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F2 Exam Dumps : Advanced Financial Reporting

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Advanced Financial Reporting Questions and Answers

Question 1

You are a Financial Controller at BCD and are in the process of preparing the year-end financial statements. A member of your finance team has come to see you about her provisions balance at year-end.

She says that the Managing Director has asked her to increase the provisions balance by $1 million overall. She thinks this is because BCD has had a very good year in terms of profit, and the Managing Director wants to put some profit aside to protect against any future reductions in profit. $1 million is material to BCD.

You believe that the provisions balance was fairly stated without the additional $1 million.

Which TWO of the following would be appropriate actions in this scenario?

Options:

A.

Discuss the matter with the Finance Director as he is your immediate line manager.

B.

Speak to the Managing Director to explain that the level of provisions is governed by financial reporting standards.

C.

Tell the member of your finance team to ignore the Managing Director and to leave the provisions balance as it was.

D.

Contact the external auditors of BCD and tell them that the Managing Director wants to change the provisions balance.

E.

Speak to the shareholders at the upcoming annual general meeting about this issue.

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Question 2

Which of the following would limit the effectiveness of analysis performed on the operating profit margins of two separate entities with the same total revenue over a12 month period?

Options:

A.

Different accounting estimates in respect of depreciation of property, plant and equipment.

B.

Different approaches to allocating expenses to cost of sales, administration expenses and distribution costs.

C.

Different interest rates on loan finance available to the entities.

D.

Different pattern of monthly revenues caused by seasonality.

Question 3

LM is preparing its consolidated financial statements for the year ended 30 April 20X5. During the year LM acquired 30% of the equity shares of AB giving it significant influence over AB.

LM conducted ratio analysis comparing the financial performance of the group for 30 April 20X4 and 20X5.

Which of the following ratios would not be comparable as a result of the acquisition of AB? 

Options:

A.

Operating profit margin.

B.

Return on capital employed.

C.

Earnings per share.

D.

Interest cover.