International Financial Reporting Standards for Compensation Professionals Exam (T7) Free Practice Test

Question 1

Neutral and complete are ingredients of which of the following fundamental characteristics of accounting information?

A. Faithful representation

B. Comparability

C. Predictive value

D. Relevance

Correct Answer: A

Question 2

Defined benefit pension commitments often represent a company's largest single financial liability. IAS 19 was amended as of January, 2014. What does this amendment require?

A. That surplus or deficit of a pension fund be detailed in the financial statement

B. That any projected deficit of a pension fund be detailed in the financial statement

C. That companies state whether they have a defined benefit or defined contribution plan in the financial statement

D. That any existing deficit of a pension fund be detailed in the financial statement

Correct Answer: A

Question 3

Which of the following is true of accrual accounting?

A. It rests on a primary guiding principle, which is recognition

B. It entails recording income or expenditure only when money comes into or leaves the company

C. The recognition of revenue involves the receipt or payment of cash, while the recording of expense does not

D. Neither the recognition of revenue nor the recording of expense necessarily involves the receipt or payment of cash

Correct Answer: D

Question 4

Which statement below most accurately describes a primary purpose of the International Accounting Standards Committee (IASC) Foundation?

A. Approves principles-based standards and informs International Accounting Standards Board (IASB) of implications of proposed standards

B. Oversees standards set for the public sector

C. Provides advice to International Accounting Standards Board (IASB) on priorities

D. Monitors International Accounting Standards Board (IASB)'s effectiveness, raise funds, approve budget, responsible for constitution

Correct Answer: D

Question 5

The profit-sharing plan of Company ABC requires the company pay a specified proportion of its profit for the year to employees who serve throughout the year. If no employees leave during the year, the total profit-sharing payments for the year will be 3% of profit. The company estimates that staff turnover will reduce the payments to 2.5% of profit. What does Company ABC recognize as a liability and an expense?

A. 2.5% of profit

B. 5.5% of profit

C. 0.5% of profit

D. 3% of profit

Correct Answer: A

Question 6

Employee benefits that are expected to be settled wholly before twelve months after the end of the annual reporting people in which the employee rendered the related service are considered what kind of benefits?

A. Post-employment benefits

B. Short-term benefits

C. Long-term benefits

D. Termination benefits

Correct Answer: B

Question 7

Company XYZ has a group of six employees who will be retiring in four years -- on the 31st of December. Each retiree will receive $125,000. Company XYZ's accountants must make provisions in their accounts for this. Calculate the present value of future payments based on a discount rate of 10%.

A. $512,250

B. $515,500

C. $521,500

D. $551,250

Correct Answer: A

Question 8

IAS 19 classifies employee benefits into four main categories. Which of the following best represent those categories?

A. Short-term benefits, post-employment benefits, long-term benefits, termination benefits

B. Wages, profit-sharing, bonuses, non-monetary bonuses

C. Wages, short-term benefits, bonuses, termination benefits

D. Wages, short-term benefits, long-term benefits, termination benefits

Correct Answer: A

Question 9

Employee benefits that are not short-term, post-employment or termination benefits are considered what kind of benefits?

A. Post-employment benefits

B. Short-term benefits

C. Long-term benefits

D. Termination benefits

Correct Answer: C

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