Question 1

AASB 101 permits entities to present the components of other comprehensive income either before tax effects (gross presentation)or after their related tax effects (net presentation).

Accepted Answer

AASB 101 allows entities to choose between presenting the components of other comprehensive income before tax effects (gross presentation) or after their related tax effects (net presentation).

Question 2

AASB 101 permits an entity to present all items of income and expense recognised in a period to be presented in either the statement of comprehensive income or the income statement.

Accepted Answer

False

Question 3

Total comprehensive income for the year is profit for the year plus other items of comprehensive income.

Accepted Answer

Total comprehensive income for the year includes both profit for the year and other items of comprehensive income, such as gains or losses on the disposal of assets, foreign exchange differences, and changes in the fair value of available-for-sale investments. Therefore, the statement is true.

Question 4

According to AASB 101,the income statement provides a total profit figure to which opening retained earnings is added and from which dividends are deducted.

Accepted Answer

According to AASB 101, the income statement provides information about an entity's income and expenses during a period, but it does not provide a total profit figure. The statement of comprehensive income provides information about all items of income and expense recognized in a period, including those that are not recognized in the income statement. The statement of changes in equity shows the opening balance of retained earnings, any adjustments made during the period, and the closing balance of retained earnings, from which dividends may be deducted.

Question 5

AASB 101 requires profit or loss and the total comprehensive income for the period reported on the face of the statement of comprehensive income to be disaggregated between the non-controlling interest and the owners of the parent.

Accepted Answer

AASB 101 does require the disaggregation of profit or loss and total comprehensive income between non-controlling interest and owners of the parent on the face of the statement of comprehensive income.

Question 6

Discovery of an error from a prior period corrected retrospectively is an example of an item reportable under other comprehensive income.

Accepted Answer

When an error from a prior period is discovered and corrected retrospectively, it is reported as a prior period adjustment through retained earnings in the current period's financial statements. This would be reported under other comprehensive income. Therefore, the statement is true.

Question 7

An item must be outside the ordinary operations of the business or be of a non-recurring nature to be classified as an extraordinary item under AASB 101.

Accepted Answer

As of the updates to AASB 101, the concept of "extraordinary items" has been eliminated, and entities are no longer required to classify items as extraordinary based on them being outside the ordinary operations of the business or of a non-recurring nature.

Question 8

By focusing only on the income statement,we do not obtain a full picture of all the gains and losses that may have occurred for an entity during the period.

Accepted Answer

The income statement only shows the revenue and expenses of an entity during a specific period, but it does not reflect other gains and losses, such as changes in the value of assets, investments, or changes in equity. Therefore, it does not provide a complete picture of an entity's financial performance.

Question 9

If the exercise (strike)price of a call option is greater than the current share price,the option is said to be 'in-the-money'.

Accepted Answer

If the exercise (strike) price of a call option is greater than the current share price, the option is said to be 'out-of-the-money'. If the current share price is greater than the exercise price of a call option, then the option is 'in-the-money'.

Question 10

AASB 2 requires that the fair value of the option issued as a share-based payment to an employee,be determined and this value be deemed to be the cost of the options.

Accepted Answer

This statement is true. AASB 2 requires that the fair value of share-based payment transactions, including options issued to employees, be determined and recognized as an expense in the financial statements. The fair value of the options is deemed to be the cost of the options.

Question 11

Comprehensive income includes dividend payments to shareholders.

Accepted Answer

Comprehensive income includes all elements of income and expense recognized in a period, but dividend payments to shareholders are not classified as income or expense. They are classified as distributions to owners and do not affect the calculation of comprehensive income.

Question 12

All adjustments to equity other than those related to transactions with owners in their capacity as owners are disclosed in the statement of comprehensive income (AASB 101).

Accepted Answer

The answer of All adjustments to equity other than those...

Question 13

All expenses from operating activities must be classified according to either their nature or function.

Accepted Answer

The answer of All expenses from operating activities must be...

Question 14

All disclosure requirements that relate to an entity's profit or loss are included in AASB 101.

Accepted Answer

AASB 101 covers the presentation of financial statements and provides guidelines on their structure and minimum requirements for their content, not all specific disclosure requirements related to profit or loss, which may be covered under other standards.

Question 15

In establishing the classification of items in the income statement,the size of an item is an appropriate basis for establishing a separate classification (by nature or function)for it.

Accepted Answer

The size of an item alone is not an appropriate basis for classification. Items must be classified based on their nature or function, which is determined by the economic substance of the item, not just its size or amount.

Question 16

The income statement under AASB 101 is designed to report all revenues and expenses to determine profit or loss.

Accepted Answer

The answer of The income statement under AASB 101 is...

Question 17

The choice between reporting expenses by nature or by function is extremely important,as different net profit figures are derived depending upon the choice made.

Accepted Answer

The choice between reporting expenses by nature or by function does not affect the net profit figure, as it is merely a presentation choice in the income statement. The total expenses remain the same, only the way they are classified and presented changes.

Question 18

Profit is a measure of financial performance and therefore may not truly reflect the success or otherwise of an organisation.

Accepted Answer

Profit may not take into account non-financial factors such as customer satisfaction, employee engagement, environmental impact, and social responsibility. An organization with high profits may still be struggling with these non-financial aspects, and vice versa. Therefore, profit alone may not be a comprehensive measure of an organization's success.

Question 19

As part of the process of international harmonisation,standard setters have removed the need for professional judgment to be exercised in respect of expenses; all discretion that once existed has been removed.

Accepted Answer

Standard setters have not completely removed the need for professional judgment to be exercised in respect of expenses. While there are prescribed methods and guidelines for recognizing and measuring expenses, professional judgment may still be required in certain circumstances, such as determining the nature and classification of expenses or assessing the materiality of certain items.

Question 20

An entity shall recognise all items of income and expense in a period in profit or loss unless an Australian Accounting Standard requires or permits otherwise.

Accepted Answer

This statement is in accordance with the principle of accrual accounting, which requires recognition of income and expenses in the period in which they are earned or incurred, regardless of whether cash is received or paid in that period. However, there may be circumstances where an Australian Accounting Standard permits deferral or recognition of income or expenses in a different period.

Quiz 16: The Statement of Comprehensive Income and Statement of Changes in Equity