IAS Revision Flashcards
IAS16 - Property, plant & equipment
How is a Revaluation Gain accounted for in the financial statements?
Debit - Non-current assets
Debit - Accumulated depreciation
Credit - Revaluation surplus
In the statement of financial position, the non-current asset is shown as the revalued amount
In the statement of profit or loss and comprehensive income, the revaluation surplus is added to “other comprehensive income”
IASB Conceptual Framework
Define “verifiability”
Different, knowledgeable, independent observers could agree that a particular depiction of a transaction in the financial statements is a faithful representation
IASB Conceptual Framework
Define “materiality”
An item of information is material if omitting it or misting it could influence decisions that users make on the basis of the financial statements.
An item can be material on account go its nature or an account of its magnitude.
IAS1 - Presentation of Financial Statements
In which statements are the following presented in:
Finance Expenses
Revaluation loss on a building
Bad Debt Expense
Finance Expenses - The statement of profit or loss and other comprehensive income (under finance cost - SOPL)
Revaluation loss on a building - The statement of profit or loss and other comprehensive income, under the other comprehensive income as a negative figure
Bad debt expense - The statement of profit or loss and other comprehensive income, in administration & distribution costs
IAS2 Inventory
Define ‘Net Realisable Value (NRV)”
The estimated selling price of inventories in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale
Selling price - costs of completion
IASB Conceptual Framework
Define “matching/accrual”
This dictates that the effects of transactions and other events are recognised in the financial statements in the periods that they occur, rather than in the period when the cash is received or paid
IASB Conceptual Framework
Define “going concern”
The assumption that the entity has neither the intention nor the necessity to liquidate or curtail major operations
IAS40 Investment Property
How is investment property measured?
Using either the cost model or the fair value model
The cost model - Cost less any accumulated depreciation or impairment losses
The fair value model - The exit price, proceeds if the investment property was sold today
IAS40 Investment Property
Using the cost model, how is investment property recorded in the financial statements?
The cost model
Depreciation is calculated first
In the statement of profit or loss (when calculating administration & distribution expenses), there will be a depreciation charge of x amount
In the statement of financial position (non-current assets), the property will be shown at carrying value (i.e. cost less accumulated depreciation)
IAS40 Investment Property
Using the fair value model, how is investment property recorded in the financial statements?
The fair value model
No depreciation charge
In the statement of profit or loss there will be a gain or loss (on revaluation) representing the fair value adjustment, in other income
In the statement of financial position (non-current assets), the property will be shown at its fair value
IAS23 - Borrowing costs
When does IAS23 state that capitalisation of the borrowing cost should cease?
Capitalisation of borrowing costs must suspend when all the activities necessary to prepare the asset for its intended use or sale are complete
IFRS5 - Discontinued operations
Define a “discontinued operation”
A component of an entity that either has been disposed of or is classified as held for sale. For this purpose, a component comprises operations and cash flows that can clearly be distinguished from the rest of the entity
IFRS5 - Discontinued operations
What does the separation of discontinued operations enable users to do?
The separate presentation enables users to immediately identify that the performance relating to the discontinued segment or area will not continue in the future, hence making the information more relevant to users decision making
The user can choose to include the information when evaluating the past performance of the company or ignore it when forecasting future outcomes
IAS10 - Events after the reporting period
What should you do with non-adjusting, but material, events?
They should be disclosed in the notes to the financial statements
IAS1 - Presentation of Financial Statements
What does IAS1 require for an item to be classified as a “Current Asset”
Held primarily for the use of being traded
It is a cash or a cash equivalent
Expected to be realised within 12 months of the reporting period
Expected to be realised, sold or consumed within the entity’s normal operating cycle
IAS17 - Leases
How are finance leases accounted for at the commencement of the lease term?
Shown as an increase in non-current asset in the statement of financial position
Shown as an increase in liability in the statement of financial position, a liability to the lessor
IAS17 - Leases
How are finance leases measured? The lower of:
The fair value of the asset
or
The present value of the minimum lease payments
IAS17 - Leases
How is the actuarial method used to apportion interest in a finance lease over the lease term?
Interest is charged at a constant percentage on the outstanding liability, therefore matching interest to the “loan balance”
This method is specified by IAS17 as it is the most accurate. However, to apply it the rate of interest in the lease is required
IAS23 - Borrowing costs
What is the treatment of borrowing costs?
Borrowing costs must be capitalised if they are directly attributable to qualifying assets, which are assets that take a substantial time to complete
IAS17 - Leases
Define a “lease”
An agreement whereby the lessor conveys to the lessee the right to use an asset for a period of time, in return for a payment or a series of payments
IAS17 - Leases
Define a “finance lease”
A lease that transfers substantially all the risks and rewards incidental to ownership of an asset
The leased item should be considered an asset in the lessee’s financial statements along with a corresponding liability to the lessor
IAS23 - Borrowing Costs
Define “borrowing costs”
The interest and other costs that an entity incurs in connection with the borrowing of funds
IAS23 - Borrowing Costs
Define a “qualifying asset”
An asset that necessarily takes a substantial period of time to get ready for its intended use or sale
IAS40 - Investment Property
Define “Investment property”
Property held to earn rentals or for capital appreciation or both
IAS40 - Investment Property
What is investment property measured at initially and at a subsequent reporting date?
Initially - Cost
At a subsequent reporting date - Cost model or fair value model
IAS23 - Borrowing Costs
How is the average borrowing rate calculated?
Weighted Average Borrowing Rate
Total interest charge/
Total outstanding liability
What is the difference between the IAS16 - property, plant & equipment and IAS40 - investment property, subsequent measurement of the value?
IAS16 - Property, Plant & Equipment
Either the cost model or the revaluation model
IAS40 - Investment Property
Either the cost model or the fair value model
