Explain questions

Question 1

What is the treatment for a sale and leaseback

Answer 1

• Derecognise the carrying amount of the property.
• Recognise a right-of-use asset and depreciation (subsequent measurement)
• Recognise a lease liability (initial and sub-PV)
• Recognise a gain in respect of the rights transferred (SPL amount)

Think C,R,P,L,P (cash, ROU, PPE, Lease SPL)
Find initial measurement then subsequent

Question 2

What is the treatment for a contingent liability

Answer 2

Relates to provisions.

Is it remote, possible, probable?
What does this mean? (give detail i.e. is it remote in nature)
What is the consequence? (is disclosure required)

Question 3

What is the treatment for related party transactions?

Answer 3

It requires identification of related parties and disclosures of related party relationships.
If its a consolidated statement then exclude as this is intragroup trading

State how its a RPT
Disclose nature of transaction but no need to disclose names

Question 4

What is the accounting treatment for changes to depreciation model

Answer 4

This is a change in accounting estimate as per IAS16. Therefore required prospective changes- current and future

Question 5

How do you treat loyalty cards (explain question)

Answer 5

IFRS 15 treatment here is rev recognised OVERTIME and discount is a single performance obligation.

Explain how overtime- benefit transferred over period

IFRS 15 requires X to recognise rev but measuring progress to complete satisfaction of obligation. Output method is best here (measure how much time passed. Input is cost to entity for providing service)

Question 6

How do you treat purchase of intangible asset?

Answer 6

Explain how it meets recognition criteria (identifiable and non-monetary. If purchased then identifiable and benefits assumed)

Capitalise at cost but recognise amortisation

Dr operating expense (amortisation)
Cr Accum Amort (amortisation)

Hold at historical cost as FV cannot be measured for IA (lack of active market)

Question 7

How do you treat internally generated brands in a consolidated statement?

Answer 7

Identifiable IA acquired in business combination should be recognised separate from goodwill in CSFP

if excluded from sub- explain why (doesnt meet criteria) but meets definition of asset therefore recognised on acquisition

Increase IA by x or carrying amount if finite life

Reduce group profit bu amortisation and show split