lecture Four

Question 1

what is IAS 40?

Answer 1

it is applied to the recognition, measurement and disclosure of investment proeprty

Question 2

when does IAS40 apply?

Answer 2

when the owner does not occupy it

Question 3

how do you know what is classed as an investment property?

Answer 3

it is held for:
-capital appreciation
-rental income
-both

Question 4

how do you know if a property is specifically classed as PPE (IAS16)?

Answer 4

it is primarily held for:
- admin purposes
-for the production of goods and services

Question 5

what is the recognition criteria for an investment property?

Answer 5

an investment property is recognised as an asset with probable future benefits that will flow and cost measured reliably. recognition criteria that is applied is:

-initially to acquire investment property
-subsequently to replace part of the property
-cost of day-to-day services to maintain is recognised as an expense

Question 6

criteria for properties that are not classified as an investment property?

Answer 6

-property occupied by the owner
-property held for sale in the ordinary course of business.

Question 7

should properties bough initially be measured at cost?

Answer 7

yes

Question 8

what measurement of recognition can be used after initial measurement?

Answer 8

-measurement of cost
-measurement using revaluation model

Question 9

what are the only circumstances you can switch accounting policies away from revaluation model once chosen?

Answer 9

IAS8 dictates changes away form revolution model is allowed only if it leads to better and more reliable information been produced.

Question 10

what happens when re-valaution model is chosen for investment properties?

Answer 10

all the investment properties are measured using this accounting policy and any gain/loss would go directly to the income statement.

Question 11

how to calculate market cap?

Answer 11

quantity of shares x market price

Question 12

how to calculate value of equity on the SOFP?

Answer 12

OE x (A-L)

Question 13

what are the three criteria of an intangible asset?

Answer 13

-identifiable
-controlable
-future economic benefits

Question 14

an intangible asset is recognised when future economic benefits flow to the entity and its cost can be measured reliably: (T/F)

Answer 14

true

Question 15

how are intangible assets first measured?

Answer 15

using the cost model

Question 16

what is business combination and when does it occur?

Answer 16

business combination is when one business acquires another business and it occurs at the date the acquirer inherits the assets and liabilities of the buisness

Question 17

during business combination, how are intangible assets acquired valued?

Answer 17

-fair value
-any internally generated by the acquirer are recognised as long as it meets the recognition criteria and it wasn’t recognised by the previous entity in the SOFP.

Question 18

what is goodwill?

Answer 18

the difference in market value and netbook value for non current assets

Question 19

what is covered by IAS 39?

Answer 19

capital financial assets

Question 20

what does cost compromise of?

Answer 20

-purchase price, import duties, non-refundable VAT.
-Directly attributable costs.

Question 21

what do you need to determine before you measure an assets probable economic benefits?

Answer 21

-seperable?
-arises form contractual rights
-sufficient info exists to measure reliably the future value of the asset

Question 22

how would you recognised intangible assets that is acquired separately?

Answer 22

-probable future economic benefits (usually the cost)
-cost can usually be measured reliably
-you stop recognising cost once the asset is ready to be used as intended by management

Question 23

what happens when an asset is classed as a goodwill?

Answer 23

it is always expensed because:
-no legal rights to protect relationship
-entity has insufficient control over future economic benefits
-customers may leave

Question 24

what happens if research and development can not be distinguished?

Answer 24

they are both expensed

Question 25

what are the six conditions that development has to meet in order for it to be capitalised?

Answer 25

-technical feasibility
-intentions to complete
-ability to use
-generate future economic benefits
-availability of resources to complete
-measures expenditure reliably

Question 26

what is the double entry for revaluation surplus or loss

Answer 26

gains are credited to revaluation reserves and recognised as other comprehensive income

revaluation losses are recognised as an expense in the calculation of p&l