Adjustments

Question 1

Tax

Answer 1

Dr income tax expense (pl)
Cr cash (sofp)
Cr current liabilities : taxation (sofp)

Under provision in py - liability - increase tax liability cy

Over provision - asset - decrease cy libikitu

Question 2

Dividends

Answer 2

Appropriations of profit

Interim ordinary dividend that has been declared in the period but not paid is not a liability

Unpaid mandatory Dividends on irredeemable preference shares is a current liability

Dividends that are a liability are a finance expense too

Question 3

Accounting entries for dividends

Answer 3

Payment of ordinary dividend
Dr RE
CR cash

Payment or declaration of interim or final dividend on preference shares classed as a liability :

Dr finance costs
Cr cash/other payables (current liability)

Payment or declaration of mandatory dividend on preference shares classified as equity

DR RE
CR cash/ dividends payable

Question 4

Changes in accounting estimates and policies

Answer 4

Change in policy - applied retrospectively

Estimate - applied prospectively (depreciation)

Question 5

Discontinued operations

Answer 5

A component of an entity that has either been
Disposed of
Or is held for sale, and;

• Represents a single major line of business or geographical area of operations or
• is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or
• is a subsidiary acquired solely with a view to resale

Component of an entity = operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes from the rest of the entity

Question 6

Presenting discontinued operations

Answer 6

Entity should disclose a single amount in the statement of profit and loss, a total of :

-Post tax profit/loss of discontinued operations

-post tax gain/loss recognised on
measurement to fair value less costs to sell or on the disposal of the assets constituting the discontinued operation

In workings for (pl) have a column for continuing operation and another for discontinued then a total column

In the p and l the value will be the total less the discontinued opps

Question 7

Foreign exchange

Currencies

Answer 7

Functional currency - currency of primary economic environment of the entity

Presentation currency - currency of FS

Monetary items - units of currency held and assets and liabilities to be received or paid in an fixed or determinable number of units of currency

Question 8

Foreign exchange workings

Answer 8

IAS 21 - Foreign currency (FC) transaction should be recorded on initial recognition by applying the exchange rate between reporting and foreign currency

Translation gains / losses - exchange rate changes mean there’s likely to be a difference between what the item was expected to cost/be sold at and the actual money paid/received
Difference = exchange gain/loss

RETRANSLATION- required when entity still holds monetary assets/liabilities obtained in a foreign currency come the end of the reporting period

Monetary items = rights to receive/obligation to deliver cash. Non monetary items = assets eg inventory, NCAs

Following rules apply :
A) report foreign currency monetary items using closing rate

B) report non monetary items which are carried at historical cost in a foreign currency using the exchange rate at date of transaction

C) report non monetary items which are carried at FV in a FC using rates that existed when the values were measured

Question 9

Earnings per share

Answer 9

Profit loss / number of shares in issue :

Profit/loss attributable to ordinary equity holders of the parent/ weighted average number of shares outstanding during the period