TOA QUIZZER 5

Multiple Choice 7. It is a benefit plan under which an entity pays a

Identify the choice that best completes the statement or answers the question.
fixed contribution into a separate fund and will
____ 1. These are all forms of consideration given by an have no legal or constructive obligation to pay
entity in exchange for service rendered by further contribution if the fund becomes
employees. insufficient to pay employee benefits.
a. Employee benefits c. Fringe benefit a. Postemployment benefit c. Defined benefit plan
b. Employee compensation d. Salaries and wages plan
b. Defined contribution plan d. Multi-employer plan

____ 2. Short-term employee benefits include all of the

8. Which is incorrect concerning the recognition and
following, except
measurement of a defined contribution plan?
a. Wages, salaries and social security contributions.
b. Short-term compensated absences. a. The contribution shall be recognized as expense in
c. Profit-sharing and bonuses payable in more than the period it is payable.
twelve months after the end of the period in which b. Any unpaid contribution at the end of the period shall
the employees render the related service. be recognized as accrued liability.
d. Nonmonetary benefits for current employees, such c. Any excess contribution shall be recognized as
as medical care, housing, car and free and prepaid expense but only to the extent that the
subsidized goods. prepayment will lead to a reduction in future
payments or a cash refund.
d. An entity shall not disclose the amount recognized
as expense for a defined contribution plan.
____ 3. These are compensated absences that are carried
forward and can be used in future periods and the
employees are entitled to a cash payment for 9. Which is incorrect concerning the recognition and
unused entitlement on leaving the entity. measurement of a defined benefit plan?
a. Accumulating and c. Nonaccumulating and a. Actuarial assumptions are required to measure the
vesting vesting obligation and expense and there is a possibility of
b. Accumulating and d. Nonaccumulating and actuarial gains and losses.
nonvesting nonvesting b. The obligation is measured on a discounted basis.
c. The defined benefit plan must be fully funded.
d. The expense recognized for a defined benefit plan is
____ 4. Post-employment employee benefits include all of not necessarily the amount of contribution due for
the period.
the following, except
a. Nonmonetary benefits such as housing, car and free
or subsidized goods.
b. Retirement benefits, such as pensions. 10. What is the mandated method of determining the
c. Postemployment life insurance present value of the defined benefit obligation?
d. Postemployment medical care a. Projected unit credit c. Individual level premium
method method
b. Entry age normal d. Aggregate method
____ 5. The entity retains the obligation for the payment method
of retirement benefits without the establishment
of a separate fund. 11. It is the increase in the present value of the
a. Contributory plan c. Funded plan
b. Noncontributory plan d. Unfunded plan defined benefit obligation resulting from
employee service in the current period.
a. Current service cost c. Past service cost
____ 6. Under a defined contribution plan b. Interest cost d. Unrecognized actuarial
I. The entity’s legal or constructive obligation is limited loss
to the amount it agrees to contribute to the fund.
II. The entity’s obligation is to provide the
agreed benefits to current and former
employees.
a. I only c. Both I and II
b. II only d. Neither I nor II
____ 12. These are assets held by an entity, the fund itself, d. Minus the fair value of plan assets at balance sheet
date
that is legally separate from the reporting entity
and exists solely to pay or fund employee
benefits. 17. It is the excess of the fair value of the plan assets
a. Plan assets c. Retirement fund over the present value of the defined benefit
b. Trust fund d. Pension assets
obligation.
a. Surplus c. Accrued benefit cost
____ 13. Plan assets are assets held by a long-term benefit b. Projected benefit d. Accumulated benefit
fund that satisfies all of the following conditions, obligation obligation
except
a. The fund is legally separate from the reporting entity.
b. The assets of the fund are to be used only to settle 18. It is the increase in present value of the defined
the employee benefit obligation. benefit obligation for employee service in prior
c. The assets in the fund can be returned to the entity periods, resulting in the current period from the
even if the remaining assets of the fund are not
sufficient to meet the plan’s obligation.
introduction or amendment of a defined benefit
d. The assets are not available to the reporting entity’s plan.
creditors even in bankruptcy. a. Current service cost c. Past service cost
b. Interest cost d. Employee benefit cost

____ 14. It is an insurance policy issued by an insurer that

19. Which is correct concerning amortization of past
is not a related party of the reporting entity and service cost?
the proceeds of the policy can be used only to pay I. The past service cost shall be expensed
or fund employee benefits under a defined immediately when additional benefits vest
immediately.
benefit plan.
a. Qualifying insurance c. Annuity II. If the benefits are not vested, the past service
policy cost is amortized on a straight line basis
b. Aggregate policy d. Unconditional insurance over the period until the benefits become
policy
vested.
a. I only c. Both I and II
b. II only d. Neither I nor II
____ 15. Which is incorrect concerning return on plan
assets?
a. The actual return on plan assets is one component 20. The vested benefits
of the expense recognized in the income statement. a. Are employee benefits that are not conditional on
b. The difference between the expected return and future employment.
actual return on plan assets is an actuarial gain or b. Are benefits to be paid to the retired employees in
loss. the current period.
c. The expected return on plan assets is based on c. Are benefits to be paid to the retired employees in
market expectations, at the beginning of the period, the subsequent year.
for returns over the entire life of the related d. Are benefits accumulated in the hands of a trustee.
obligation.
d. In determining the expected and actual return on
plan assets, an entity shall deduct expected
21. Which is incorrect concerning the basic accounting
administration costs not included in actuarial
assumptions in measuring defined benefit obligation, considerations for a defined benefit plan?
and tax payable by the plan itself. a. The fair value of plan assets is the source of fund
set aside in meeting future benefit payments.
b. The projected benefit obligation is the present value
____ 16. The amount recognized as liability in the statements of of expected future payments required to settle the
financial position shall be the net total of the following obligation arising from employee service in the
amounts (choose the incorrect one) current and prior periods.
a. The present value of the projected benefit obligation c. If the fair value of plan assets is more than the
at balance sheet date projected benefit obligation, the plan is overfunded
b. Plus any actuarial gains, less any actuarial losses, and there is prepaid benefit cost.
not yet recognized d. The fair value of plan assets is classified as
c. Plus any past service cost not yet recognized noncurrent asset and the projected benefit obligation
is classified as noncurrent liability in the statement of
 financial position. quality bonds.
b. Stated rate on high quality bonds.
c. Market yield at the end of reporting period on
____ 22. These are the entity’s best estimates of the government bonds.
d. Stated rate on government bonds.
variables that will determine the ultimate cost of
providing postemployment benefits.
a. Actuarial assumptions c. Financial assumptions 27. These are employee benefits that are payable as a
b. Demographic d. Actuarial computations
assumptions result of an entity’s decision to terminate an
employee’s employment before the normal
retirement date, or an employee’s decision to
____ 23. Which statement is correct concerning actuarial gains
and losses?
accept voluntary redundancy in exchange for
I. Actuarial gains and losses comprise of experience those benefits.
adjustments and the effects of changes in a. Termination benefits
actuarial assumptions. b. Short-term benefits
II. Actuarial gains and losses may result from c. Long-term benefits
d. Postemployment benefits
increases or decreases in either the present
value of defined benefit obligation or the
fair value of any related plan assets. 28. The gain or loss on curtailment or settlement shall
a. I only c. Both I and II be
b. II only d. Neither I nor II a. Recognized when the curtailment or settlement
occurs.
b. Recognized in other comprehensive income.
____ 24. What is the so called “corridor” in the recognition c. Deferred and amortized over the average remaining
of actuarial gains and losses? service period of the covered employees.
a. 10% of the present value of the defined benefit d. Treated as a change in accounting policy.
obligation or 10% of the fair value of plan assets at
the beginning of the year, whichever is higher.
b. 10% of the present value of the defined benefit 29. Any transition loss on first adopting PAS 19 shall be
obligation or 10% of the fair value of the plan assets recognized
at the beginning of the year, whichever is lower. I. As expense immediately
c. 10% of the present value of the defined benefit II. As expense over a maximum of 5 years
obligation or 10% of the fair value of plan assets at a. I only c. Either I or II irrevocably
the end of the year, whichever is higher. b. II only d. Either I or II revocably
d. 10% of the present value of the defined benefit
obligation or 10% of the fair value of plan assets at
the end of the year, whichever is lower. 30. Any transition gain on first adopting PAS 19 shall
be
a. Recognized in income immediately
____ 25. Which statement is incorrect concerning actuarial b. Deferred and amortized over a maximum of 5 years
assumptions for a defined benefit plan? c. Credited to retained earnings
a. Actuarial assumptions shall be biased and mutually d. Credited to equity
compatible
b. Actuarial assumptions comprise of demographic and
financial assumptions.
c. The discount rate is equal to the market yield at the
end of reporting period on high quality bonds, or if
there are no such bonds, the market yield on
government bonds.
d. Postemployment benefit obligations shall be
measured on a basis that reflects estimated future
salarry increases.

____ 26. The discount rate used in making actuarial

assumptions shall be determined by reference to
a. Market yield at the end of reporting period on high
____ 31. An entity contributes to an industrial pension plan d. The value in the entity’s statement of financial
position will simply be used in the consolidated
that provides a pension arrangement for its financial statements.
employees. A large number of other employers
also contibute to the pension plan and the entity
makes contribution in respect of each employee. 34. An entity operates a defined benefit pension plan and
changes it at the beginning of the current year to a
These contributions are kept separate from defined contribution plan. The net pension liability after
corporate assets and are used together with any the plan amendment is less than the net pension
investment income to purchase annuities for liability before the plan amendment. How should
retired employees. The only obligation of the the entity account for this change?
entity is to pay the annual contribution. This a. The entity shall recognize a gain.
pension scheme is b. The entity does not recognize a gain.
a. Multiemployer plan and a defined contribution c. The entity shall recognize a gain over the remaining
scheme service period of the employees.
b. Multiemployer plan and a defined benefit scheme d. The entity shall recognize the gain but applies the
c. Defined contribution plan only 10% corridor approach.
d. Defined benefit plan only

35. An entity operates a defined benefit plan that

____ 32. An entity has decided to improve its defined pays employees an annual benefit based on the
benefit pension scheme. The benefit payable shall number of years of service. The annual payment
be determined by reference to 60 years of service does allow the employer to vary the final benefit.
rather than 65 years of service. As a result, the Over the last five years, the entity has used his
defined benefit pension liability would increase. flexibility to increase employee’s pension by the
The average remaining service period of the current growth in earnings per share. How will
employees is 10 years. What is the treatment of employees’ benefit be calculated if they retire in
the increase in the pension liability in the financial the current period?
statements? a. It will be based on the existing plan rules plus the
a. The past service cost shall be charged against additional award.
retained earnings. b. It will be based on the existing plan rules plus the
b. The past service cost shall be charged against profit current rate of growth in earnings per share.
or loss for the year. c. It will be based on the plan rules plus the current
c. The past service cost shall be spread over the rate of inflation.
remaining service period of the employees. d. It will be based on the plan rules plus the increase in
d. The past service cost shall bot be recognized. earnings per share anticipated over the remaining
service period of the employees.

____ 33. An entity uses Philippine Financial Reporting

36. Which of these events will not cause a change in a
Standards to prepare its financial statements but
defined benefit obligation?
the defined benefit obligation has been calculated a. Changes in mortality rate or the proportion of
using assumptions that are different from PFRS. employees taking early retirement.
The financial statements of the entity also do not b. Changes in the estimated salaries or benefits that
will occur in the future.
take into account unrecognized past service cost. c. Changes in the estimated employee turnover.
How would the entity measure its net pension d. Changes in the expected rate of return on plan
liability? assets.
a. The net present value of the defined benefit
obligation less the fair value of the plan assets.
b. The net present value of the defined benefit 37. Which of the following terms best describes
obligation less the fair value of plan assets less the benefits which are payable as a result of an
unrecognized past service cost.
c. The net present value of the defined benefit entity’s decision to end an employee’s
obligation less the fair value of the plan assets less employment before the normal retirement date?
the unrecognized past service cost and in addition, a a. Postemployment benefits c. Termination benefits
review of the assumptions shall be undertaken to b. Defined contribution d. Defined benefit plans
remeasure the obligation. plans
____ 38. Which of the following statements best describes 43. Retirement benefit plan investments shall be
“other long-term employee benefits”? carried at
a. Benefits that are not due to be settled within twelve a. Fair value c. Not realize value
months at the end of the period in which the service b. Historical cost less d. Value in use
is rendered. impairment
b. Benefits that are due to be settled within twelve
months at the end of the period in which the service
is rendered. 44. In rare circumtances, when a retirement benefit
c. Benefits payable as a result of an entity’s decision to
end an employee’s employment before the normal
plan has attributes of both defined contribution
retirement date. plan and defined benefit plan, it is deemed
d. Benefits which are payable after completion of a. Defined benefit plan
employment. b. Defined contribution plan
c. Neither defined benefit plan nor defined contribution
plan
____ 39. Which of the following items should be included in plan d. Both defined benefit plan and defined contribution
assets? plan
I. Assets held by a long-term employee benefit fund.
II. Qualifying insurance policies.
a. I only c. Both I and II 45. In the case of a defined benefit plan, PAS 26
b. II only d. Neither I nor II a. Makes it incumbent upon the plan to obtain an
annual actuarial valuation.
b. Does not make it incumbent upon the plan to obtain
____ 40. Under which category should lump sum benefit an annual actuarial valuation
c. Allows the plan to estimate the present value of
expressed as a certain percent of the final salary future benefits based on valuation done by other
for each year of services and actuarial gains can similar plans.
be accounted for? d. Allows the plan to add a percentage based on
a. Lump sum benefit should be accounted for under consumer price index to the previous year’s
defined benefit plans. Actuarial gains should be valuation of actuarial valuation.
accounted for under defined benefit plans.
b. Lump sum benefit should be accounted for under
short-term employee benefits. Actuarial gains should 46. PAS 26 Accounting and reporting by retirement benefit
be accounted for under defined benefit plans. plans shall be applied to which of the following?
c. Lump sum benefit should be accounted for under a. The costs to entities of employee retirement benefits
defined benefit plans. Actuarial gains should be b. Report to individuals on their future retirement
accounted for under defined contribution plans. benefits
d. Lump sum benefit should be accounted for under c. The financial statements relating to an actuarial
short-term employee benefits. Actuarial gains should business
be accounted for under defined contribution plans. d. The general purpose financial reports of pension
schemes

____ 41. The report of a defined contribution plan shall contain

I. A statement of net assets available for benefits. 47. Which of the following may be disclosed in the
II. A description of the funding policy. financial report of a defined benefit plan but
a. I only c. Both I and II
b. II only d. Either I or II
would not be shown in the financial report of a
defined contribution plan?
a. Government bonds held
____ 42. The report of a defined benefit plan shall contain b. Actuarial present value of promised retirement
I. A statement showing net assets available for benefits
benefits, the present value of promised benefits and c. Employee contributions
the resuliting excess or deficit. d. Employer contributions
II. A statement of net assets available for benefits
including a note disclosing the present value
48. An employer sponsoring a defined benefit
of promised benefits.
a. I only c. Both I and II
pension plan must report a liability in the
b. II only d. Either I or II statement of financial position equal to
 a. The current year pension cost that was not funded.
b. The difference between the fair value of plan assets required for the
54. Which of the following criteria is not
and the accumulated benefit obligation.
c. The difference between the accumulated benefit
recognition of a liability for compensated
obligation and the projected benefit obligation. absences?
d. The difference between the fair value of plan assets a. The amount of the obligation must be estimable.
and the projected benefit obligation. b. Payment of the obligation must be probable.
c. Payment of the obligation will require the use of
current assets.
____ 49. Which statement characterizes defined d. The compensation either vests with the employee or
can be carried forward to subsequent years.
contribution plans?
a. They are more complex in construction than defined
benefit plans. 55. An employer’s obligation for postretirement health
b. The employer’s obligation is satisfied by making the
benefits that are expected to be provided to an
appropriate amount of periodic contribution.
c. The investment risk is borne by the employer. employee must be fully accrued by the date the
d. Contribution are made in equal amounts by a. Employee is fully eligible for benefits
employer and employees. b. Employee retires
c. Benefits are utilized
d. Benefits are paid
____ 50. Which of the following components should not be
included in the calculation of net pension cost
56. The projected benefit obligation is the measure of
recognized for a period by an employer
obligation that
sponsoring a defined benefit plan? a. Can no longer be used under GAAP as an estimate
a. Expected return on plan assets for reporting the service cost component of pension
b. Amortization of unrecognized past service cost expense.
c. Interest cost b. Is not an allowable estimate for reporting the service
d. Contribution to the fund cost component of pension expense for defined
benefit plan.
c. Is one of several allowable estimates for reporting
____ 51. Unrecognized past service cost can be amortized the service cost component of pension expense.
based on which of the following methods? d. Is the only allowable estimate for reporting the
a. Straight line method using any systematic and service cost component of pension expense.
rational approach
b. Straight line method based on the average
remaining service period of the qualified employees 57. The conclusion relating to the computation of the
c. Interest method using the actuary’s discount rate service cost component of pension expense is that
d. Service method based on the average remaining a. The projected benefit obligation computed using
service period of the qualified employees future salary levels provides a reasonable measure
of present pension obligation and expense.
b. The projected benefit obligation computed using
____ 52. If the actual return onplan assets exceeds the present salary levels provides a reasonable
expected return for the period the difference is measure of present pension obligation and expense.
a. A deferred loss c. The projected benefit obligation computed using
b. A deferred gain present salary levels provides a reasonable
c. Recognized as a loss in the current period measure of future pension obligation and expense.
d. Recognized as a gain in the current period d. The projected benefit obligation computed using
future salary levels provides a reasonable measure
of future pension obligation and expense.
____ 53. The components of net periodic pension expense that
involve delayed recognition are
58. These are transactions in which the entity receives goods or
a. Interest cost, past service cost, transition cost and services as consideration for equity instruments of the entity,
expected return on plan assets. including shares and share options.
b. Service cost, transition cost, and gains and losses.
c. Gains and losses, transition cost and past service a. Equity settled share-based payment transactions
cost. b. Cash settled share-based payment transactions
d. Transition cost, past service cost and expected c. Equity payment transactions
return on plan assets. d. Cash payment transactions
 64. It is the date on which the entity and another party agree to a
share-based payment arrangement, being when the entity and
____ 59. These are transactions in which the entity acquires goods or the counterparty have a shared understanding of the terms and
services by insuring liabilities to the supplier of those goods conditions of the arrangement.
or services for amounts that are based on the price of the
entity’s shares and other equity instruments. a. Grant date c. Exercise date
b. Measurement date d. Balance sheet date
a. Equity transactions
b. Cash payment transactions
c. Purchase transactions 65. What is the date on which the fair value of the equity
d. Cash settled share-based payment transactions instrument granted is measured?

a. Measurement date c. Exercise date

____ 60. For equity share based payment transactions, the entity shall b. Grant date d. Balance date
measure the goods or services received and the corresponding
increase in equity
66. For transactions with employees and others providing similar
I. Directly, at the fair value of the goods or services services, the fair value of the equity instrument granted is
received. measured on

II. Indirectly, be reference to the fair value of the equity a. Exercise date c. Balance sheet date
instruments granted, if the fair value of the goods or b. Grant date d. Beginning of the year of
services received cannot be estimated reliably. grant

a. I only c. Both I and II

b. II only d. Neither I nor II 67. Which of the following transactions involving the issuance of
shares does not come within the definition of a “share-based”
payment under PFRS 2?
____ 61. For cash settled share-based payments transactions, an entity
shall measure the goods or services received and the liability a. Employee share purchase plans.
incurred at the b. Employee share option plans.
c. Share-based payment relating to an acquisition of a
a. Fair value of the goods and services received subbsidiary.
b. Fair value of the liability d. Share appreciation rights.
c. Either the fair value of the good or services received or
the fair value of the liability
d. Neither the fair value of the goods or services received 68. Which of the following is true regarding the requirements of
bor the fair value of the liability PFRS 2?

a. Private entities are exempt.

____ 62. For cash settled shared-based payment transactions, until the b. “Small” entities are exempt.
liability is settled, the entity is required to remeasure the fair c. Subsidiaries using their parent entity’s shares as
value of the liability at each reporting date and at the date of consideration for goods and services are exempt.
settlement and any changes in fair value are d. There are no exemptions from PFRS 2.

a. Included in profit or loss

b. Included in retained earnings 69. Many shares and most share options are not traded in an
c. Treated as component other comprehensive income active market. Therefore, it is often difficult to arrive at a fair
d. Not recognized value of the equity instrument being issued. Which of the
following option valuation techniques should not be used as a
measure of fair value in the first instance?
____ 63. It is the difference between the fair value of the shares to
which the counterparty has the right to subscribe and the price a. Black-Scholes model c. Monte-Carlo model
the counterparty is required to pay for those shares b. Binomial model d. Intrinsic value

a. Fair value c. Market value

b. Intrinsic value d. Book value 70. In what circumtances is compensation expense immediately
recognized under a share option plan?

a. In all circumtances
b. In circumtances when the option are exercisable within
two years for services rendered over the next two years.
 c. In circumtances when the options are granted for prior
service and the options are immediately exercisable.
d. In no circumtances is compensation expense immediately
recognized.

____ 71. An entity has entered into a contract with another entity which
will supply a range of services. The payment for those
services will be in cash and based upon the price of the
entity’s ordinary shares on completion of the contract. In
accordance with PFRS 2, what type of share-based payment
transaction does this represent?

a. Asset-settled share-based payment transaction

b. Liability-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Equity-settled share-based payments transaction

____ 72. The entity has issued a range of share options to employees.
In accordance with PFRS 2, what type of share-based
payment transaction does this represent?

a. Asset-settled share-based payment transaction

b. Equity-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Liability-sttled share-based payment transaction

____ 73. How should an entity recognize the change in the fair value of
the liability in respect of a cash-settled share-based payment
transaction?

a. Should not recognize in the financial statements but

disclose in the notes
b. Should recognize in the statement of changes in equity
c. Should recognize in other comprehensive income
d. Should recognize in profit or loss

____ 74. Under PFRS 2, a cash-settled share-based payment

transaction will increase which of the following?

a. A current asset c. Equity

b. A noncurrent asset d. A liability

____ 75. The following statements relate to share options granted to

employees in exchange for their services. What statement is
true?

I. The services received shall be measured at the fair value

of the employees’ services.

II. Fair value shall be measured at the date the options vest.

a. I only c. Both I and II

b. II only d. Neither I nor II
TOA QUIZZER 5 29. C
Answer Section 60. C
30. A
MULTIPLE CHOICE 61. B
31. A
1. A 62. A
32. B
2. C 63. B
33. C
3. A 64. A
34. A
4. A 65. A
35. B
5. D 66. B
36. D
6. A 67. C
37. C
7. B 68. D
38. A
8. D 69. D
39. C
9. C 70. C
40. A
10. A 71. C
41. C
11. A 72. B
42. D
12. A 73. D
43. A
13. C 74. D
44. A
14. A 75. D
45. B
15. A
46. D
16. C
47. B
17. A
48. D
18. C
49. B
19. C
50. D
20. A
51. B
21. D
52. B
22. A
53. C
23. C
54. C
24. A
55. A
25. A
56. D
26. A
57. A
27. A
58. A
28. A
59. D