Sample Questions
Question 1
Easy
Under IFRS, goodwill is tested for impairment:
Solution
A is correct.
Under IAS 36, goodwill must be tested for impairment at least annually, regardless of whether there are indicators of impairment. Additional testing is required whenever there are specific indicators suggesting the goodwill may be impaired.
This is consistent with US GAAP (ASC 350), which also requires at least annual impairment testing.
Both IFRS and US GAAP require at least annual goodwill impairment testing.
Under IAS 36, goodwill must be tested for impairment at least annually, regardless of whether there are indicators of impairment. Additional testing is required whenever there are specific indicators suggesting the goodwill may be impaired.
This is consistent with US GAAP (ASC 350), which also requires at least annual impairment testing.
Both IFRS and US GAAP require at least annual goodwill impairment testing.
Question 2
Medium
The Beneish M-score model is most commonly used to:
Solution
C is correct.
The Beneish M-score is a quantitative model that uses financial ratios derived from financial statement data to detect the probability of earnings manipulation. An M-score greater than -1.78 suggests a higher probability that the company is an earnings manipulator.
The Beneish M-score was specifically designed to detect earnings manipulation by analyzing patterns in financial statement data.
The Beneish M-score is a quantitative model that uses financial ratios derived from financial statement data to detect the probability of earnings manipulation. An M-score greater than -1.78 suggests a higher probability that the company is an earnings manipulator.
The Beneish M-score was specifically designed to detect earnings manipulation by analyzing patterns in financial statement data.
Question 3
Hard
What is the ending loss reserve balance?
Solution
B is correct.
The loss reserve changes as follows:
Beginning reserve: 15,000M
Add: New claims incurred: 8,200M
Less: Claims paid: M
Less: Prior-year reserve reduction (favorable development): M
Ending reserve = M
The ending reserve equals the beginning reserve because new claims roughly offset payments, and the favorable prior-year development offsets the net addition.
The loss reserve changes as follows:
Beginning reserve: 15,000M
Add: New claims incurred: 8,200M
Less: Claims paid: M
Less: Prior-year reserve reduction (favorable development): M
Ending reserve = M
The ending reserve equals the beginning reserve because new claims roughly offset payments, and the favorable prior-year development offsets the net addition.
