
As soon as they can be legitimately established
None of these
Which of the following categories of government assistance is not specified by IAS 20? (Difficulty: Moderate)
