Explain questions

Question 1

Sale and leaseback

Answer 1

Identify sale
explain what sale and leaseback is and how it applies
define ROU and give measurement (initial= CA x PV/FV)
define lease liability with measurement (table)
Correct accounting treatment
Find CL/NCL

Dr Cash (fv) ROU (formula)
Cr PPE (ca) LL (pv) Gain (proceed x (part transferred/ca)

Part transferred= CA- ROU
Proceed= FV-CA

Question 2

Contingent liability

Answer 2

IAS37

Explain obligation- obligation from past event, existence confirmed by occurence/non occurence outside of control of entity

Identify if remote, possible, probable and repercussions

Question 3

Disposal of sub

Answer 3

Treatment- recognised as profit from disposal as single line
No longer consolidated
For parent spl: Profit= proceed - cost
For group spl: Profit= proceeds - goodwill on consol - NA + gross profit

NA= BF + PFTY - Div

Question 4

Related party

Answer 4

IAS24

Definition
How it qualifies
What does IAS24 say about it- i.e. recognition/treatment
Apply to scenario
Disclose in individaul FS- nature, amounts etc

Question 5

Change in estimates (e.g. dep)

Answer 5

IAS16

State req- should reval dep each year and which is more appropriate
Treatment- prospective application
IAS8 includes more detail on changes
Depreciate on CA

Question 6

Loyalty cards

Answer 6

IFRS 15

Separate obligation
Recognised over time as performance satisfied over time (search measuring progress)
Show correct recognition

Dr Revenue Cr CL and NCL (contract liability)

Question 7

Convertible bonds

Answer 7

IAS 32

Form is pref share but substance is debt
defined as financial liability- obligation to pay interest/capital
convertible= equity component too
IAS32 req substance to be reflected i.e. as 2 financial instruments
Apply split accounting
PV table (DCF) and Amortising

Dr Equity Dr finance cost
Cr liability Cr dividend Cr liability (FC-Div)

Question 8

Zero coupon bonds