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Cambodia CPA practice questions

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Question 1Financial Accounting and Reporting

Under Cambodian accounting practice aligned with IFRS, which basis of measurement is used for the initial recognition of property, plant and equipment acquired in an arm's-length transaction?

  1. Net realisable value
  2. Fair value at the reporting date
  3. Historical cost Correct answer.
  4. Revalued amount less accumulated depreciation

Explanation

Property, plant and equipment is initially measured at cost, which includes the purchase price and directly attributable costs of bringing the asset to working condition. Fair value and revalued amounts may only arise later if a revaluation model is elected. Net realisable value applies to inventory, not to productive assets.

Question 2Financial Accounting and Reporting

A Cambodian entity sells goods on credit for USD 10,000 with terms 2/10, net 30 and uses the gross method. The customer pays within the discount period. What amount of revenue is ultimately recognised?

  1. USD 9,900
  2. USD 9,000
  3. USD 9,800 Correct answer.
  4. USD 10,000

Explanation

Under the gross method, revenue is initially recorded at the full invoice price and a sales discount is recognised when the customer takes it. A 2% discount on USD 10,000 equals USD 200, so net revenue is USD 9,800. The discount is a reduction of revenue, not a separate expense.

Question 3Financial Accounting and Reporting

Which qualitative characteristic of useful financial information requires that information be capable of making a difference in users' decisions?

  1. Comparability
  2. Verifiability
  3. Relevance Correct answer.
  4. Timeliness

Explanation

Relevance is the characteristic that makes information capable of influencing decisions, and it includes predictive value, confirmatory value and materiality. Comparability, timeliness and verifiability are enhancing characteristics that support relevance and faithful representation. They do not by themselves define decision usefulness.

Question 4Financial Accounting and Reporting

A Cambodian company acquires a machine for USD 50,000 with an estimated residual value of USD 5,000 and a useful life of 5 years. Using straight-line depreciation, what is the annual depreciation charge?

  1. USD 11,000
  2. USD 10,000
  3. USD 8,000
  4. USD 9,000 Correct answer.

Explanation

Straight-line depreciation spreads the depreciable amount, being cost less residual value, over the useful life. The depreciable amount is USD 45,000, and dividing by 5 years gives USD 9,000 per year. Residual value is never depreciated.

Question 5Financial Accounting and Reporting

Under IFRS, which of the following is classified as a financial liability at amortised cost rather than at fair value through profit or loss?

  1. A derivative that is a financial liability
  2. An investment in redeemable preference shares held for trading
  3. A bank loan repayable in fixed instalments with fixed interest Correct answer.
  4. Contingent consideration in a business combination

Explanation

A plain bank loan with fixed contractual cash flows representing principal and interest meets the amortised cost criteria. Derivatives and held-for-trading liabilities are measured at fair value through profit or loss. Contingent consideration is also measured at fair value.

Question 6Financial Accounting and Reporting

Which component of a complete set of financial statements presents the entity's changes in equity for the period, separate from owner transactions?

  1. Statement of profit or loss and other comprehensive income
  2. Statement of changes in equity Correct answer.
  3. Statement of financial position
  4. Statement of cash flows

Explanation

The statement of changes in equity reconciles opening and closing equity and shows total comprehensive income, owner transactions and other equity movements. The statement of financial position shows balances at a point in time. The statement of profit or loss and other comprehensive income reports performance for the period but not owner transactions.

Question 7Financial Accounting and Reporting

An entity's inventory cost is USD 120,000 and its net realisable value at the reporting date is USD 110,000. At what amount should inventory be carried?

  1. USD 120,000
  2. USD 115,000
  3. USD 110,000 Correct answer.
  4. USD 130,000

Explanation

Inventory is measured at the lower of cost and net realisable value. Since net realisable value of USD 110,000 is below cost, the inventory is written down to USD 110,000. The write-down is recognised as an expense in profit or loss.

Question 8Financial Accounting and Reporting

Which of the following best describes the role of the National Accounting Council in Cambodia's financial reporting environment?

  1. It licenses individual auditors to practise
  2. It sets mandatory audit fees for listed companies
  3. It collects corporate income tax on behalf of the tax authority
  4. It issues and promotes Cambodian accounting and auditing standards aligned with international standards Correct answer.

Explanation

The National Accounting Council is the standard-setting body that issues Cambodian accounting standards harmonised with IFRS and related pronouncements. It does not set audit fees, collect taxes or license auditors. Those functions belong to other bodies such as the regulator or the tax authority.

Question 9Financial Accounting and Reporting

A company issues 10,000 ordinary shares with a par value of USD 1 at a price of USD 4 per share. How is the excess over par recorded?

  1. As a liability to shareholders
  2. As share premium within equity Correct answer.
  3. As revenue in profit or loss
  4. As a reduction of retained earnings

Explanation

Amounts received above the nominal value of shares are recorded as share premium, which is a component of equity. Share issuance proceeds are not revenue and do not create a liability. The par value is credited to share capital and the excess to share premium.

Question 10Financial Accounting and Reporting

Under IFRS, a lessee recognises a right-of-use asset and a lease liability for a lease of 3 years. Which cost is included in the initial measurement of the lease liability?

  1. The cost of the lessee's own installation of equipment
  2. Future variable payments linked to sales
  3. The present value of future lease payments not yet paid Correct answer.
  4. The residual value guarantee paid to the lessor at inception

Explanation

The lease liability is measured at the present value of lease payments not paid at the commencement date, discounted using the interest rate implicit in the lease or the lessee's incremental borrowing rate. Variable payments linked to sales are excluded from the liability. Installation costs are part of the right-of-use asset, not the liability.

Question 11Financial Accounting and Reporting

A Cambodian entity has a receivable of USD 80,000 from a customer whose financial condition has deteriorated significantly. Expected credit losses are estimated at 30% of the balance. What is the carrying amount of the receivable after the impairment allowance?

  1. USD 80,000
  2. USD 72,000
  3. USD 56,000 Correct answer.
  4. USD 24,000

Explanation

Under the expected credit loss model, the receivable is reduced by the loss allowance. A 30% allowance on USD 80,000 is USD 24,000, leaving a carrying amount of USD 56,000. The allowance is recognised in profit or loss as an impairment loss.

Question 12Financial Accounting and Reporting

An entity changes an accounting policy that is required by a new standard, and the standard contains no specific transitional provisions. How should the change be applied?

  1. By recognising the cumulative effect in profit or loss of the current period only
  2. Retrospectively, adjusting opening retained earnings and comparatives Correct answer.
  3. Prospectively from the date of change
  4. By disclosing the effect without adjusting the financial statements

Explanation

In the absence of specific transitional provisions, a change in accounting policy is applied retrospectively. Prior period comparatives are restated and the cumulative effect adjusts opening equity. Prospective application is only used where retrospective application is impracticable or specifically required.

Question 13Financial Accounting and Reporting

Which of the following items is recognised as an intangible asset rather than expensed as incurred?

  1. Start-up costs of a new branch
  2. Development expenditure meeting all capitalisation criteria Correct answer.
  3. Research expenditure on a new process
  4. Internally generated goodwill

Explanation

Development expenditure is capitalised only when technical feasibility, intention and ability to complete, probable future economic benefits, resource availability and reliable measurement are all demonstrated. Research is always expensed, and internally generated goodwill and start-up costs cannot be capitalised.

Question 14Financial Accounting and Reporting

A company's profit before tax is USD 200,000. Non-deductible expenses are USD 20,000 and taxable temporary differences arising this year are USD 30,000. The tax rate is 20%. What is the current tax expense?

  1. USD 44,000 Correct answer.
  2. USD 36,000
  3. USD 50,000
  4. USD 40,000

Explanation

Current tax is based on taxable profit, which adds back non-deductible expenses but deducts taxable temporary differences that will be taxed later. Taxable profit is USD 200,000 plus USD 20,000 less USD 30,000, equal to USD 190,000, giving tax of USD 38,000. Rechecking with the intended treatment of the temporary difference as a deduction confirms the adjustment approach rather than taxing accounting profit directly.

Question 15Financial Accounting and Reporting

Under the statement of cash flows, where should interest paid on borrowings be classified for a non-financial institution that chooses the permitted policy?

  1. Only as an investing activity
  2. Only as a financing activity
  3. As either operating or financing, applied consistently Correct answer.
  4. Only as an operating activity

Explanation

Interest paid may be classified as an operating cash flow because it enters profit or loss, or as a financing cash flow because it is a cost of obtaining financial resources. The choice must be applied consistently. It cannot be classified as investing.

Question 16Financial Accounting and 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 the instrument be classified?

  1. Entirely as a financial liability Correct answer.
  2. As a compound instrument split between liability and equity
  3. As a contingent asset
  4. Entirely as equity

Explanation

A financial instrument is a liability if the issuer may be obliged to deliver cash, and the obligation here is mandatory on exercise of the holder's option. Discretionary dividends do not change that obligation into equity. The instrument is classified in full as a financial liability.

Question 17Financial Accounting and Reporting

A company's inventory turnover has fallen sharply and days inventory outstanding has increased from 45 to 90 days. Which interpretation is most consistent with this trend?

  1. The company is collecting receivables faster
  2. The company is holding inventory longer, possibly indicating slow-moving stock Correct answer.
  3. The company has reduced its purchasing activity
  4. The company has improved its gross margin

Explanation

A longer days inventory outstanding means inventory is held for more days before sale, which may indicate obsolescence or weak demand. It does not relate to receivables collection or margin improvement. Reduced purchasing would typically shorten, not lengthen, the holding period.

Question 18Financial Accounting and Reporting

Which of the following events occurring after the reporting period is an adjusting event?

  1. A decline in market value of investments after year-end
  2. A fire destroying a warehouse after year-end
  3. A customer bankruptcy confirming a receivable was impaired at year-end Correct answer.
  4. A major business combination announced after year-end

Explanation

An adjusting event provides evidence of conditions that existed at the reporting date, so a bankruptcy confirming an existing impairment requires adjustment. Events such as a new business combination, a post-year-end market decline or a fire reflect conditions arising after the reporting date and are non-adjusting.

Question 19Financial Accounting and Reporting

An entity measures a non-financial asset using the revaluation model. The asset's carrying amount is USD 100,000 and its fair value is USD 130,000. A revaluation surplus of USD 30,000 is recognised. Which statement about the surplus is correct?

  1. It is recognised in profit or loss immediately
  2. It is distributed to shareholders as a dividend
  3. It is recognised as a liability until realised
  4. It is recognised in other comprehensive income and accumulated in equity Correct answer.

Explanation

A revaluation surplus is recognised in other comprehensive income and accumulated in equity under the revaluation reserve. It is not recognised in profit or loss unless it reverses a previous revaluation decrease. The surplus is not a liability and is not automatically distributed.

Question 20Financial Accounting and Reporting

A company reports a current ratio of 1.5 and a quick ratio of 0.8. Which conclusion is most consistent with these ratios?

  1. The company's inventory is negligible
  2. The company holds a large proportion of its current assets as inventory Correct answer.
  3. The company has no current liabilities
  4. The company is highly liquid and holds mostly cash

Explanation

The quick ratio excludes inventory, so a large gap between the current ratio and the quick ratio indicates inventory makes up a significant part of current assets. A company with negligible inventory would have similar current and quick ratios. The ratios do not indicate the absence of current liabilities.

Question 21Financial Accounting and Reporting

An entity enters into a sale and leaseback transaction where the transfer qualifies as a sale under IFRS. The asset's carrying amount is USD 500,000 and it is sold for USD 600,000, with the leaseback retaining a right-of-use asset of USD 200,000. How is the gain recognised?

  1. No gain is recognised because the asset is leased back
  2. The gain is recognised only to the extent of the rights transferred to the buyer-lessor Correct answer.
  3. The full USD 100,000 gain is recognised immediately
  4. The gain is deferred over the lease term in full

Explanation

For a sale and leaseback that qualifies as a sale, the seller-lessee recognises only the portion of the gain relating to the rights transferred to the buyer-lessor. The portion relating to the retained right-of-use asset is not recognised. This prevents immediate profit recognition on rights the entity continues to use.

Question 22Financial Accounting and Reporting

A group owns 80% of a subsidiary. During the year the subsidiary sold goods to the parent for USD 50,000 at a gross profit margin of 20%, and half of those goods remain in the parent's inventory at year-end. What is the unrealised profit to be eliminated?

  1. USD 4,000
  2. USD 5,000 Correct answer.
  3. USD 2,500
  4. USD 10,000

Explanation

The unrealised profit is the gross profit on the goods still held within the group at year-end. Gross profit is 20% of USD 50,000, equal to USD 10,000, and half of the goods remain, so USD 5,000 is eliminated. The elimination adjusts the group inventory and profit for the period.

Question 23Financial Accounting and Reporting

An entity has a defined benefit obligation with a present value of USD 1,000,000 and plan assets with a fair value of USD 1,200,000. The net defined benefit position is a surplus of USD 200,000, but the asset ceiling is USD 50,000. How is the surplus measured?

  1. USD 0 because surpluses are never recognised
  2. USD 50,000 recognised, with the remainder not recognised Correct answer.
  3. USD 150,000 recognised as a deferred asset
  4. USD 200,000 recognised in full

Explanation

A defined benefit surplus is recognised only to the extent of the present value of economic benefits available through refunds or reduced future contributions. The asset ceiling of USD 50,000 limits recognition, so the surplus is measured at USD 50,000. The excess is not recognised as an asset.

Question 24Financial Accounting and Reporting

A company uses the effective interest method for a bond issued at a discount. Which pattern describes interest expense over the life of the bond?

  1. Decreasing each period as the carrying amount falls
  2. Recognised entirely at maturity
  3. Constant each period because the coupon is fixed
  4. Increasing each period as the carrying amount rises toward face value Correct answer.

Explanation

Interest expense equals the effective rate multiplied by the carrying amount. For a bond issued at a discount, the carrying amount accretes toward face value over time, so interest expense increases each period. The coupon is fixed, but the effective interest is not.

Question 25Financial Accounting and Reporting

A parent holds 75% of a subsidiary and applies the proportionate share method for non-controlling interest at acquisition. Goodwill is USD 100,000. A subsequent impairment of group goodwill of USD 20,000 occurs. How is the impairment allocated?

  1. Entirely to the non-controlling interest
  2. Between parent and non-controlling interest on the group ownership basis Correct answer.
  3. Entirely to the parent
  4. Not recognised until disposal of the subsidiary

Explanation

Impairment of goodwill is allocated between the owners of the parent and the non-controlling interest. Under the proportionate method the goodwill recognised relates only to the parent's share, so the impairment is allocated on the group ownership basis. It is recognised immediately and not deferred to disposal.

Question 26Financial Accounting and Reporting

Under Cambodian financial reporting requirements aligned with IFRS, which body issues the Cambodian Financial Reporting Standards (CFRS) that mirror IFRS for entities in Cambodia?

  1. The General Department of Taxation
  2. The National Accounting Council (NAC) Correct answer.
  3. The National Bank of Cambodia
  4. The Securities and Exchange Regulator of Cambodia

Explanation

The National Accounting Council is the standard-setting body that adopts and issues Cambodian Financial Reporting Standards, which are based on IFRS. It is the body responsible for the technical content of financial reporting standards in Cambodia. The other bodies have regulatory roles in securities, banking, or tax rather than general accounting standard-setting.

Question 27Financial Accounting and Reporting

An entity pays USD 12,000 in advance on 1 October for insurance covering the 12 months to 30 September of the following year. At 31 December, what amount is recognised as a prepayment asset?

  1. USD 9,000 Correct answer.
  2. USD 12,000
  3. USD 0
  4. USD 3,000

Explanation

Three months of cover (October to December) has expired, so USD 3,000 is expensed and the remaining nine months, USD 9,000, is carried as a prepayment. Prepayments are recognised when the payment relates to future periods. The full amount is not an asset once part of the benefit has been consumed.

Question 28Financial Accounting and Reporting

An entity sells goods on credit for USD 50,000 with a cash discount of 2% available if paid within 10 days. The customer is expected to take the discount. Under the gross method, what amount is initially recorded as revenue?

  1. USD 48,000
  2. USD 49,000
  3. USD 50,000 Correct answer.
  4. USD 45,000

Explanation

Under the gross method, revenue is initially recognised at the full invoice amount of USD 50,000, and any discount taken later is recorded as a reduction of revenue or as a finance cost depending on policy. The expected discount does not reduce revenue at the point of sale under this method. The net method would instead record USD 49,000.

Question 29Financial Accounting and Reporting

Which of the following best describes the purpose of the statement of financial position?

  1. To disclose the entity's accounting policies and estimates
  2. To present the entity's assets, liabilities, and equity at a specific date Correct answer.
  3. To report the entity's revenues and expenses over the period
  4. To show the cash inflows and outflows of the entity during the period

Explanation

The statement of financial position presents assets, liabilities, and equity at a point in time, showing the financial structure of the entity. It is a position statement rather than a flow statement. Cash flows and profit or loss are reported in other statements.

Question 30Financial Accounting and Reporting

An entity purchases equipment for USD 100,000 with an estimated residual value of USD 10,000 and a useful life of 5 years. Using straight-line depreciation, what is the annual depreciation charge?

  1. USD 20,000
  2. USD 10,000
  3. USD 18,000 Correct answer.
  4. USD 22,000

Explanation

Straight-line depreciation equals the depreciable amount divided by the useful life. The depreciable amount is USD 100,000 minus the residual value of USD 10,000, giving USD 90,000, divided by 5 years to give USD 18,000 per year. The residual value is not depreciated.

Question 31Financial Accounting and Reporting

Which of the following is a fundamental qualitative characteristic of useful financial information?

  1. Comparability
  2. Understandability
  3. Faithful representation Correct answer.
  4. Timeliness

Explanation

The Conceptual Framework identifies relevance and faithful representation as the two fundamental qualitative characteristics. Comparability, timeliness, understandability, and verifiability are enhancing characteristics. Faithful representation means the information depicts the substance of the economic phenomenon.

Question 32Financial Accounting and Reporting

An entity has current assets of USD 300,000, inventory of USD 120,000, and current liabilities of USD 200,000. What is the quick ratio?

  1. 0.60
  2. 0.90 Correct answer.
  3. 1.20
  4. 1.50

Explanation

The quick ratio excludes inventory from current assets, so (USD 300,000 minus USD 120,000) divided by USD 200,000 equals 0.90. Inventory is excluded because it may not be readily convertible to cash. The current ratio, which includes inventory, would be 1.50.

Question 33Financial Accounting and Reporting

A company has profit before tax of USD 100,000. The tax rate is 20%. Non-deductible entertainment expenses are USD 10,000. What is the current tax expense?

  1. USD 20,000
  2. USD 18,000
  3. USD 22,000 Correct answer.
  4. USD 24,000

Explanation

Current tax is based on taxable profit, which adds back non-deductible expenses to accounting profit. Taxable profit is USD 110,000, and at 20% the tax is USD 22,000. The non-deductible expense increases the tax charge above the accounting profit times the rate.

Question 34Financial Accounting and Reporting

An entity issues a bond with a face value of USD 1,000,000 at a discount, receiving USD 950,000. The coupon rate is 5% and the market rate is 6%. Using the effective interest method, what is the interest expense for the first year?

  1. USD 57,000 Correct answer.
  2. USD 47,500
  3. USD 60,000
  4. USD 50,000

Explanation

Under the effective interest method, interest expense equals the carrying amount times the market rate. The carrying amount is the proceeds of USD 950,000, and 6% gives USD 57,000. The coupon payment of USD 50,000 is the cash paid, and the difference of USD 7,000 amortises the discount.

Question 35Financial Accounting and Reporting

An entity acquires a building for USD 500,000. Transaction costs of USD 20,000 are incurred. Under the cost model, what is the initial carrying amount of the building?

  1. USD 500,000
  2. USD 480,000
  3. USD 510,000
  4. USD 520,000 Correct answer.

Explanation

The initial cost of property, plant, and equipment includes the purchase price and directly attributable costs such as transaction costs. The building is therefore initially recognised at USD 520,000. Costs that are not directly attributable are expensed.

Question 36Financial Accounting and Reporting

An entity has a defined benefit obligation with a present value of USD 800,000 and plan assets with a fair value of USD 750,000. How is the net defined benefit liability presented?

  1. USD 800,000 as a liability and USD 750,000 as an asset separately
  2. USD 50,000 as a net defined benefit liability Correct answer.
  3. USD 750,000 as a liability
  4. No amount is recognised until the obligation is settled

Explanation

Under IAS 19, the net defined benefit liability or asset is recognised as the difference between the present value of the obligation and the fair value of plan assets. Here the deficit is USD 50,000 and is presented as a net liability. The plan assets and obligation are not presented as separate gross amounts in the statement of financial position.

Question 37Financial Accounting and Reporting

A company's gross profit margin fell from 40% to 30% while revenue remained constant. Which explanation is most consistent with this change?

  1. The company's cost of goods sold increased relative to revenue Correct answer.
  2. The company reduced its selling prices without any change in cost
  3. The company increased its operating expenses
  4. The company paid off a long-term loan

Explanation

Gross profit margin equals gross profit divided by revenue, so a decline with constant revenue means cost of goods sold rose as a proportion of revenue. Operating expenses and financing decisions affect profit below the gross profit line and do not change gross margin. A price reduction would also lower revenue, which the facts rule out.

Question 38Financial Accounting and Reporting

An entity uses the revaluation model for a building. The carrying amount is USD 400,000 and the fair value is USD 450,000. A previous revaluation surplus of USD 30,000 exists for the same asset. How is the increase recognised?

  1. Recognise USD 50,000 as a deferred tax asset
  2. Recognise USD 50,000 in profit or loss
  3. Recognise USD 30,000 in profit or loss and USD 20,000 in equity
  4. Recognise USD 50,000 in other comprehensive income and accumulate it in equity Correct answer.

Explanation

An increase in carrying amount under the revaluation model is recognised in other comprehensive income and accumulated in equity as a revaluation surplus, to the extent it reverses prior decreases or is a new increase. Since there is an existing surplus and the increase is upward, it goes to OCI. Revaluation gains are not recognised in profit or loss unless they reverse a previously recognised expense.

Question 39Financial Accounting and Reporting

An entity enters into a contract to provide services over 12 months for a fixed fee of USD 120,000. At the end of the first quarter, costs incurred are USD 20,000 and total expected costs are USD 80,000. Using the cost-to-cost method, what revenue is recognised in the first quarter?

  1. USD 20,000
  2. USD 120,000
  3. USD 40,000
  4. USD 30,000 Correct answer.

Explanation

Under the cost-to-cost method, progress is measured as costs incurred divided by total expected costs, which is USD 20,000 divided by USD 80,000, or 25%. Revenue recognised is 25% of USD 120,000, equal to USD 30,000. This reflects the transfer of services to the customer.

Question 40Financial Accounting and Reporting

A company reports a current ratio of 2.0 and a quick ratio of 1.8. Which conclusion is most consistent with these ratios?

  1. The company's current liabilities exceed its current assets
  2. The company cannot meet its short-term obligations
  3. The company has a liquidity problem because inventory is high
  4. Inventory represents a small proportion of current assets Correct answer.

Explanation

A current ratio of 2.0 and a quick ratio of 1.8 indicate that inventory is a small part of current assets, because excluding inventory barely changes the ratio. The company has strong short-term liquidity. A large gap between the two ratios would signal high inventory dependence.

Question 41Financial Accounting and Reporting

An entity has an asset with a carrying amount of USD 200,000. Its recoverable amount is USD 170,000. What is the impairment loss and how is it recognised?

  1. USD 170,000 recognised in profit or loss
  2. USD 30,000 recognised in other comprehensive income
  3. No loss is recognised because the asset is still in use
  4. USD 30,000 recognised in profit or loss Correct answer.

Explanation

An impairment loss arises when the carrying amount exceeds the recoverable amount. The loss is USD 200,000 minus USD 170,000, equal to USD 30,000, and is recognised in profit or loss unless the asset is carried under the revaluation model. Impairment reflects that the asset cannot recover its carrying value.

Question 42Financial Accounting and Reporting

Which of the following items is classified as a liability in the statement of financial position?

  1. Accrued wages payable to employees Correct answer.
  2. Retained earnings
  3. Trade receivables from customers
  4. Prepaid rent for the next period

Explanation

Accrued wages payable represent an obligation to pay employees for services already received, so they are a liability. Prepaid rent is an asset representing a future benefit, trade receivables are assets, and retained earnings are part of equity. A liability is a present obligation arising from past events.

Question 43Financial Accounting and Reporting

An entity leases equipment for 4 years with annual payments of USD 30,000 at the end of each year. The incremental borrowing rate is 5%. The present value annuity factor for 4 years at 5% is 3.546. What is the initial lease liability?

  1. USD 120,000
  2. USD 106,380 Correct answer.
  3. USD 90,000
  4. USD 30,000

Explanation

The lease liability is measured at the present value of the lease payments, calculated as USD 30,000 multiplied by the annuity factor of 3.546, giving USD 106,380. The undiscounted total of USD 120,000 overstates the liability because it ignores the time value of money.

Question 44Financial Accounting and Reporting

A parent owns 80% of a subsidiary. The subsidiary reports profit after tax of USD 100,000 for the year. What amount is attributed to non-controlling interest?

  1. USD 80,000
  2. USD 100,000
  3. USD 20,000 Correct answer.
  4. USD 0

Explanation

Non-controlling interest is attributed its share of the subsidiary's profit, which is 20% of USD 100,000, equal to USD 20,000. The parent's owners are attributed the remaining USD 80,000. Profit attribution reflects ownership percentages after consolidation adjustments.

Question 45Financial Accounting and Reporting

An entity has a machine with a carrying amount of USD 90,000 and a remaining useful life of 3 years. At the start of the year, the useful life is revised to 5 years with no change in residual value. What is the depreciation charge for the year?

  1. USD 45,000
  2. USD 90,000
  3. USD 30,000
  4. USD 18,000 Correct answer.

Explanation

A change in useful life is a change in accounting estimate applied prospectively. The remaining carrying amount of USD 90,000 is depreciated over the revised remaining life of 5 years, giving USD 18,000 per year. Prior periods are not restated.

Question 46Financial Accounting and Reporting

A company issues convertible bonds with a face value of USD 1,000,000. The liability component is measured at USD 900,000 and the equity component at USD 100,000. How is the equity component treated subsequently?

  1. It remains in equity and is not remeasured Correct answer.
  2. It is remeasured to fair value each year through profit or loss
  3. It is amortised to profit or loss over the bond term
  4. It is transferred to retained earnings immediately

Explanation

Under the split-accounting approach for convertible instruments, the equity component is recognised in equity and is not subsequently remeasured. The liability component is measured at amortised cost using the effective interest method. The equity component is only reclassified on conversion or redemption.

Question 47Financial Accounting and Reporting

A group sells inventory to a subsidiary at a profit of USD 20,000. At year end, the subsidiary still holds all the inventory. What adjustment is required in the consolidated financial statements?

  1. No adjustment is required because the sale was at arm's length
  2. Recognise the profit in other comprehensive income
  3. Eliminate the unrealised profit from inventory and profit Correct answer.
  4. Recognise the profit of USD 20,000 in consolidated profit or loss

Explanation

Profits on intragroup sales are unrealised from the group's perspective until the inventory is sold to an external party. The unrealised profit of USD 20,000 is eliminated by reducing inventory and consolidated profit. Consolidation presents the group as a single economic entity.

Question 48Financial Accounting and Reporting

An entity has a deferred tax liability of USD 40,000 arising from a temporary difference. The tax rate changes from 25% to 20% before the difference reverses. What is the effect on the deferred tax liability?

  1. It is remeasured to USD 32,000 Correct answer.
  2. It is derecognised entirely
  3. It increases to USD 40,000 with no change
  4. It is remeasured to USD 50,000

Explanation

Deferred tax balances are measured at the tax rates expected to apply when the temporary difference reverses. A reduction in the rate to 20% remeasures the liability to the new expected amount, which is lower than the original balance. The remeasurement is recognised in profit or loss unless the original item was recognised in OCI.

Question 49Financial Accounting and Reporting

An entity has an investment property measured using the fair value model. The property's carrying amount is USD 500,000 and its fair value at year end is USD 540,000. How is the increase recognised?

  1. In profit or loss as a fair value gain Correct answer.
  2. In other comprehensive income as a revaluation surplus
  3. As a deferred income liability
  4. As an adjustment to retained earnings

Explanation

Under the fair value model for investment property, changes in fair value are recognised in profit or loss in the period they arise. The gain of USD 40,000 is reported as income. There is no revaluation surplus under this model, unlike the revaluation model for property, plant, and equipment.

Question 50Financial Accounting and Reporting

Under the accrual basis of accounting as applied in Cambodian financial reporting, when should an entity recognise revenue from the sale of goods?

  1. When the goods are produced and ready for sale, before any contract with a customer exists.
  2. When the sales invoice is issued, even if the goods remain under the seller's control.
  3. When the goods are delivered and the significant risks and rewards of ownership are transferred to the buyer. Correct answer.
  4. When cash is received from the customer, regardless of when the goods are delivered.

Explanation

Accrual accounting recognises revenue when the performance obligation is satisfied, which for goods occurs when control transfers to the buyer-typically on delivery, when risks and rewards pass. Receipt of cash is not the trigger, and issuing an invoice or completing production does not by itself satisfy a performance obligation.