Accounting standards

Question 1

IAS 38 Intangibles revaluation model criteria

Answer 1

Revalued amount: asset’s fair value at date of revaluation less amortization and impairment loss

1) The revaluation model cannot be applied to an intangible asset unless its fair value can be measured reliably
2) If the revaluation model is applied to an intangible asset, then it must apply to the entire class
3) Revaluations should be made with sufficient regularity to ensure that the carrying amount of an intangible asset does not differ materially from fair value

Question 2

IFRS 15 steps

Answer 2

1) Identify the contract with the customers
2) Identify the separate performance obligations
3) Determine the transaction price
- “Expected value” method
- “Most likely” amount
4) Allocate the transaction price to performance obligation
5) Recongnize revenue when a performance obligation is satisfied

Question 3

IAS38/IAS16 revaluation steps: revaluation increases then decreases

Answer 3

First credit revaluation reserve and record it under other comprehensive income. Secondly, debit revaluation reserve, account the decrease as a negative figure in other comprehensive income and recognize remaining value as expense

Question 4

IAS38/IAS16 revaluation steps: revaluation decreases then increases

Answer 4

First, record it as an expense in P&L. Secondly, record as an income in P&L, credit revaluation reserve and recognize remaining as other comprehensive income.

Question 5

IAS38 Revaluation where disposal of an intangible has been previously revalued

Answer 5

Revaluation gain transferred from revaluation reserve to retained earnings. Profit/loss on disposal recorded in P&L.

Question 6

IFRS 15 Repurchase agreement

Answer 6

Such agreements should be treated as finance agreements if repurchase price exceeds original selling price. Recognize as NCL.

Question 7

IFRS 15 Contracts that allow customers to return goods

Answer 7

• Do not recognize revenue in relation to goods that are expected to be returned.
• Recognize revenue by multiplying the percentage of customers that will not exercise their right of return.
• A refund liability for those percentage of customers expected to return.
• An inventory equal to cost of the products that are expected to be returned.
• If refunds actually paid to customers differ, the difference should be amounted for prospectively as a change in accounting estimate.

Question 8

IFRS 15 Determine the transaction price

Answer 8

If contract permits to return goods and the company has no relevant historical evidence of product returns, then this product has to be recorded at cost in an asset account named Asset for returns. When the right of return period lapses and the product is not return, credit this account and debit COGS.

Question 9

IFRS 15 Warranties

Answer 9

• Service-type warranties
• Assurance type warranties

Question 10

IAS 36 Definitions (Fair value, Value in use, Recoverable amount, carrying amount)

Answer 10

Fair value - price that would be received to sell an asset
Value in use - present value of the future cashflows expected to derived from an asset
Recoverable amount - the higher of (fair value - costs of disposal) and value in use
Carrying amount - amount at which an asset is recognized after deducting any accumulated depreciation

Question 11

IAS 36 Steps

Answer 11

1. Calculate (fair value - costs of disposal) and value in use
2. The higher of the 2 amounts = recoverable amount
3. If recoverable amount is lower than carrying amount, the difference is impairment loss
4. Impairment loss/gain is charged to P&L