IFRS vs UK GAAP

Question 1

Borrowing costs

Answer 1

IFRS: MUST capitalise borrowing costs

UK GAAP: CHOICE to capitalise borrowing costs or expense through PL

Question 2

Development costs

Answer 2

IFRS: Eligible development costs MUST be capitalised

UK GAAP: CHOICE to capitalise or to expense

Question 3

AHFS

Answer 3

IFRS: Recognised separately in the SFP as a single line within Current Assets. No longer depreciated

UK GAAP: No separate line. Depreciated like normal (UK GAAP don’t recognise the difference between AHFS and normal PPE)

Question 4

Capital grants

Answer 4

IFRS: CHOICE of netting off or deferred income method

UK GAAP: Deferred income method ONLY.

Question 5

Revenue

Answer 5

IFRS: Revenue recognised when control passes to customer

UK GAAP: Revenue recognised when risks and rewards have been passed over to customer

Question 6

Leases

Answer 6

IFRS:

Leases for more than 12 months are recognised as ROU asset and lease liability calculated at present value of future lease payments.

Leases less than 12 months are expensed through PL over the lease term on a straight line basis

UK GAAP:

Finance lease: where all risks and rewards are passed over. Asset and lease liability is recognised.

Operating lease: Lease payments expensed through PL over the lease term on a straight line basis

Question 7

Intangible assets

Answer 7

IFRS: Indefinite useful life and no amortisation.Review annually for impairments.

UK GAAP: Amortised over useful life. Not expected to have a useful life exceeding 10 years

Question 8

Goodwill

Answer 8

IFRS: Indefinite useful life and no amortisation.Review annually for impairments.

UK GAAP: Amortised over useful life. Not expected to have a useful life exceeding 10 years

Question 9

Negative goodwill

Answer 9

IFRS: Recognised as a gain on bargain purchase. Credited to CSPL in year of acq.

UK GAAP: Recognised as a negative asset and amortised over useful life. (Pos amort. in CSPL)

Question 10

Acquisition costs

Answer 10

IFRS: Expensed through SPL as they’re incurred

UK GAAP: Capitalised when calculating goodwill

Question 11

NCI

Answer 11

IFRS: FV or Proportionate method

UK GAAP: Proportionate method only

Question 12

Associate / JV

Answer 12

IFRS: Goodwill not recognised

UK GAAP: Goodwill recognised

Question 13

Discontinued operations

Answer 13

IFRS: Single line in SPL. Income and expenses in Notes to FS

UK GAAP: SPL of discontinued operations shown as entirely separate column.`

Question 14

CSFP - Double entry for inventory PURP, P selling to S

Answer 14

Dr RE of P (W5)
Cr Group inventory

Question 15

CSFP - Double entry for inventory PURP, P selling to A

Answer 15

Dr RE of P (W5)
Cr Investment in Associate

Question 16

CSFP - Double entry for inventory PUPR, A selling to P

Answer 16

Dr RE of P (W5)
Cr Group Inventory

Question 17

CSFP - Double entry for inventory PURP, S selling to P

Answer 17

Dr RE of S (W2)
Cr Group inventory

Question 18

CSPL - Double entry for inventory PURP, P selling to S

Answer 18

Dr COS of P
Cr Group inventory

and then cancel out sale in revenue and COS

Question 19

CSPL - Double entry for inventory PURP, S selling to P

Answer 19

Dr COS of S
Cr Group inventory

and then cancel out sale in revenue and COS

Question 20

CSPL - Double entry for inventory PURP, P selling to A

Answer 20

Dr COS of P
Cr Investment in Associate

Question 21

CSPL - Double entry for inventory PURP, A selling to P

Answer 21

Dr Share of profit from A
Cr Group inventory

Question 22

CSFP, S pays dividend to P

Answer 22

No adjustments needed

Question 23

CSPL, S pays dividend to P

Answer 23

Take P’s share out from investment income