Financial Reporting MCQs for CA Final

Answer: (b) Retrospectively, as a change in accounting policy, unless impracticable

✅ Answer: (b) A change in inventory cost formula (FIFO to weighted average) is a change in accounting policy, so it is applied retrospectively unless that is impracticable. 🧮 How: Ind AS 2 treats the cost formula as an accounting policy. Ind AS 8 allows a voluntary change in policy only if it gives reliable and more relevant information. The change is applied retrospectively: comparatives are restated and the opening balance of retained earnings of the earliest period presented is adjusted. If that is impracticable, the new policy is applied from the earliest date practicable. ❌ Why not the others: (a) A change in cost formula changes the measurement basis, so it is a policy change, not a change in estimate. (c) FIFO was a valid choice, so there was no error to correct. (d) Ind AS 8 does not allow the effect to be routed through OCI; the cumulative effect goes to opening equity. 💡 Exam tip: A change in measurement basis or cost formula is a change in accounting policy (retrospective). A revision of an estimate, such as useful life or a provision amount, is prospective. When in doubt, Ind AS 8 treats the change as a change in estimate.

Answer: (b) An adjusting event, so the receivable is written down at 31 March

✅ Answer: (b) The insolvency gives evidence that the receivable was already impaired at 31 March, so it is an adjusting event. 🧮 How: Ind AS 10 defines adjusting events as those that give evidence of conditions existing at the end of the reporting period. It gives the bankruptcy of a customer after the reporting period as an example, because it usually confirms a loss on the receivable at year end. The event falls between 31 March and the approval date of 20 May, so the ₹10 lakh receivable is written down (impairment / expected credit loss recognised) in the 31 March financial statements. ❌ Why not the others: (a) Disclosure alone applies only to conditions that arose after year end; here the customer's difficulty existed at 31 March. (b) is the answer. (c) Events between the reporting date and the approval date cannot be ignored; they must be assessed as adjusting or non-adjusting. (d) Pushing the loss to next year would overstate this year's assets and profit. 💡 Exam tip: Ask whether the condition existed at year end. Customer insolvency after year end is usually adjusting. A loss from an event arising after year end, such as a fire destroying the customer's business in April, is non-adjusting and needs disclosure only.

Answer: (c) ₹72,000

✅ Answer: (c) The ₹90,000 transaction price is allocated in proportion to relative stand-alone selling prices, so the machine gets ₹72,000. 🧮 How: Total SSP = ₹80,000 + ₹20,000 = ₹1,00,000. Ind AS 115 requires allocation on a relative stand-alone selling price basis. Machine = 90,000 × 80,000/1,00,000 = ₹72,000. Servicing = 90,000 × 20,000/1,00,000 = ₹18,000. The ₹10,000 discount is thus shared proportionately. ❌ Why not the others: (a) Uses the machine's stand-alone price and ignores the ₹10,000 discount. (b) Puts the whole contract price on the machine and leaves nothing for servicing. (d) Loads the entire ₹10,000 discount on the machine, i.e. a residual approach, which is not justified here. 💡 Exam tip: Allocate a discount proportionately to all performance obligations. Put it on only one or some of them only when observable evidence shows it relates to those specific obligations.

Answer: (b) ₹50 lakh

✅ Answer: (b) Recoverable amount is ₹450 lakh (the higher of FVLCD and VIU), so impairment loss = ₹500 − ₹450 = ₹50 lakh. 🧮 How: Under Ind AS 36, recoverable amount = higher of fair value less costs of disposal (₹420 lakh) and value in use (₹450 lakh) = ₹450 lakh. Carrying amount ₹500 lakh > ₹450 lakh, so the asset is impaired. Loss = ₹500 − ₹450 = ₹50 lakh, recognised in profit or loss (or as a revaluation decrease if the asset is carried at a revalued amount). ❌ Why not the others: (a) ₹80 lakh wrongly uses the lower figure (FVLCD of ₹420 lakh) as the recoverable amount. (c) ₹30 lakh is only the gap between VIU and FVLCD, not between carrying amount and recoverable amount. (d) Nil is wrong because the carrying amount exceeds the recoverable amount, so there is an impairment. 💡 Exam tip: Recoverable amount is always the HIGHER of FVLCD and VIU. If either one is above the carrying amount, there is no impairment, and the other need not be calculated.

Answer: (c) Comparability

(c) is correct: comparability, verifiability, timeliness and understandability are the enhancing characteristics. Relevance and faithful representation are the fundamental characteristics, and materiality is an entity-specific aspect of relevance.