Week 4

Question 1

Context of IAS?

Answer 1

Issued by IASC
1973-2000
IAS 1-41

Question 2

Context if IFRS

Answer 2

Issued by IASB
2001-Present
IFRS supersede IAS

Question 3

What are financial statements used for?

Answer 3

• Comparison year on year within business
• Comparison with competitors
• Predicting trends + future performance
• Forecasting + budgeting

Question 4

What happens when there is a one-off gain and/or loss?

Answer 4

Leads to a distorted comparison so trends and forecasting moves.
Should be separately disclosed

Question 5

What does IFRS5 cover?

Answer 5

NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
- guidance on how to define + account for items + operations that are no longer being used for operational activities + either being sold/abandoned
- (Operational profit = profit from continuing activities)

Question 6

Give some examples of IFRS 5

Answer 6

Some non-current assets held for sale:
- properties
- land
- buildings
- machinery
- equipment
- interests in other companies

Question 7

What does IAS 8 cover?

Answer 7

ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS
- changes in these should be separately disclosed
- changes in estimates do NOT need prior period adjustments, applied in year of change and years after
- Notes disclose: nature of error, impact on FS and impact on earliest period presented

Question 8

Give some IAS 8 examples

Answer 8

• Change in accounting policies: whole new standard introduced to accounting, charging depreciation from CoS to expenses
• Change in estimates: provisions, impairment in assets, useful life of assets
• Errors: material error in previous year account

Question 9

What does IAS 10 cover?

Answer 9

EVENTS AFTER REPORTING PERIOD
- between SFP date and date FS are authorised for issue

Question 10

Give examples of adjustable events after reporting period (IAS10)

Answer 10

• Events providing additional evidence of conditions that existed at end of reporting period
  Reduction in value of assets
  Changes in Taxation
  Insurance Claims
  Errors/Fraud
  MUST BE INCLUDED WITHIN FS E.G. CREATE PROVISIONS, ADJUST ERRORS + REDUCE INVENTORIES

Question 11

Give examples of non-adjustable events after reporting periods (IAS10)

Answer 11

• Events indicative of conditions that arose after reporting period
  Mergers + acquisitions
  Restructuring
  Share and Debenture issues
  Asset Revaluations
  Government Action
  Strikes
  Labour disputes
  MUST BE INCLUDED IN THE NOTES, NOT ADJUSTED WITHIN FS

Question 12

What dies IAS 37 cover?

Answer 12

PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Question 13

What is a liability (IAS 37)

Answer 13

A debt to a known party of a known certain amount

Question 14

What’s is a provision? (IAS 37)

Answer 14

A known / highly probably future loss, with the amount and/or timing not being known = estimate

Question 15

What’s a contingent liability? (IAS 37)

Answer 15

A liability that may occur depending on the outcome of a future uncertain event or present liability but payment is not probably or amount cannot be measured reliably.

Question 16

What is a contingent asset? (IAS37)

Answer 16

A potential economic benefit / asset whose existence is dependant on a future event, beyond company’s control

Question 17

What is the rule of IAS 37.14 regarding recognition of provision?

Answer 17

An entity must recognise a provision if, and only if:
- a present obligation has arisen of a past event
- payment is probable
- amount can be estimated reliably

Question 18

What happens to the contingent assets and liabilities in the FS? (IAS 37)

Answer 18

An entity must NOT recognise these in the accounts but disclose them in the notes if not too remote; should include its nature and an estimate of financial effect.