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wrong answers Flashcards

1
Q

what is materiality

A

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

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2
Q

what does the conceptual framework describe materiality as

A

application by an entity of the fundamental qualitative characteristic of relevance

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3
Q

why do preparers find materiality difficult

A

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

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4
Q

what is IFRS practice statement 2

A

Making materiality judgements - non mandatory guidance

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5
Q

2 rules of IFRS practice statement 2

A

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

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6
Q

4 step materiality process

A

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

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7
Q

why is it important to disclose related party transactions

A

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

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8
Q

what is IFRS 13

A

fair value measurement

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9
Q

definition of fair value

A

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

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10
Q

how should fair value be measured

A

at the highest and best use

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11
Q

what does a remeasurement component include

A

actuarial gains and losses

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

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12
Q

what do redundancys cause

A

a curtailment not a remeasurement

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13
Q

where do curtailments go

A

in the OCI

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14
Q

what IAS is 19

A

employee benefits

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15
Q

when must employee benefits be recognised in the FS

A

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

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16
Q

what costs can be included in restructuring provision

A

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

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17
Q

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

A

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

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18
Q

when does a deferred tax asset occur

A

when the tax base of an asset exceeds the carrying amount

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19
Q

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

A

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

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20
Q

ethics - where can an accountant seek help

A

ACCA ethical helpline and get legal advise, can also resign

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21
Q

definition of goodwill

A

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

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22
Q

what does fair value include

A

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

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23
Q

what market should you get FV from

A

principal if there is one, then the most advantageous

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24
Q

when is an intangible asset identifiable

A

when its separable or it arises from contractual legal rights

25
Q

what is an investment property

A

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

26
Q

when do you recognise an investment property

A

when its probable economic benefits will flow to the entity

and the cost of the asset can be measured reliably

27
Q

whats the initial measurement of an investment property

A

purchase price - directly attributable expenditure

28
Q

where do you charge an impairment to for investment property

A

P/L

29
Q

two cost models for investment property

A

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

cost model

30
Q

when should government grants be recognised

A

when reasonably certain conditions are met

31
Q

how should you recognise grants re assets

A

deferred income or reduce carrying amount

32
Q

how should you recognise grants re income

A

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

33
Q

how is a defined contribution plan accounted for

A

on an accruals basis

34
Q

when should you recognise a termination in FS

A

earlier of :

date at which entity cant withdraw

when restructuring is recognised

35
Q

what is the tax base of a lease

A

0

36
Q

how to calculate DTA on lease

A

right of use asset - lease liability = x

x-0 = x - DTA

37
Q

how to account for a finance lease as a lessor

A

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

38
Q

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

A

derecognise asset
recognise right of use asset
recognise gain or loss

39
Q

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

A

recognise as normal sale and lease as per normal

40
Q

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

A

continue to recognise asset

recognise liability equal to lease

41
Q

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

A

do not recognise asset

recognise asset for lease

42
Q

when does an investor have control over an investee

A

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

43
Q

what kind of rights give the investor control

A

substantive rights

44
Q

what are substantive rights

A

a right that the holder has the practical ability to exercise

45
Q

what are protective rights

A

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

46
Q

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

A

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)

47
Q

what is a customers unexercised rights called

A

breakage

48
Q

what should accountants do as a minimum

A

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

49
Q

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

A

FV of the consideration

50
Q

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

A

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

51
Q

how to measure unlisted shares ( 3 approaches)

A

market approach - transaction paid for similair or identical instrument

income approach ie discounted cash flow

adjusted net asset approach

52
Q

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

A

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

53
Q

what does the revised framework state that an element must meet

A

probable future economic benefits

can be measured reliably

54
Q

how do you allocate common costs between segments

A

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

55
Q

what does IFRS 8 say you must do to segmental reports

A

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

56
Q

why do companies enter into hedging transactions

A

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

57
Q

what is the hedge accounting criteria that all must be met

A

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

58
Q

how to recognise gains and losses in a FV hedge

A

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

59
Q

how to recognise gains and losses in a cash flow hedge

A

the amount that is effective is recognised in OCI

SBR (8 decks)

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