Question

Which of the following statements is incorrect?
a)	According to PAS 29, the financial statements of an entity whose functional currency is that of hyper-
	inflationary economy shall restate its financial statements in terms of the measuring unit current at the end
	of the reporting period only if those financial statements are prepared under the historical cost basis.
b)	Entities whose functional currency is that of a hyperinflationary economy shall disregard the concept of
	stable monetary unit assumption.
c)	According to PAS 29, the determination of the absolute rate at which hyperinflation is deemed to arise is
	a matter of judgment.
d)	Only non-monetary items, statement of financial position amounts not already expressed in terms of the
	measuring unit current at end of the reporting period, are restated when using the constant peso accounting

An entity acquires equipment on January 1, 20x1 for P1M. General price index on that date was 100. In 20x2,
the average general price index is 120, while on December 31, 20x2, the general price index is 140. Which of the
following statements is incorrect when the entity restates its 20x2 financial statements following PAS 29?
a)	Restated depreciation expense in 20x2 is computed by multiplying historical cost depreciation by 140/120.
b)	Restated depreciation expense in 20x2 is computed by multiplying historical cost depreciation by 140/100.
c)	The restated cost of the equipment is computed by multiplying P1M by 140/100
d)	The restated accumulated depreciation is computed by multiplying the historical cost accumulated
	depreciation by 140/100

Which of the following is restated by multiplying indices under constant peso accounting?
a)	Share premium	c)	Retained earnings
b)	Investment in bonds	d)	Petty cash fund

PAS 32 - Financial Instruments: Presentations
66	Which of the following statements is incorrect?
		a)	The PAS 32 definition of "equity" reflects the basic accounting equation of "Assets-Liabilities = Equity"
		b)	According to PAS 32, a contract is an equity instrument if it may result in the receipt or delivery of the entity's
			own equity instruments.
		c)	Entity A issues a compound financial instrument for P1M. If the fair value of the liability component without
			the equity feature is P.8M, the value to be assigned to the equity component is P.2M.
		d)	An intention to settle a financial asset and a financial liability on a net basis without the legal right to do is
			not sufficient to justify offsetting because the rights and obligations associated with the individual financial
			asset and financial liability remain unaltered.

A gain or loss may arise from which of the following?
a)	The initial recognition of the debt and equity components of a compound financial instrument.
b)	The settlement of a liability at an amount below or above its carrying amount.
c)	The conversion of bonds into the entity's own equity instrument.
d)	The purchase, sale, issue or cancellation of the entity's own equity instruments.

Answer 1

D) Only non-monetary items, statement of financial position amounts not already expressed in terms of the measuring unit current at end of the reporting period, are restated when using the constant peso accounting.

B) Restated depreciation expense in 20x2 is computed by multiplying historical cost depreciation by 140/100.

B) PAS 32 - Financial Instruments: Presentations

C) Entity A issues a compound financial instrument for P1M. If the fair value of the liability component without the equity feature is P.8M, the value to be assigned to the equity component is P.2M.

B) The settlement of a liability at an amount below or above its carrying amount