Accounting Standards

Question 1

Contingent asset

Answer 1

• A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events. (D9a, D9b) (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 2

Double entry for a provision is

Answer 2

Dr relevant expense - sci

Cr provision - sofp

Question 3

A contingent liability

Answer 3

possible obligation that arises from past events whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events; or

– A present obligation that arises from past events, but is not recognised because either the outflow of resources cannot be reliably measured or it is not probable that an outflow of resources will take place. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 4

Events after the reporting period

Answer 4

• Events after the reporting period are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. (F4a) (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 5

Adjusting event

Answer 5

Adjusting events are those that provide evidence of conditions that existed at the end of the reporting period. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 6

Disclosure notes

Answer 6

• Disclosure notes are included in a set of financial statements to give users extra information. (F3a, F3b) (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 7

A provision

Answer 7

Is a liability of uncertain timing and amount and should only be recognised whereby :

There is a legal or contracture obligation as a result of a past event (LSBF)

Payment is probable (LSBF)
The amount of the payment can be reliably measured

Question 8

Non- adjusting event

Answer 8

Non-adjusting events are those that are indicative of conditions that arose after the reporting period, therefore are not recognised in the financial statements for the current financial period. (F4b, F (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 9

IAS 37

Answer 9

Provisions and contingent liabilities/ assets

Question 10

IAS 10

Answer 10

Events after the reporting period

Question 11

IAS 1

Answer 11

Presentation off financial statements

Question 12

IAS 7

Answer 12

Statement of cash flows

Question 13

IAS 2

Answer 13

Inventories

Question 14

IAS 16

Answer 14

Property plant and equipment

Question 15

Adjusting events examples

Answer 15

The sale of a non-current asset at a loss indicates that it was impaired at the reporting date.

• The bankruptcy of a customer indicates that their debt was irrecoverable at the reporting date.
• The sale of inventory at less than cost indicates that it should have been valued at NRV in the accounts.
• The determination of cost or proceeds of assets bought/sold during the accounting period indicates at what amount they should be recorded in the accounts.
• The discovery of fraud or error showing that the financial statements are incorrect. (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 16

Non-adjusting events - examples

Answer 16

A purchase or sale of a non-current asset.

• The destruction of assets due to fire or flood.
• The announcement of plans to discontinue an operation.
• An issue of shares (LSBF)

LSBF. ACCA F3 Study Manual 2017/18. London School of Business and Finance, 20170501. VitalBook file.

Question 17

Following criteria must be met in order to make a provision per IAS 37

Answer 17

A present obligation , legal or constructive, arisen as a result of a past event

A reliable estimate of a payment can be made

An outflow must be probable

Question 18

Contingent liability

Answer 18

Shown on disclosure notes only

Arises if failed the criteria of probable payment or reliable payment estimate
Required for a provision

< 50% chance of paying money

<5% chance - ignore

Question 19

Contingent asset

Answer 19

İs not recognised but should disclose

> 50% receiving money then disclose in notes
<50% receipt Then. Ignore
<5% receipt. Then. Ignore