Example – Present value and an effective rate interest methodPresent Value:

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Example:An entity purchased a property for 500 on January, 1st. There are 3 instalments amounted 201 every December, 31st. Construct the amortisation table for the liability.

Date Payment Interest rate Liability as at the beginning

of a period

Interest Reduction of a liability

31.12. X 201 10%31.12. X+1 201 10%31.12. X+2 201 10%

Property Liability

Cash Interest expense

BS end of Y1 BS end of Y2 BS end of Y3

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Multiple-choice questions – IFRS Conceptual Framework(1) What is the authoritative status of the Framework?

(a) It has the highest level of authority. In case of conflict between the Framework and a Standard or Interpretation, the Framework overrides the Standard or Interpretation.

(b) If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the Framework. In the absence of a Standard the management shall refer to, and consider the applicability of, the following sources in descending order:

the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework.

the requirements in IFRSs dealing with similar and related issues; and(c) If there is a Standard or Interpretation that specifically applies to a transaction, it overrides the

Framework. In the absence of a Standard the management shall refer to, and consider the applicability of, the following sources in descending order:

the requirements in IFRSs dealing with similar and related issues; and the definitions, recognition criteria and measurement concepts for assets, liabilities,

income and expenses in the Framework.

(2) The fundamental qualitative characteristics of financial information are:(a) Relevance and faithful representation(b) Relevance and comparability(c) Verifiability and timeliness(d) Understandability and prudence(e) Faithful representation and Understandability

(3) Which of the following is not a qualitative characteristic of financial statements according to the Framework?(a) Materiality(b) Understandability(c) Comparability(d) Relevance(e) Timelines

(4) IFRS Conceptual Framework defines:(a) eight elements of financial statement(b) five elements of financial statements(c) ten elements of financial statements(d) seven elements of financial statements

(5) The elements of financial statements which relate to financial position are:(a) Income and expenses(b) Assets and Liabilities(c) Assets, Liabilities and Equity(d) Income, Expenses and Equity

(6) The elements of financial statements which relate to performance are:(a) Income and expenses(b) Assets and Liabilities(c) Assets, Liabilities and Equity(d) Income, Expenses and Equity

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(7) When should an item that meets the definition of an element be recognised, according to the Framework?

(a) When it is probable that any future economic benefit associated with the item will flow to or from the entity

(b)Then the item's cost or value can be measured with reliability.(c) When it is probable that any future economic benefit associated with the item will flow to or

from the entity and the item's cost or value can be measured with reliability.(d)When the entity obtains control of the rights or obligations associated with the item.

(8) The definition of Fair value according to IFRS Conceptual Framework is:(a) The price that could be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date.(b) Fair value is the amount which an asset could be exchanged, or a liability settled, between

knowledgeable, willing parties in an arm´s length transaction.(c) IFRS Conceptual Framework does not define the Fair value at all.

(9) The primary users of general purpose financial reporting according to IFRS Conceptual Framework are:

(a) Tax authorities, government and market regulators(b) Employees and management of particular entity(c) Present and potential investors, lenders and other creditors

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