Definitions

Question 1

Goodwill

Answer 1

According to IFRS 3 business combinations, goodwill is calculated by comparing the aggregate of the fair value of the consideration transferred and the non-controlling interest in the acquiree at the acquisition date with the FV of the identifiable net assets at acquisition.

Question 2

Financial instrument

Answer 2

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

Question 3

Reportable segments

Answer 3

Under IFRS 8, an operating segment is a component of an entity whose results are regularly reviewed by the entity’s chief operating decision maker.

Question 4

Functional currency

Answer 4

Currency of the primary economic environment where the entity operates

Question 5

Cgu

Answer 5

Smallest identifiable group of assets for which independent cashflows can be measured and identified.

Question 6

Onerous contract

Answer 6

Ias 37 defines it as ‘in which the unavoidable costs of meeting the contract exceed the economic benefits expected to be received under it.

Question 7

Intangible assets

Answer 7

An identifiable non-monetary asset without physical substance

Question 8

Joint arrangement

Answer 8

Under ifrs 11 A joint arrangement is an agreement over which 2 or more parties have joint control. This will only apply if the relevant activity require unanimous consent of the parties. A joint arrangement may take form of joint operations or joint ventures.

Question 9

Financial liability

Answer 9

IAS 32 financial instruments:presentation says that a financial liability is a contractual obligation to deliver either cash or another financial asset to another entity.

Question 10

Equity

Answer 10

Any contract which evidences a residual interest in the entity’s assets after deducting all of its liabilities.

Question 11

NCA held for sale

Answer 11

Ifrs 15, nca held for sale and discontinued operations defines an asset held for sale as one where the carrying amount will be recovered principally through a sales transaction.

Question 12

Discontinued operations

Answer 12

Ifrs 5 defines discontinued operations as a component of an entity which has has been disposed of or is classified as held for sale, and
1. Represents a major line of business or geographical area pf operations, or
2. Is a single co-ordinates plan to dispose of a seperate major line of area of operations,or
3. Is a subsidiary acquired exclusively for resale.

Question 13

Fair value

Answer 13

Ifrs 13 FV is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

While pricing, the condition, location and restrictions to usage of the asset should be taken into account.

Question 14

Lease

Answer 14

IFRS 16 leases, defines lease as a contract or a part of contract, that conveys the right to use an underlying asset for a period of time in exchange for consideration

Question 15

Finance lease

Answer 15

A lease where the risks and rewards of the underlying asset substantially transfer to the lessee.
The majority of the UL of the asset is leased, ownership is transferred at the end of the LT, and the PV of lease rentals is almost equal to the FV of the asset.
(An operating lease is that does not meet the definition of a finance lease)

Question 16

Cash equivalents

Answer 16

Short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value