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Question 1Financial Reporting

Under IFRS, which basis of measurement is used for property, plant and equipment after initial recognition when the revaluation model is elected?

  1. Fair value at initial recognition without any subsequent adjustment
  2. Historical cost less accumulated depreciation only, with no revaluation permitted
  3. Net realisable value determined at each reporting date
  4. Fair value at the date of revaluation less subsequent accumulated depreciation and impairment losses Correct answer.

Explanation

IAS 16 permits a choice between the cost model and the revaluation model. Under the revaluation model, the carrying amount is fair value at the revaluation date less subsequent accumulated depreciation and subsequent impairment losses, and revaluations must be kept sufficiently regular.

Question 2Financial Reporting

A company sells goods on 1 December with a right of return allowing customers to return items within 30 days. At 31 December, past experience indicates 8% of such sales are returned. Under IFRS 15, how should revenue be recognised?

  1. Recognise revenue for the full amount and disclose a contingent asset for returns
  2. Recognise revenue only for the consideration expected to be entitled, with a refund liability for the expected returns Correct answer.
  3. Recognise revenue for the full amount and recognise a provision for possible returns
  4. Defer all revenue until the 30-day return period has expired

Explanation

IFRS 15 requires revenue to be recognised at the amount to which the entity expects to be entitled, so expected returns reduce revenue. A refund liability is recognised for the obligation to refund, and a return asset for the right to recover goods.

Question 3Financial Reporting

Which of the following best describes the objective of IAS 1 presentation of financial statements?

  1. To prescribe the exact chart of accounts every entity must use
  2. To eliminate all judgement in selecting accounting policies
  3. To ensure financial statements provide information about financial position, performance and cash flows useful to economic decision-making Correct answer.
  4. To require fair value measurement for every asset and liability

Explanation

IAS 1 sets out the overall requirements for presenting general purpose financial statements so that they are comparable with prior periods and other entities. Its objective is decision-useful information about financial position, financial performance and cash flows.

Question 4Financial Reporting

An entity has a defined benefit obligation of BDT 500 million and plan assets of BDT 460 million at year end. The net defined benefit liability is recognised at BDT 40 million. Which statement best explains the recognition principle?

  1. The net liability is recognised because the present value of the obligation exceeds the fair value of plan assets Correct answer.
  2. The net asset is recognised because plan assets are always measured at cost
  3. No amount is recognised until the plan is actually settled with employees
  4. Only the gross obligation is recognised and plan assets are disclosed in the notes

Explanation

IAS 19 requires the net defined benefit liability or asset to be recognised in the statement of financial position. It is measured as the present value of the defined benefit obligation less the fair value of plan assets, adjusted for any asset ceiling.

Question 5Financial Reporting

Which of the following is a required component of a complete set of financial statements under IAS 1?

  1. A five-year summary of share prices
  2. A statement of changes in equity for the period Correct answer.
  3. A directors' remuneration schedule
  4. A statement of value added

Explanation

IAS 1 requires a statement of changes in equity as part of a complete set of financial statements, together with a statement of financial position, statement of profit or loss and OCI, statement of cash flows and notes.

Question 6Financial Reporting

An entity changes an accounting policy because a new IFRS becomes effective. How should the change generally be applied under IAS 8?

  1. Retrospectively, adjusting opening equity and restating comparatives, unless transitional provisions specify otherwise Correct answer.
  2. By disclosing the change without adjusting any amounts
  3. By recognising the cumulative effect in profit or loss for the current year only
  4. Prospectively from the date of change with no restatement

Explanation

IAS 8 requires retrospective application for changes in accounting policy, restating comparative information and adjusting opening retained earnings, unless a specific transitional provision applies. This preserves comparability across periods.

Question 7Financial Reporting

Under IAS 36, when should an impairment test be performed for goodwill acquired in a business combination?

  1. Annually, and also whenever there is an indication of impairment Correct answer.
  2. Only on disposal of the related cash-generating unit
  3. Every five years regardless of indicators
  4. Only when there is an indication of impairment

Explanation

IAS 36 requires goodwill and intangible assets with indefinite useful lives to be tested for impairment annually. An additional test is required whenever events or changes in circumstances indicate that the asset may be impaired.

Question 8Financial Reporting

A cash-generating unit has carrying amount of BDT 900 million, including goodwill of BDT 100 million. Its recoverable amount is BDT 820 million. Under IAS 36, how is the impairment loss of BDT 80 million allocated?

  1. Allocated pro rata across all assets including goodwill
  2. Allocated entirely to the other assets because goodwill is not tested
  3. Recognised only as a disclosure with no adjustment to carrying amounts
  4. Allocated entirely to goodwill first, then to other assets pro rata Correct answer.

Explanation

IAS 36 requires an impairment loss for a cash-generating unit to be allocated first to reduce the carrying amount of goodwill. Any remaining loss is then allocated to the other assets of the unit pro rata to their carrying amounts.

Question 9Financial Reporting

Which condition must be met for an entity to recognise a provision under IAS 37?

  1. A possible obligation that depends on a future event outside the entity's control
  2. A decision by management to undertake future expenditure
  3. A present obligation arising from a past event, probable outflow of resources, and a reliable estimate Correct answer.
  4. A future operating loss expected in the next period

Explanation

IAS 37 requires a present obligation as a result of a past event, a probable outflow of economic benefits, and a reliable estimate of the amount. All three conditions must be satisfied for recognition.

Question 10Financial Reporting

An entity is defending a lawsuit. Legal counsel assesses a 60% chance the entity will pay BDT 50 million and a 40% chance it will pay nothing. Under IAS 37, how should the provision be measured if a reliable estimate can be made?

  1. Recognise BDT 50 million as the single most likely outcome Correct answer.
  2. Recognise BDT 20 million as the probability-weighted expected value
  3. Disclose only, because the outcome is uncertain
  4. Recognise BDT 30 million as the midpoint of possible outcomes

Explanation

When a single obligation is being measured and there is a range of possible outcomes, IAS 37 requires the provision to reflect the single most likely outcome. The 60% probability makes BDT 50 million the most likely amount.

Question 11Financial Reporting

Under IFRS 9, at what amount are most trade receivables without a significant financing component initially measured?

  1. Transaction price as defined in IFRS 15 Correct answer.
  2. Fair value plus transaction costs at each reporting date
  3. Amortised cost using the effective interest method from inception
  4. The undiscounted contractual cash flows expected

Explanation

IFRS 9 generally requires financial assets to be initially measured at fair value plus transaction costs, but trade receivables without a significant financing component are measured at the transaction price under IFRS 15. This simplifies initial measurement for routine credit sales.

Question 12Financial Reporting

Which of the following is the correct treatment of a change in accounting estimate under IAS 8?

  1. Applied prospectively by recognising the effect in the current and future periods Correct answer.
  2. Applied by adjusting opening retained earnings
  3. Applied retrospectively with restatement of prior periods
  4. Applied by restating only the earliest comparative period presented

Explanation

Changes in accounting estimates result from new information or developments and are applied prospectively. The effect is recognised in profit or loss in the period of change and future periods if relevant.

Question 13Financial Reporting

An entity recognises a deferred tax asset of BDT 30 million on unused tax losses. Which factor most directly affects whether this asset should be recognised?

  1. The probability that sufficient taxable profit will be available against which the losses can be utilised Correct answer.
  2. Whether the entity pays tax at the highest marginal rate
  3. Whether the losses arose in the current or a prior period
  4. The number of years the entity has been in operation

Explanation

IAS 12 requires a deferred tax asset to be recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary difference or unused tax loss can be utilised. The assessment therefore hinges on the probability of future taxable profits.

Question 14Financial Reporting

Under IAS 21, which exchange rate should be used to translate a monetary balance denominated in a foreign currency at the reporting date?

  1. The closing rate at the reporting date Correct answer.
  2. The forward rate for a future settlement date
  3. The historical rate at the transaction date
  4. The average rate for the reporting period

Explanation

IAS 21 requires foreign currency monetary items to be translated at the closing rate at the reporting date. Exchange differences arising on retranslation are recognised in profit or loss in the period in which they arise.

Question 15Financial Reporting

A parent owns 80% of a subsidiary. The subsidiary reports profit after tax of BDT 100 million. What amount is attributed to non-controlling interests?

  1. BDT 20 million Correct answer.
  2. Nil, because the parent controls the subsidiary
  3. BDT 80 million
  4. BDT 100 million

Explanation

IFRS 10 requires profit or loss to be attributed to owners of the parent and to non-controlling interests. The NCI share is 20% of BDT 100 million, which equals BDT 20 million.

Question 16Financial Reporting

Which of the following best describes the purpose of the statement of cash flows under IAS 7?

  1. To disclose the fair value of all financial instruments
  2. To provide information about historical changes in cash and cash equivalents Correct answer.
  3. To show the profitability of the entity over the period
  4. To reconcile the opening and closing statement of financial position for all accounts

Explanation

IAS 7 requires a statement of cash flows that provides information about historical changes in cash and cash equivalents through operating, investing and financing activities. This helps users assess the entity's ability to generate cash.

Question 17Financial Reporting

An entity incurs BDT 12 million of development expenditure that meets all IAS 38 capitalisation criteria. How should this expenditure be treated?

  1. Expensed immediately because research and development are always expensed
  2. Recognised as an intangible asset and amortised over its useful life Correct answer.
  3. Recognised as an intangible asset with an indefinite life and not amortised
  4. Recognised as a deduction from retained earnings

Explanation

IAS 38 requires development expenditure to be capitalised when the entity can demonstrate all specified criteria, such as technical feasibility and probable future economic benefits. The resulting intangible asset is then amortised over its useful life.

Question 18Financial Reporting

Which of the following is a disclosure requirement under IFRS 13 for fair value measurements?

  1. The tax rate applicable to any gain on disposal
  2. The valuation technique used and the level of the fair value hierarchy Correct answer.
  3. The profit margin earned by the seller in an orderly transaction
  4. The identity of every counterparty to the transaction

Explanation

IFRS 13 requires disclosure of the valuation techniques and inputs used, together with the level of the fair value hierarchy into which the measurement falls. These disclosures help users assess the reliability and subjectivity of fair values.

Question 19Financial Reporting

An entity issues a financial instrument that is redeemable at the holder's option for a fixed cash amount and pays discretionary dividends. How should it be classified under IAS 32?

  1. As a financial liability because the entity has an obligation to deliver cash on redemption Correct answer.
  2. Entirely as equity because dividends are discretionary
  3. As a compound instrument with equal liability and equity components
  4. As equity until the holder exercises the redemption option

Explanation

IAS 32 classifies an instrument as a financial liability when the issuer has an obligation to deliver cash or another financial asset. A mandatory redemption for a fixed amount creates such an obligation, so the instrument is a liability regardless of dividend discretion.

Question 20Financial Reporting

Under IAS 40, which of the following would be classified as investment property?

  1. Machinery used in the production process
  2. A building owned to earn rentals and for capital appreciation Correct answer.
  3. A building owned and used by the entity as its head office
  4. Land held for future development as owner-occupied premises

Explanation

IAS 40 defines investment property as property held to earn rentals or for capital appreciation, or both, rather than for use in production or administration. A building held to earn rentals and for appreciation meets that definition.

Question 21Financial Reporting

An entity uses the revaluation model for a building. Its carrying amount before revaluation is BDT 400 million and fair value is BDT 460 million. There is a prior revaluation deficit of BDT 20 million recognised in profit or loss. How is the surplus treated?

  1. Recognise BDT 40 million in other comprehensive income and BDT 20 million as a deferred tax adjustment
  2. Recognise the full BDT 60 million in other comprehensive income
  3. Recognise BDT 20 million in profit or loss to reverse the prior deficit and BDT 40 million in other comprehensive income Correct answer.
  4. Recognise the full BDT 60 million in profit or loss

Explanation

Under IAS 16, a revaluation increase is recognised in other comprehensive income, except to the extent it reverses a previous revaluation decrease for the same asset that was recognised in profit or loss. The BDT 20 million prior deficit is therefore reversed through profit or loss and the remainder goes to OCI.

Question 22Financial Reporting

Which of the following is the correct treatment of a material prior period error under IAS 8?

  1. Corrected retrospectively by restating comparatives and adjusting opening equity Correct answer.
  2. Corrected prospectively in the current period's profit or loss
  3. Corrected by adjusting the current period's tax expense only
  4. Disclosed only, with no adjustment to the financial statements

Explanation

IAS 8 requires material prior period errors to be corrected retrospectively by restating the comparative amounts and adjusting opening retained earnings. This ensures the financial statements reflect the corrected position as if the error had never occurred.

Question 23Financial Reporting

Under IFRS 15, a contract with a customer includes a right to acquire additional goods at a discount. When does that option give rise to a separate performance obligation?

  1. When the option provides a material right that the customer would not receive without entering the contract Correct answer.
  2. When the option is exercisable within twelve months of the contract date
  3. Whenever the discount exceeds 5% of the standard price
  4. Only when the customer actually exercises the option

Explanation

IFRS 15 treats an option for additional goods or services as a separate performance obligation when it grants a material right. A material right exists when the customer would not receive that discount without entering into the contract.

Question 24Financial Reporting

Which of the following items is classified as a non-current asset under IAS 1?

  1. A machine expected to be used for eight years Correct answer.
  2. Cash and cash equivalents
  3. Trade receivables due within twelve months
  4. Inventory expected to be sold within the normal operating cycle

Explanation

IAS 1 classifies an asset as non-current when it is not expected to be realised or consumed within twelve months or the normal operating cycle. A machine used for eight years meets the non-current classification.

Question 25Financial Reporting

An entity grants share options to employees that vest over three years. Under IFRS 2, when is the expense recognised?

  1. At the end of the vesting period in a single adjustment
  2. Entirely at the grant date
  3. Only when the options are exercised
  4. Over the vesting period, with a corresponding increase in equity Correct answer.

Explanation

IFRS 2 requires equity-settled share-based payment expense to be recognised over the vesting period as the employees render services. The credit entry is recorded in equity rather than as a liability.

Question 26Financial Reporting

Under IAS 1, which of the following is the minimum required content of a complete set of financial statements?

  1. A statement of financial position, a trial balance, a statement of cash flows and a directors' report
  2. A statement of profit or loss, a bank reconciliation, notes and an audit committee report
  3. A statement of financial position, a management commentary, a value added statement and notes
  4. A statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity, a statement of cash flows and notes Correct answer.

Explanation

IAS 1 requires a complete set to comprise a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity, a statement of cash flows and notes. Comparative information and a statement of financial position at the start of the earliest comparative period are also required where relevant.

Question 27Financial Reporting

An entity's inventory cost is BDT 100 million and its net realisable value is BDT 92 million. Under IAS 2, at what amount should the inventory be carried?

  1. BDT 8 million
  2. BDT 96 million
  3. BDT 92 million Correct answer.
  4. BDT 100 million

Explanation

IAS 2 requires inventory to be measured at the lower of cost and net realisable value. Because net realisable value of BDT 92 million is below cost, the inventory is written down to BDT 92 million and the BDT 8 million difference is recognised as an expense.

Question 28Financial Reporting

Under IAS 16, which cost may be capitalised as part of the cost of an item of property, plant and equipment?

  1. Staff training costs for operators of the new machine
  2. Advertising costs to launch products made by the new plant
  3. Costs of relocating the entity's operations to a new region
  4. Initial delivery and handling costs of the asset Correct answer.

Explanation

IAS 16 states that the cost of an item of property, plant and equipment includes its purchase price plus any directly attributable costs of bringing the asset to the location and condition necessary for intended use. Delivery and handling costs are directly attributable, whereas training, relocation and advertising are not.

Question 29Financial Reporting

An entity has a building with a carrying amount of BDT 500 million and a tax base of BDT 400 million. The tax rate is 25%. What deferred tax should be recognised, assuming the temporary difference will reverse?

  1. A deferred tax asset of BDT 25 million
  2. No deferred tax, because the difference relates to a building
  3. A deferred tax liability of BDT 25 million Correct answer.
  4. A deferred tax liability of BDT 100 million

Explanation

A taxable temporary difference of BDT 100 million arises because the carrying amount exceeds the tax base. Applying the 25% tax rate gives a deferred tax liability of BDT 25 million, since the entity will recover the asset at an amount greater than its tax-deductible base.

Question 30Financial Reporting

Under IFRS 5, when should a non-current asset be classified as held for sale?

  1. When a buyer has expressed informal interest in the asset
  2. When the asset has been fully depreciated but remains in use
  3. When management has decided to keep using the asset for at least another year
  4. When the asset is available for immediate sale in its present condition and the sale is highly probable Correct answer.

Explanation

IFRS 5 requires the asset to be available for immediate sale in its present condition and the sale to be highly probable, with an active programme to locate a buyer and a committed plan. On classification the asset is measured at the lower of carrying amount and fair value less costs to sell, and depreciation ceases.

Question 31Financial Reporting

Under IAS 10, which event occurring after the reporting period would require adjustment of the financial statements?

  1. The bankruptcy of a customer whose receivable existed at the reporting date Correct answer.
  2. A business combination completed after the reporting date
  3. A fire that destroyed a major plant in the following year
  4. A decline in market prices of investments in the following period

Explanation

IAS 10 distinguishes adjusting events, which provide evidence of conditions existing at the reporting date, from non-adjusting events. A customer's bankruptcy that confirms the receivable was already impaired at the reporting date is an adjusting event requiring recognition of the loss.

Question 32Financial Reporting

Under IAS 24, which party is a related party of an entity?

  1. A government department that collects taxes from the entity
  2. A trade union representing the entity's employees
  3. A major customer that has no ownership interest or board representation
  4. A key management personnel member of the entity Correct answer.

Explanation

IAS 24 defines related parties to include key management personnel, close family members of such personnel, and entities under common control or significant influence. Ordinary customers, tax authorities and trade unions do not meet the definition merely through their dealings with the entity.

Question 33Financial Reporting

Under IAS 7, which item is classified as a cash flow from investing activities?

  1. Cash paid to suppliers for inventory purchases
  2. Proceeds from the issue of ordinary shares
  3. Interest paid on long-term borrowings
  4. Purchase of plant and equipment for cash Correct answer.

Explanation

IAS 7 classifies the acquisition of property, plant and equipment as an investing activity because it relates to resources intended to generate future income and cash flows. Purchases of inventory are operating activities, equity issuance is financing, and interest paid is usually financing or operating.

Question 34Financial Reporting

An entity has revenue of BDT 200 million, cost of sales of BDT 120 million and operating expenses of BDT 50 million. Under IAS 1, what is the gross profit presented in the statement of profit or loss?

  1. BDT 120 million
  2. BDT 80 million Correct answer.
  3. BDT 200 million
  4. BDT 30 million

Explanation

Gross profit is revenue less cost of sales, so BDT 200 million minus BDT 120 million equals BDT 80 million under a presentation by function. Operating expenses are deducted after gross profit to arrive at operating profit, which would be BDT 30 million.

Question 35Financial Reporting

Under IAS 36, what is the recoverable amount of an asset?

  1. The lower of fair value less costs of disposal and value in use
  2. The original cost less any residual value
  3. The carrying amount less accumulated depreciation
  4. The higher of fair value less costs of disposal and value in use Correct answer.

Explanation

IAS 36 defines recoverable amount as the higher of an asset's fair value less costs of disposal and its value in use. An impairment loss is recognised when the carrying amount exceeds this recoverable amount.

Question 36Financial Reporting

An entity issues 10,000 convertible bonds with a face value of BDT 1,000 each. The liability component, measured at fair value, is BDT 8.5 million. Under IAS 32, how should the residual amount be treated?

  1. Recognised as a contingent asset
  2. Recognised as an equity component of BDT 1.5 million Correct answer.
  3. Recognised as a deferred tax liability
  4. Recognised as an expense in profit or loss

Explanation

IAS 32 requires a compound instrument to be split into a liability component and an equity component. The liability is measured first at fair value and the residual proceeds of BDT 1.5 million are recognised in equity as the conversion option.

Question 37Financial Reporting

An entity leases equipment for five years with annual payments of BDT 10 million at the end of each year. Under IFRS 16, what is the lease liability initially measured at?

  1. The first annual payment of BDT 10 million
  2. The fair value of the equipment at the commencement date
  3. The present value of the lease payments not yet paid, discounted at the interest rate implicit in the lease Correct answer.
  4. The undiscounted total of BDT 50 million

Explanation

IFRS 16 requires the lease liability to be measured initially at the present value of lease payments not paid at the commencement date. Those payments are discounted using the interest rate implicit in the lease, or the lessee's incremental borrowing rate if that rate is not readily determinable.

Question 38Financial Reporting

An entity has a defined benefit obligation of BDT 500 million and plan assets of BDT 460 million at the reporting date. How should the net position be presented under IAS 19?

  1. A contingent liability of BDT 40 million
  2. A net defined benefit asset of BDT 40 million
  3. A net defined benefit liability of BDT 40 million Correct answer.
  4. An unrecognised actuarial loss of BDT 40 million

Explanation

Under IAS 19, the net defined benefit liability is the present value of the defined benefit obligation less the fair value of plan assets. Because the obligation of BDT 500 million exceeds plan assets of BDT 460 million, a net liability of BDT 40 million is recognised.

Question 39Financial Reporting

Under IFRS 15, when should an entity recognise revenue from a performance obligation satisfied over time?

  1. When the invoice is issued to the customer
  2. When control of the goods or services transfers to the customer over the period Correct answer.
  3. When cash is received from the customer
  4. When the contract is signed by both parties

Explanation

IFRS 15 requires revenue to be recognised when a performance obligation is satisfied by transferring a promised good or service to the customer. Where the obligation is satisfied over time, revenue is recognised over that period as control transfers.

Question 40Financial Reporting

An entity has an asset with a carrying amount of BDT 300 million and a tax base of BDT 340 million, giving a deductible temporary difference of BDT 40 million. The tax rate is 25% and recovery is probable. What is the deferred tax effect?

  1. No deferred tax is recognised
  2. A deferred tax liability of BDT 10 million
  3. A deferred tax asset of BDT 10 million Correct answer.
  4. A deferred tax asset of BDT 40 million

Explanation

A deductible temporary difference arises when the tax base exceeds the carrying amount, and it gives rise to a deferred tax asset to the extent that taxable profit will be available. Applying the 25% rate to BDT 40 million produces a deferred tax asset of BDT 10 million.

Question 41Financial Reporting

Under IFRS 3, how should non-controlling interest be measured at the acquisition date?

  1. Always at the proportionate share of the acquiree's identifiable net assets
  2. At the nominal value of the acquiree's shares
  3. At fair value, or at the proportionate share of identifiable net assets, on an acquisition-by-acquisition basis Correct answer.
  4. At the carrying amount of the acquiree's net assets in its own financial statements

Explanation

IFRS 3 permits a choice for each business combination between measuring non-controlling interest at fair value or at its proportionate share of the acquiree's identifiable net assets. The choice affects the amount of goodwill recognised.

Question 42Financial Reporting

An entity has a provision that is expected to be settled in 18 months for BDT 50 million. The appropriate pre-tax discount rate is 10% per year. Which measurement approach does IAS 37 require?

  1. Recognise BDT 50 million with no adjustment for the time value of money
  2. Recognise the present value of the expenditure expected to be required to settle the obligation Correct answer.
  3. Recognise the amount only when the obligation is actually settled
  4. Recognise the maximum amount payable under the contract

Explanation

IAS 37 requires the amount recognised as a provision to be the best estimate of the expenditure required to settle the present obligation. Where the effect is material, as with an 18-month settlement, that estimate is discounted to present value.

Question 43Financial Reporting

Under IAS 21, how should the assets and liabilities of a foreign operation be translated for consolidation where the functional currency differs from the presentation currency?

  1. At the closing rate at the reporting date Correct answer.
  2. At the average rate for the period
  3. At the rate on the date the foreign operation was acquired
  4. At the historical rate at the date each asset was acquired

Explanation

IAS 21 requires assets and liabilities of a foreign operation to be translated at the closing rate at the reporting date. Income and expenses are translated at exchange rates at the dates of the transactions, often approximated by an average rate, and differences are recognised in other comprehensive income.

Question 44Financial Reporting

An entity has profit before tax of BDT 400 million. The tax rate is 25%, but the entity also has non-deductible expenses of BDT 40 million. What is the tax expense for the year?

  1. BDT 100 million
  2. BDT 110 million Correct answer.
  3. BDT 90 million
  4. BDT 60 million

Explanation

Tax expense is computed on taxable profit, which is accounting profit adjusted for non-deductible items. Adding BDT 40 million of non-deductible expenses to BDT 400 million gives taxable profit of BDT 440 million, and 25% of that is BDT 110 million.

Question 45Financial Reporting

Under IAS 38, which of the following costs should be expensed rather than capitalised as an intangible asset?

  1. Costs of internally generated brands and customer lists Correct answer.
  2. Purchase price of a licence acquired in a separate transaction
  3. Legal fees incurred to register a patent
  4. Directly attributable costs of preparing an acquired licence for use

Explanation

IAS 38 prohibits the recognition of internally generated brands, mastheads, publishing titles, customer lists and similar items as intangible assets. Such expenditure cannot be distinguished from the cost of developing the business as a whole and is expensed.

Question 46Financial Reporting

An entity has 1,000,000 ordinary shares outstanding throughout the year and profit attributable to ordinary shareholders of BDT 5,000,000. It also has 200,000 share options with an exercise price of BDT 20, while the average market price is BDT 25. What is diluted earnings per share under IAS 33?

  1. BDT 4.55
  2. BDT 4.63 Correct answer.
  3. BDT 4.17
  4. BDT 5.00

Explanation

Options are dilutive when the exercise price is below the average market price, and the incremental shares are those that would be issued for no consideration. The 200,000 options generate 40,000 incremental shares, giving a diluted denominator of 1,040,000 and diluted EPS of BDT 5,000,000 divided by 1,040,000, which is BDT 4.63.

Question 47Financial Reporting

A parent sells goods to its 75%-owned subsidiary at a profit of BDT 20 million, and half of those goods remain in the subsidiary's inventory at year end. What adjustment is required in the consolidated financial statements?

  1. No adjustment is required because the sale was at arm's length
  2. Eliminate only 25% of the unrealised profit, or BDT 2.5 million
  3. Eliminate only 75% of the unrealised profit, or BDT 7.5 million
  4. Eliminate the full unrealised profit of BDT 10 million against group inventory and profit Correct answer.

Explanation

Intra-group profits on inventory still held by the group are unrealised from the group's perspective and must be eliminated in full against inventory and profit. The elimination is not restricted to the parent's ownership percentage because the entire profit is unrealised for the group.

Question 48Financial Reporting

An entity has a cash-generating unit with a carrying amount of BDT 600 million, including goodwill of BDT 80 million. The recoverable amount is BDT 540 million. What is the correct allocation of the impairment loss under IAS 36?

  1. Allocate BDT 60 million to the other assets first, then to goodwill
  2. Recognise no impairment because goodwill is tested separately each year
  3. Allocate the full BDT 60 million to goodwill Correct answer.
  4. Allocate BDT 60 million pro rata across all assets of the unit

Explanation

When an impairment loss arises in a cash-generating unit to which goodwill has been allocated, IAS 36 requires the loss to be allocated to reduce the carrying amount of the goodwill first. Only after goodwill is reduced to nil are the remaining losses allocated to the other assets pro rata.

Question 49Financial Reporting

An entity has taxable temporary differences of BDT 200 million that will reverse in future periods. The tax rate is 30% but is expected to fall to 25% before the differences reverse. What deferred tax liability should be recognised?

  1. BDT 10 million
  2. BDT 60 million
  3. BDT 50 million Correct answer.
  4. BDT 55 million

Explanation

IAS 12 requires deferred tax to be measured at the tax rates expected to apply when the asset is realised or the liability settled, based on enacted or substantively enacted rates. The expected future rate of 25% applied to BDT 200 million gives BDT 50 million.

Question 50Financial Reporting

An entity recognises a financial asset at fair value through other comprehensive income. The asset was purchased for BDT 100 million and its fair value at year end is BDT 115 million, with no impairment identified. How should the gain be treated under IFRS 9?

  1. Recognised in profit or loss as a fair value gain of BDT 15 million
  2. Recognised directly in retained earnings without passing through any statement
  3. Recognised in other comprehensive income, with interest revenue calculated using the effective interest method Correct answer.
  4. Deferred until the asset is sold

Explanation

Under IFRS 9, gains and losses on debt instruments measured at fair value through other comprehensive income are recognised in other comprehensive income. Interest revenue is still calculated using the effective interest method and recognised in profit or loss.