wrong answers

Question 1

what is materiality

Answer 1

information is material if omitting, misstating or obscuring it could be reasonably expected to influence decisions that primary users make

Question 2

what does the conceptual framework describe materiality as

Answer 2

application by an entity of the fundamental qualitative characteristic of relevance

Question 3

why do preparers find materiality difficult

Answer 3

preparers may be reluctant to filter out information which is not relevant as auditors and regulators may challenge their decisions

Question 4

what is IFRS practice statement 2

Answer 4

Making materiality judgements - non mandatory guidance

Question 5

2 rules of IFRS practice statement 2

Answer 5

recognition and measurement criteria only need to be applied when the effect is material

an entity does not need to make certain disclosures if the information provided is not material

Question 6

4 step materiality process

Answer 6

asses whether information could influence primary users, considering quantitive and qualitative factors

quantitate factors can be assessed by a threshold, ie 5% of profit
qualitative can be internal or external

its usually more helpful to look at it from a quantitive perspective first

the entity should review a complete set of FS considering whether all material info is included

Question 7

why is it important to disclose related party transactions

Answer 7

the financial performance and position of all entities can be affected by these transactions

in absence of other information, users will assume the company pursues its interests independently and does business at an arms length basis

knowledge of these relationships affect the decisions of the users

it is essential to the stakeholders positive view of the companys moral and ethical behaviour

Question 8

what is IFRS 13

Answer 8

fair value measurement

Question 9

definition of fair value

Answer 9

price which would be received to sell an asset or paid to transfer a liability to market participants on the measurement date

Question 10

how should fair value be measured

Answer 10

at the highest and best use

Question 11

what does a remeasurement component include

Answer 11

actuarial gains and losses

changes in the asset ceiling not included within the net interest calculation

Question 12

what do redundancys cause

Answer 12

a curtailment not a remeasurement

Question 13

where do curtailments go

Answer 13

in the OCI

Question 14

what IAS is 19

Answer 14

employee benefits

Question 15

when must employee benefits be recognised in the FS

Answer 15

earlier of when the plan for termination is announced and when the restructuring costs are recognised

Question 16

what costs can be included in restructuring provision

Answer 16

only costs that are necessary such as redundancies and termination fees but not relocation costs or any cost that relates to ongoing operations

Question 17

can a restructuring provision be put in when management have decided to restructure

Answer 17

no - need more than this as this doesnt mean they are obliged to restructure. there must be an obligation to restructure

Question 18

when does a deferred tax asset occur

Answer 18

when the tax base of an asset exceeds the carrying amount

Question 19

when does a tax base of an asset need to be restricted

Answer 19

to the extent that there is a probability of sufficient tax profits to offset the trading losses

Question 20

ethics - where can an accountant seek help

Answer 20

ACCA ethical helpline and get legal advise, can also resign

Question 21

definition of goodwill

Answer 21

an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified or separately recognised

Question 22

what does fair value include

Answer 22

fair value is price you would receive after transport costs but before transaction costs

Question 23

what market should you get FV from

Answer 23

principal if there is one, then the most advantageous

Question 24

when is an intangible asset identifiable

Answer 24

when its separable or it arises from contractual legal rights

Question 25

what is an investment property

Answer 25

a property held to earn rentals or for capital appreciation or both rather than for sale in the ordinary course of business or for use in production or administration

Question 26

when do you recognise an investment property

Answer 26

when its probable economic benefits will flow to the entity | and the cost of the asset can be measured reliably

Question 27

whats the initial measurement of an investment property

Answer 27

purchase price - directly attributable expenditure

Question 28

where do you charge an impairment to for investment property

Answer 28

P/L

Question 29

two cost models for investment property

Answer 29

FV model - gains and losses to P/L and no depreciation cost model

Question 30

when should government grants be recognised

Answer 30

when reasonably certain conditions are met

Question 31

how should you recognise grants re assets

Answer 31

deferred income or reduce carrying amount

Question 32

how should you recognise grants re income

Answer 32

in P/L when expense recognised - other income or reduce expense amount

Question 33

how is a defined contribution plan accounted for

Answer 33

on an accruals basis

Question 34

when should you recognise a termination in FS

Answer 34

earlier of : date at which entity cant withdraw when restructuring is recognised

Question 35

what is the tax base of a lease

Answer 35

0

Question 36

how to calculate DTA on lease

Answer 36

right of use asset - lease liability = x | x-0 = x - DTA

Question 37

how to account for a finance lease as a lessor

Answer 37

recognise the lease receivable ( PV of lease payments + unguaranteed residual value ) = net investment

Question 38

how to account for sale and lease back if you are the seller and lessee and the transfer is in substance a sale

Answer 38

derecognise asset recognise right of use asset recognise gain or loss

Question 39

how to account for sale and lease back if you are the buyer and lessor and the transfer is in substance a sale

Answer 39

recognise as normal sale and lease as per normal

Question 40

how to account for sale and lease back if you are the seller and lessee and the transfer is in substance not a sale

Answer 40

continue to recognise asset | recognise liability equal to lease

Question 41

how to account for sale and lease back if you are the buyer and lessor and the transfer is in substance not a sale

Answer 41

do not recognise asset | recognise asset for lease

Question 42

when does an investor have control over an investee

Answer 42

it has power over the investee it has exposure or rights to variable returns from its involvement with the investee the ability to use its power over the investee to affect the amount of the investors returns

Question 43

what kind of rights give the investor control

Answer 43

substantive rights

Question 44

what are substantive rights

Answer 44

a right that the holder has the practical ability to exercise

Question 45

what are protective rights

Answer 45

rights designed to protect the interest of the party without giving that party power

Question 46

how do you measure the surplus of a defined benefit pension scheme

Answer 46

must be the LOWER OF : surplus in the plan or PV of economic benefits in the form of refunds from the plan or reductions in the future combinations ( asset ceiling)

Question 47

what is a customers unexercised rights called

Answer 47

breakage

Question 48

what should accountants do as a minimum

Answer 48

be committed to the presentation of true, fair and accurate FS show independence and objectivity in applying FR standards be committed to an ethical approach to business, and apply this in the prep of FS

Question 49

how should non cash consideration be measured if it can be measured reliably

Answer 49

FV of the consideration

Question 50

how should non cash consideration be measured if it can NOT be measured reliably

Answer 50

should be measured by the stand alone selling price of the good or service in the contract

Question 51

how to measure unlisted shares ( 3 approaches)

Answer 51

market approach - transaction paid for similair or identical instrument income approach ie discounted cash flow adjusted net asset approach

Question 52

if an equity instrument is not for trading, what choice does an entity

Answer 52

choose to recognise it through OCI except dividend income in the P/L

Question 53

what does the revised framework state that an element must meet

Answer 53

probable future economic benefits can be measured reliably

Question 54

how do you allocate common costs between segments

Answer 54

there is no basis as per the IAS but it must be done on a reasonable basis - ie no of employees for employee rated expenses, or percentage of revenue for head office costs

Question 55

what does IFRS 8 say you must do to segmental reports

Answer 55

amounts are allowed to be different to other standards as its the same as internal reports but must be reconciled back

Question 56

why do companies enter into hedging transactions

Answer 56

to reduce business risk, the aim is that if you hedge a transaction and it makes a loss, the hedge will make a gain

Question 57

what is the hedge accounting criteria that all must be met

Answer 57

only eligible hedging instruments and eligible hedged items it was designated at its inception as a hedge and theres a full documentation of this economic relationship between hedged item and hedging instrument

Question 58

how to recognise gains and losses in a FV hedge

Answer 58

in P/L unless it is for an investment in equity or an instrument being held at FV through the OCI - then its OCI

Question 59

how to recognise gains and losses in a cash flow hedge

Answer 59

the amount that is effective is recognised in OCI