IAS AND IFRS

Question 1

What IAS is about the presentation of Financial Statements?

Answer 1

IAS 1- Presentation of Financial Statements

Question 2

IAS 16 PPE- What does the cost include?

Answer 2

-Purchase cost
-Import duties
-Net discounts/rebates
-Direct costs to bring to location
-Dismantling and restoring at site
-Testing costs
-Professional fees

Question 3

When should IAS 16 PPE be capitalized?

Answer 3

-improves future economic benefits that asset will generate
-replaces component of asset
-CA of previous inspection is derecognised

Question 4

IAS 16- PPE- what is the measurement of the initial recognition?

Answer 4

1. Cost model= Carrying value= Cost - acc depreciation- impairment loss
2. Revaluation model= Carrying Amount= Fair value - accumulated depreciation- accumulated impairment losses

Question 5

How do you account for a IFRS 13 Fair Value Measurement Depreciation?

Answer 5

-All acc. Depreciation should be reversed
-Depreciation recalculated on revalued amount
-Revaluations need to be made for entire assets
-more volatile more frequent Revaluation

Question 6

What are the 4 steps to account for Asset Revaluation?

Answer 6

1. Restate Asset cost to revalued amount.
2. Remove acc. Depreciation
3. Transfer increase in cost account and accumulated Depreciation to Revaluation surplus within equity.
4. Recalculate current year dep on revalued amount.

Question 7

What are the IAS16 -PPE disclosure requirements?

Answer 7

-Measurement basis
- Depreciation method,useful life,Depreciation rate
-Groos carrying amount, accumulated Depreciation at beginning and end of period
-recon of additions l, disposals, Revaluation, impairments

Question 8

What is the definition of IAS36 - Impairment of Assets?

Answer 8

An impairment loss is the amount by which Carrying Amount of asset exceeds its recoverable amount.

Question 9

IAS36- how do we measure the recoverable amount?

Answer 9

HIGHER OF:
-Net selling price= fair value-cost of disposal
-Value in use= Present value of est. Future cash flows arising from use and disposal of asset.

Question 10

What are the signs that an asset is impaired (IAS36)?

Answer 10

-Decline in Market Value
-Technological, legal or economic changes
-physical damage to asset
-plans to dispose of asset

Question 11

What are the IAS36 Impairment disclosures in the Financial Statements?

Answer 11

• Amount of impairment losses and where it is recorded
  -Amount of reversals for impairment loss in SOPL
  -Amount of IP recognized directly in equity
• Amount of reversal in equity

Question 12

What is the definition of Non-current asset held for sale (IFRS5) ?

Answer 12

Should be classified as held for sale if an entity plans to recover the value of the asset by selling it, rather than through its continued use in the business.

Question 13

IFRS5 - what is the criteria for an asset to be held for sale?

Answer 13

-available for immediate sale in present condition
-sale is highly probable
-management is committed to sell
- active program to locate buyers
-asset marketed at reasonable price
- sale expected to happen between 12 months
-unlikely that this will change

Question 14

IFRS5 -NA held for sale- how is it measured?

Answer 14

LOWER OF:
1. Carrying Amount
2. Fair Value less costs of disposal
HELD FOR SALE ASSETS ARE NOT DEPRECIATED

Question 15

IFRS 5 - What is Discontinued operations?

Answer 15

A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale and:
-Represents separate major line of business of geographical area of operations
- Is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations
- Is a subsidiary acquired exclusively with a view to resale

Question 16

IFRS 5 Discontinued Operations - What should be presented and disclosed in the Financial Statements?

Answer 16

Entity should disclose an analysis of single amount broken into:
- Revenue,expenses and pre-tax profit or loss
- Related income tax expense
- Post tax gain or loss on disposal of assets/disposal groups or on measurement to fair value less costs of disposal

Question 17

IFRS 16 Leases - what is the definition of a lease? And who is the lessor and a lessee?

Answer 17

• a contract that conveys the right to use an asset
• entity that provides the right to use an asset
  -entity that obtains right to use asset

Question 18

IFRS 16 Leases - how is Lease Liability measured?

Answer 18

Measured at Present Value of lease payments that have not yet been paid.
-Fixed payments over term
- Variable payments
- Residual value guarantee
- exercise price purchase option
- penalties for termination

Question 19

IFRRS 16- what includes the measurement of the Right of Use asset?

Answer 19

• Cost
  -Lease liability initial measurement
• Lease payment made before commencement date
  -initial direct costs
• Est. Cost of removing/dismantling asset

Question 20

IFRS 16 - Leases - How is Depreciation treated when it comes to right of ownership of the asset?

Answer 20

• if ownership transfers to lessee at end of lease term, then depreciation should be charged over assets remaining useful life
• or charged over shorter of useful life and lease term

Question 21

IAS2 - Inventories - What is the definition of Inventory?

Answer 21

• held for sale in ordinary course of business
• used in process of production
  -materials that will be used in production process

Question 22

IAS2 - Inventories- how is inventory measured? What ate the 2 options?

Answer 22

LOWER OF:
-Cost - Production overhead allocated correctly
- NRV - Selling prices less costs to completion less costs to sell

Question 23

IAS10 Events after the Reporting Period- Define an Adjusting Event?

Answer 23

• events that provide evidence of conditions that existed AT reporting date
• FS should be adjusted to reflect it
  ( selling inv after year end for lower than cost price)

Question 24

IAS 10 - Non adjusting events. What is the definition?

Answer 24

Conditions that indicative of conditions that arose after reporting date.
Only disclose in FS.

Question 25

IAS2 Inventories - Name 5 reasons why NRV may be lower than cost?

Answer 25

• Increase in costs or fall in selling price
• Physical deterioration of inventories
• Obsolescence of products
• Decision being made as part of a company’s marketing strategy to manufacture and sell products at a loss
• Errors in production or purchasing