2021

Question 1

what is investment property?

Answer 1

property held to earn rentals / capital appreciation, rather than for use in prod / supply of g&s, admin, or sale in ordinary course of business

Question 2

investment property examples?

Answer 2

• generates cash flows independently
• land held for cap app. or undetermined future use
• building leased out by the entity
• property constructed / dev for future use

Question 3

portions of investment property?

Answer 3

if portions can be sold separately, account for separately. otherwise no.

Question 4

what is an intangible asset?

Answer 4

an identifiable non-monetary asset without physical substance. not held for sale in ordinary business course.

Question 5

what must intangible assets have?

Answer 5

• identifiability
• existence of future EB
• control over a resource

Question 6

when is an asset identifiable?

Answer 6

if it is separable and arises from legal/contractual rights. no impact on bus continuity to exist.

Question 7

measurement on intangible assets?

Answer 7

cost + import duties, non-ref taxes, etc

Question 8

classifications for int-generated intangible assets?

Answer 8

• research phase
• development phase
  (if indistinguishable, treat it as research phase only)

Question 9

if intangible asset in research phase?

Answer 9

• not recognized
• will be P/L= an expense
• cannot demonstrate that an asset that will produce EB exists

Question 10

useful life of intangible assets?

Answer 10

finite = amortize
indefinite = not amortized, review EUL annually

Question 11

pv of annuity for leases?

Answer 11

pmt x [1 - 1/(1 + i/m)^nm] / (i/m)

Question 12

what is a financial instrument?

Answer 12

any contract that gives rise to a financial asset of one entity and a financial E/L in another

Question 13

deciding accounting policy for financial assets?

Answer 13

• contractual CF = amortised costs

- realize FV changes = P/L and OCI (only OCI if we don’t trade frequently)

Question 14

new conceptual framework liability definition?

Answer 14

a present obligation of the entity to transfer an economic resource as a result of past events. no practical ability to avoid duty. must be potentially occurring.

Question 15

IAS 37 liability definition?

Answer 15

present obligation resulting from a past event from which future EBs are expected to flow from the entity. recognize L if possible and measurable.

Question 16

probability of outflow?

Answer 16

if probable and certain of timing = L

if uncertain timing = provision

Question 17

when do we recognize a provision?

Answer 17

• obligation is result of past event
• transfer of FEBs probable
• amt estimated reliably

Question 18

what is a provision?

Answer 18

a liability with uncertain timing or uncertain amount

Question 19

contingency?

Answer 19

not recognized as either because it is not measurable and/or not probable. possible occurrence, will only be confirmed with future event not controlled by the entity.

Question 20

recognition of contingent L?

Answer 20

notes only

Question 21

contingent A recog?

Answer 21

only if receipt is probable – disclose in notes

Question 22

commitment?

Answer 22

when the comp commits to buy an asset at a future date and they will have a future obligation. we give a note disclosure.

Question 23

if no current obligation at year end?

Answer 23

commitment, not contingent L

Question 24

PPE vs non-current assets?

Answer 24

used in more than one period vs used in more than 12months period

Question 25

restoration costs for PPE?

Answer 25

create a provision on initial recognition that increases annually with interest. include the initial price of restoration costs in PPE costs on initial recognition.

Question 26

subsequent expenditure for PPE?

Answer 26

capitalize if enhancing

expense if maintenance/repair

Question 27

how does revaluation work?

Answer 27

• gains go through OCI – “revaluation gain” and closed off to “reval surplus”
• losses reduce “surplus” and once it dips below og cost, you make an impairment expense

Question 28

costs of conversion?

Answer 28

costs directly related to units of production

Question 29

recognizing a provision for sales returns?

Answer 29

DR revenue (P/L)
CR provision for returns (L)
DR right to return of asset (A)
CR COS exp (P/L)

Question 30

recognizing a provision for warranty expense?

Answer 30

DR inventory repairs / COS (P/L)

CR provision for warranty (L)

Question 31

recognizing a provision for a lawsuit settlement to be paid in future?

Answer 31

DR lawsuit expense (P/L)
CR provision (L)

inc annually:
DR finance costs (P/L)
CR provision (L)

Question 32

contingency?

Answer 32

not measurable

not probable

Question 33

if we offer the customer a settlement discount?

Answer 33

DR Accs rec (A), CR Revenue (P/L) (as normal)
DR Revenue, CR Allowance for settlement discount (A)
(remove portion of rev amount that was allowed as a discount)

Question 34

if the customer pays meets requirements of settlement discount?

Answer 34

DR Bank
DR Allowance for settlement discount
CR Accs receivable

Question 35

if the customer does not meet requirements of settlement discount?

Answer 35

DR Bank, CR Accs rec

DR Allowance, CR Revenue

Question 36

capitalization issue?

Answer 36

DR dividends (E) (closed off to RE)
CR share election reserve (E) (close off to stated cap)

Question 37

share repurchase?

Answer 37

DR Stated cap, DR RE, CR Bank

DR Stated cap, CR Bank

Question 38

share issue costs?

Answer 38

DR stated capital

CR bank

Question 39

disposing of financial assets? (shares)

Answer 39

at year end, reduce current value to value of sale for all shares. remove shares sold. return to FV at end of year.