Note: We encourage you to attempt this with complete conscience within a 30 minutes time frame. Please feel free to refer to the ICAI Material and TowardsCA study notes before attempting the same. You can e-mail your answers to towardsca@gmail.com for verification.
Direct Questions:
- Define “Accounting Policies” and explain their significance in financial reporting.
- What factors should an entity consider when selecting and applying accounting policies?
- Discuss the disclosure requirements for accounting policies in financial statements.
- How do accounting policies impact the comparability of financial statements across different entities?
- Explain the concept of “Consistency” in relation to accounting policies and its importance in financial reporting.
Practical Questions:
- ABC Ltd. recently changed its accounting policy for recognizing revenue. Discuss the factors that ABC Ltd. should consider when making this change and explain how it should disclose this change in its financial statements.
- DEF Company operates in multiple countries and has subsidiaries with different functional currencies. Describe how DEF Company should establish and apply accounting policies for foreign currency translation in its consolidated financial statements.
- XYZ Corporation has adopted the first-in, first-out (FIFO) method for inventory valuation. Discuss the potential impact on XYZ Corporation’s financial statements if it had chosen the weighted average cost (WAC) method instead.
- LMN Ltd. has significant goodwill on its balance sheet. Explain the accounting policy that LMN Ltd. should follow for testing the impairment of goodwill and how the impairment loss should be recognized and disclosed.
- PQR Enterprises is in the construction industry and follows the completed-contract method for revenue recognition. Compare and contrast the completed-contract method with the percentage-of-completion method in terms of their accounting policies and impact on financial statements.