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QUESTION: 11

Which THREE of the following statements about government grants are INCORRECT?

A grant is recognised as revenue
Grants must not be deducted from the related expenses in financial statements
Capital grants relate to cash inflow and outflow
A compensatory grant should be recognised in statements when it is received, not when the expenses it applies to occurred
A grant is recognised only when there is reasonable assurance that the entity will comply with any conditions attached to the grant

Answer(s): A,B,C

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QUESTION: 12

Which of the following does the phrase 'events after the reporting period' refer to?

Material events which occur between the statement of financial position date and the date on which the financial statements are approved
Material events which occur after the release of the statement of financial position
Material events which occur before the statement of financial position date
Material events which occur between the income statement date and the statement of financial position date

Answer(s): A

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QUESTION: 13

Which of the following is the most appropriate definition of the term 'factoring'?

Where a business sells its accounts receivable to a third party at a discount
Where a business borrows a loan with short-term conditions from a third party
Where a business sells equity to third parties to gain short-term finance
Where a business is provided with a highly flexible regular source of short-term finance by a bank

Answer(s): A

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QUESTION: 14

Company Y is using some of the money from a share issue to purchase a new office building. The company is also using some of the money to purchase inventories.
Which method of financing is this?