General (Blue)

Question 1

Treatment of Borrowing Costs:

• If specifically borrowed funds
• If generally borrowed fund

Answer 1

If specific: Capitalize (less investment income from other use of funds)

If general: Only capitalize borrowing costs
= Average borrowing costs for the period * Expenditure on the asset

Question 2

Recoverable Amount

Answer 2

The higher of:
Fair value - Disposal costs
Value in Use

Question 3

Recognition of Impairment Losses

Answer 3

If asset carried at cost:
Expense impairment loss

If asset revalued:
Reduce revaluation surplus
Then expense

Question 4

Can impairment losses to goodwill be reversed?

Answer 4

No.

Question 5

Contract Asset

Answer 5

Revenue that’s been earned but not invoiced for

Not yet a receivable

Question 6

Contract Liability

Answer 6

Something that a customer has paid for that hasn’t yet been provided

Question 7

Forward Contract

Right of Return

Answer 7

The entity is obligated to repurchase the asset

Treat as a loan
Revenue only recognized at end of loan period

Question 8

Call Option

Right of Return

Answer 8

The entity has the right to repurchase the asset

Treated as a loan
Revenue only recognized when return period ends

Question 9

Put Option

Right of Return

Answer 9

The entity is obliged to repurchase only if requested by the customer

If repurchase price < original: Treat as sale

Otherwise, treat as a loan

Question 10

When are warranties treated as a distinct service?

Answer 10

When purchased separately

Question 11

Government Grants:

• Income
• Asset
• Loan

Answer 11

Income-related grants shown in SPLOCI as other income

Asset-related grants shown in SOFP as deferred income
Released to SOPL as a reduction in the asset’s carrying amount over its life

Repayment grants increase the carrying amount of the asset or decrease deferred income

Question 12

Entries to write off impairments to goodwill

Answer 12

Debit Retained Earnings
Debit NCI

Credit Goodwill

Question 13

Entries to adjust for parent to subsidiary sales

Answer 13

Debit Cost of Sales
Debit Retained Earnings of Parent

Credit Consolidated Investments

Question 14

Entries for consolidating intragroup PPE sales (P to S)

Answer 14

Debit Retained earnings of parent Unrealized profit
Credit PPE Unrealized profit

Debit PPE Excess depreciation
Credit Retained earnings of subsidiary Excess depreciation

Question 15

Entries/Calculations to deal with unrealized profit

Answer 15

Debit/Increase Cost of Sales

Credit/Decrease Inventories

-Adjust NCI when S sells to P

Question 16

Entries for dealing with intragroup loans

Answer 16

Cancel in CSFP:
Debit Loan payables
Credit Loan receivables

Cancel in CSPLOCI
Debit Group finance income
Credit Group finance costs

Question 17

CSFP with an associate

Answer 17

Line with “Investment in Associate”

= Cost of associate + Share of post-acq reserves - Impairment losses - Group share of unrealized profit

Question 18

CSPLOCI with an associate

Answer 18

Line for “Share of profit of the associate”

Line for “Share of OCI of the associate”

Question 19

Measurement of Debt Instruments

Answer 19

Initially: Fair value + Transaction costs

Subsequently: Amortized cost

   - EXCEPT when debt instrument only held for sale
          - Then, changes to fair value shown in OCI

Question 20

Steps to capitalizing provision costs

Answer 20

1. Debit Non-current assets
   Credit Provision
2. Release costs to SOPL:
   Debit Depreciation expense
   Credit Accumulated depreciation
3. Once provision is required (in final year):

Question 21

Steps to capitalizing provision costs

Answer 21

1. Debit Non-current assets
   Credit Provision
2. Release costs to SOPL:
   Debit Depreciation expense
   Credit Accumulated depreciation
3. Once provision is required (in final year):
   Debit Provision
   Credit Cash

Question 22

Adjusting vs Non-adjusting events after the reporting period

Answer 22

Adjusting: Evidence shows that the condition existed at or before the reporting period end date

Non-adjusting: Occurred after the reporting period (prior to reports being issued)

Question 23

Inventories are measured at…

Answer 23

The lower of:
Cost
Net Realizable Value

Question 24

Deferred Tax

Answer 24

A non-payable accounting adjustment needed due to the difference between the carrying amount of assets and their tax bases

Recognized in SPLOCI only