80. Cukoo Ltd is in the business of chemicals.

Under a recent legislation related to pollution the

company needs to install equipments related to purification of air in the premises by 31st December
2022. As at 31st March 2023 Cukoo Ltd failed to install the equipments. The cost of the equipment
was Rs.250, 000 and the penalty for non-compliance was Rs.25,000. What amount should be provided
under IAS 37?

(A) Rs.250,000 (B) Rs.25,000 (C) Nil

(D) Rs. 275,000

Answer (B)

81. Pursuant to IAS 37 a contingent asset is:

A) not recognized but is disclosed when an inflow of economic benefits is probable.

B) always recognized in financial statements.

C) always disclosed in the notes to the financial statements,

D) disclosed in the notes when the possibility of an inflow of economic benefits is remote.

Answer (A)

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82. Cookware Ltd has received a claim of Rs.1,000,000 from a customer for supplying poor quality
products. The lawyers of Cookware Ltd have opined that there is a 25% chance that Cookware Ltd will
successfully avert the claim. Whether Cookware Ltd should,

A) provide for the claim,

B) disclose the amount as contingent liability in notes to accounts,

C) do nothing.

D) provide for the claim when there is a court order substantiating the same.

Answer (A)

83. Cutglass Ltd owns a patent for a established successful drug that has a remaining life of 8 years. A
firm of specialized advisors has estimated current value of patent at Rs 20 m. However, the firm is
awaiting clinical trials, which if successful would push the value upwards to Rs. 35 m. Value of patent
to be considered under IAS 38: Intangible Assets would be:

A) Rs.35 million B) Rs.20 million C) Rs.10 million D) None of the above.

Answer (B)
34. A case for damages against Baxter Ltd was pending in court on 31st March 2022, the end of
reporting period. Baxter Ltd had estimated the probable liability at Rs. 600,000 and made a provision
in the Accounts. The Company’s lawyers studied the claim and advised that the provision should be
considered at Rs.635, 000 on 30th April 2022. The Company’s auditors reviewed the legal opinion but
failed that the provision should be made to the tune of Rs.675,000. The Court gave a verdict on 31
May 2022 fixing the liability to Rs. 650,000. Baxter Ltd accepted the verdict. The financial statements
were approved on 30th June 2022. The Company in accordance with IAS 10:

A) Retain probable liability at Rs.600, 000.

B) Increase provision to Rs. 635, 000 treating it as adjusting event.

C) Increase provision to Rs.650, 000 treating it as adjusting event.

D) Increase provision to 675,000 treating it as adjusting event.

Answer (C)

84. In Dec 2021 Alpha Ltd paid Rs 15 million for a television advertising campaign for its products that
will run for six months from 1st Jan 2022 to 30th June 2022. The directors believe that increased sales
as a result of the publicity will continue for two years from the start of the advertisement. However, it
is not clear whether the advertising campaign will generate economic benefit to flow to the entity.

A) The amount of Rs.15 million to be shown under Intangible assets.

B) The amount of Rs.15 million to be charged to Statement of Profit & Loss.

C) The amount of Rs.15 million should be amortized for a period of two years.

D) None of the above.

Answer (B)

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85. Flamingo Ltd hold a trademark with a carrying value of Rs.3.7 million, which it uses to produce
consumer goods. It is expected that the products will continue to be in demand for at least ten years
and the trademark has an indefinite life. At 31st December 2022, based on a report by an independent
expert, it is estimated that the recoverable amount of the trademark is only Rs. 2.6 million.

A) The trademark will be amortized for a period of ten years.

B) The trademark having indefinite life would be tested for impairment.

C) The carrying value of trademark should be charged to revenue.

D) None of the above.

Answer (B)
86. Falcon Ltd. produced a place of antivirus software and declared it as ‘open’ software. Anybody can
download it for free from the internet and anyone can make changes to it. Falcon Ltd has spent Rs. 5
million in developing the software.

a) The software will be treated as intangible asset and amortized over its useful life.

b) The software will be tested for impairment depending on its recoverable value in

future.

c) The amount spent on the software will be capitalized under Ind AS 16.

d) The software cost would be charged to revenue as it does not meet the criteria laid down under IAS
38: Intangible Assets

Answer (D)

87. Panama Ltd has created employee goodwill by recognizing its retirement benefit package. An
independent management consultant estimated the value of the goodwill at Rs.5 million. In addition,
Panama Ltd recently purchased a patent that was developed by a competitor. The patent has an
estimated useful life of five years. Should Panama Ltd report the goodwill and patent on its Balance
Sheet?

Goodwill Patent

A) Yes No

B) No Yes

C) No No

D) Yes Yes

Answer (B)

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88. Alpha Ltd hold a trademark with a carrying value of Rs.2.7m, which it uses to produce consumer
goods. It is expected that the products will continue to be in demand for the foreseeable future, and
the trademark has an indefinite life. At 31st December 20X9, based on a report by an independent
expert, it is estimated that the recoverable amount of the trademark is only Rs.2.6m. Accordingly,
please state which of the following statements is true:

A The value of the trademark will be Rs.2.7m and will be tested for impairment

B The value of the trademark will be Rs.2,6m and will be amortized.

The value of the trademark will be Rs.2.6 with an impairment loss of Rs.0.1m and will be
C
tested for impairmentNone of the above.

D
Answer: (C)

89. Beta Ltd has a software that originally cost Rs.350,000. Its accumulated amortization is Rs. 50,000.
The market value of the software is Rs. 300,000 if sold at this stage. The costs of restructuring the
software company if the software is sold are Rs. 100,000. The value in use as determined by the
management is Rs. 275,000. The remaining estimated life of the software as assessed by the
management is at least 5 years and estimated residual value at the end of this life is Rs. 25,000.

Impairment loss would be:

A Rs. 25,000

B Rs. 30,000

C Rs. 29,500

D None of the above

Answer: (B)

90. Using the data in 89 above, the revised amortization charge on the software after the impairment
loss has been recognized would be:

A Rs. 25,000

B Rs. 30,000

C Rs. 50,000

D None of the above

Answer: (C)

91. ABC Ltd owns a patent for a established successful drug that has a remaining life of 8 years. A firm
of specialized advisors has estimated current value of patent at Rs 40 m.

However, the firm is awaiting clinical trials, which if successful would push the value upwards to Rs.
75 m.

Value of patent to be considered under IAS 38: Intangible Assets would be:

A Rs.40 million

B Rs.20 million

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C Rs.75 million

D None of the above.

Answer: (A)
92. Which of the points below are not true:

The cost of a separately acquired intangible asset comprises:

its purchase price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates; andany directly attributable cost of preparing the
(A)
asset for its intended use.costs of introducing a new product or service (including costs of
advertising and promotional activities)

(B)
(C)

Answer: (C)

93. Which are the expenses that cannot be capitalized as intangible asset?

costs of employee benefits (as defined in IAS 19) arising directly from bringing the asset
to its working condition.professional fees arising directly from bringing the asset to its
(A) working condition; andcosts of testing whether the asset is functioning properly.costs of
conducting business in a new location or with a new class of customer (including costs of
staff training);

(B)
(C)
(D)

Answer: (D)

94. An enterprise is developing a new production process. During the year 20X1, expenditure incurred
was Rs. 10 lakhs, of which Rs. 9 lakhs were incurred before 1 December 20X1 and 1 lakh was incurred
between 1 December 20X1 and 31 December 20X1.

The enterprise is able to demonstrate that, on 1 December 20X1, the production process met the
criteria for recognition as an intangible asset. The recoverable amount of the know-how embodied in
the process (including future cash outflows to complete the process before it is available for use) is
estimated to be Rs. 5 lakhs.

Which of the following will be recognized as intangible asset:

(A)Rs. 10 lakhs (B) Rs.9 lakhs (C) Rs. 1 lakh (D)Rs. 5 lakhs

Answer (C)

At the end of 20X1, the production process is recognised as an intangible asset at a cost of Rs. 1 lakh
(expenditure incurred since the date when the recognition criteria were met, that is, 1 December
20X1). The Rs. 9 lakhs expenditure incurred before 1 December 20X1 is recognised

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30
as an expense because the recognition criteria were not met until 1 December 20X1. This expenditure
will never form part of the cost of the production process recognised in the balance sheet.

95. According to IAS 40, Investment property, which of these are investment properties:

A) Property held for sale in the ordinary course of business,

B) Building given out on lease,

C) Owner occupied property used for corporate headquarters,

D) Property held for use in the production or supply of goods or services or for administrative processes.

Answer (B)

96. In accordance with IAS 40, the following are not investment properties:

(i) Land held for long term capital appreciation (ii) Land held for undetermined future use.

(iii)Abuilding that is vacant, but is held to be leased out via one, or more operating leases (iv)Owner
occupied property

(v)Property held for sale in the ordinary course of business

A. All of the above are investment properties

B. (i), (ii) and (iv)

C. (ii), (iii) and (v)

D. (iv) and (v)

Answer (D)

97. Alpha Limited has rented out its property to Beta Limited. Alpha Limited provides ancillary
services to Beta Limited in its property which includes provision for security and maintenance to
tenants.

According to IAS 40, how should this property be treated?

A. It will be classified as owner – occupied property

B. The service fees should be capitalized

C. It will be classified as investment property,

D. None of the above

Answer (C)

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98. In accordance with IAS 41, Agriculture, a bearer plant

(A) is a living plant that used in the production or supply of agricultural produce and is expected to bear
produce for more than one period;

(B) is a dead plant that used in the production or supply of agricultural produce; (C) is expected to bear
produce for one period only;

(D) has a likelihood of being sold as agricultural produce, except for incidental scrap sales.

Answer (A)

99. Which of the following agricultural activities are within the scope of IAS 41, Agriculture?

(i) Agricultural produce at the point of harvest (ii) Biological assets

(iii)Land related to agricultural activity (iv)Intangible assets related to agricultural activity

A. (i) and (ii)

B. Only (i)

C. Only (ii)

D. All of the above

Answer (A)

100. An entity shall recognize a biological asset or agricultural produce when:

(i) the entity controls the asset as a result of past event

(ii) the fair value and cost of the asset can be measured reliably (iii)future benefits associated with the
asset, will flow to the entity.

A. (i) and (ii)

B. Only (i)

C. Only (ii)

D. All of the above

Answer (D)

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101. Bolton Ltd offers bonus issue to its employees on meeting sales target for 2022. What is the
nature of share-based payment in accordance with IFRS 2: Shared based payments:

a) Cash settled share-based payment

b) Equity settled share-based payment

c) Share appreciation rights

d) None of the above.

Answer (B)

102. Iceland Ltd offered share options scheme to its staff on 5th August 2022. The scheme was
approved by shareholders on 31st December 2022. The scheme commenced on 10th January 2023.
The financial year of Iceland Ltd ends on 31st March 2023. The grant date is:

a) 5th August 2022

b) 31st December 2022

c) 10th January 2023

d) 31st March 2023

Answer (B)

103. Lockbox Limited issued share options on June 1, 2020 to pay for the purchase of inventory. The
inventory is eventually sold on December 31, 2022. The value of the inventory on June 1, 2020 was Rs.
600,000 and this value was unchanged up to the date of sale. The sale proceeds were Rs. 800,000. The
shares issued have a market value of Rs. 630,000.

Calculate the value at which the share-based payment transaction be recorded in the financial
statements for the year ended December 31, 2022.

A. Rs. 600,000

B. Rs. 800,000

C. Rs. 630,000

D. None of the above.

Answer: (A)

104. Cameron Limited grants 2000 share options to each of the three directors on January 1, 2022
subject to the directors being employed on December 31, 2024. The options vest on December 31,
2024. The fair value of each option on January 1, 2022 is Rs. 10/- and it is anticipated that on January
1, 2022 all of the share options will vest on December 30, 2022.

The options will only vest of the entity’s share price reaches Rs.14 per share. The share price at
December 31, 2022 is Rs.8/- and it is not anticipated that it will rise over the next two years. It is

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anticipated on December 31, 2022 that only two directors will be employed on December 31, 2024.

Calculate the charge to the income statement of Quixote Limited for the year ended December 31,
2022?

A. Rs 13,333
B. Rs.26,667

C. Rs.10,667

D. Rs.21,333

Answer (A)

According to IFRS 2, the market-based conditions (i.e. increase in share price) can be ignored for the
purpose of the computation. However, the employment condition must be considered and the options
will be calculated as follows:

(2000 options x 2 directors x Rs.10/-) x one year

------------------------------------------------------------------- = Rs.13,333

Three years

105. K Ltd acquired al the

5,00,000 shares of C Ltd as at
1st January 2022 for Rs.25 per
share. Just before the
acquisition date, C Ltd’s
Balance Sheet reported net
assets of Rs.10 million. K Ltd
did a financial due diligence
and determined the fair value
of C Ltd’s property and
equipment at Rs. 1 million
higher than the amount
reported by Cola. What would
be the amount of goodwill
calculated by K Ltd on
acquisition of C Ltd?A. Rs.
5,00,000B. Rs. 15,00,000C. Rs.
0SolutionStatement of
calculation of goodwill:

A
m
ou
nt
Rs
.

Co 12
st 5,
of 00
ac ,0
qu
isi
tio
n
(5,
00
,0 00
00
x
Rs.
15
/-)
(A)

Fai
r
val
ue
of
ne
t
as
se
ts
11
($.
0,
10
00
0,
,0
00
00
,0
00
+
$.
10
,0
0,
00
0)
(B)

Go 15
od ,0
wil 0,
l 00
(A 0
–
 B)

Hence correct answer is (B).

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34

106. Parent Ltd paid Rs.600

million for the outstanding
share of Partner Ltd. At the
acquisition date Partner Ltd
reported the following
condensed balance
sheet.Condensed balance
sheet of Partner Ltd

A
m
ou
nt
(R
s
mi
lli
on
)

Pl
an
t
&
Eq
76
ui
0
p
m
en
t(n
et)

Cu
rre
nt
80
as
se
ts

Go 30
 od
wil
l

Lia
bil 40
iti 0
es

Sh
ar
eh
ol
47
de
0
rs’
eq
uit
y

The fair value of plant and

equipment was Rs.120 million
more than its recorded book
value. The fair values of all
other identifiable assets and
liabilities were equal to their
recorded book values.
Calculate the amount of
goodwill Parent Ltd should
report on its consolidated
Balance Sheet.A. Rs. 50
MillionB. Rs. 40 MillionC. Rs.
0SolutionStatement of
calculation of purchased
goodwill:

Rs Rs
Ite Mi Mi
m lli lli
on on

Co 60
st 0.
of 0
in (A)
ve
st
m
en
t

Le
ss
Fai
r
val
ue
of
ne
t
as
se
ts
Pl
an 88
t 0.
& 0
Eq 80
ui .0(
p 40
m 0.
en 0)
t
(n
et)
Cu
rre
nt
As
se
ts
Lia
bil
iti
es

56
To
0.
tal
0
(B)
(B)

Pu 40
 rc
ha
se
d
go
.0
od
wil
l
(A-
B)

Goodwill reported in Partner

Ltd’s balance sheet is an
identifiable asset and hence
not an intangible asset under
Ind AS 38 and hence ignored in
calculation of Parent’s
goodwill amount.

Correct Answer (B)

107. Computation of goodwill under full goodwill method follows:

A) Fair value of net assets on acquisition plus Fair value of consideration minus fair value of
noncontrolling interest.

B) Fair value of consideration plus fair value of non-controlling interest minus fair value of net assets.

C) Fair value of consideration plus fair value of non-controlling interest plus fair value of net assets on
acquisition.

D) Fair value of consideration minus fair value of non-controlling interest minus fair value of net assets

Answer (B)

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108. On 1st Jan 2023, A Ltd acquired 27,000 shares in B Ltd by way of exchange of two shares in A Ltd
for every three shares in B Ltd. The face value of A Ltd’s share is Re. 10 each and its market price is Rs.
30 each.

Hence the consideration in B Ltd will work to:

A) Rs. 540,000

B) Rs. 180,000

C) Rs. 810,000
D) Rs. 400,500

Answer (A)

109. When a consideration that an acquirer commits to the acquiree in cash or additional equity
interests or other assets after the acquisition date on the fulfilment of a certain specified event or
condition in the future, it is called:

A) Consideration in cash

B) Deferred consideration

C) Consideration through share exchange

D) Contingent consideration

Answer (D)

110. When consideration is not payable immediately but is payable in the future and which is not
dependent upon any future events, it is called:

A) Contingent consideration B) Deferred consideration C) Consideration through share exchange D)

None of the above.

Answer (B)

111. A Ltd acquires 85% of shares of B Ltd. The fair value of net assets is Rs.20 million. Goodwill on
acquisition worked out to Rs.1.2 million. The valuer appointed by B Ltd determines the fair value of
the 15% non-controlling interest in C Ltd is Rs.4.2 million. Hence the fair value of the consideration in
acquisition of B Ltd would be:

A) Rs.20.0 million

B) Rs.24.4 million

C) Rs.17.0 million

D) None of the above

Answer (C)

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112. P Ltd acquires 60% of shares of S Ltd for Rs.136 million. The fair value of net assets is Rs.150
million. The goodwill on acquisition was Rs.25.4 million. Fair value of non-controlling interest in S Ltd
would be:

A) Rs. 10.40 million

B) Rs. 39.40 million

C) Rs.110.60 million
D) Rs. 29.40 million

Answer (B)

113. In accordance with IFRS 3 Business Combination, which of the following statements are correct:

A) Goodwill should be reviewed annually for test of impairment,

B) Goodwill should be amortized for a period of twenty years,

C) The carrying value of goodwill should be revised annually to reflect fair value of assets

D) Goodwill should not be disclosed in statement of financial position.

Answer (A)

114. Pursuant to IFRS 5 – Assets held for sale and discontinued operations all of the following are the
criteria to be met for an asset to be held for sale except:

A) Sale must be highly probable,

B) An appropriate level of management must be committed to sell the asset or the disposal group,

C) The sale should be expected to be completed within two years,

D) An activate program to locate a buyer and complete the plan must have been initiated.

Answer (C)

115. Proxy Limited uses the cost model for measuring the non-current assets. On October 30, 2022
Proxy Limited classified a non-current asset as held for sale in accordance with IFRS 5. At that date the
asset’s carrying amount was Rs. 30,000, its fair value was estimated at Rs.22,000 and the costs of
disposal at Rs.3,000. On November 20, 2022 the asset was sold for net proceeds of Rs.18,400.

Pursuant to Ind AS 105, what amount should be included as a loss on disposal in Proxy’s Statement of
Profit and Loss for the year ended December 31, 2022?

A. Rs.11,000

B. Rs. 8,600

C. Rs. 11,600

D. Rs. 600

Answer (D)

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Workings

According to IFRS 5, when any non-current asset is classified as held for sale it is valued at lower of the
carrying value or fair value less cost of disposal. The difference if any is treated as impairment loss.
Hence the working is as follows:

Carrying value (A) Fair value Less cost of disposal Fair

value less cost of Disposal (B) Hence the asset will be = Rs. 30,000=
carried at lower of A and B = (C) Loss recognized on Rs.22,000= Rs.3,000
disposal

= Rs.19,000

Rs. 19,000

Rs. 19,000 (C)– Rs. 18,400 (D) = (E) Rs. 600

116. Alpha Limited stopped using a Plant during 2021. In the same year, it let the Plant out on lease to
Beta Limited and now foresees that the Plant will be of no further use to it. It is now negotiating the
sale of the Plant to Beta Limited.

According to IFRS 5, what is the treatment to be provided to the depreciation of the Plant?

A. Plant is depreciated like other assets as actual sale has not taken place yet

B. Depreciation is reversed

C. Depreciation is charged to discontinued operations

D. Plant is not depreciated.

Answer (D)

117. According to IFRS 5, which of the following are the criteria to be met for an asset to be held for
sale?

Sale must be highly probableAn appropriate level of management must be committed

to sell the asset or the disposal groupAn active programme to locate a buyer and
(i) (ii) complete the plan must have been initiatedThe sale should be expected to be
completed within two years.The asset should be fully depreciated.There is remote
possibility of the modification or cancellation of plan.

(iii)

(iv)
(v)
(vi)

A. (i),(ii),(iii) and (iv)

B. (i),(iii),(v) and (vi)

C. (i),(ii),(iii) and (vi)

D. All of the above

Answer (C)
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118. Which of the following statements are incorrect?

A. It requires segments to be determined with reference to information regularly reviewed

by the chief operating decision maker

B. Allows exemption from disclosure on the grounds that it would be seriously prejudicial

C. An entity must disclose some geographical information.

D. Disclosures are only required for companies with listed securities and those in the

process of listing securities

Answer (D)

119. According to IFRS 8, two or more operating segments may be aggregated into a single operating
segment if it satisfies all of the below requirements, except,

A. The segments have dissimilar characteristics

B. The aggregation is consistent with the core principle of segment reporting

C. The segments have similar characteristics

D. The segments are similar in the nature of product or service, nature of production process, class of
customer, method of product distribution and regulatory environment

Answer (A)

120. Pursuant to IFRS 8, an entity shall disclose which of the following information?

A. Factors used to identify the entity’s reportable segments including the basis of organization

B. Types of products and services from which each reportable segment derives its revenue

C. Neither A or B

D. Both A and B

Answer (D)

121. IFRS 8 prescribes that, under the quantitative threshold, the total amount of revenue that should
be covered by reportable segments is at least:

A. 50%

B. 75%

C. 80%

D. None of the above

Answer (B)

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122. Valuation of Financial Assets

Financial Instruments to be held at Fair Value (IFRS 9)

Under IFRS 9 Financial

Instruments which of the
following should be held at fair
value?(i) An interest rate
swap(ii) 7% 2020 bonds
acquired with the intention to
hold to maturity(iii) An
investment in the ordinary
shares of Milk Plc(iv) An
investment in a convertible
loan noteA (i) only B (ii) onlyC
All of the above D (i), (iii) and
(iv)Answer (D)