It is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. Insurance risk Financial risk Operating risk Credit risk You are a business manager. During the period, you have authorized the acquisition of a machine that will be used in your company’s manufacturing activities in the next 5 years. In your selection of an appropriate accounting policy for the recognition and measurement of the machine, which of the following reporting standards is most relevant? PAS 1 PAS 2 PAS 16 PAS 32 Under current standards, a subsequent expenditure on an item of property, plant and equipment is most likely to be capitalized to the asset account. debited to the related accumulated depreciation account. a or c According to PFRS 6, expenditures on exploration for and evaluation of mineral resources are recognized as a or b depending on the entity’s accounting policy. not accounted for

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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It is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract.
1. Insurance risk
2. Financial risk
3. Operating risk
4. Credit risk

You are a business manager. During the period, you have authorized the acquisition of a machine that will be used in your company’s manufacturing activities in the next 5 years. In your selection of an appropriate accounting policy for the recognition and measurement of the machine, which of the following reporting standards is most relevant?
1. PAS 1
2. PAS 2
3. PAS 16
4. PAS 32

Under current standards, a subsequent expenditure on an item of property, plant and equipment is most likely to be
1. capitalized to the asset account.
3. debited to the related accumulated depreciation account.
4. a or c

According to PFRS 6, expenditures on exploration for and evaluation of mineral resources are recognized as
3. a or b depending on the entity’s accounting policy.
4. not accounted for

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