FRS 102 Flashcards
How many measurement bases are there under:
IFRS
FRS 102
IFRS
Historic Cost
Current cost
Realisable Value
Present Value
FRS 102
Historic Cost
Fair Value
How are discontinued operations reported under IFRS and FRS 102?
IFRS
Separate line after profit from continuing operations (IFRS 5)
FRS 102
Income statement is Line by line
Continuing / Discontinuing / Total
Which entities have to prepare a statement of cashflows under IFRS and FRS 102?
IFRS
All entities
FRS 102
All entities who are not exempt.
Exempt entities are:
* Small entities
* Mutual Life assurance
* Some investment Funds
* Pension Funds
How ofter must an entity review the economic life of their assets under IFRS vs FRS 102?
IFRS must review annually (IAS 16/38)
FRS 102 only review if evidence exists they have changed.
When an entity decides to sell an asset, what are the accounting implications under IFRS and FRS 102?
IFRS
Meet criteria
Revalue to lower of FV less cost to sell/ Carrying amount
Stop Depreciation
One line in FS
FRS 102
Doesn’t contain the concept of held for sale
Depreciate/amortise up to disposal
Decision to sell is an indicator of impairment.
How does an entity account for development costs under IFRS /FRS 102?
IFRS - Development costs MUST be capitalised when criteria met
FRS 102 - Development costs MAY be capitalised but this is optional
What is the UEL of intangible assets under IFRS and FRS 102?
IFRS - Can be indefinite
FRS 102 - Considered to be finite. If unknown, 10 year max!
How are investment properties treated under IFRS vs FRS 102?
IFRS
Cost or Fair Value
No depreciation
Gain/loss to P&L
FRS 102
No choice - must use fair value unless cannot reliably measure.
How are ancillary services treated under IFRS and FRS 102?
IFRS
If significant, cannot classify as investment property
FRS 102
No such rule
How are borrowing costs that relate to the build of an asset treated under IFRS vs FRS 102?
IFRS - MUST capitalise if qualifying
FRS 102 - MAY capitalise but can chose to expense.
More specific on capitalisation rates
When an entity leases an asset, how is this accounted for under IFRS vs FRS 102?
IFRS - Create a RoU asset and a liability unless short term of low value.
FRS 102 - Some leased assets are treated finance lease with an asset and liability recognise.
Some are operating leases and are expensed to the P&L.
Under FRS 102, how is a leased asset initially measured?
PV of minimum lease payments
How ofter are assets review for impairment under IFRS and FRS 102?
IFRS - Goodwill MUST be tested annually.
Other assets tested when there is indicators of impairment exist
FRS 102
Only if there are indicators of impairment
Goodwill is amortised so testing not required.
Which GAAP requires a separate translation reserve in equity?
IFRS
FRS 102 - exchange gains and losses go to retained earnings.
Which GAAP reclassifies exchange gains and losses to the P&L?
IFRS
FRS remains in equity
How do entities account for dividends declared after the reporting date and where are dividends presented?
Neither IFRS or FRS 102 present as they are non adjusting events.
No liability is included.
IFRS presents dividends in Cash flows and SOCIE in the retained earnings column
FRS presents them in. Cash Flows, and can be presented as a separate component of retained earnings.
With regard to management compensation, what must be disclosure under IFRS and FRS 102?
IFRS
Break down
- Short term benefuits
- Post employment
- Other long term benefits
- Termination benefits
- Share based payments
FRS 102
Just the total amount
How should an entity measure biological assets under IFRS and FRS 102?
IFRS
FV model
Initially FV less cost to sell
Measure at each reporting date
Gains and losses to P&L
FRS 102
Can chose cost of FV model.
Cost = cost - acc. depreciation - impairment
FV = as above
If an entity has surplus cash and invests in an insignificant number of shares in, for example, the national grid, how do we account for these shares under IFRS and FRS 102?
IFRS 9
Financial instrument
Recognise at FV through P&L or OCI
FRS 102
A simplified approach is adopted and FVTPL is used (unless the FV cannot be reliably measured - then use Cost less impairments)
If we invest in a significant no. of shares in a company, how is control definited under IFRS vs FRS 102?
IFRS states control is power over the investee, the rights or exposure to variable returns, and the ability to influence those returns through it’s power.
FRS 102 - Definition is difference
Power to govern the operating and financial policies of the entity so as to obtain benefit from its activities. Control is presumed is more than half the voting rights are owned.
When you gain control of an entity and purchase goodwill, how is goodwill calculated under IFRS and FRS 102?
IFRS - using FV or proportionate method
FRS 102 - MUST use proportionate method
If we pay for shares with a contingent consideration element, how is that measured under IFRS and FRS 102?
IFRS - Fair Value and always included ( FV takes into account probability of payment)
FRS 102 - include only if it is probable!
How are professional and legal fees associated with the purchase of a subsidiary accounted for under IFRS and FRS 102?
IFRS - expense
FRS 102 - Capitalise and including in cost of investment
If we own 10% of shares and then purchase a second holding of 50% extra, do we remeasure original holding under IFRS / FRS 102?
IFRS - Yes - remeasure to FV and include in consideration
FRS 102 - No.
If we acquire a subsidiary do we recognise a separate intangible in the consolidated financial statements under IFRS and FRS 102?
IFRS - intangible assets other than goodwill arising from a business combo are recognise at fair value if they are separable or if the arise from legal or contractual rights.
FRS 102 - only requires recognition of intangible assets other than goodwill arising from business combos if they are separable AND arise from legal or contractual rights.
However, FRS 102 permits an entity to recognise addition tangibles if they are separable or if they arise from legal or contractual rights.
If you enter into a bargain purchase of a subsidiary, how do you account for the negative goodwill under IFRS and FRS 102?
IFRS - Send to P&L immediately. Doesn’t hit SOFP
FRS 102. - Negative goodwill is recognised initially on the SoFP underneath positive goodwill as a negative asset.
It’s released to the P&L in the period in which the non monetary assets are realised.
How is goodwill subsequently measured?
IFRS - It isn’t! Only Impairment testing annually
FRS 102 - Amortised over it’s UEL (should not exceed 10 years)
If we acquire less than 100% of shares but gain control, what account needs creating under IFRS and FRS 102?
IFRS - NCI - FV or proportionate
FRS 102 NCI - proportionate only
If you acquire a Sub, but intend to slip it (sell it on) how is this accounted for under IFRS and FRS 102?
IFRS.- Asset held for sale - one liner
FRS 102- No concept of held for sale.
Election is made to measure at cost, FVTPL or FVTOCI
If we acquire significant influence, how do we account for transaction costs under IFRS and FRS 102?
Would Goodwill arise?
IFRS - expensed. No goodwill arises
FRS 102 - Capitalise.
Implicit goodwill arises and is amortised over the UEL
If you jointly control an entity, what is this called under IFRS and FRS 102?
IFRS - Joint arrangement
- Venture
- Operation
FRS 102 - Joint Venture
- Jointly controlled operations
- Jointly Controlled Assets
- Jointly control Entity (separate entity - equity accounting)
What are the qualitative characteristics under the FRS 102?
Verifiability
Understandability
Comparability
Timely
Substance over form
Materiality
Reliable
Prudence
Complete
Cost vs benefit
How do we account for a reversal of impairment on inventory under IFRS and FRS 102?
IFRS - can’t be reversed
FRS 102 - Can reverse an impairment loss on inventory by Cr inventory and DR P&L
How are trade receivables loss allowances accounted for under IFRS and FRS 102?
IFRS - equivalent to life time credit losses
FRS 102 - Incurred loss model ie only if objective evidence of potential impairment exists
How do we account for a restructuring provision under IFRS and FRS 102?
IFRS - if a constructive or legal obligation exists.
We estimate the cost of restructure and discount to PV.
Add to cost of asset, and unwind finance costs.
FRS 102 - A provision for restructuring should be recognised when a legal or constructive obligation exists - that’s all they say.
What gives rise to deferred tax under IFRS and FRS 102
IFRS - Taxable temporary difference
CA less tax base = temporary difference.
FRS 102 - Taxable profits less accounting profit = timing difference.
Uses concept of permanent differences but no tax would arise on theses.
What GAAP has a 5 step model to recognising revenue?
IFRS
FRS 102 is split into 3 areas
- Goods
- Services
- construction contracts.
Which GAAP has two methods of recognition of Government grants? IFRS or FRS 102?
FRS 102 has two methods.
Accruals model - released systematically
Performance model - if no conditions released immediately
How are termination benefits accounted for under IFRS and FRS 102?
IFRS
Recognised at the earlier of:
The date the entity can no longer withdraw vs the date the costs associated with the restructure are recognised under IAS 37.
FRS 102 - when a detailed formal plan for the restructure has no realistic possibility of withdrawal
Share based payments are valued at Fair Value under IFRS and FRS 102 - what are the measurement differences?
IFRS - Share option pricing model.
FRS 102 - 3 tier hierachy
- Observable market price
- Use of entity specific market data
- Valuation method that uses market date where possible.
Share based payments are valued at Fair Value under IFRS and FRS 102 - what does FRS 102 give rules on?
Deciding whether to account as wholly cash settled (SARS) or wholly equity settled (share options)
If you were advising on an accounting standard available under UK GAAP, where would you look?
FRS 100
If you are a listed group, what options do you have in the UK?
FULL IFRS
FRS 101 with companies individual statements
What choices to other UK companies (not a group) have?
IFRS if they chose
IFRS 102
IFRS 105 - if qualifying
Under UK Companies Act for single entity financial statements, under what circumstances is an individual company exempt from preparing accounts?
If it’s a subsidiary undertaking
If it’s been dormant for a full year
Parent undertaking is under law of a EEA state (p in france but you’re in UK)
What reasons does a non small UK company have for not preparing group accounts?
- Wholly owned Sub
- Section 405 if all subs could be excluded
Under what circumstances can a subsidiary be excluded?
- If it’s inclusion isn’t material
- Severe longer term restrictions hinder exercises rights over assets or management
- Interest is held exclusively for resale
- Disproportionate expense
FRS 105
How do you quantify a micro-entity?
Meet two out of 3 of the following criteria
Turnover - £632,000
Total assets - £316,000
Employees - 10 or less
What are the examinable differences between FRS 105 and 102?
Prohibits:
Capitalisation of borrowing costs
Capitalisation of development costs
Use of Revaluation model for PPE/Investment Prop and intangibles
Accounting for deferred tax
Accounting for equity settled SBP until shares issused.
Simplifies classification of financial instruments
Removes distinction between functional and presentational currency.
Under FRS 102 what is a change in accounting estimate?
an adjustment of the carrying amount of an asset or liability, or related expense, resulting from the assessment of the present status of, and expected future benefit associated with, that asset of liability
Under FRS 102, what is the critera for an intangible asset to be recognised?
How is this different from a conceptual framework?
- It must be probably that expected future economic benefits will flow to the entity and
- the cost of the asset can be measured reliably
This requirement applies whether an intangilbe asset is acquired externally or is internally generated.
Probability criteria always satisfied it axquired separately.
The conceptual framework only recognises items if they meet the definition on an element. Asset - a present economic resource controlled by the entity as a result of a past event’.
- It must provide relevant information
- a Faithful representation of the asset or liability and resulting income, espenses or equity movements.
If an intangible asset is acquire through a business combination, and arises from legal or contractual rights then FRS 102 allows recognition if there is evidence of what?
exchange transactions for similar assets.
Under FRS 102, a disclosure need not be given of transactions entered into between two or more member of a group, provided that……what?
Any subsidiary party to the transaction is wholly owned by such a member.
