T11 Other statndards

Question 1

What is IAS 8?

Answer 1

Accountaning Policies, Changes in accounting estimates and errors.

Question 2

What is accounting policies?

Answer 2

The specfic principles, bases, convention, rules and practices applied by an entity in preparing and presenting the finanial statements

Question 3

What are the requirements for IAS 8?

Answer 3

Policies should be selected so as to result in information that is relevant, reliable in the framwork.
Relevant - to the economic decision making of the user.
Reliable - Understandable
Faithful representation - accopunted for correctly
Reflect the Substance - commercial reality.
Neutral and free from bias - e.g depreciaton
Prudent - Showing worse case scenerio
Complete in all material respect.

Question 4

When can policy changes be made? and what do you have to do when changed?

Answer 4

1.) If its a required by a change to IFRS standard.
2.) If it will provide the user with more reliable information.
Chaneg the previosu periods, liek it has alwasy been that policy. For it to be a change in accounting policy it must affect the following : Recognition, Presentation, Measurement. Anything else is a change in accounting estimates.

Question 5

What is a chnage in depreciation?

Answer 5

A Change in accounting estimates.

Question 6

Why would you change the accounting estimate? and what do you do onec changed?

Answer 6

You use the best information you have at the time of presenting the asset for the first time however information can change over time and adjustments need to be made e.g Machinery was meant to last 10 years but is wearing quicker than its meant to so will only last 5 years so depreciation needs to change.
You chnage the policy prospectively, no need to go back and change anything.

Question 7

What is IFRS 13?

Answer 7

IFRS - Fair value measurements

Question 8

What is the fair value measurement?

Answer 8

Fair value of the price that would be recevied to sell an asset or paid to transfer a liability in an orderly trasaction (Commercial Transaction) between market participants at teh measured date (Exit Price).

Question 9

What is the hierarchy that categories the input to valuation techniques used

Answer 9

Level 1 Input - Observable market prices, Having an active market and asset value are readily available.
Level 2 Input - observable but rather than an active market for that asset, its got a active market to a similar asset.
Level 3 Input - Unobservable - Have to use best infromation you have for an estimate.

Question 10

What is measurement?

Answer 10

An entity shall measure the fair value of an asset or liability using the assumptions that market participants would use when pricing the asset or liability, asusming the market participant actin their economic interest.
Consideration on location and wear.

Question 11

Which standards does IFRS 13 not apply to?

Answer 11

Leases, IAS 2 Inventories, IAS 8 Accounting policies, IAS 36 Impairments

Question 12

What is IAS 2? and what is the main rule?

Answer 12

IAS 2 Inventories
Inventories should be measured at the lower of cost and net realisable value.

Question 13

What does cost comprise of?

Answer 13

Purchase price, Import duties, Irrecoverable taxes, Transport, Handling and other direct cost attributable to the acqusition of finished goods, materials and services. & trade discount

Question 14

What costs are not included in the purchase price?

Answer 14

Abnormal costs, Storage Costs, Administration costs and selling costs.

Question 15

What is IAS 41?

Answer 15

IAS 41 Agriculture

Question 16

Define IAS 41?

Answer 16

When an business has biological assets such as a diary herd.

Question 17

1.) What is Agricultural Activity?
2.) What is Biogolical Asset?
3.) What is a Harvest?
4.) What is a agricultural produce?
5.) Bearer Plants

Answer 17

1.) The activity by a company of biologocal asset for the sale of agricultural produce or into additional biological assets.
2.) Is a living animal or plant
3.) It is the detachment of produce from the biological asset e.g shearing sheep. or teh cessation of a biological asset e.g killing animals for produce.
4.) The havested produce of biological assets. after the havest the IAS 41 ceases to apply as it turns into inventory.
5.) is a living plant used in production or supply of agricultural produce, that will produce for more than one period, however, it is impractical to revalue the plants every year so we can treat them with IAS 16 PPE.

Question 18

When should you recognise a Biological asset or agricultural produce and bearer plants?

Answer 18

The company controls the asset as a result of past events.
It is probable that the future economic benefit will flow to the entity
The fair value or cost of the asset can be reliably measured.
Bearer plants cant be reliably measured so we use IAS 16 PPE

Question 19

How to measure biological assets?

Answer 19

At Fair value less cost to sell.
Should be shown sepreatley on the statement finacial postion
havested produced be valued at cost minus cost to sell and would be classed as inventory.

Question 20

What are costs to sell to biological assets and havested assets?

Answer 20

Commisons charged
Levies charged by the local agricultural authorities
Does not included transport.

Question 21

When do we revalue biological assets and havest?

Answer 21

Biological assets - every period.
Hevest - never.

Question 22

From the following lists which would be accounted for under IAS 41?
Cattle
Cheese
Sugar Cane
Sheep dog
Cart Horse
Fruit tree
Milk

Answer 22

Cattle - Yes, Biological asset
Cheese - No, Its not the havested product, milk is.
Sugar Cane - Yes
Sheep dog - No, Don’t Produce
Cart Horse - No, Dont Produce
Fruit tree - No, Bearer Plant
Milk - Yes, it is the havested produce

Question 23

What is IAS 37?

Answer 23

IAS 37 - Provisions and Contingencies

Question 24

When do you recognised a provision?

Answer 24

An entity has a present obligation, legal or constructive, as a result of a past event.
It is probable that an outflow of resources will be required to settle that obligation
A reliable estimate can be made of the amount of the obliagtion.
if these conditions are not met, no provision shall be recognised.

Question 25

What is the difference between legal and constructive?

Answer 25

Legal obligation is when something is required due to a change in regulations or required by law. It comes from a contract or legistration.
A Constructive obligation is an obligation becasue of something you have or havent done. This when a companies has a established pattern of past practice, published policies, or a sufficently specific current statement. Basically its not in a contract but its implied that the company has a responsiblity and if it stops and negatively affect the other party, it is a constructive obligation.

Question 26

What is contigent liabilities?

Answer 26

A possible obliagtion that arises from past evenst and whose existence will be confirmed only by the occurance or non-occurence of one of more uncertian future events not wholly within the control of the entity.
A Present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources will occur / The amount of teh obligation cannot be measured with sufficent reliability.

Question 27

What is the difference between a contingent liability and a provision?

Answer 27

Contingent liability is only possible whereas provisions are probable.
Provisons are disclosed on the financial statements whereas contingent liabilities are disclosed in the notes.

Question 28

What are contingent assets?

Answer 28

A possible asset that arises from past evenst and whose existence will be confirmed only by the occurance or non-occurence of one of more uncertian future events not wholly within the control of the entity.