Worldatwork t7 practice test

International Financial Reporting Standards forCompensation Professionals Exam

Last exam update: Feb 21 ,2024
Page 1 out of 6. Viewing questions 1-15 out of 89

Question 1

Company XYZ has a group of six employees who will be retiring in four years -- on the 31st of
December. Each retiree will receive $125,000. Company XYZs accountants must make provisions in
their accounts for this. Calculate the present value of future payments based on a discount rate of
10%.
A. $512,250
B. $551,250
C. $515,500
D. $521,500

Answer:

A
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Question 2

What are the changes in the present value of the defined benefits obligation that result from
experience adjustments or the effects of changes in actuarial assumptions called?

  • A. Net interest on the net defined benefit liability (asset)
  • B. Time value of money
  • C. Current service cost
  • D. Actuarial gains and losses
Answer:

D

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Question 3

Which of the following describes the change in the net defined benefit liability (asset) during the
period due to passage of time?

  • A. Past service cost
  • B. Current service cost
  • C. Net interest on the net defined benefit liability (asset)
  • D. Time value of money
Answer:

C

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Question 4

What is the present value of any economic benefits available in the form of refunds from or
reductions in the future contributions to the defined benefits plan called?

  • A. Net defined benefit liability (asset)
  • B. Asset ceiling
  • C. Fair value
  • D. Net present value
Answer:

B

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Question 5

IAS 19 requires that all numbers involved in accounting for defined benefit plans be presented as a
single amount in the statement of financial position. What is this amount called?

  • A. Net defined benefit liability (asset)
  • B. Asset ceiling
  • C. Fair value
  • D. Net present value
Answer:

A

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Question 6

Which of the following should be used when discounting a benefit in order to determine the present
value of the defined benefit obligation and the current service cost?

  • A. Fair value
  • B. Time value of money
  • C. Net present value
  • D. The corporate vision
Answer:

C

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Question 7

To estimate how much the employees have earned for their work in the current and prior periods in
order to attribute the benefit to the periods of service and to incorporate estimates about
demographics and financial variables into calculations, a company must utilize what method?

  • A. Re-measurement method
  • B. Fair value method
  • C. Net present value method
  • D. Projected unit credit method
Answer:

D

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Question 8

What is the difference between the present value of defined benefit obligation and fair value of plan
assets at the end of the reporting period called?

  • A. The financial position
  • B. The deficit or surplus
  • C. The discount
  • D. The present fair value
Answer:

B

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Question 9

Why is accounting for defined benefits plans one of the most complex issues in International
Financial Reporting Standards?

  • A. Because it involves incorporating actuarial assumptions into measurement of the obligation and the expenses
  • B. Because defined benefits plan obligations are not measured on a discounted basis
  • C. Because defined benefits plans must be settled within ten years after the employee renders the related service
  • D. Because the employer is not allowed to incorporate actuarial assumptions into measurement of the obligation and the expenses
Answer:

A

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Question 10

In defined contribution plans when the contributions are not expected to be settled wholly before
twelve months after the end of the reporting period, what must occur?

  • A. The employer must assume risk for the plan
  • B. Contributions must be discounted
  • C. Contributions must not be discounted
  • D. The employer must pay a specified amount to the employee
Answer:

B

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Question 11

Which of the following plans obliges an employer to pay a specified amount of benefits to the
employee?

  • A. Post-employment plan
  • B. Defined contribution plan
  • C. Defined benefit plan
  • D. Bonus plan
Answer:

C

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Question 12

In a defined contribution benefit plan, who assumes risk?

  • A. Employees
  • B. Employers
  • C. Both employees and employers
Answer:

A

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Question 13

The profit-sharing plan of Company ABC requires the company pay a specified proportion of its profit
for the year to employees who serve throughout the year. If no employees leave during the year, the
total profit-sharing payments for the year will be 3% of profit. The company estimates that staff
turnover will reduce the payments to 2.5% of profit. What does Company ABC recognize as a liability
and an expense?

  • A. 0.5% of profit
  • B. 2.5% of profit
  • C. 3% of profit
  • D. 5.5% of profit
Answer:

B

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Question 14

What is a constructive obligation?

  • A. When a company recognizes the expected cost of profit-sharing and bonus payments
  • B. When a company has no realistic alternative but to make payments
  • C. When a change in the companys informal practices would cause unacceptable damage to its relationship with employees
  • D. The required accounting entry for liabilities or accrued expenses or cash paid
Answer:

C

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Question 15

When does a present obligation exist?

  • A. When the employee renders service
  • B. When the company has no realistic alternative but to make the payments
  • C. When a change in the companys informal practices would cause unacceptable damage to its relationship with employees
  • D. When the company recognizes the expected cost of profit-sharing and bonus payments
Answer:

B

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