FR B Taxation, government grants and foreign currency

Written by Fahad Mirza (ACCA)

ACCA · Financial Reporting · 8 questions

Name: ____________________   Date: ____________

1. An asset has a carrying amount of $80,000 and a tax base of $50,000. The tax rate is 25 percent. What is the deferred tax liability?

   • A $32,500
   • B $12,500
   • C $20,000
   • D $7,500

2. Which situation usually gives rise to a deferred tax liability?

   • A Accounting depreciation is faster than tax allowances
   • B Tax allowances are faster than accounting depreciation
   • C The tax rate falls
   • D Revenue is exempt from tax

3. A revaluation surplus is recognised in other comprehensive income. Where is the related deferred tax recognised?

   • A It is not recognised
   • B In profit or loss
   • C In other comprehensive income
   • D In revenue

4. Prior year tax was estimated at $20,000 and the final amount was $22,000. What happens in the current year?

   • A The $2,000 under-provision is added to the current year charge
   • B It is ignored
   • C The prior year is restated
   • D It is deducted from the current year charge

5. When are grants related to income recognised in profit or loss?

   • A At the end of the project
   • B Never
   • C Over the periods in which the related costs are recognised
   • D When received

6. Goods are bought on credit for FC 120,000 when $1 = FC 4.0. At the year end $1 = FC 3.0. What is the exchange difference?

   • A A loss of $10,000
   • B A loss of $30,000
   • C No difference
   • D A gain of $10,000

7. At the reporting date, which items are retranslated at the closing rate?

   • A Non-monetary items at historical cost
   • B Monetary items
   • C Inventories at cost
   • D Equity share capital

8. What is the functional currency?

   • A The currency used in the statements
   • B The currency of its largest supplier
   • C The currency of the parent's country
   • D The currency of the main economic environment in which the entity operates