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FR B Revenue, performance and earnings per share

Written by Fahad Mirza (ACCA)

ACCA · Financial Reporting · 9 questions

Name: ____________________   Date: ____________

  1. What is the first step of the IFRS 15 five-step model?

    • A Identify the contract with the customer
    • B Recognise revenue
    • C Identify the performance obligations
    • D Allocate the transaction price

  2. A bundle of a product (stand-alone price $600) and a service ($400) is sold for $900. How much is allocated to the product?

    • A $450
    • B $600
    • C $540
    • D $500

  3. A contract has a price of $1,000,000. Costs to date are $300,000 and total estimated costs are $750,000. Using the cost-to-cost method, what is the revenue to date?

    • A $300,000
    • B $400,000
    • C $750,000
    • D $250,000

  4. An entity that acts as an agent recognises revenue at:

    • A The gross amount of the sale
    • B Zero
    • C The cost of the goods
    • D The amount of its fee or commission

  5. A non-current asset held for sale is measured at:

    • A The higher of carrying amount and fair value
    • B The lower of carrying amount and fair value less costs to sell
    • C Cost
    • D Fair value

  6. How is a change in accounting estimate applied?

    • A Prospectively
    • B By restating the prior year
    • C By adjusting opening reserves
    • D Retrospectively

  7. A rights issue is made at a price below the market price. Why is the earlier number of shares adjusted in EPS?

    • A The shares are worth nothing
    • B The company is insolvent
    • C The shares have no voting rights
    • D The issue contains a bonus element

  8. A 1 for 5 rights issue is made at $2.00 when the market price is $3.00. What is the theoretical ex-rights price?

    • A $2.5000
    • B $3.0000
    • C $2.8333
    • D $2.0000

  9. Which statement about diluted EPS is correct?

    • A It shows the effect of potential ordinary shares such as convertible debt and options
    • B It ignores share options
    • C It is calculated on preference shares
    • D It is always higher than basic EPS

Answer key

1. A, 2. C, 3. B, 4. D, 5. B, 6. A, 7. D, 8. C, 9. A

  1. The steps run: contract, performance obligations, transaction price, allocation, recognition.

  2. 900 x 600 / 1,000 = 540.

  3. Progress = 300 / 750 = 40%. Revenue = 40% x 1,000,000.

  4. A principal recognises the gross amount.

  5. It is not depreciated.

  6. Changes in policy and corrections of errors are retrospective.

  7. The bonus fraction is the market price divided by the theoretical ex-rights price.

  8. (5 x 3.00 + 1 x 2.00) / 6 = 2.8333.

  9. Diluted EPS shows possible dilution for users.