Chapters 7-11

Question 1

what does tax base mean

Answer 1

the amount attributed to that asset or liability for tax purposes

Question 2

what is deferred tax

Answer 2

the tax attributable to temporary differences

Question 3

how do you calculate a DT Asset or a DT liab

Answer 3

temp diff x tax rate

Question 4

how do you calculate the temp diff

Answer 4

carrying amount of an asset or liab - the tax base

Question 5

when is DT a liability

Answer 5

tax you will need to pay in the future, ie accrued income

Question 6

what is DT an asset

Answer 6

when the entity has recorded a provision but they dont have to pay the tax until they spend on the provision

Question 7

what journal would need to occur for a FV Gain

Answer 7

Dr Goodwill

Cr DT Liability

Question 8

what journal would need to occur for a FV loss

Answer 8

Dr DTA

Cr Goodwill

Question 9

what happens if there is a gain on an asset but it is not taxable until the asset is sold

Answer 9

the gain is ignored for tax purposes therefore creating a DTL

Question 10

what happens if there is a loss on an asset but it is not taxable until the liability is transferred

Answer 10

DTA is created

Question 11

when can a DTA be recognised until

Answer 11

it can be carried forward to the extent that its probable that a future tax profit will be available

Question 12

what is a financial instrument

Answer 12

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

Question 13

whats a financial asset

Answer 13

cash
an equity instrument of another entity
a contractual right to receive cash or another asset from another entity
to exchange financial assets or liability with another entity

Question 14

whats a financial liability

Answer 14

to deliver cash to another entity

to exchange financial assets or liabilitys

Question 15

acronym for derivative

Answer 15

Future
Underlying
No initial investment

Question 16

what makes something a liability over equity

Answer 16

there is a contractual obligation to deliver cash or another asset

Question 17

what does classifying something as a financial liability mean from the stakeholder perspective

Answer 17

increased gearing

reduced profit due to finance cost

Question 18

what does classifying something as equity mean from the stakeholder perspective

Answer 18

decrease gearing

no effect on profit

Question 19

common example of an instrument being a liability and equity

Answer 19

convertible debt

Question 20

how do you seperate the equity and liability parts of the debt

Answer 20

determine the carrying amount of the liability

assign residual amount to equity

Question 21

what interest rate do you use in a convertible debt question

Answer 21

market interest rate

Question 22

when do you derecognise a financial asset

Answer 22

when the cash flows have expired or the asset is transferred

Question 23

when do you derecognise a financial liability

Answer 23

when the obligation is discharged

Question 24

should you derecognise an asset if it will be returned

Answer 24

no

Question 25

should you derecognise an asset if you have the right to repurchase

Answer 25

yes - its only an option

Question 26

is a debt instrument held to collect cash flows debt or shares

Answer 26

debt

Question 27

is a debt instrument held to collect cash flows AND SELL debt or shares

Answer 27

debt

Question 28

are investments in equity instruments NOT held for trading debt or shares

Answer 28

shares

Question 29

are any other financial assets that are not: held for cash flows held for cash flows and sale investments in equity not held for trading, debt or shares?

Answer 29

shares

Question 30

initial measurement and subsequent measurement of held to collect cash flows

Answer 30

FV + Transaction costs then amortised cost

Question 31

initial measurement and subsequent measurement of held to collect cash flows and to sell

Answer 31

FV + Transaction costs then FV to OCI then to P/L when derecognised

Question 32

initial measurement and subsequent measurement of investments in equity not held for trading

Answer 32

FV + Transaction costs FV to OCI and dividend income in P/L

Question 33

initial measurement and subsequent measurement of any other financial assets that are not : held for cash flows held for cash flows and sale investments in equity not held for trading,

Answer 33

FV only, transaction costs are expensed FV to P/l

Question 34

how do you initially measure and subsequently measure most financial liabilities

Answer 34

FV - transaction costs then at amortised cost

Question 35

how do you measure ( initially and subsequently ) a liability that is held for trading

Answer 35

FV - transaction costs expensed FV through P/L

Question 36

when can assets and liabilities be offset

Answer 36

when an entity has a right to offset they intend to settle on a net basis or realise the asset and settle the liability simultaneously

Question 37

what is a loss allowance

Answer 37

the allowance for expected credit losses on financial assets

Question 38

what is stage 1 of loss allowances

Answer 38

initial recognition of the asset will put a 12 month expected credit loss in - unwind this and difference will go to Finance costs

Question 39

when do you go to stage 2 of loss allowances

Answer 39

if there is an increase in risk

Question 40

what does stage 2 mean

Answer 40

increase the allowance and therefore finance costs for lifetime losses

Question 41

when do you go stage 3 loss allowance

Answer 41

there is objective evidence of impairment

Question 42

what does stage 3 mean

Answer 42

increase the allowance to lifetime losses and only calculate interest on net amount ( asset - allowance )

Question 43

what IAS is Leases

Answer 43

16

Question 44

definition of a lease

Answer 44

a contract, or part of a contract that conveys the right to use an asset for a period of time in exchange for consideration

Question 45

how to tell if the entity has control over the asset

Answer 45

if they can direct the use of the asset and if they can obtain substantially all of the economic benefits

Question 46

if the supplier has the right to substitute the asset, is it a lease?

Answer 46

no

Question 47

definition of a lease term

Answer 47

the non cancellable period for which a lessee has the right to use an underlying asset

Question 48

what does the lessee recognise at the commencement of a lease

Answer 48

a lease liability and a right of use asset

Question 49

how do you usually measure a right of use asset

Answer 49

cost less depreciation and impairment losses

Question 50

how do you depreciate a right of use asset

Answer 50

use the earlier of useful life or end of lease term

Question 51

what does the initial measurement of a right of use asset include

Answer 51

initial measurement of liability direct costs dismantling or restoration costs payments made at or before the lease commencement date

Question 52

reasons to use exemption to include lease payments as an expense

Answer 52

short term or low value

Question 53

when is a lease liability remeasured

Answer 53

when lease payments have been revised

Question 54

for DT purposes, what is the carrying amount of the lease

Answer 54

the net of right of use asset - lease liability

Question 55

what is the tax base of the lease

Answer 55

0

Question 56

what is a finance lease

Answer 56

a lease that transfers substantially all of the risks and rewards to the lessee

Question 57

what is a operating lease

Answer 57

a lease that does not transfer substantially all of the risks and rewards to the lessee

Question 58

5 examples of what makes a lease a finance lease

Answer 58

transfer of ownership at the end of lease option to purchase at end of lease for a cheaper price lease term is a major part of the economic life value of lease payments amounts to substantially all of the fair value its specialised

Question 59

how does a lessor account for a finance lease

Answer 59

derecognise asset | recognise a receivable for the net investment in lease

Question 60

what is net investment for finance lease

Answer 60

present value of lease payments + unguaranteed residual value

Question 61

what is the grant date of a share based payment

Answer 61

the date the entity and another party agree to the share based payment arrangement

Question 62

2 types of share based payment

Answer 62

equity settled share based payment | cash settled share based payment

Question 63

what is an example of equity settled share based payments

Answer 63

share options

Question 64

what is an example of cash settled share based payments

Answer 64

share appreciation rights (SARS)

Question 65

how to recognise an equity settled SBP

Answer 65

Dr exp | Cr equity

Question 66

how to recognise a cash settled SBP

Answer 66

Dr Expense | Cr Liability

Question 67

whats a vesting condition

Answer 67

a condition that must be met before the SBP can be made

Question 68

if there is no vesting period how would we account for the SBP

Answer 68

full expense at grant date

Question 69

how to measure an equity settled SBP

Answer 69

use FV at grant date and do not update

Question 70

how to measure a cash settled SBP

Answer 70

Update FV at each YE with changes going to P/L

Question 71

how to calculate share based payment equity or liability value at YE

Answer 71

No of employees x no of instruments per employee x FV per instrument x proportion of vesting period elapsed at YE

Question 72

if the entity has the choice of SBP do you need to account differently?

Answer 72

no

Question 73

if the counter party has the choice of SBP do you need to account differently?

Answer 73

yes - measure debt as you would a cash settled scheme, then equity as a balancing figure

Question 74

what are the exemptions where a parent does not need to prepare consolidate accounts

Answer 74

it is itself a wholly owned sub its debt or equity instruments arent publicly traded

Question 75

how does a parent have control over a sub

Answer 75

power to direct relevant activities exposure or rights to variable returns ability to use power to affect the amount of returns

Question 76

should you still consolidate if the subs activities are different to the group

Answer 76

yes - disclosure needs to be made under IFRS 8

Question 77

should you still consolidate if the subs was only purchased for resale

Answer 77

yes IFRS 5 Non current assets should be applied

Question 78

definition of a lease

Answer 78

a contract that conveys the right to use an asset for a period of time in exchange for consideration

Question 79

how can you tell how to identify a lease

Answer 79

whether the contract allows the lessee the right to control the asset

Question 80

how to tell when an entity has the right to control the asset

Answer 80

it can direct use of asset the right to obtain substantially all of the economic benefits

Question 81

what do you recognise on commencement as a lessee

Answer 81

a lease liability a right of use asset