ACCA FR

Question 1

Profit or Loss on disposal in the group accounts

Answer 1

£ £
Sale proceeds X
Net assets at disposal X
Goodwill at disposal X
Less: NCI at disposal (X)
X
Profit or loss on disposal X/(X)

Question 2

Definition of associate

Answer 2

Significant influence 20-50%

Representation on the board of directors
Participation in policy making processes
Material transactions between investor and investee

Question 3

Enhancing qualitative characteristics

Answer 3

Comparability
Verifiability
Timeliness
Understandability

Question 4

Asset

Answer 4

A present economic resource controlled by the entity as a result of past events

Question 5

Liability

Answer 5

A present obligation of the entity to transfer an economic resource as a result of past events

Question 6

Equity

Answer 6

The residual interest in the assets of the entity after deducting all its liabilities

Question 7

Income

Answer 7

Increases in assets or decreases in liabilities that result in increases in equity other than those relating to contributions from holders of equity claim

Question 8

Expenses

Answer 8

Decreases in assets or increases in liabilities that result in decreases in equity other than those relating to distributions to holders of equity claims

Question 9

Non current assets held for sale

Answer 9

Seeking - the entity must be actively seeking a buyer
Available - the asset must be available for immediate sale
Likely - the sale must be highly probable
Expected - the sale is expected to be made in 1 year

Question 10

Development costs can be capitalised if: (pirate)

Answer 10

P - probable future economic benefits will be generated by the asset
I - intention to complete and use/sell asset
R - resources adequate and available to complete and use/sell asset
A - ability to use/sell the asset
T - technical feasibility of completing asset for use/sale
E - expenditure can be measured reliably

Question 11

Disposing of a subsidiary (single company accounts)

Answer 11

Sale proceeds X
Less Cost of investment (X)
Profit or loss X/(X)

Question 12

Disposing of a subsidiary (group accounts)

Answer 12

Sale proceeds X
Net assets at disposal X
Goodwill at disposal X
Less NCI at disposal (X)
Total (X)
Profit of loss in disposal X/(X)

Question 13

Goodwill working

Answer 13

Cost of combination X
Plus: NCI at acq X
Less: subs net assets
Share capital X
RE X
subtotal X
Goodwill at acq X
Cumulative impairments (X)
Carrying amount of goodwill X

Question 14

Retained earnings working

Answer 14

PARENT SUB
RE at SFP X X
RE at acq (X)
Subs post acq RE (sub total) X
Group share
subs post req RE X
Less goodwill impair (X)
Retainer earnings X

Question 15

IFRS Interpretations Committee

Answer 15

Interpret the application of IFRS standards
Provide guidance on financial reporting issues not specifically addressed in IFRS accounting standards
Publish draft interpretations for public comment

Question 16

Change in depreciation method

Answer 16

Change of accounting estimate
Applied prospectively

Question 17

PUP

Answer 17

Profit on inter company sale x % of goods still in inventories at the year end

Question 18

Cash generating units

Answer 18

A cash generating unit is the smallest identifiable group of assets for which individual cash flows can be identified and measured.

Question 19

Non current assets held for sale

Answer 19

SEEKING - The entity must be actively seeking a buyer.
AVAILABLE - The asset must be available for immediate sale.
LIKELY - The dale must be highly probable
EXPECTED - The sale is expected to complete in the next year.

Question 20

Discontinued Operations

Answer 20

Represents a major line of business or geographical area. Or
Is part of a single coordinated plan to dispose of a separate major line of business or geographical area. Or
Is a subsidiary acquired exclusively with a view to resale.

Question 21

Which currency exchange rates may be used?

Answer 21

The rate that existed on the day of purchase or sale.
An average rate for the year, provided there have been no significant fluctuations in the year.

Question 22

Bonus fraction (bonus issue of shares)

Answer 22

New number of shares / old number of shares

Question 23

Rights issue - bonus fraction

Answer 23

Fair value per share immediately before exercise of rights / TERP (theoretical ex rights price)

Question 24

Financial instrument

Answer 24

Any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity

Question 25

PUP

Answer 25

P&L - Add to COS
SFP - Deduct from inventory & RE
Include in NCI if sub made sale

Question 26

Inter-company sales

Answer 26

P&L - deduct full amount from revenue & COS
SFP - deduct outstanding amount in receivables and payables

Question 27

Increase a provision

Answer 27

Dr - expense
Cr - provision (SFP)

Question 28

Unwinding of a discount factor

Answer 28

Times amount by discount factor percentage.
Dr - finance cost
Cr - provision (increase)

Question 29

Gain on disposal of subsidary

Answer 29

Proceeds
Less: net assets (at disposal)
Less: goodwill
Plus NCI (at disposal)

Question 30

Limitations of comparing ratios

Answer 30

Didn’t use same accounting policies
Different accounting years
Sector averages are just averages
Ratios have not been consistently calculated

Question 31

Impairment - recoverable amount

Answer 31

Higher of value in use and fair value less selling costs