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IFRSs Flashcards

1
Q

IAS 2 Inventory - What costs are included?

How is it measured?

A

Purchase Price
Conversion
Cost to bring to present condition and location

Lower or Cost or NRV

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2
Q

IFRS 8 Operating segments - what is an operating segment?

A

A component of an entity that:

  • Engages in activities from which they earn revenues including those in relation to transactions with other components of the same entity.
  • Whose operating results are regularly reviewed by the entities chief operation officer to make decisions about resources to be allocated to the segment and assess its performance.
  • for which discrete information is available
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3
Q

IFRS 8 - Segmental reporting

What should be disclosured?

A
  • Information available to users of the f/s to evaluate the nature of the financial effects of the business activities of the economic environment.

10% of the below = Operating segment

  • Revenue
  • Profit or Loss
  • Assets

‘Other’ - Can only use this category if the segment has less than 25% of external revenue in ‘other’

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4
Q

IAS 7 - Define ‘ Cash or Cash equivalent’

A

Short term, highly liquid investments that are readily convertible to known amounts of cash which which are subject to an insignificant change in value.

Held to meet short term cash needs

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5
Q

IAS 8 - Accounting policies, changes in accounting estimates and errors

What is a policy?

A

Specific rules, principles, bases, conventions etc applied in preparing the financial statements

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6
Q

IAS 8 - Accounting policies, changes in accounting estimates and errors

When can you change an accounting policy?

A
  • If it’s required by law/ standard
  • If it provides more reliable, relevant information to do so.

Changes are applied retrospectively and must be disclosed.

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7
Q

IAS 8 - Accounting policies, changes in accounting estimates and errors

How are change in accounting estimates applied?

A

Prospectively

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8
Q

IAS 8 - Accounting policies, changes in accounting estimates and errors

What is considered a prior period error? How should they be corrected?

A

A misstatement or omission on prior period financial statements as a result of not using reliable info that should have been available. Errors must be ones clearly identifiable when the F/S were issued

Correct retrospectively

  • opening bal
  • comparative
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9
Q

IAS 8 - Accounting policies, changes in accounting estimates and errors

What should be disclosed when an entity changes an accounting policy?

A

Reason for the change

The amount of the adjustment in the current period.

The amount of the adjustments in the comparative for the prior period.

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10
Q

IAS 34 - Interim Reporting

What should be included in an interim report

A 
Condensed:
SoFP
SOCE
Cashflow
Explanatory notes
Basic and diluted EPS

at period end vs last year end

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11
Q

IAS 10

When would you disclose a non adjusting event?

A

If it’s significantly material to the financial statements

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12
Q

IFRS 11 - What is a joint venture?

Which accounting method is used?

A

Where two or more parties have joint control and the right the net assets of a separate entity.

Use equity accounting.

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13
Q

IFRS 11 - What is a joint operation

A

Parties have joint control and rights to net assets and obligation for liabilities. Not usually a separate entity.

Consolidate in proportion to their share line by line

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14
Q

IAS 12 - Income Tax

Temporary differences accounted for…

A
  • Depreciation/ tax allowances on PPE
  • Share Options - annual expenses allowed for tax when exercised
  • Benefit pension plan - charge /contributions allowed for tax.
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15
Q

IAS 16- PPE

Are revenue based methods of depreciation considered appropriate or not, and why?

A

No.

Revenue generate by an activity that involves the use of an asset generally reflects factors other than the consumption of the economic benefit.

This is rebuttable.

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16
Q

IFRS 5 - what is the definition of an asset geld for sale and what are the criteria that need to be met?

How is it measured?

A

Carrying value must be primarily recoverable by it’s sale rather than continued use.

Critera:

  • Management committed
  • Available in immediate condition
  • Actively marketed at a reasonable price
  • Sale highly probably
  • Sale expected within 12 months

Measure at the lower of Carrying amount or FV - Cost to sell.

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17
Q

IFRS 5 - what is a discontinued operation?

A

A component of an entity that has:

  • Been disposed off, or classified as held for sale
  • Part of a single co-ordinated plan to dispose of a separate major line of business or geo area of operations
  • Subsidiary acquired with a view to resell.
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18
Q

IFRS 10 - What’s the proforma for Gain or loss on disposal of a sub in full?

A

Proceeds
(Remaining Goodwill)
NCI
(Net Assets)

= Gain or loss on disposal

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19
Q

IFRS 10 - What’s the proforma for Gain or loss on disposal of a sub in part?

A 
Proceeds
FV or residual holding
(Remaining Goodwill)
NCI  
(Net Assets)

= Gain or loss on disposal

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20
Q

IFRS 11

Define Joint Control

A

The contactually agreed sharing of an arrangement which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

It must be clear which parties are required to agree

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21
Q

IFRS 13 - Define Fair Value measurement

A

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

3 tier heirachy

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22
Q

IFRS 13 - Fair Value

What is required to be disclosed?

A
  • Info about levels into which FV measurement falls
  • Transfers between level 1 and 2
  • Methods used and inputs
    -Changes in techniques
    -Additional disclosures for level 3 measurements
    Rec of opening and closing bals, quantitive info and assumptions
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23
Q

IAS 21 - effects of FX rates

What is the functional currency?

A

The currency of the primary economic environment in which the entity operates.

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24
Q

IAS 21 - effects of FX rates

What are the primary factors?

A
  • CCY which mainly influences the sales price of goods and services
  • CCY of the country whose competitive forces and regulations mainly influence the sales price of goods and servies
  • CCY which influences the labour, materials, and costs of providing goods or services
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25
Q

IAS 21 - effects of FX rates

What are the secondary factors

A
  • CCY in which funds from financing activities are generated

- CCY in which receipts from operations are retained.

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26
Q

For individual companies, which exchanges rates are used from translation?

A

P&L - Average rate / spot rate of transaction
Non monetary - not translated
Monetary - closing rate.

Gain or losses to P&L if individual
Gain or losses on translation from foreign operation - OCI

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27
Q

IAS 28 - Define significant influence

A

Power to participate in but not control the financial and operating policies and decisions of an entity.

Presumed with a holding of between 20% - 50% unless it can be demonstrated this is not the case.

Equity accounting

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28
Q

Business combinations must include a business.

What is a business?

A

Must have processes to convert inputs to outputs.

Input - economic resource
Process - systems protocols etc
Outputs - Goods, services, income

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29
Q

Goodwill impairment using the proportionate method

A

CGU

Goodwill is grossed up - impairment allocated to goodwill first (unless specific asset it impaired).

Only the P’s proportion of the impairment allocated.

The rest is notional

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30
Q

IFRS 15 - Revenue from contracts with customers

What’s the 5 step model?

A
  1. Identify the contract
  2. Identify the performance obligation
  3. Determine the contract price
  4. Allocate the contract price
  5. Recognise when obligations are met
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31
Q

Define revenue

A

Increase in economic benefits in the form of inflows or enhancements of assets or decreases in liabilities that results in the increase of equity, other than those relating to contributions from equity participants.

32
Q

IFRS 15 - When can a contract with a customer be accounted for?

A
  • Parties have approved the contract
  • Rights and obligations identifiable
  • Payment terms identified
  • Contract has commercial substance
  • Probable that the seller can collect the consideration they are entitled to
33
Q

IAS 24 - How is key management personnel compensation broken down?

A 
Short term benefits
Post employment benefits
Other long term benefits
Termination benefits
Share based payments
34
Q

IAS 24 - Disclosures must be made separately for which categories?

A 
The parent
Joint control or sig influence 
Subsidiaries
Associate
Joint ventures in which entity is a venturer
Key management personnel
Other related parties
35
Q

IAS 19 - Defined Benefit Plans.

What are the components of a defined benefit plan?

A 
Plan Asset - at Fair Value
Plan Liability at Present Value
Cash contributions 
Current Services Cost 
Past service costs
Net finance costs
Remeasurement component
36
Q

IAS 19 - When plan ammendment, curtailment or settlement occurs, what must an entity do?

A

Determine the current service cost for the remainder of the period after the PACS using actuarial assumptions used to remeasure the net defined asset/liability reflecting the benefits offered under the plan and the plan assets after the event.

37
Q

According to the conceptual framework, when would and income or expense be presented in other comprehensive income?

A
  1. If it results from remeasuring an item to its current value
  2. If it means that profit or loss provides more relevant info
  3. If a more faithful representation is present of the entities performance.
38
Q

According to the conceptual framework when would an income or expense be reclassified to the profit or loss?

A

When doing so would result in the profit or loss providing more relevant information

39
Q

When might the board decide that reclassification is not appropriate?

A

Board may decide reclassifying to the P$L isn’t appropriate if there is no clear basis for identifying the amount or timing of that reclassificiation.

40
Q

IAS 19 Employee Benefits

Define a ‘Defined contribution plan’

A

A post employment benefit plan in which an entity pays a fixed contribution into a separate entity and will have no legal or constructive obligation to pay further contributions if the fund does not have sufficient assets to pay all employee benefits relating to employee service in the current or prior period.

Risk is with the employee not the empoyer

41
Q

IAS 20 Capital Grants - what are the two methods of accounting for a capital grant?

It should not be recognised unless there is reasonable assurance that:

A
  1. Deferred income - release on a systematic basis over useful economic life.
  2. Deduct grant from cost and recognise as part of the depreciation charge.

An entity will comply with the conditions and the grant will be received.

42
Q

IAS 23 Borrowing costs

When must you capitalise / stop capitalising?

What is a qualifying asset?

A

Must capitalise if meet the criteria at the earlier of:

  • Expenditure starting to be incurred
  • Finance costs starting to be incurred
  • Activity commencing

Stop if construction suspended or completed.

A qualifying asset is one which takes a significant amount of time to get ready to use or sell.

43
Q

IAS 36 - Impairment of assets

When is an asset impaired and how should it be measured?

A

When the recoverable amount is lower than its carrying value.

Recoverable amount is measured at the HIGHER of:

Fair Value less Cost to sell
Value in Use

44
Q

What are the internal and external indicators of impairment?

A

Internal:
Damage
Not performing well
Obsolete

External:

Change in markets
Interest rate changes

45
Q

What is a CGU?

Can impairment be reversed?

A

The smallest group of assets that generate independent cashflows.

Yes in the period.

Cannot reverse goodwill in subsequent periods.

46
Q

IAS 37 - What’s the criteria for a provision?

A
  • Present legal or constructive obligation as a result of a past event
  • Probable economic outflow
  • Reliable estimate can be made
47
Q

IAS 37 - What is a contingent liability?

What should be disclosed?

A

Possible obligation arising from a past event whose existence will be confirmed only by the occurance or non ocurrance of one or more uncertain future events not wholly in the control of the entity.

Disclose:
Nature
Uncertainty expected to effect outcome
Estimate of potential financial effects

48
Q

What is an onerous contract?

How should they be provided for?

What about assets bought for the contact?

A

One in which the unavoidable costs of meeting the contract exceed the economic benefits expected to be received under it.

Provision recognised at the. LOWER of:

Cost of fulfilling the contract
Cost of terminating it and suffering penalties.

Review assets bought specifically for the contract for impairment.

49
Q

IAS 38 - R&D

What is the criteria for capitalising development costs?

A 
Probable economic benefit
Intention to use or sell
Reliable measurement of costs
Adequate resources to complete
Technically feasible
Expected to be profitable
50
Q

IAS 38 - R&D

When do you amortise a capitalised development cost?

A

When commercial production begins.

51
Q

What is an intangible asset?

A

An identifiable non monetary asset without physical substance

52
Q

What is meant by identifiable?

A

Must be able to be sold separately and meet the criteria of an asset i,e a present economic resource controlled by the entity as a result of past events.

Measured at cost usually
FV allowed but rare!

53
Q

IAS 40 Investment property

What is considered investment property and how is it measured?

A
  • Not used in business
  • Held to earn rental income or for capital appreciation
  • Initially measured at Cost

Subsequently measured at cost (less depreciation) of fair value ( Not depreciated)

54
Q

Step Acquisitions

What do we treat the current investment on a step acquisition?

A

Remeasure it to FV in whatever the standard it is currently in. (IFRS 9, IFRS 11, IAS 28)

Recognise the gain or loss in the P&L

Transfer the FV to Goodwill as part of consideration.

55
Q

IAS 19 Employee Benefits

What is the net interest component?

How is it calculated and where is it charged?

A
  • It’s charged to the P&L
  • Represents the change in the net pension liability (or asset) due to the passage of time.
  • Apply discount rate at start of the year, to the net defined liability at the start of the year.
56
Q

IAS 19 Employee Benefits

What is the service cost component?

A
  • Current service costs = increase in the present value of the obligation arising from the employee services in the current period.
  • Past service costs - Change in the value of the obligation for employee service in prior periods resulting from a plan amendment or curtailment
  • Any gain or loss on settlement

Recognise at the earliest of:

Date the amendment or curtailment occurs
When the entity recognised the related restructuring provision

57
Q

IAS 19 Employee Benefits

What is a settlement and how do you meausure the gain or loss?

A

Obligation to eliminate the obligation for part or all of the benefits or the plan.

Gain or loss on the settlement is the difference between the FV of the plan assets paid out, and the PV of the reduction in the defined benefit obligation. Forms part of the service component

58
Q

IAS 41 Agriculture

When can we recognised a biological asset?

A
  1. Company controls the assets as a result of past events
  2. Probably that future economic benefit will flow to the entity
  3. Can be reliably measured
59
Q

How do you measure a biological asset/Harvested produce?

Where to gains and losses go?

Are disclosures required?

A

Fair Value less cost to sell - shown separately on SFP.

Harvested produced then classified as inventory afterwards.

Gain or loss goes to P&L on revaluation

Disclosure - including reconciliation of charges in reporting period.

60
Q

IAS 12 - TAX

What is current tax?

A

The amount payable to the tax authorities in relation to the trading activity in the current period.

Dr Tax expense
Cr Tax Payable

Based on estimates.

61
Q

IAS 12 Tax

TAX ASSETS
When should they be recognised?

When can unused tax losses/credits be used?

How do we measure and present them?

A
  • Always unless it arises on Goodwill
  • Sufficient taxable temporary differences to use losses against.
  • Used before losses expire
  • Result from a one off occurrence
  • Tax planning opportunities are available to enable use of the losses.

Measure at tax rate expected to apply when tax difference is expected to reverse.

Present separately.

62
Q

Conceptual Framework 2018

Define an Asset

A

A present economic resource controlled by an entity as a result of past events.

An economic resource is a right that has the potential to produce economic benefits

63
Q

Conceptual Framework 2018

Define an Liability

A

A present obligation of an entity to transfer an economic resource as a result of a past event.

64
Q

Conceptual Framework 2018

Define an Expense

A

Decrease in assets, or an increase in liabilities that result in a decrease in equity, other than those relating to distributions to the holders of equity claims

65
Q

Conceptual Framework 2018

Define income

A

Increase of assets or decrease in liability that result in an increase in equity other than those relating to the contributions from holders of equity claims

66
Q

What is Crowdfunding, and what are the different types?

A

Funding a new start up or project by collecting cash from individuals or entities often via the internet.

  1. Equity Based - Dr Cash Cr Equity
  2. Debt Based - Dr cash Cr Liability
  3. Reward based - Dr Cash Cr Deferred income
  4. Donation based - Dr Cash Cr P&L
67
Q

IFRS for SME’s

What is considered a SME?

A

No formal definition

Owner Managed or small ownership base

Small net asset position, revenue, no. employees

Simple in structure and nature

68
Q

IFRS for SME’s

Which standards are excluded?

A

IFRS 5 - Assets held for sale

IAS 33 - Earnings per share

IFRS 8 - Segmental reporting

IAS 34 - Interim Reporting

69
Q

IFRS of SMES

How are borrowing costs treated?

A

Expensed

70
Q

IFRS for SMEs

How are intangibles including goodwill treated, research and development?

A

Goodwill is amortised over a max 10 years

Intangibles amortised over UEL max 10 years

Development costs are also expensed.

71
Q

IFRS for SME’s

Are depreciation and amortisation reviewed annually?

A

No.

72
Q

IFRS for SME’s

When disposing for a foreign subsidiary under IFRS SME’s, is the FX gain or loss reclassified to P&L?

A

No.

73
Q

IFRS for SME’s

How is the classification of IFRS 9 simplied in IFRS SME’s?

A

Most debt held at amortised costs

Equity - FVTPL unless cannot be determined

Then use cost - impairment.

74
Q

IFRS for SME’s

For jointly controlled entities or associates, how do we account for these?

A

No equity accounting

Account for as a financial investment at FV or cost if FV cannot be obtained.

75
Q

How do you calculate the EPS after a rights issue?

A
  1. TERP
  2. Rights Fraction (Actual Cum rights / TERP)
  3. Weighted average
  4. Work out EPS using weighted average shares.
76
Q

How do you restated an EPS after a bonus issue?

A

Prior year EPS x Shares before/Shares after

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