Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ACA ICAEW > FAR > Flashcards

FAR Flashcards

1
Q

What are the 2 fundamental principles ?

A

Relevance and faithful representation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the 4 enhancing characteristics?

A

Comparability
Verifiability
Timeliness
Understandability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the elements of FS?

A

Assets
Liabilities
Equity
Income
Expenses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What must be met for the recognition of an element?

A

Must meet the requirements for an element

Must be relevant and faithfully represented

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the conceptual framework for financial reporting?

A

A document that explains the principles behind the financial statements. It helps to facilitate the consistent and logical formulation of IFRS standards. Also provides a basis for use of judgement in resolving accounting issues.

It is not a standard.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is historical cost?

A

The consideration paid to acquire or create an asset when it was purchased including any transaction costs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is fair value?

A

Price that would be received to sell and asset in an orderly transaction in the open market at the measurement date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the value in use?

A

Present value of the cash flows or other economic benefits an entity expects to derive from the use of an asset and its ultimate disposal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is current cost?

A

The cost of an equivalent asset at the measurement date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the 5 fundamental principles for ICAEW

A

Integrity
Objectivity
Competence and due care
Confidentiality
Professional behaviour

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the 5 threats?

A

Self interest
Self review
Advocacy
Familiarity
Intimidation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are some examples of safeguards to the threats to the fundamental principles?

A

Entry requirements
CPD
Professional Standards

Ethics programmes (workplace)
Internal controls
Leadership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

When are changes in accounting policies allowed? (Relates to IAS 8)

A

Only allowed if:

Required by an IFRS Accounting Standard

Results in the financial statements providing more relevant or reliable information (RARE)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How to account for changes in accounting policy in line with IAS 8?

A

Account for retrospectively - adjust previous years as if the new accounting policy had been in place.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How to account for prior period errors?

A

Account for retrospectively - go back and change and ‘restate’

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How to account for changes in developments in accounting estimates?

A

Account for prospectively - no requirement to retrospectively review

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What does IAS 1 relate to?

A

The presentation of financial statements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

How to account for underprovision of the expected tax liability in the following year?

A

Increase next years tax charge in tbe PL

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How to account for over provision in the estimated tax liability?

A

Decrease the tax charge in the following year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What does IFRS 5 relate to?

A

Non current assets held for sale and discontinued operations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is a discontinued operation?

A

A component of an entity that has either been disclosed or is classified as held for sale and:

  • represents a separate major line of business or geographical area of operations
  • is part of a single coordinated plan to dispose of a separate line of business
  • is a subsidiary acquired exclusively with the view to resale
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What must a discontinued operation be to be classified as a discontinued operation?

A

Have been disposed of

Be held for sale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What rules apply to foreign currency items in the SOFP subsequent to year end?

A

a) restate foreign currency monetary items using the closing rate

b) do not restate non monetary items that are measured at historical cost - these should be translated using the exchange rate at the date of the transaction instead of closing rate.

c) restate non monetary items measured at fair value using the exchange rate at the date that the fair value was measured.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Where is an exchange difference recognised?

A

On monetary items: in the P/L

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What should happen where a gain or loss is recognised in other comprehensive income?

A

Any exchange differences should also be recognised in OCI

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What 2 models for measuring PPE are set out by IAS 16?

A

Cost model

Revaluation model

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is the cost model?

A

Where an item of PPE is carried at cost less accumulated depreciation and impairment losses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What is the revaluation model?

A

An item of PPE is carried at the revalued amount being fair value less accumulated depreciation and impairment losses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

How to account for an increase in value on revaluation?

A

1) Increase (debit) original asset cost to fair value.

2) remove the accumulated depreciation to date (debit)

3) credit revaluation surplus within other comprehensive income and equity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

How to account for a decrease in value (downward revaluation) on a lab asset that has not been previously revalued upwards?

A

DR P/L Expense

CR PPE (carrying amount)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

How to account for a decrease in value which reverses a previous increase?

A

The deficit should be;

a) recognised in OCI to the extent of any remaining reval surplus on the same asset

b) the excess (balancing figure) is expensed in the PL

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

How to account for an increase in value which reverses a previous decrease?

A

The surplus should be recorded in profit and loss to the extent of the previous decrease.

Any excess is recognised in OCI / Revaluation Surplus. The credit to OCI / Revaluation Surplus should be the amount as if the previous downward revaluation had never taken place.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What is the formula for the transfer between reserves?

A

Amount of transfer = annual depreciation charge now LESS old depreciation prior to revaluation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What is the double entry for recording a transfer between reserves?

A

DEBIT Revaluation Surplus
CREDIT Retained Earnings

Show transfer in SOCIE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Which assets must be tested for impairment annuallly?

A

An intangible that has an indefinite useful life

Goodwill acquired in a business combination

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

What is the recoverable amount of an asset?

A

The HIGHER of:

Fair value less costs to sell

The value in use of the asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

How to account for impairment on an asset that has been depreciated at historic cost?

A

The impairment loss is charged to the P/L

Dr PL Expense
Cr NCA Cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

How to account for impairment on an asset that has previously been revalued upwards?

A

Impairment loss is first charged to OCI to the extent to which there is a revaluation surplus to clear this to 0 for this asset.

Any further impairment is incurred as an expense to the PL

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

What are the 3 criteria for capitalisation?

A

It incurs expenditures for the asset.

It incurs borrowing costs.

It undertakes activities that are necessary to prepare the asset for its intended use.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

When should an entity cease capitalising borrowing costs?

A

When substantively all activities necessary to get the asset ready for its intended use or sale are complete.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

What should the entity disclose in relation to borrowing costs?

A

The costs which have been capitalised in the current period

The capitalisation rate used to determine the amount of borrowing costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

How to account for the derecognition of PPE when the asset has been held at depreciated cost?

A

1) Remove asset from SOFP -
CR Asset Cost
DR Accumulated Depreciation

2) Recognise the Cash -
DR Cash (proceeds)

3) Balancing Figure Gain / Loss
DR/CR Gain / Loss in disposal (P/L)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

What is the double entry to realise the income from the disposal of an asset that has previously been revalued?

A

Same as normal de recognition however any remaining balance in revaluation surplus must be transferred to retained earnings:

Dr Revaluation Surplus (clear to 0)
Cr Retained Earnings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

When should an item be classified as held for sale?

A

If an asset is available for immediate sale in its current condition

If the sale if an asset is highly probable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

What are the indicators for a highly probable sale?

A

Management commitment to sell the asset - discussed in board meeting

Active programme to locate a buyer - employed an agent.

Marketing for sale at a price that is reasonable.

Expectation for the sale to take place within a year from date of classification.

No likelihood of significant changes to the plan.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

Conditions for an intangible asset to be recognised?

A

Should be identifiable and under the control of the entity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

What makes an asset identifiable?

A

Separable (capable of being disposed of individually)

Arises from contractual or other legal rights

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

When can recognition of an asset only occur under IAS 38?

A

Probable that the future economic benefits associated with the item will flow from the entity

Item has a cost or value that can be measured with reliability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

What costs should be included in the costs of asset?

A

Purchase price

Any directly attributable costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

Examples of directly attributable costs?

A

Employee costs
Legal and professional fees
Costs of testing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

What expenditure should not be included in the costs of an intangible asset?

A

Advertising and promotion costs

Cost of conducting business in a new location

Admin and overhead costs

Staff training costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

What intangibles cannot be recognised?

A

Internally generated goodwill, brands, customer lists etc

As their cost cannot be reliably measured

EXCEPT FOR R&D costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

Costs during which phase of research and development should be capitalised?

A

Development phase - capitalise
Research phase - expensed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

What are the 6 criteria for capitalising costs in the development phase of an asset?

A
  • technical feasibility of completing the asset (working prototype)
  • intention to complete asset for use and sale
  • ability to use or sell the intangible (demand?)
  • how the intangible will generate probable future economic benefits
  • availability of technical, financial and other resources
  • ability to reliably measure the expenditure attributable to the intangible during development.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
55
Q

How are intangibles measured after development?

A

Cost

Or

Revaluation (RARE)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
56
Q

Borrowing costs - FRS 102 vs IAS 23?

A

Under FRS 102 - entities can choose whether to capitalise borrowing costs or expense them

Under IAS 23 - capitalisation is required.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
57
Q

IFRS 5 - Assets held for sale:

Comparison to UK?

A

There is no equivalent concept in the UK - gain or loss is only recognised when the disposal is made.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
58
Q

Intangible assets - FRS 102 vs IAS 38?

A

FRS 102 -
capitalisation is optional
No UEL should be > 10 years
No disclosure of CAs required

IAS 38 -
Requires capitalisation where criteria are met.
Annual impairments reviews for assets with indefinite UEL.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
59
Q

How to measure the cost of an ROUA?

A

Initial measurement of cost:

PVFLP
+ payments made at commencement date
- incentives received

+ initial direct costs
+ costs of dismantling, removing and restoring site

= cost of ROUA

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
60
Q

Double entry for depreciating ROUA?

A

Dr Depreciation (SPL)

Cr ROUA accum deprec (SOFP)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
61
Q

What must an ROUA be depreciated over?

A

Useful life of the asset IF ownership transfers at the end of the lease term or purchase options are available

IF THERE US NO TRANSFER OF OWNERSHIP or purchase option - the shorter of the lease term and useful life of the asset should be used

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
62
Q

What leases are exempt from recognition?

A

Short term leases - 12m or less

Low value leases - tablets, phones, office furniture

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
63
Q

Accounting treatment for leases?

A

Lease payments are recognised as an expense to the PL on a straight line basis over the leases life

64
Q

Formula to measure ROUA?

A

Carrying amount of PPE x (PVFLP / FV)

65
Q

How to calculate the gain or loss that relates to the rights transferred to the buyer on a sale and leaseback agreement?

A
  1. Calculate gain = fair value (proceeds) less carrying amount
  2. Calculate the gain that relates to the rights retained:
    Gain x (PVFLP / Fair value)
  3. Gain relating to rights transferred is the balancing figure expensed in the PL
66
Q

How to account for sale and leaseback if the sale does not meet the conditions to apply IFRS 15?

A

Seller must continue to recognise the transferred asset.

The transfer proceeds are treated as a financial liability accounted for in accordance with IFRS 9.

This transaction is more in the nature of a secured loan.

67
Q

FRS 102 vs IFRS 16 - Leases?

A

FRS 102 makes a distinction between finance leases and operating leases - not required in IFRS 16.

68
Q

When can a government grant be recognised?

A

The entity will comply with any conditions attached to the grant

Entity will actually receive the grant

69
Q

What is the netting off method in regards to accounting for gov grants?

A

The grant is netted off against the carrying amount of the asset to which it relates.

Grant is recognised in profit and loss over the life of the depreciable asset in the form of a reduced depreciation charge.

70
Q

Which method of accounting for grants related to assets is banned in the UK?

A

The netting off method

71
Q

How can grants related to income be presented?

A

This can be presented in 2 ways:

A credit in the PL

A deduction from the related expense.

72
Q

What are the 5 steps for recognising revenue in line with IFRS 15?

A

Identify a Contract

Identify performance obligations

Determine transaction price

Allocate transaction price to performance obligations

Recognise revenue when the performance obligation is satisfied.

73
Q

How to allocate performance obligations?

A

Identify the components of the package which could be sold separately.

Measure and recognise each component as if it had been sold separately

74
Q

What are indicators of satisfactions of performance obligations at a point in time?

A

Entity has a present right to payment for the asset.

Customer has legal title to the asset

Entity has transferred physical possession of the asset.

Customer has significant risks and rewards of ownership

Customer has accepted the asset.

75
Q

When is an entity classed as an agent?

A

Entity is an agent if its performance obligation is to arrange for the provision of goods or services by another entity

  • can only recognise revenue for the fee or commission to which it is entitled.
76
Q

What criteria must be met for the satisfaction of a performance obligation over time?

A

Customer simultaneously received and consumes the benefits as the entity performs

or

Entity performance creates or enhances an asset which is controlled by the customer

or

Entity’s performance does not create an asset with an alternative use and the entity has an enforceable right to payment

77
Q

What outputs can be used to determine % completion for revenue recognition?

A

Surveys of performance completed to date.

Appraisals of results achieved

Time elapsed

Units produced

Units delivered

78
Q

What inputs can be measured and used as an indicator of completion?

A

Resources consumed
Labour hours expended
Costs incurred
Time elapsed
Machine hours used

79
Q

What are the 2 elements of revenue receivable when an extended period of interest free credit is offered?

A

Fair value of the goods on date of sale (cash selling price)

Financing income

80
Q

What are the 3 forms available when there is sale and repurchase?

A

1) an obligation to repurchase (a forward contract)

2) a right to repurchase (a call option)

3) an obligation to repurchase at customers request (a put option)

81
Q

What are the 3 forms available when there is sale and repurchase?

A

1) an obligation to repurchase (a forward contract)

2) a right to repurchase (a call option)

3) an obligation to repurchase at customers request (a put option)

82
Q

What should an entity recognise with a sale with a right of return?

A

The entity should recognise:

Revenue for the transferred products (that are not expected to be returned)

A refund liability

An asset in respect of the right to the products to be returned

83
Q

Under consignment sales, when can the original seller recognise the sale?

A

When the owners buyer sells the assets onto the third party

84
Q

What amounts should be disclosed in relation to revenue?

A

Revenue recognised from contracts with customers, disclosed separately from other sources of revenue.

Any impairment losses recognised on any receivables or contracts arising disclosed separately.

Opening and closing balances of receivables, contract assets, and contract liabilities

Revenue recognised in the period relating to performance obligations satisfied in the previous period

85
Q

What should inventories be recognised at?

A

Lower of cost and NRV

86
Q

What are the methods for accounting for the cost of inventory?

A

FIFO

Weighted Average Cost

87
Q

Examples of fixed overheads which should be allocated to inventory units based on normal levels of production?

A

Abnormal losses
Storage costs
Admin overheads
Selling costs

88
Q

What is the retail method for the measurement of cost?

A

Total selling price of inventories, deduct overall profit margin

89
Q

Differences between FRS 102 and IFRS 15?

A

FRS 102 does not apply the 5 step approach of transfer of control like in IFRS 15

FRS 102 includes a definition for turnover as well as one for revenue

90
Q

Differences between FRS 102 and IAS 2?

A

FRS 102 required inventories held for distribution at no or nominal consideration to be measured at adjusted cost. IAS 2 does not require this.

Under FRS 102 impairment losses on inventory can be reversed if circumstances which led to the impairment no longer exist or if economic circumstances change - no guidance on this in IAS 2.

91
Q

What is a financial asset?

A

Cash

An equity instrument of another entity

A contractual right to cash or the exchange of financial assets

92
Q

What is a financial liability?

A

A contractual obligation:

To deliver cash or another financial asset

To exchange financial assets or financial liabilities with another entity

93
Q

What is an equity instrument?

A

A contract that evidences a residual interest in assets of an entity after deducting all liabilities

94
Q

What is a derivative?

A

Value changes in response to an underlying variable

Requires little or no initial investment

Is settled at a future date.

95
Q

How should a financial instrument be recognised and measured?

A

Recognise when the entity becomes party to the contractual provisions of the instrument

Measure at fair value, transaction costs are added for assets and deducted for liabilities

96
Q

How to calculate amortised cost?

A

Amortised cost is:

Initial amount recognised for financial asset

+ amortisation

  • less repayments of principle sun
97
Q

What factors should taken into account in determining fair value under IFRS 15?

A

Asset or liability being measured

Principal or most advantageous market

Highest and best use of item

Assumptions that market participants would use in valuing the item

98
Q

What are the 3 levels of inputs under IFRS 13?

A

Level 1 - quoted prices in active markets for identical items.

Level 2 - inputs other than quoted prices that are directly observable.

Level 3 - unobservable inputs

99
Q

How should financial instruments be classified?

A

According to their substance rather than their legal form

100
Q

What is a compound financial instrument?

A

A financial instrument which has characteristics of both debt and equity.

101
Q

What are the most common example of compound financial instruments?

A

Convertible bonds

102
Q

What happens if the compound financial instrument is converted?

A

If converted at end of the term. The carrying amount of financial liability should be reclassified as part of equity with the original equity remaining as part of equity.

103
Q

What happens if the compound financial instrument is redeemed?

A

Redeemed (paid out in cash): the original equity remains in equity and is not transferred out.

104
Q

What are treasury shares?

A

Treasury shares at equity instruments reacquired and held by the entity which issued them

Eg. Company buying back their own shares.

Treasury shares should be shown as a deduction from equity at an amount equal to the consideration paid to reacquire them.

105
Q

What are the requirements of IFRS 7 : financial instruments?

A

Entity should disclose categories of financial instruments of the entity

Disclosures should indicate the nature and extent of risks arising from financial instruments

How the entity manages those risks

106
Q

What is credit risk?

A

The risk that one party to a financial instrument will causes a financial loss for the other party by failing to discharge an obligation

107
Q

What is liquidity risk?

A

Risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities

108
Q

What is market risk?

A

The risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market places

109
Q

What does the conceptual framework identify a liability as?

A

A present obligation to transfer an economic resource

A result of past events

An economic resource is a right that has the potential to produce economic benefits

110
Q

What is a provision?

A

A liability of uncertain timing or amount.

111
Q

What are the 3 criteria which must be met in order to recognise a provision?

A

Existence of a present obligation

Probable outflows

Reliable measure

112
Q

What are the 2 types of present obligations?

A

Legal obligation

Constructive obligation

113
Q

What is a legal obligation?

A

Derives from a contract, legislation or operation of law

114
Q

What is a constructive obligation?

A

Derives from an entity’s actions where past practice, published policies or specific statements have created expectations that they will discharge the responsibilities

115
Q

What is an onerous contract?

A

A contract in which the unavoidable costs of meeting the obligations s made under the contract exceed the economic benefits expected to be received under it.

116
Q

When would a constructive obligation exist with restructuring within a business?

A

A detailed formal plan

Raised a valid expectation in those affected that it will carry out the restructuring by starting to implement it or announcing its main features.

117
Q

What expenditures should be included in a provision?

A

Direct expenditures which are necessarily entailed by the restructuring

Not associated with ongoing activities

118
Q

What does IAS 37 require disclosures of relating to provisions?

A

Carrying amounts at the beginning and end of the period

Movements during the period

119
Q

What is a contingent liability?

A

A possible obligation that arises from past events that is uncertain

Do not recognise but do disclose.

120
Q

What is a contingent asset?

A

Is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence of one or more uncertain future events

121
Q

How to calculate basic earnings per share?

A

Profit / Loss attributable to ordinary equity holders of parent / weighted average number of shares

122
Q

How to calculate weighted average number of shares?

A

1) the number of shares in issue at the start of the year, time apportioned for the period before the new share issue,

PLUS

2) the number of shares in issue after the new share issue, time apportioned for the period after the date of issue

123
Q

How to calculate the EPS using the alternative method (wording)?

A

1) no of shares in issue at start of the year

PLUS

2) number of shares issues in new market issue time apportioned for period after date of issue

124
Q

How to calculate EPS alternative method (numerical formula)?

A

Profit/loss attributable to ordinary shareholders / number of shares issued at start of year + (x/12 * no of shares issued)

125
Q

When can the alternative method for calculating EPS be used?

A

Can only be used if the only shares issued in the year are issued at full market value.

126
Q

How to calculate EPS where there has only been an issue of bonus shares in the year?

A

Profit/loss attributable to ordinary shareholders / number of shares at start of year + number of bonus shares issued

127
Q

What is the calculation for EPS where there is both a market issue and a bonus issue of shares?

A

Profit attributable to ordinary shares /
no. shares at start of year + (x/12 number of MV shares issued) + number of bonus shares issued

128
Q

What is a rights issue?

A

An issue of shares for cash to the existing shareholders in proportion to their current shareholdings

At a discount to the current market price

129
Q

How to calculate the rights fraction?

A

Pre rights issue price of shares / theoretical ex rights price (TERP)

130
Q

How to calculate the TERP?

A

Total value of shares after rights issue / total number of shares after rights issue

131
Q

When is complains with IAS 33 mandatory?

A

Separate financial statements for entities whose ordinary shares are publicly traded

Consolidated financial statements for groups whose parent has shares similarly traded / being issued

132
Q

What are distributable profits?

A

The amount that can be distributed to shareholders of a private company as the dividend is calculated

133
Q

How to calculate distributable profits?

A

Accumulated realised profits less accumulated realised losses

134
Q

What are distributable profits reduced by in public companies?

A

Reduced by the excess of the unrealised losses over unrealised profits

135
Q

What are undistributable reserves?

A

Share premium

Net realised profits

Any other reserve specified by law

136
Q

What are examples of relates parties of an entity?

A

A person of control, group control, significant influence or is key management personnel (including close family members of above)

Members of same group of companies

An associate or joint venture of the entity

Two entities that are joint ventures of a third party

Entity that is a joint venture of a third party

137
Q

What are examples of relates parties of an entity?

A

A person of control, group control, significant influence or is key management personnel (including close family members of above)

Members of same group of companies

An associate or joint venture of the entity

Two entities that are joint ventures of a third party

Entity that is a joint venture of a third party

138
Q

What are NOT examples of related parties?

A

Two entities that have a common director

Joint ventures

Providers of finance

Public utilities

Government

Large customers / suppliers

139
Q

What are NOT examples of related parties?

A

Two entities that have a common director

Joint ventures

Providers of finance

Public utilities

Government

Large customers / suppliers

140
Q

What does IAS 24 require disclosures of for related parties?

A

Name of the entities parent and the ultimate controlling party

Any transactions disclosed in nature, amount, provisions, any bad and doubtful debts amounts.

Key management personnel compensation

141
Q

What are examples of adjusting events?

A

Events that provide extra evidence of conditions that already exist at the end of the reporting period.

Eg: settlement of a court case, customer bankruptcy, entity no longer going concern

142
Q

What are examples of non adjusting events?

A

Events that are indicative of conditions arising after the end of the reporting period

Examples: MV of investments falls, catastrophes, discontinuance after p/e, dividends

143
Q

How to calculate goodwill?

A

Consideration transferred (investment in sub at cost in parents SOFP)
+
Non controlling interest at acquisition
-
Net assets of subsidiary at acquisition

144
Q

What is non controlling interest?

A

The equity in a subsidiary not attributable to the patent

145
Q

How to calculate the non controlling interest?

A

NCI at acquisition date (NCI % * net assets at acquisition)

+

Share of post acquisition reserves. NCI % * S post acq reserve)

146
Q

What is partial goodwill method?

A

Proportionate share:

NCI @ acquisition at the proportionate share of the fair value of the net assets

Goodwill calculated and allocated to the parent only

All impairment losses allocated to the RE of the parent

147
Q

What is the full goodwill method?

A

NCI at acquisition at the fair value (Joe much it would cost parent to buy remaining share)

Goodwill allocated to parent and the NCI

Impairment losses to be shared between parents and NCI

148
Q

What are examples of intra group balances?

A

One Group company’s loans, debentures, or redeemable preference shares

Intra-group trading

Dividends from subsidiary to parent

149
Q

What are examples of intra group balances?

A

One Group company’s loans, debentures, or redeemable preference shares

Intra-group trading

Dividends from subsidiary to parent

150
Q

How to deal with goods still sorted in inventory at year end after purchase from another group company?

A

The profit will be overstated due to unrealised profits.

These must be eliminated on consolidation. This is achieved by creating a provision for unrealised profit (PURP)

151
Q

How must assets be shown on consolidation?

A

Consolidated SOFP must show assets at their cost to the group, and any depreciation charges must be based on that cost.

152
Q

What are the 3 fair value adjustments to net assets?

A

Adjustments to carrying amounts of assets and liabilities recognised by the subsidiary

Adjustments to eliminate goodwill in the subsidiary financial statements

Adjustments to recognise items that the subsidiary has not recognised it’s its separate financial statements

153
Q

How should consideration be measured?

A

Measured at fair value at the date of exchange (date of acquisition)

154
Q

What are the forms of consideration?

A

Cash
Quoted equity instruments
Deferred consideration ie deferred cash and shares
Contingent consideration ie contingent cash and contingent shares

155
Q

How to account for associate losses?

A

Deduct the group share of the loss to arrive at the investment in associate until the carrying amount of the investment in the associate has been reduced to zero.

No further losses should be recognised by the group beyond this point

156
Q

How to account for mid year acquisitions?

A

Only the profits since the acquisition dates should be shown in the statement of profit and loss.

The entity statement of profit and loss for the subsidiary should be time apportioned

157
Q

What disclosures are required for cash flows?

A

The components of cash and cash equivalents

Reconciliation showing the amounts in the statement of cash flows

ACA ICAEW (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions