UPDATES IN FINANCIAL REPORTING

Summative Test
Topics: PFRS for SMEs and Micro Enterprises

Name: _____________________________ Date: _______________ Score:_______

1. Statement I. SMEs cannot adopt or apply full PFRS in the preparation and presentation of its financial statements as it
qualifies only for partial PFRS
Statement II. PFRS for Microenterprises is only the minimum standard that qualifying entities need to adopt.
A. Both statements are correct C. Both statements are incorrect
B. Statement I is correct; II is incorrect D. Statement I is incorrect; II is correct

2. It is a set of accounting principles, standards, interpretations and pronouncements that must be adopted in the
preparation and presentation of annual financial statements.
A. PFRS B. Conceptual Framework C. PAS D. Notes to Financial Statements

3. Financial Reporting Standards framework includes the following except

A. Philippine Financial Reporting Standards (PFRS)
B. Philippine Financial Reporting Standards for SMEs
C. Philippine Financial Reporting Standards for Small Entities
D. Philippine Financial Reporting Standards for Combined Entities

4. A reporting entity is
a. Necessarily a legal entity c. An entity that is required or chooses to prepare the financial statements
b. A regulatory government authority d. Necessarily an economic entity

5. Which entities are eligible to use PFRS for SMEs?

A. Large public companies C. Listed companies
B. Small and Medium Sized entities without public accountability D. Government owned corporations

6. What is the primary purpose of PFRS for SMEs?

A. To impose stricter reporting guidelines for SMEs C. To prepare SMEs for public listing
B. To align SMEs with IFRS D. To reduce complexity and cost of financial reporting for SMEs

7. Which section of PFRS for SMEs deals with revenue recognition?

A. Section 21 B. Section 23 C. Section 10 D. Section 25

8. What is the default measurement basis for property, plant and equipment under PFRS for SMEs?
A. Net Realizable Value B. Revaluation Model C. Fair value model D. Historical cost model

9. The treatment of Borrowing Costs under PFRS for SMEs should be

A. Expensed if they meet certain criteria C. Capitalized as cost of PPE
B. Always expensed D. Deducted from cost of PPE

10. Statement I. PFRS for SMEs is the maximum standard that qualifying entities need to adopt.
Statement II. SMEs may opt not to adopt the full PFRS.
 A. Both statements are correct C. Both statements are incorrect
B. Statement I is correct; II is incorrect D. Statement I is incorrect; II is correct

11. Statement I. PFRS for SMEs were developed as a separate or stand-alone standard.
Statement II. General purpose financial statements are not required for SMEs and microenterprises because there is a
specific PFRS for SMEs and Microenterprises.
C. Both statements are correct C. Both statements are incorrect
D. Statement I is correct; II is incorrect D. Statement I is incorrect; II is correct

12. How are financial instruments generally classified under PFRS for SMEs?
A. Loans or receivables and equity investment C. Heald to maturity and trading
B.

13. What is the treatment of goodwill under PFRS for SMEs?

A. Tested annually for impairment C. written off immediately after recognition
B. Amortized for period not exceeding 20 years D. Amortized for period not exceeding 10 years

14. PFRS for SMEs is designed to

A. Relace full PFRS C. Apply simplified financial reporting for smaller entities
B. Address only tax accounting requirements D. Allow SMEs to choose any standard from full PFRS

15. Statement I. Entities with total assets not less than 3M but not more than 350M may qualify as SMEs
Statement II. Entities with total liabilities not more than 3M but not less than 250M may qualify as SMEs
A. Both statements are correct C. Both statements are incorrect
B. Statement I is correct; II is incorrect D. Statement I is incorrect; II is correct

16. Statement I. Entities with total assets and liabilities not more than 3M may qualify as SMEs
Statement II. Entities with public accountability will not qualify to apply the PFRS for SMEs irrespective of the size of its
assets or liabilities
A. Both statements are correct C. Both statements are incorrect
B. Statement I is correct; II is incorrect D. Statement I is incorrect; II is correct

17. Statement I. Entities with total assets not less than 3M but not more than 350M may not qualify as SMEs
Statement II. Entities with total liabilities not more than 3M but not less than 250M may not qualify as SMEs
A. Both statements are correct C. Both statements are incorrect
B. Statement I is correct; II is incorrect D. Statement I is incorrect; II is correct

18. Statement I. SMEs corporations that are holding secondary licenses are not allowed to apply the PFRS for SMEs.
Statement II. Publicly listed companies may not be allowed to use the PFRS for SMEs.
A. Both statements are correct C. Both statements are incorrect
B. Statement I is correct; II is incorrect D. Statement I is incorrect; II is correct

19. The following are exempt from PFRS for SMEs, except
A. It has short – term projections that show it will breach the quantitative thresholds for SMEs
B. It is a subsidiary of a parent reporting under full PFRS
C. It is a subsidiary of a foreign parent company D. It has a subsidiary that is mandated to report under full PFRS
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20. These are entities that have either total assets or total liabilities below three million pesos
A. Small Medium Enterprise (SMEs) C. Micro entities
B. Public entities D. Answer not given

21. Statement I. For entities to qualify as Micro Entities, they must have total assets or total liabilities of not less than 3M
Statement II. For entities to qualify as Micro Entities, they must have both total assets below 3M and total liabilities
below 3M
A. Both statements are correct C. Both statements are incorrect
B. Statement I is correct; II is incorrect D. Statement I is incorrect; II is correct

22. PFRS for SMEs and Full PFRS have the same provisions and requirements with respect to the following concepts,
except
A. Changes in accounting policies C. Changes in accounting estimates
B. Prior period adjustments D. None of the given choices

23. Statement I. Under PFRS for SMEs, inventories are reported at Lower of Cost or Net Realizable Value (LCNRV).
Statement II. Under Full PFRS, inventories are reported at Lower of Cost or Net Realizable Value (LCNRV).
A. Both statements are correct C. Both statements are incorrect
B. Statement I is correct; II is incorrect D. Statement I is incorrect; II is correct

24. Statement I. Entities ceasing to qualify as SMEs shall adopt the Full PFRS unless they qualify as Micro Entities.
Statement II. SMEs are permitted but not required to present a Statement of Income and Retained Earnings.
A. Both statements are correct C. Both statements are incorrect
B. Statement I is correct; II is incorrect D. Statement I is incorrect; II is correct

25. All of the following are considered basic financial instruments, except
A. Cash B. Accounts Receivable C. Investment in Bonds D. None of the given choices

26. The component of Other Comprehensive Income under the PFRS for SMEs reported the following, except
A. Changes in revaluation surplus C. Currency translation gain or loss of foreign operations
B. Changes in fair values of hedging instruments D. unrealized gain or loss on FVOCI

27. An SME must recognize government grant received before the income recognition criteria are satisfied
A. As Equity B. As income when the grant is received C. As a liability D. None of the given choices