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Myanmar CPA Part I study materials
Myanmar CPA Part I study resources

Myanmar CPA Part I practice questions

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Question 1Financial Accounting and Reporting

Under MFRS 116 Property, Plant and Equipment, which cost component of a purchased machine is capitalised as part of its carrying amount?

  1. The cost of relocating staff to operate the new machine
  2. The training cost for operators of the machine
  3. The annual maintenance contract for the first year
  4. The estimated dismantling cost recognised as a provision at initial recognition Correct answer.

Explanation

MFRS 116 requires the initial estimate of dismantling, removal and site restoration obligations to be included in the cost of an item of PPE, with the corresponding credit to a provision under MFRS 137. Training and staff relocation costs are not costs of bringing the asset to its location and condition, and routine maintenance is expensed.

Question 2Financial Accounting and Reporting

An entity uses the revaluation model under MFRS 116. A building with carrying amount of 800,000 is revalued to 650,000, and there is no previous revaluation surplus for this asset. How is the decrease recognised?

  1. Recognised as a deferred tax asset
  2. Recognised in other comprehensive income as a revaluation reserve
  3. Recognised as a reduction of retained earnings directly
  4. Recognised in profit or loss as an expense Correct answer.

Explanation

Under MFRS 116, a decrease in carrying amount on revaluation is recognised in profit or loss, except to the extent it reverses a previous revaluation surplus for the same asset. Because there is no existing surplus, the full 150,000 decrement is an expense in profit or loss.

Question 3Financial Accounting and Reporting

Under MAS 38 Intangible Assets, which of the following costs incurred on an internally generated brand may be capitalised?

  1. Costs of market research to assess brand acceptance
  2. None of these costs may be capitalised Correct answer.
  3. Costs of an advertising campaign that launched the brand
  4. Internal design costs incurred before technical feasibility was established

Explanation

MAS 38 prohibits recognising internally generated brands, mastheads and similar items as intangible assets. None of the listed costs can therefore be capitalised as part of the internally generated brand; successful legal registration would not create an exception.

Question 4Financial Accounting and Reporting

Under MFRS 136 Impairment of Assets, what is the recoverable amount of an asset?

  1. Value in use only
  2. Fair value less costs of disposal only
  3. The higher of fair value less costs of disposal and value in use Correct answer.
  4. The lower of fair value less costs of disposal and value in use

Explanation

MFRS 136 defines recoverable amount as the higher of an asset's fair value less costs of disposal and its value in use. An impairment loss arises only when the carrying amount exceeds this recoverable amount.

Question 5Financial Accounting and Reporting

A cash-generating unit has carrying amount of 900,000, including goodwill of 100,000. Its recoverable amount is 780,000. How is the impairment loss of 120,000 allocated?

  1. Allocated first to goodwill of 100,000, then 20,000 to other assets Correct answer.
  2. Recognised only when goodwill is separately tested annually
  3. Allocated pro rata to all assets including goodwill
  4. Allocated entirely to the other assets

Explanation

Under MFRS 136, an impairment loss for a cash-generating unit is allocated first to reduce the carrying amount of any goodwill allocated to the unit. Any remaining loss is then allocated to the other assets pro rata to their carrying amounts.

Question 6Financial Accounting and Reporting

Under MFRS 137 Provisions, Contingent Liabilities and Contingent Assets, when should a provision be recognised?

  1. When a possible obligation exists regardless of probability
  2. When a present obligation exists, an outflow is probable, and the amount can be reliably estimated Correct answer.
  3. When the entity intends to incur the expenditure in future periods
  4. When a contingent asset becomes probable

Explanation

MFRS 137 requires recognition of a provision when a present obligation arising from a past event exists, it is probable that an outflow of resources will be required, and a reliable estimate can be made. Contingent assets are not recognised but disclosed when probable.

Question 7Financial Accounting and Reporting

Under MFRS 115 Revenue from Contracts with Customers, what is the first step in the five-step model?

  1. Identify the performance obligations in the contract
  2. Determine the transaction price
  3. Allocate the transaction price to performance obligations
  4. Identify the contract with a customer Correct answer.

Explanation

The five-step model begins with identifying the contract with a customer, followed by identifying performance obligations, determining the transaction price, allocating it, and recognising revenue when obligations are satisfied.

Question 8Financial Accounting and Reporting

A contract includes equipment sold for 1,000,000 and a two-year maintenance service. Standalone prices are 1,000,000 for equipment and 200,000 for maintenance. Total consideration is 1,100,000. How much revenue is allocated to the equipment?

  1. 880,000
  2. 916,667 Correct answer.
  3. 1,000,000
  4. 1,100,000

Explanation

MFRS 115 requires allocation based on relative standalone selling prices. The equipment's share is 1,000,000/1,200,000 × 1,100,000 = 916,667, with the remainder allocated to the maintenance obligation.

Question 9Financial Accounting and Reporting

Under MFRS 116, which depreciation method results in higher depreciation expense in the earlier years of an asset's useful life?

  1. Units of production method based on output
  2. Reducing balance method Correct answer.
  3. Amortisation method
  4. Straight-line method

Explanation

The reducing balance method applies a constant rate to a declining carrying amount, producing higher depreciation in early years and lower charges later. Straight-line and units of production spread cost according to time or usage rather than front-loading the charge.

Question 10Financial Accounting and Reporting

Under MFRS 116, how is depreciation of a revalued asset calculated after a revaluation increase?

  1. On the original historical cost only
  2. On the revaluation surplus only
  3. No depreciation is charged until the asset is disposed of
  4. On the revalued carrying amount less residual value over the remaining useful life Correct answer.

Explanation

After revaluation, depreciation is based on the asset's revalued carrying amount, less its residual value, over the remaining useful life. The revaluation surplus is transferred to retained earnings as the asset is used, not depreciated itself.

Question 11Financial Accounting and Reporting

Under MFRS 10 Consolidated Financial Statements, which of the following indicates that an investor controls an investee?

  1. Holding exactly 20 percent of the voting rights
  2. Having a contractual right to appoint one of five directors
  3. Being the largest single shareholder
  4. Power over the investee, exposure to variable returns, and ability to use power to affect returns Correct answer.

Explanation

MFRS 10 defines control as power over the investee, exposure or rights to variable returns, and the ability to use power to affect those returns. All three elements must be present for consolidation.

Question 12Financial Accounting and Reporting

An entity acquires 80 percent of a subsidiary for 800,000. The fair value of net identifiable assets is 900,000. Goodwill is measured using the proportionate method. What is goodwill?

  1. -80,000
  2. 160,000
  3. 0
  4. 80,000 Correct answer.

Explanation

Under the proportionate method, goodwill equals the consideration transferred less the parent's share of net identifiable assets: 800,000 − (80% × 900,000) = 80,000. The non-controlling interest is measured at its proportionate share.

Question 13Financial Accounting and Reporting

Under MFRS 127 Separate Financial Statements, how may an investment in a subsidiary be measured in the entity's separate financial statements?

  1. At the subsidiary's net asset value
  2. At fair value only
  3. At cost, in accordance with MFRS 9, or using the equity method Correct answer.
  4. At the parent's share of the subsidiary's retained earnings

Explanation

MFRS 127 permits an entity in its separate financial statements to measure investments in subsidiaries at cost, in accordance with MFRS 9, or using the equity method. The choice must be applied consistently to each category of investment.

Question 14Financial Accounting and Reporting

Under MFRS 121 The Effects of Changes in Foreign Exchange Rates, how are monetary items denominated in a foreign currency translated at the reporting date?

  1. At the rate on the first day of the period
  2. At the average rate for the period
  3. At the closing rate at the reporting date Correct answer.
  4. At the historical rate on the transaction date

Explanation

MFRS 121 requires foreign currency monetary items to be translated using the closing rate at the reporting date. Exchange differences arising are recognised in profit or loss in the period they arise.

Question 15Financial Accounting and Reporting

A parent's functional currency is the kyat and its subsidiary's functional currency is the baht. On translating the subsidiary's financial statements, where is the exchange difference recognised?

  1. As an adjustment to goodwill
  2. In other comprehensive income and accumulated in equity Correct answer.
  3. As a deferred tax liability
  4. In profit or loss of the parent

Explanation

MFRS 121 requires translation differences on translating a foreign operation to be recognised in other comprehensive income and accumulated in a separate component of equity. They are reclassified to profit or loss only on disposal of the foreign operation.

Question 16Financial Accounting and Reporting

Under MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors, how is a change in accounting estimate applied?

  1. By adjusting opening retained earnings
  2. Retrospectively with restatement of prior periods
  3. Prospectively from the date of change Correct answer.
  4. Retrospectively only if material

Explanation

Changes in accounting estimates are applied prospectively, affecting current and future periods only. Prior periods are not restated because the change results from new information or developments.

Question 17Financial Accounting and Reporting

Under MFRS 108, a material prior period error is corrected by:

  1. Restating comparative amounts and adjusting opening retained earnings Correct answer.
  2. Recognising the correction in current period profit or loss
  3. Disclosing the error only in the notes
  4. Adjusting the current year's tax expense only

Explanation

Material prior period errors are corrected retrospectively by restating the comparative amounts for prior periods presented and adjusting the opening balance of retained earnings. If the error occurred before the earliest period presented, opening retained earnings of the earliest period are restated.

Question 18Financial Accounting and Reporting

Under MFRS 107 Statement of Cash Flows, interest paid by a non-financial institution is normally classified as:

  1. A financing cash flow only
  2. A non-cash transaction excluded from the statement
  3. An operating cash flow, although it may be classified as financing Correct answer.
  4. An investing cash flow only

Explanation

MFRS 107 requires interest paid to be classified as an operating cash flow because it enters into the determination of profit or loss, although it may alternatively be classified as financing. The choice must be applied consistently.

Question 19Financial Accounting and Reporting

Which of the following is presented in other comprehensive income under MFRS 101?

  1. Gain on disposal of equipment
  2. Cost of goods sold
  3. Revaluation surplus on property, plant and equipment Correct answer.
  4. Depreciation expense for the year

Explanation

MFRS 101 requires items of other comprehensive income to be presented separately, including revaluation surplus on PPE, remeasurements of defined benefit plans, and exchange differences on translation. Expenses such as depreciation and cost of goods sold are recognised in profit or loss.

Question 20Financial Accounting and Reporting

Under MFRS 112 Income Taxes, a deductible temporary difference arises when:

  1. The tax base equals the carrying amount
  2. The carrying amount of an asset is less than its tax base Correct answer.
  3. The carrying amount of an asset exceeds its tax base
  4. The carrying amount of a liability exceeds its tax base

Explanation

A deductible temporary difference arises where the carrying amount of an asset is less than its tax base, or the carrying amount of a liability exceeds its tax base, and will result in deductible amounts in future periods. This gives rise to a deferred tax asset, subject to recoverability.

Question 21Financial Accounting and Reporting

Under MFRS 116, the depreciable amount of an asset is:

  1. Its cost less residual value Correct answer.
  2. Its revalued amount plus residual value
  3. Its carrying amount plus accumulated depreciation
  4. Its fair value at the reporting date

Explanation

The depreciable amount is the cost of an asset, or other amount substituted for cost, less its residual value. This amount is allocated over the useful life on a systematic basis.

Question 22Financial Accounting and Reporting

An entity leases equipment for five years with annual payments of 100,000 payable in arrears. The interest rate implicit in the lease is 10 percent. The present value annuity factor for five years at 10 percent is 3.7908. What is the initial lease liability under MFRS 16?

  1. 620,920
  2. 500,000
  3. 100,000
  4. 379,080 Correct answer.

Explanation

MFRS 16 requires the lease liability to be measured at the present value of lease payments not paid at the commencement date, discounted using the interest rate implicit in the lease. 100,000 × 3.7908 = 379,080.

Question 23Financial Accounting and Reporting

Under MFRS 16 Leases, how does a lessee initially measure a right-of-use asset?

  1. At the lease liability plus initial direct costs and any restoration estimate Correct answer.
  2. At the fair value of the underlying asset
  3. At the lease liability only
  4. At the total undiscounted lease payments

Explanation

The right-of-use asset is initially measured at the amount of the lease liability, adjusted for lease payments made at or before commencement, initial direct costs, and estimated restoration costs. Any lease incentives received are deducted.

Question 24Financial Accounting and Reporting

Under MFRS 102 Inventories, inventories are measured at:

  1. The higher of cost and net realisable value
  2. The lower of cost and net realisable value Correct answer.
  3. Fair value less costs to sell
  4. Cost only

Explanation

MFRS 102 requires inventories to be measured at the lower of cost and net realisable value. This ensures assets are not carried above the amount expected to be realised from their sale.

Question 25Financial Accounting and Reporting

Under MFRS 102, which cost formula is prohibited for inventories of items that are ordinarily interchangeable?

  1. Specific identification where appropriate
  2. Weighted average cost
  3. Last-in, first-out Correct answer.
  4. First-in, first-out

Explanation

MFRS 102 prohibits the use of the last-in, first-out formula for interchangeable items because it does not reflect a reliable current cost. FIFO and weighted average cost are permitted.

Question 26Financial Accounting and Reporting

Under MFRS 138 Intangible Assets, which of the following expenditures must be recognised as an expense when incurred?

  1. Direct costs of developing a marketable product after feasibility is proven
  2. Research expenditure before technical feasibility is established Correct answer.
  3. Cost of testing whether a prototype works as designed
  4. Legal fees to register a patent

Explanation

MFRS 138 prohibits recognising internally generated intangibles arising from the research phase, because no intangible asset can yet be identified that will probably generate future economic benefits. Research outlays are therefore expensed as incurred. Expenditure in the development phase may be capitalised only once all six recognition criteria are met.

Question 27Financial Accounting and Reporting

An entity issues 100,000 ordinary shares with a par value of 1,000 kyat each at an issue price of 1,250 kyat. Under MFRS 132 and MFRS 101, how is the excess over par presented?

  1. As share premium within equity Correct answer.
  2. As a deduction from retained earnings
  3. As deferred income amortised over five years
  4. As a liability until the shares are fully paid

Explanation

The par value of 100,000,000 kyat is credited to share capital and the excess of 25,000,000 kyat is credited to share premium, both components of equity. An issue of own equity instruments never creates a liability or deferred income for the premium.

Question 28Financial Accounting and Reporting

Under MFRS 137, an entity has a present obligation from a past event, but the amount cannot be measured with sufficient reliability. How should this obligation be treated?

  1. Recognise a provision measured at the best estimate
  2. Recognise a contingent liability and disclose it unless the outflow is remote Correct answer.
  3. Recognise a provision at the maximum possible outflow
  4. Recognise a contingent asset and disclose it

Explanation

A provision requires both a reliable estimate and a probable outflow; where no reliable estimate can be made, the item is a contingent liability rather than a provision. MFRS 137 requires disclosure of the nature and, where practicable, an estimate of its financial effect. Recognition is not permitted merely because an obligation exists.

Question 29Financial Accounting and Reporting

Under MFRS 113 Fair Value Measurement, an entity holds a large block of listed shares that trades in an active market. Which input is used to measure fair value?

  1. A valuation model reflecting the entity's intended holding period
  2. The price at which the block could be sold in a private placement
  3. Quoted price per share in the active market, without adjustment for the size of the holding Correct answer.
  4. Historical cost adjusted for accumulated impairment

Explanation

MFRS 113 gives the unadjusted quoted price in an active market the highest priority and prohibits a blockage factor for holdings of identical assets. The fair value is the price for one unit of the asset, multiplied by the quantity held. Entity-specific intentions and private placement discounts are not relevant.

Question 30Financial Accounting and Reporting

An entity's statement of financial position shows total assets of 5,000,000 kyat and total liabilities of 3,200,000 kyat. Under MFRS 101, what is the amount presented as total equity?

  1. 5,000,000 kyat
  2. 3,200,000 kyat
  3. 8,200,000 kyat
  4. 1,800,000 kyat Correct answer.

Explanation

MFRS 101 requires the statement of financial position to present equity as the residual of assets less liabilities. The amount is 5,000,000 minus 3,200,000, which equals 1,800,000 kyat. Equity is never presented as a gross amount of assets or liabilities.

Question 31Financial Accounting and Reporting

Under MFRS 7 Financial Instruments: Disclosures, which of the following is required for each class of financial assets and financial liabilities?

  1. The names of the counterparties to derivative contracts
  2. The net profit earned on each financial instrument
  3. A maturity analysis of financial liabilities Correct answer.
  4. The fair value of each individual customer receivable

Explanation

MFRS 7 requires disclosure of the nature and extent of risks arising from financial instruments, including a maturity analysis for financial liabilities that shows the remaining contractual maturities. It does not require counterparty names, per-instrument profit, or individual receivable fair values.

Question 32Financial Accounting and Reporting

Under MFRS 136 Impairment of Assets, an entity has an item of plant with a carrying amount of 900,000 kyat, a fair value less costs of disposal of 820,000 kyat and a value in use of 850,000 kyat. What is the impairment loss?

  1. 80,000 kyat
  2. 900,000 kyat
  3. 50,000 kyat Correct answer.
  4. Nil

Explanation

Recoverable amount is the higher of fair value less costs of disposal and value in use, which is 850,000 kyat. The impairment loss is the carrying amount of 900,000 kyat less the recoverable amount of 850,000 kyat, giving 50,000 kyat. The asset is written down to its recoverable amount, not to the lower fair value less costs of disposal.

Question 33Financial Accounting and Reporting

Under MFRS 136, how is an impairment loss on a cash-generating unit allocated when goodwill has been assigned to that unit?

  1. Equally among all assets of the unit
  2. First to the asset with the largest carrying amount
  3. First to goodwill, then to the other assets of the unit pro rata to their carrying amounts Correct answer.
  4. Entirely to goodwill regardless of the size of the loss

Explanation

MFRS 136 requires the impairment loss to reduce the carrying amount of goodwill allocated to the unit before it is allocated to the other assets. Any remaining loss is apportioned to the other assets pro rata to their carrying amounts, subject to the floor that no asset is written below its own recoverable amount.

Question 34Financial Accounting and Reporting

Under MFRS 141 Agriculture, a biological asset is initially and subsequently measured at:

  1. Lower of cost and net realisable value
  2. Historical cost plus directly attributable borrowing costs
  3. Fair value less costs to sell Correct answer.
  4. Cost less accumulated depreciation

Explanation

MFRS 141 requires biological assets to be measured at fair value less costs to sell, both on initial recognition and at each reporting date. Changes in that amount are recognised in profit or loss for the period. Cost-based measures apply only in the limited case where fair value cannot be measured reliably.

Question 35Financial Accounting and Reporting

Under MFRS 141, an entity has a herd of cattle with a fair value of 2,000,000 kyat and estimated selling costs of 120,000 kyat at the reporting date. The carrying amount before remeasurement is 1,700,000 kyat. What is recognised in profit or loss?

  1. A gain of 180,000 kyat Correct answer.
  2. A gain of 300,000 kyat
  3. A loss of 120,000 kyat
  4. No gain or loss

Explanation

The biological asset is measured at fair value less costs to sell, which is 2,000,000 minus 120,000, equal to 1,880,000 kyat. The gain recognised in profit or loss is 1,880,000 less the carrying amount of 1,700,000, which is 180,000 kyat. Selling costs are deducted before comparing with the carrying amount.

Question 36Financial Accounting and Reporting

Under MFRS 5 Non-current Assets Held for Sale and Discontinued Operations, when is a non-current asset classified as held for sale?

  1. When the carrying amount will be recovered principally through a sale rather than continued use and the sale is highly probable Correct answer.
  2. When the asset is pledged as security for a bank loan
  3. When the asset has been idle for more than twelve months
  4. When management has begun negotiating with a buyer

Explanation

MFRS 5 requires the asset to be available for immediate sale in its present condition and the sale to be highly probable, with the intention that the carrying amount is recovered through sale rather than use. Mere negotiations or idleness do not meet the criteria. A held-for-sale asset is measured at the lower of carrying amount and fair value less costs to sell and is not depreciated.

Question 37Financial Accounting and Reporting

Under MFRS 5, a non-current asset classified as held for sale is measured at:

  1. Carrying amount less accumulated depreciation to date
  2. Fair value with changes recognised in other comprehensive income
  3. The higher of fair value and value in use
  4. The lower of carrying amount and fair value less costs to sell Correct answer.

Explanation

MFRS 5 requires a held-for-sale asset to be measured at the lower of its carrying amount and fair value less costs to sell, and it ceases to be depreciated. Any write-down is recognised in profit or loss. The higher of fair value and value in use is the MFRS 136 recoverable amount concept, which does not apply here.

Question 38Financial Accounting and Reporting

Under MFRS 124 Related Party Disclosures, which of the following is a related party of an entity?

  1. A key management personnel member of the entity Correct answer.
  2. A bank that provides a loan on normal market terms
  3. A government agency that regulates the entity's industry
  4. A major customer that purchases 40 percent of the entity's output

Explanation

MFRS 124 identifies key management personnel, being those with authority and responsibility for planning, directing and controlling the entity's activities, as related parties. Transactions with them and their close family members require disclosure. Customers, lenders and regulators are not related parties merely because of the volume of business or regulatory relationship.

Question 39Financial Accounting and Reporting

Under MFRS 110 Events after the Reporting Period, an entity's financial statements are authorised for issue on 25 March. On 10 March a customer that owed 500,000 kyat was declared bankrupt. The receivable was outstanding at the reporting date. How should this be treated?

  1. Ignored because the bankruptcy occurred after the reporting date
  2. As an adjusting event only if the bankruptcy was formally notified before 25 March
  3. As an adjusting event, with the receivable written down in the reporting period Correct answer.
  4. As a non-adjusting event, with disclosure only

Explanation

The bankruptcy provides evidence of conditions that existed at the reporting date, namely the customer's inability to pay, so it is an adjusting event. The receivable is written down in the financial statements for the reporting period. The date of formal notification within the authorisation window does not change the nature of the event.

Question 40Financial Accounting and Reporting

Under MFRS 110, a decline in the market value of an investment between the reporting date and the date the financial statements are authorised for issue is:

  1. An error that must be corrected retrospectively
  2. A non-adjusting event requiring disclosure if material Correct answer.
  3. An adjusting event requiring restatement of the investment
  4. A change in accounting estimate applied prospectively

Explanation

A fall in market value after the reporting date reflects conditions that arose after that date, so it is a non-adjusting event. No adjustment is made, but material non-adjusting events are disclosed with an estimate of their financial effect. It is not an error or a change in estimate.

Question 41Financial Accounting and Reporting

Under MFRS 101, an entity presents a single statement of profit or loss and other comprehensive income. Which item must be presented separately in the profit or loss section?

  1. Gains on translating a foreign operation
  2. Finance costs Correct answer.
  3. Actuarial gains on defined benefit plans
  4. Revaluation surplus on property

Explanation

MFRS 101 requires finance costs to be presented as a line item in profit or loss. Revaluation surplus, actuarial gains and foreign operation translation differences are components of other comprehensive income that will not or may not be reclassified to profit or loss.

Question 42Financial Accounting and Reporting

Under MFRS 133 Earnings per Share, how is the weighted average number of ordinary shares calculated when a bonus issue occurs during the year?

  1. Weighted by the time before and after the bonus issue
  2. Adjusted as if the bonus issue had occurred at the beginning of the earliest period presented Correct answer.
  3. Weighted only from the date the bonus shares are actually issued
  4. Ignored because no consideration is received

Explanation

A bonus issue, or share split, changes the number of shares without a change in resources, so MFRS 133 requires the number of shares to be adjusted as if the event had occurred at the beginning of the earliest period presented. Comparatives are restated on the same basis. Time weighting is applied to issues for consideration, not to bonus issues.

Question 43Financial Accounting and Reporting

An entity has profit attributable to ordinary shareholders of 1,200,000 kyat. At the start of the year there were 500,000 ordinary shares and a 1-for-5 bonus issue was made during the year. What is basic earnings per share?

  1. 2.880 kyat
  2. 2.400 kyat
  3. 2.400 kyat only if the bonus was issued on 1 January
  4. 2.000 kyat Correct answer.

Explanation

The bonus issue increases the share count by one fifth, to 600,000 shares, and is treated as if it had existed from the start of the period. Basic earnings per share is therefore 1,200,000 divided by 600,000, equal to 2.000 kyat. The timing of the bonus issue within the year does not affect the calculation.

Question 44Financial Accounting and Reporting

Under MFRS 140 Investment Property, which of the following is classified as investment property?

  1. Property held for sale in the ordinary course of business
  2. A building owned and occupied by the entity for administrative purposes
  3. A building owned by the entity and leased to a third party under an operating lease Correct answer.
  4. Land held for future use as a factory site

Explanation

Investment property is land or a building held to earn rentals or for capital appreciation, or both, rather than for use in production or administration or for sale in the ordinary course of business. A building leased to a third party under an operating lease meets that definition. Owner-occupied property falls under MFRS 116 and property held for sale falls under MFRS 102.

Question 45Financial Accounting and Reporting

An entity adopts the fair value model under MFRS 140 for its investment property. The property cost 2,000,000 kyat and had a fair value of 2,300,000 kyat at the reporting date. How is the increase treated?

  1. Recognised as a deferred gain amortised over the useful life
  2. Recognised in other comprehensive income and accumulated in a revaluation reserve
  3. Recognised only when the property is sold
  4. Recognised in profit or loss for the period Correct answer.

Explanation

Under the fair value model, a gain from a change in the fair value of investment property is recognised in profit or loss in the period in which it arises. Unlike the revaluation model for property, plant and equipment, no other comprehensive income reserve is created. The gain is not deferred.

Question 46Financial Accounting and Reporting

Under MFRS 116, how is the cost of an item of property, plant and equipment measured when it is acquired in exchange for a non-monetary asset with commercial substance?

  1. At the fair value of the asset given up, adjusted for any cash transferred Correct answer.
  2. At the original cost of the asset given up
  3. At the carrying amount of the asset given up
  4. At the fair value of the asset received only

Explanation

Where an exchange has commercial substance, MFRS 116 measures the acquired asset at fair value unless the fair value of neither the asset received nor the asset given up can be measured reliably. The fair value of the asset given up is used, adjusted for any cash consideration transferred. Carrying amount is used only when the transaction lacks commercial substance or fair value is not reliably measurable.

Question 47Financial Accounting and Reporting

Under MFRS 116, which cost is included in the initial measurement of an item of property, plant and equipment?

  1. Costs of opening a new facility
  2. The initial estimate of dismantling and restoring the site Correct answer.
  3. Costs of training staff to operate the asset
  4. Costs of relocating the entity's operations

Explanation

MFRS 116 includes in cost the initial estimate of dismantling and removing the item and restoring the site, to the extent the obligation is recognised under MFRS 137. Costs of opening a new facility, staff training and relocating operations are not costs of bringing the asset to its location and condition and are expensed.

Question 48Financial Accounting and Reporting

Under MFRS 137, an entity faces a lawsuit and its lawyers assess a 60 percent probability that it will be found liable, with the most likely single outcome being damages of 300,000 kyat and other possible outcomes ranging from 200,000 to 400,000 kyat. How is the provision measured?

  1. 300,000 kyat, the single most likely outcome Correct answer.
  2. 200,000 kyat, the lowest possible outcome
  3. 400,000 kyat, the maximum possible outcome
  4. Nil, because the outcome is uncertain

Explanation

Where a single obligation is being measured and the possible outcomes are not equally likely, MFRS 137 measures the provision at the best estimate of the expenditure required to settle the obligation, which is usually the most likely single outcome. The 60 percent probability makes the outflow probable, so a provision of 300,000 kyat is recognised. The range is used to assess uncertainty, not to select the highest or lowest amount.

Question 49Financial Accounting and Reporting

Under MFRS 137, how is a reimbursement from an insurer for expenditure covered by a provision treated in the statement of financial position?

  1. Deducted directly from the provision in all cases
  2. Recognised as a separate asset only when it is virtually certain to be received Correct answer.
  3. Offset against the provision only when the insurer has confirmed the amount in writing
  4. Recognised as a contingent asset with no recognition

Explanation

MFRS 137 requires the reimbursement to be recognised as a separate asset only when it is virtually certain that it will be received, and the amount recognised cannot exceed the amount of the provision. The expense relating to the provision may be presented net of the reimbursement in profit or loss. Netting the reimbursement against the liability in the statement of financial position is not permitted.

Question 50Financial Accounting and Reporting

Under MFRS 108, an entity changes the depreciation method for its machinery from reducing balance to straight line because of a change in the pattern of expected economic benefits. How is this change accounted for?

  1. As a prior period error corrected in opening retained earnings
  2. Retrospectively, by restating prior period comparatives
  3. By applying the new method only to assets acquired after the change
  4. Prospectively, as a change in accounting estimate Correct answer.

Explanation

A change in depreciation method results from new information about the pattern of consumption of economic benefits, so it is a change in accounting estimate. MFRS 108 requires such changes to be applied prospectively from the date of change, affecting the current and future periods. Prior periods are not restated.