- IAS 10 — Events after Reporting Period
At 31 December, a customer owed Rs. 20 million. Due to financial difficulties existing before year-end, a 20% loss allowance was recognised. Before authorization of the financial statements, the customer was declared bankrupt and only 25% of the balance is now expected to be recovered. What additional loss should be recognised?
A. Rs. 5 million
B. Rs. 11 million
C. Rs. 15 million
D. Nil
- Financial Instruments — ECL
A debt investment has a gross carrying amount of Rs. 10 million and a loss allowance of Rs. 3 million. At year-end it is credit-impaired (Stage 3). Its effective interest rate is 8%. Interest revenue for the next year is:
A. Rs. 0.24 million
B. Rs. 0.56 million
C. Rs. 0.80 million
D. Rs. 1.04 million
- IFRS 16 — Lessee Accounting
A four-year lease requires annual payments of Rs. 6 million in arrears. IBR is 10%; annuity factor = 3.1699. Expected payment under a residual value guarantee is Rs. 1.5 million; four-year PV factor = 0.6830. Initial direct costs are Rs. 0.6 million, lease incentive Rs. 0.9 million and restoration provision Rs. 1.2 million. Initial ROU asset is closest to:
A. Rs. 19.02 million
B. Rs. 20.04 million
C. Rs. 20.94 million
D. Rs. 21.84 million
- IAS 21 — Foreign Currency
Inventory costing USD 100,000 was purchased on credit when USD 1 = Rs. 280. At year-end it remains unsold and unpaid; closing rate is Rs. 290. Ignoring NRV issues, the correct carrying amounts are:
A. Inventory Rs. 29m; payable Rs. 29m
B. Inventory Rs. 28m; payable Rs. 28m
C. Inventory Rs. 28m; payable Rs. 29m with Rs. 1m exchange loss
D. Inventory Rs. 29m; payable Rs. 28m with Rs. 1m exchange gain
- IFRS 15 — Warranties
A manufacturer sells equipment with a one-year warranty against manufacturing defects. Customers may separately purchase an additional two-year maintenance warranty. Which treatment is correct?
A. Both warranties are separate performance obligations
B. Both warranties are provisions under IAS 37
C. One-year warranty is IAS 37; additional service warranty is a separate performance obligation
D. Entire consideration is recognised when the equipment is delivered
- IFRS 8 — Operating Segments
Segment profits are Rs. 52m, Rs. 8m and Rs. 4m, while segment losses are Rs. 70m and Rs. 6m. Under the profit/loss 10% test only, what is the quantitative threshold?
A. Rs. 6.4m
B. Rs. 7.0m
C. Rs. 7.6m
D. Rs. 14.0m
- IAS 12 — Income Taxes
A warranty provision has a carrying amount of Rs. 5 million. The expenditure will be deductible for tax only when paid. Tax rate is 29%. Assuming sufficient future taxable profits, the provision gives rise to:
A. DTL of Rs. 1.45m
B. DTA of Rs. 1.45m
C. DTA of Rs. 5m
D. No deferred tax
- Regulatory Framework in Pakistan
X Limited is an unlisted subsidiary of a listed company. Management argues that because X Limited itself is unlisted, it should follow the Fifth Schedule. Which is correct?
A. Fifth Schedule because X Limited is unlisted
B. Fourth Schedule because it is a subsidiary of a listed company
C. Either schedule may be selected as an accounting policy
D. Neither schedule applies if IFRSs are followed
- Consolidation — Upstream Inventory
P owns 80% of S. S sold inventory to P earning a profit of Rs. 5 million. At year-end, 40% remains unsold by P. The effect of eliminating unrealised profit is:
A. Group retained earnings ↓ Rs. 2m; NCI unaffected
B. Group retained earnings ↓ Rs. 1.6m; NCI ↓ Rs. 0.4m
C. Group retained earnings ↓ Rs. 0.4m; NCI ↓ Rs. 1.6m
D. Inventory ↓ Rs. 5m only
- Investment in Associate
An investment in associate initially cost Rs. 50 million. Since acquisition, the investor’s share of the associate’s total comprehensive income is Rs. 12 million. Dividends of Rs. 3 million have been received and an impairment loss of Rs. 4 million is required. Carrying amount of the associate is:
A. Rs. 55 million
B. Rs. 58 million
C. Rs. 59 million
D. Rs. 63 million
- IAS 33 — Rights Issue
A company had 6 million shares throughout the first six months. On 1 July it made a 1-for-3 rights issue at Rs. 15 when market price immediately before the issue was Rs. 20. What is the weighted-average number of shares for the year?
A. 7.00 million
B. 7.20 million
C. 7.50 million
D. 8.00 million
- IAS 38 — Intangible Assets
During the year an entity incurred:
• Research costs: Rs. 2m
• Development costs before recognition criteria were met: Rs. 1m
• Development costs after all criteria were met: Rs. 4m
• Staff training for the developed product: Rs. 0.5m
Amount capitalised as an intangible asset is:
A. Rs. 4.0m
B. Rs. 4.5m
C. Rs. 5.0m
D. Rs. 7.5m
- Ethics in Financial Reporting
A CFO orders the reporting accountant to capitalise research expenditure that does not meet IAS 38 criteria and threatens dismissal if the accountant refuses. The threat arising most directly from the threatened dismissal is:
A. Advocacy threat
B. Familiarity threat
C. Intimidation threat
D. Self-review threat
- ESG & Sustainability — IFRS S1
A company’s exposure to water shortages is not expected to affect current-year profit but could materially increase borrowing costs and restrict access to finance over the medium term. Under IFRS S1, the company should:
A. Ignore it because current profit is unaffected
B. Disclose it if material to the entity’s prospects
C. Disclose only if an environmental regulator requires it
D. Wait until an actual financial loss occurs
IFRS S1 focuses on sustainability-related risks and opportunities that could reasonably affect cash flows, access to finance or cost of capital over the short, medium or long term.
- Financial Instruments — Effective Interest Method
A bond measured at amortised cost is acquired for Rs. 9.5 million. Its face value is Rs. 10 million, annual coupon is 6% and EIR is 8%. Coupon is received at year-end. What is the carrying amount immediately after the first coupon?
A. Rs. 9.50m
B. Rs. 9.60m
C. Rs. 9.66m
D. Rs. 10.16m
✅ Answer Key - B — Required allowance = Rs. 15m; Rs. 4m already recognised → additional Rs. 11m.
- B — Stage 3 interest = 8% × (10 − 3) = Rs. 0.56m.
- C — Liability = 6 × 3.1699 + 1.5 × 0.6830 = Rs. 20.044m; ROU = 20.044 + 0.6 − 0.9 + 1.2 = Rs. 20.944m.
- C — Inventory remains at historical rate; payable is monetary and retranslated.
- C — Assurance warranty → IAS 37; separately purchased service warranty → IFRS 15 performance obligation.
- C — Profits = 64m; absolute losses = 76m; 10% × greater amount = Rs. 7.6m. IFRS 8 uses quantitative thresholds plus other reportability criteria.
- B — Tax base of liability = nil; deductible temporary difference = Rs. 5m × 29% = DTA Rs. 1.45m.
- B — Subsidiary of a listed company follows the Fourth Schedule.
- B — URP = 5m × 40% = 2m; because subsidiary is seller, P share = 1.6m and NCI share = 0.4m.
- A — 50 + 12 − 3 − 4 = Rs. 55m. The book’s equity-method workings likewise deduct dividends and impairment from the investment.
- B — TERP = Rs. 18.75; bonus factor = 20/18.75 = 1.0667; weighted shares = (6 × 1.0667 × 6/12) + (8 × 6/12) = 7.2m.
- A — Research, pre-criteria development and training are expensed; Rs. 4m is capitalised. The study text specifically states research and training are expensed and pre-recognition development expenditure cannot later be reinstated.
- C — Threat of dismissal creates an intimidation threat.
- B — Material medium-term financing impact falls within IFRS S1.
- C — 9.5 + (9.5 × 8%) − 0.6 = Rs. 9.66m; amortised cost uses the effective interest method.