MULTIPLE-CHOICE QUESTIONS WITH ANSWERS RELATED TO INDIAN ACCOUNTING STANDARDS AS APPLICABLE TO VALUATION
Which Indian Accounting Standard (Ind AS) deals with Property, Plant, and Equipment?
a) Ind AS 16
b) Ind AS 36
c) Ind AS 105
d) Ind AS 113
Answer: a) Ind AS 16
Ind AS 36 deals with:
a) Revenue Recognition
b) Impairment of Assets
c) Leases
d) Financial Instruments
Answer: b) Impairment of Assets
Which Ind AS provides guidance on fair value measurements?
a) Ind AS 16
b) Ind AS 36
c) Ind AS 105
d) Ind AS 113
Answer: c) Ind AS 105
Ind AS 113 deals with:
a) Revenue Recognition
b) Fair Value Measurement
c) Impairment of Assets
d) Leases
Answer: b) Fair Value Measurement
Ind AS 116 is related to:
a) Revenue Recognition
b) Impairment of Assets
c) Leases
d) Financial Instruments
Answer: c) Leases
Which Ind AS focuses on determining the recoverable amount of assets?
a) Ind AS 16
b) Ind AS 36
c) Ind AS 105
d) Ind AS 113
Answer: b) Ind AS 36
Ind AS 105 provides guidance on:
a) Property, Plant, and Equipment
b) Revenue Recognition
c) Fair Value Measurement
d) Impairment of Assets
Answer: c) Fair Value Measurement
Under Ind AS 16, Property, Plant, and Equipment are initially recognized at:
a) Fair Value
b) Cost
c) Historical Value
d) Depreciated Value
Answer: b) Cost
Ind AS 113 defines fair value as:
a) The amount at which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction
b) The current market value of an asset
c) The replacement cost of an asset
d) The historical cost of an asset
Answer: a) The amount at which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction
Ind AS 116 requires lessees to recognize most leases on their balance sheets as:
a) Operating leases
b) Financial leases
c) Off-balance sheet leases
d) Capital leases
Answer: d) Capital leases
Which of the following is not a component of Property, Plant, and Equipment under Ind AS 16?
a) Land
b) Buildings
c) Intangible assets
d) Machinery
Answer: c) Intangible assets
Ind AS 36 applies to the impairment of:
a) Inventories
b) Financial instruments
c) Goodwill and other intangible assets
d) Trade receivables
Answer: c) Goodwill and other intangible assets
Ind AS 105 provides guidance on fair value measurement for:
a) Financial instruments only
b) Property, Plant, and Equipment only
c) Both financial and non-financial assets and liabilities
d) Only liabilities
Answer: c) Both financial and non-financial assets and liabilities
Ind AS 113 does NOT include guidance on fair value measurement for:
a) Investments in equity instruments
b) Biological assets
c) Financial liabilities
d) Tangible assets
Answer: d) Tangible assets
Under Ind AS 116, which of the following is NOT a key characteristic of a lease?
a) Control over the use of the identified asset
b) Transfer of ownership of the asset to the lessee
c) Payment of consideration by the lessee
d) A defined period of use
Answer: b) Transfer of ownership of the asset to the lessee
Ind AS 36 requires impairment testing whenever there is an indication of:
a) Revaluation of assets
b) Possible impairment of assets
c) Changes in accounting policies
d) Fluctuations in exchange rates
Answer: b) Possible impairment of assets
Which statement is true regarding the treatment of leases under Ind AS 116?
a) All leases are treated as operating leases
b) Only finance leases are recognized on the balance sheet
c) Operating leases are recognized as assets and liabilities on the balance sheet
d) Finance leases are not recognized on the balance sheet
Answer: c) Operating leases are recognized as assets and liabilities on the balance sheet
Under Ind AS 105, fair value is defined as:
a) The amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction
b) The price at which an asset could be sold in the current market
c) The original cost of an asset adjusted for depreciation
d) The face value of a liability
Answer: a) The amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction
Ind AS 113 provides guidance on determining fair value when markets are:
a) Liquid
b) Illiquid
c) Volatile
d) Stable
Answer: b) Illiquid
Ind AS 16 requires which of the following to be included in the initial measurement of an item of property, plant, and equipment?
a) The asset’s residual value
b) Any subsequent costs directly attributable to bringing the asset to its working condition
c) The estimated cost of dismantling and removing the asset
d) The expected market value of the asset
Answer: b) Any subsequent costs directly attributable to bringing the asset to its working condition
Ind AS 36 requires the reversal of impairment loss recognized for an asset if:
a) The recoverable amount increases due to a change in market conditions
b) The asset’s fair value exceeds its carrying amount
c) The impairment loss was recognized based on a significant decline in the asset’s fair value
d) The asset’s useful life is extended beyond the original estimate
Answer: a) The recoverable amount increases due to a change in market conditions
Ind AS 105 requires fair value to be measured using which of the following approaches?
a) Market approach, income approach, cost approach
b) Replacement cost approach, discounted cash flow approach, market approach
c) Market approach, replacement cost approach, income approach
d) Income approach, market approach, liquidation approach
Answer: a) Market approach, income approach, cost approach
Ind AS 113 provides guidance on determining fair value for:
a) Financial assets and liabilities only
b) Non-financial assets and liabilities only
c) Both financial and non-financial assets and liabilities
d) Intangible assets only
Answer: c) Both financial and non-financial assets and liabilities
Ind AS 116 requires lessees to recognize lease liabilities based on the:
a) Present value of lease payments
b) Total lease payments over the lease term
c) Future value of lease payments
d) Residual value of leased assets
Answer: a) Present value of lease payments
Which of the following is NOT a requirement for recognizing an impairment loss under Ind AS 36?
a) The carrying amount of the asset exceeds its recoverable amount
b) There is an indication of impairment
c) The impairment loss reduces the carrying amount to fair value
d) The impairment loss is allocated to reduce the carrying amount of specific assets
Answer: c) The impairment loss reduces the carrying amount to fair value
Ind AS 16 requires which of the following to be disclosed in the financial statements?
a) The fair value of each class of property, plant, and equipment
b) The depreciation method used for each class of property, plant, and equipment
c) The carrying amount of property, plant, and equipment
d) The market value of property, plant, and equipment
Answer: c) The carrying amount of property, plant, and equipment
Ind AS 113 defines fair value as:
a) The price at which an asset could be sold in the current market
b) The amount at which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction
c) The original cost of an asset adjusted for depreciation
d) The face value of a liability
Answer: b) The amount at which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction
Which of the following is NOT considered in determining the recoverable amount of an asset under Ind AS 36?
a) Fair value less costs of disposal
b) Value in use
c) Historical cost
d) The higher of fair value less costs of disposal and value in use
Answer: c) Historical cost
Under Ind AS 105, which valuation technique estimates fair value based on prices and other relevant information generated by market transactions?
a) Market approach
b) Income approach
c) Cost approach
d) Discounted cash flow approach
Answer: a) Market approach
Ind AS 116 requires a lessee to classify leases as either:
a) Capital leases or operating leases
b) Finance leases or non-finance leases
c) On-balance sheet leases or off-balance sheet leases
d) Financial leases or operating leases
Answer: c) On-balance sheet leases or off-balance sheet leases
Ind AS 16 requires which of the following to be recognized as an asset if it is probable that future economic benefits associated with the item will flow to the entity?
a) Property, plant, and equipment
b) Intangible assets
c) Inventories
d) Financial assets
Answer: a) Property, plant, and equipment
Ind AS 36 requires impairment losses to be:
a) Recognized only if the carrying amount exceeds the fair value of the asset
b) Recognized for both financial and non-financial assets
c) Allocated to reduce the carrying amount of specific assets
d) Reversed if there is a significant increase in the asset’s fair value
Answer: b) Recognized for both financial and non-financial assets
Ind AS 105 requires fair value to be measured using:
a) One valuation technique only
b) Multiple valuation techniques, with the most appropriate technique used
c) A predetermined formula
d) Historical cost adjusted for inflation
Answer: b) Multiple valuation techniques, with the most appropriate technique used
Under Ind AS 113, fair value is:
a) Objective and readily determinable
b) Subjective and difficult to determine
c) Determined based on historical cost
d) Fixed and unchangeable
Answer: a) Objective and readily determinable
Ind AS 16 requires which of the following to be included in the initial measurement of property, plant, and equipment?
a) The fair value of the asset
b) Costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating
c) The estimated residual value of the asset
d) The present value of future cash flows from the asset
Answer: b) Costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating
Ind AS 36 applies to the impairment testing of:
a) Only tangible assets
b) Only intangible assets
c) Both tangible and intangible assets
d) Only financial assets
Answer: c) Both tangible and intangible assets
Ind AS 105 requires fair value to be measured based on which of the following?
a) The entity’s own assumptions about market participants
b) The entity’s specific circumstances
c) Hypothetical transactions
d) Market transactions
Answer: d) Market transactions
Ind AS 116 requires lessees to recognize lease liabilities for:
a) The present value of lease payments
b) The total lease payments over the lease term
c) The future value of lease payments
d) The residual value of leased assets
Answer: a) The present value of lease payments
Under Ind AS 113, the fair value hierarchy prioritizes inputs into fair value measurements. Which level has the highest priority?
a) Level 1 – Quoted prices in active markets for identical assets or liabilities
b) Level 2 – Observable inputs other than quoted prices included in Level 1
c) Level 3 – Unobservable inputs
d) Level 4 – Valuation techniques not based on observable market data
Answer: a) Level 1 – Quoted prices in active markets for identical assets or liabilities
Ind AS 16 requires which of the following to be disclosed for each class of property, plant, and equipment?
a) The depreciation method used
b) The fair value of each individual asset
c) The revaluation surplus or deficit
d) The net realizable value of each asset
Answer: a) The depreciation method used
Ind AS 105 provides guidance on measuring fair value for:
a) Financial liabilities only
b) Biological assets only
c) Both financial and non-financial assets and liabilities
d) Intangible assets only
Answer: c) Both financial and non-financial assets and liabilities
Ind AS 113 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in which type of transaction?
a) Forced liquidation
b) Current market
c) Orderly transaction
d) Private negotiation
Answer: c) Orderly transaction
Which of the following is NOT a component of the recoverable amount under Ind AS 36?
a) Value in use
b) Fair value less costs of disposal
c) Historical cost
d) The higher of value in use and fair value less costs of disposal
Answer: c) Historical cost
Ind AS 116 requires a lessee to recognize a right-of-use asset for a lease if it:
a) Is classified as an operating lease
b) Transfers ownership of the asset to the lessee
c) Provides the lessee with control over the use of the identified asset
d) Has a lease term of less than 12 months
Answer: c) Provides the lessee with control over the use of the identified asset
Under Ind AS 105, fair value is measured using:
a) One valuation technique only
b) The market approach only
c) Multiple valuation techniques, with the most appropriate technique used
d) Historical cost adjusted for inflation
Answer: c) Multiple valuation techniques, with the most appropriate technique used
Ind AS 16 requires which of the following to be included in the carrying amount of an item of property, plant, and equipment?
a) The estimated residual value of the asset
b) The present value of future cash flows from the asset
c) Any subsequent costs directly attributable to the asset
d) The market value of the asset
Answer: c) Any subsequent costs directly attributable to the asset
Ind AS 36 requires an entity to assess at each reporting date whether there is any indication that an asset may be:
a) Understated
b) Overstated
c) Recoverable
d) Impaired
Answer: d) Impaired
Ind AS 113 provides guidance on measuring fair value for:
a) Financial assets only
b) Inventories only
c) Financial liabilities only
d) Both financial and non-financial assets and liabilities
Answer: d) Both financial and non-financial assets and liabilities
Ind AS 105 requires fair value to be measured based on:
a) Historical cost
b) The entity’s own assumptions about market participants
c) Hypothetical transactions
d) Market transactions
Answer: d) Market transactions
Ind AS 116 requires a lessee to recognize a lease liability for:
a) The present value of lease payments
b) The total lease payments over the lease term
c) The future value of lease payments
d) The residual value of leased assets
Answer: a) The present value of lease payments
