The Kit

Question 1

The key feature of debt

Answer 1

Issuer should return cash or another financial asset to the holder

Question 2

Equity

Answer 2

Any contract evidencing a residual interest in entity’s assets after deducting all of its liabilities
Fin instrument is normally an equity instrument if the instruments include no CONTRACTUAL Obligation TO DELIVER CASH OR ANOTHER FIN ASSET TO ANOTHER ENTITY ( such as ordinary shares)

Question 3

Contract contains a lease if

Answer 3

Conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To have control the contract must give the customer the right throughout the period to
- The right substantially all of the identified asset’s economic BENEFITS
- DIRECT the identified assets use
Cannot be substituted or substitution costs are high that owner is not likely to exercise it
Restrictions on operating during high winds define the scope of use rather than preventing from directing use
LL should be recognised - PV of the payments to be made. A right os use assets to be recognised for the same amount plus associated direct costs

Question 4

Cash flow projections requirements

Answer 4

Should be based on reasonable and supportable assumptions, the most recent budgets and forecasts, and extrapolation for periods beyond budgeted projections

Question 5

Time restrictions for CF

Answer 5

IAS presumes that budgets and forecasts should not go beyond 5 years, if more than 5 years, extrapolation should be used

Question 6

Financial instrument is financial liability if it provides that, on settlement, the entity will deliver either

Answer 6

I. Cash or another financial asset
Ii. Its own shares whose value is determined to exceed substantially the value of cash or other financial asset

Question 7

Equity

Answer 7

Is entity decides whether to reward or not, no obligation - is there dividend. But , Bitcoin can be readily converted into cash in B’s jurisdiction and therefore can be treated as cash or legal tender ( fiat money)
A shares will be classified as liability, because value of shares settlement 1000 class A instruments at 2 Bitcoin substantially exceeds that of the ‘cash’ settlement option of 1 bitcoin

Question 8

confidentiality and competence

Answer 8

1. Accountants ethical conscience should prevail
2. New business models require an evolving level of digital literacy by accountants
   Provide relevant, decision useful analysis to ensure right tech application are adopted for the best interests of the business
3. Requires growing set of competencies : not only fin, but social impact assessment, environmental accounting, or other nonfinancial capital valuation techniques
   Fundamental principle of professional competence and due care requires the accountant to undertake significant tasks for which she has or can obtain training . Should not intentionally mislead the employer as to he level of expertise and experience possessed
   Act of whistleblowing can cause conflict of interest bn personal, societal and organisational spheres. This conflict stems from the way whistle blower is viewed. As someone acting disloyal or sharing knowledge of misconduct for the benefit of others. She will be Tron between loyalty and her own moral commitments

Question 9

Pressure

Answer 9

Can lead to losing objectivity and would create a loss of professional identity: some as you g account ants are more vulnerable
He has created a self-interest threat as a chief accountant has a personal interest
The pressure of applying to this position has inappropriately influenced his professional judgement and behaviour

Question 10

Stewarship

Answer 10

Ethical princippe which embodies Responsible planning and management of resources. Stewarship role appointed by shareholders. Directors assume responsibilities to protects entity’s resources from unfavorable effects of economic factors such as price and tech changes and to ensure that entity complies with all laws, regulations and contractual obligations

Question 11

How effectiveness of stewarship is assessed

Answer 11

Investors have reliable and accurate information about entity’s resources to assess how efficiently and effectively management discharged their responsibilities
Important that FS are transparent, objective and comply fully with IFRs standards
Prudence I’d key in dealing with uncertainty

Question 12

Key ethical principles

Answer 12

Objectivity, professional competence and professional behaviour. Intimidation threat to objectivity
Insider trading involves the use of non-publicised information in order to make decisions on fin investment based on information other don’t know yet. Such activities seen as fraudulent and are likely to be breach of local money laundering regulations

Question 13

Confidentiality

Answer 13

Should not be disclosed unless there is legal or professional rogh or duty to disclose. Ensure that they don’t use information for personal benefit.
Mr Jas self interest threat BC wife and nephew

Question 14

IAS 23 Related party disclosures

Answer 14

Requires entity’s financial statements to contain disclosures NECESSARY TO DRAW ATTENTION TOT HE Possibility THAT ITS FS may have been affected by existence of RP and by transactions and outstanding balances with such parties

Question 15

Deferred tax

Answer 15

IAS 12 Income tax - deferred tax assets recognised for the carry forward of unused tax losses
To extent that future taxable profit will be available against which the unused tax losses can be utilised

Question 16

Disclosure on deferred tax

Answer 16

1. Have convincing evidence that profits will flow
2. Disclose amount for asset and nature of evidence supporting it’s recognition
   Directors must assess whether it is probably that A will have taxable profits before unused tax losses or unused tax credits expire

Question 17

Justification for deferred tax

Answer 17

Whether the unused tax losses result from identifiable causes which are unlikely to recur
Tax planning to utilise the inside tax losses in the future available?
Carrying amount of equity equals carrying amount of net assets - so reduction in assets lead to reduction in equity, gearing ratio will deteriorate

Question 18

Fundamental ethical principles in ACCA rulebook

Answer 18

Act with
1. Integrity
2. Objectivity ( bias and influence; intimidation threat to objectivity; self interest threat to objectivity)
3. professional competence And Due care
4. Confidentiality
5. Professional behaviour
Be mindful of any threats to these fundamental principles
Consoder facts ethical issues, whether internal procedures exist which mitigate threats or what alternative courses
In this case all under threat
Before acting confirm The FACTS! DIDCYSS THE TREATMENT and explain risks of non compliance
Keep record of conversations and actions

Question 19

Provision

Answer 19

Present obligation ( legal or constructive) has arisen as a result of past event
Payment is probably
The amount can be estimated reliably

Question 20

IAS38

Answer 20

IA are recognised at cost. It prohibits recognitiin of internally generated IA ( except those arising from developmental activity) BC costs cannot be determined
Ref gnition either through cost or reval
If not market, no recovery
Exception is IFR3 Business combo

Question 21

Brand

Answer 21

It is identifiable acquired in a business combo separately from goodwill
To be identifiable the asset must be separable or arise from contractual or legal rights
It is asset as has potential to generate future economic benefits by increasing sales volumes
It can be disposed of.

Question 22

Cgu

Answer 22

Generates CF that are largely independent of cash inflows from other assets. Brands rarely CGU, more corporate asset BC not attributable to single CGU. Allocated to each CGU that expect to benefit

Question 23

Asset

Answer 23

A present economic resource controlled by entity as a result of past event

Question 24

Not all elements recognised

Answer 24

• Relevant information ( not relevant if there is uncertainty over the existence of element or low probability of inflow or outflow of economic resources
• It must provide faithful representation ( not so if there high degree of measurement uncertainty)