Questions and Answers of Applying IFRS Standards

4 identify relationships that do not give rise to a related party relationship as envisaged under IAS 24
3 identify an entity’s related parties
2 explain the objective and scope of IAS 24
1 explain the potential effect of related party relationships
7. Company A must disclose a reconciliation of total segment assets to its consolidated assets of $1132 million
6. The assets fi gure that should be used by the general department stores segment for the purposes of determining whether or not it is a reportable segment is $877 million.
5. The assets fi gure that should be used by the general department stores segment for the purposes of determining whether or not it is a reportable segment is $855 million.
4. The assets fi gure that should be used by the general department stores segment for the purposes of determining whether or not it is a reportable segment is $900 million.
3. Company A must disclose the toy stores segment liabilities after deducting the $45 million owed to general department stores.
2. The revenue fi gure that should be used by the general department stores segment for the purposes of determining whether or not it is a reportable segment is $350 million.
1. Company A has three reportable segments.
Exercise 18.6 ★ ★ ★ ANALYSING THE SEGMENT INFORMATION Company A is a listed diversifi ed manufacturing company. It is listed on the London Stock Exchange and produces most of its products in
Exercise 18.5 ★ ★ REPORTABLE SEGMENTS, ALLOCATING AMOUNTS TO SEGMENTS Company A is a listed diversifi ed retail company. Its stores are located mainly in Australia. It has three main types of
Exercise 18.4 ★ ★ DISCLOSURES Company X has three reportable segments, A, B and C, which represent distinct geographical areas. The CODM receives fi nancial information about the geographical
Exercise 18.3 ★ IDENTIFYING REPORTABLE SEGMENTS Using the information from exercise 18.2, identify Company B’s operating segments.
Exercise 18.2 ★ ★ AGGREGATING OPERATING SEGMENTS Company B is a listed manufacturing company. It produces most of its products in Australia but exports 90% of these products to the United States,
Exercise 18.1 ★ DEFINING OPERATING SEGMENTS IFRS 8 sets out four key steps that need to be followed in order to identify an operating segment. Required List the four key steps.
3. Evaluate whether the reconciliations required by paragraph 28 of IFRS 8 address a concern about lack of comparability between entities caused by management’s ability to select any measurement
2. Explain what the ‘management approach’ used in IFRS 8 means.
1. Segment disclosures are widely regarded as some of the most useful disclosures in fi nancial statements because of the extent to which they disaggregate fi nancial information into meaningful and
9 discuss the outcome of the post-implementation review of IFRS 8.
8 analyse the disclosures made by companies applying IFRS 8 in practice
7 explain the disclosure requirements of IFRS 8
6 apply the defi nition of reportable segments
5 distinguish between operating segments and reportable segments
4 identify operating segments in accordance with IFRS 8
3 explain and evaluate the controversy surrounding the issuance of IFRS 8
2 identify the types of entities that are within the scope of IFRS 8
1 discuss the objectives of fi nancial reporting by segments
Exercise 17.8 ★ ★ W PREPARING A STATEMENT OF CASH FLOWS WITH NOTES The statement of profi t or loss and other comprehensive income and comparative statements of fi nancial position of Blue Inc.
Exercise 17.7 ★ ★ PREPARATION OF A STATEMENT OF CASH FLOWS A comparative statement of fi nancial position of Aqua Ltd is presented below:31 Dec 2016 31 Dec 2017 Cash Trade receivables Inventory
Exercise 17.5 ★ PREPARATION OF A STATEMENT OF CASH FLOWS A summarised comparative statement of fi nancial position of Black Inc. is presented below: 31 Dec 2016 31 Dec 2017 Cash Trade receivables
Exercise 17.4 ★ FINANCING CASH FLOWS The following information has been compiled from the accounting records of Mustard Ltd for the year ended 31 December 2017: Dividends — paid Dividend
Exercise 17.3 ★ INVESTING CASH FLOWS The following information has been compiled from the accounting records of Navy Inc. for the year ended 31 December 2017: Purchase of land, with the vendor fi
Exercise 17.2 ★ CASH PAYMENTS TO SUPPLIERS Purple Ltd had the following balances: 31 Dec 2016 31 Dec 2017 Inventory Accounts payable for inventory purchases £170 000 50 000 £210 000 65 000 Cost
Exercise 17.1 ★ CASH RECEIVED FROM CUSTOMERS At 31 December 2016, Ruby Inc. had net accounts receivable of $180 000. At 31 December 2017, accounts receivable were $220 000 and sales for the year
10. What supplementary disclosures are required when a consolidated statement of cash fl ows is being prepared for a group that has obtained or lost control of a subsidiary?
9. An entity may report losses over a number of successive years and still report positive net cash fl ows from operating activities over the same period. How can this happen?
8. An entity may report profi ts over a number of successive years and still experience negative net cash fl ows from its operating activities. How can this happen?
7. The statement of cash fl ows is said to be of assistance in evaluating the fi nancial strength of an entity, yet the statement can exclude signifi cant non-cash transactions that can materially
6. Explain the differences between the presentation of cash fl ows from operating activities under the direct method and their presentation under the indirect method. Do you consider one method to be
5. What sources of information are usually required to prepare a statement of cash fl ows?
4. Explain the required classifi cations of cash fl ows under IAS 7.
3. What is the meaning of ‘cash equivalent’?
2. How might a statement of cash fl ows be used?
1. What is the purpose of a statement of cash fl ows?
6 prepare other disclosures required or encouraged by IAS 7.
5 prepare a statement of cash fl ows and use a worksheet to prepare a statement of cash fl ows with more complex transactions
4 contrast the direct and indirect methods of presenting net cash fl ows from operating activities
3 explain the classifi cation of cash fl ow activities and classify cash infl ows and outfl ows into operating, investing and fi nancing activities
2 explain the defi nition of cash and cash equivalents
1 explain the purpose of a statement of cash fl ows and its usefulness
Exercise 16.12 ★ ★ ★ PREPARATION OF A STATEMENT OF FINANCIAL POSITION, STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME AND STATEMENT OF CHANGES IN EQUITY The summarised general
Exercise 16.11 ★ ★ ★ ADJUSTING/NON-ADJUSTING EVENTS AFTER THE REPORTING PERIOD The fi nancial statements of Company N are authorised for issue on 12 February 2017 and the end of the reporting
Exercise 16.10 ★ ★ CHANGE IN ACCOUNTING ESTIMATE On 1 January 2011 Company H acquired a building. The company depreciated the building on a straight-line basis, with an estimated useful life of
Exercise 16.9 ★ ★ ACCOUNTING POLICIES, ACCOUNTING ESTIMATES, ERRORS State whether the following changes should be accounted for and, if so, whether retrospectively or prospectively, in
Exercise 16.8 ★ ★ PRESENTATION OF ITEMS IN THE FINANCIAL STATEMENTS Consider the following items for Cooper Ltd at 31 December 2016: (a) contingent liabilities (b) the effect on retained earnings
Exercise 16.7 ★ ★ STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME The general ledger trial balance of James Ltd includes the following accounts at 31 December 2016: (a) (b) (c) (d) (e)
Exercise 16.6 ★ PREPARATION OF A STATEMENT OF FINANCIAL POSITION The summarised general ledger trial balance of Noah Ltd includes the following accounts at 31 December 2016: Dr Cr Cash deposits
Exercise 16.5 ★ ACCOUNTING POLICIES, ACCOUNTING ESTIMATES State whether each of the following is an accounting policy or an accounting estimate for Company A: (a) The useful life of depreciable
Exercise 16.4 ★ MATERIALITY, OFFSETTING Company A is a retailer that imports about 30% of its goods. The following foreign exchange gains and losses were recognised in profi t during the year: Loss
Exercise 16.3 ★ STATEMENT OF CHANGES IN EQUITY The shareholders’ equity section of the statement of fi nancial position of Riley Ltd at 31 December 2016 is shown below. 2016 2015 Share capital
Exercise 16.2 ★ STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME The general ledger trial balance of Lachlan Ltd includes the following accounts at 31 December 2016: (a) Sales revenue (b)
Exercise 16.1 ★ CURRENT ASSET AND LIABILITY CLASSIFICATIONS The general ledger trial balance of Joshua Limited at 31 December 2016 includes the following asset and liability accounts: (a) Interest
14. What is the difference between an accounting policy and an accounting estimate? Provide an example of each.
13. What disclosures are required in the notes in regard to accounting policy judgements?
10. What is the objective of a statement of changes in equity?
3. How do the presentation and disclosure requirements of IFRS Standards refl ect the objectives of fi nancial statements? Illustrate your argument with examples from IAS 1, IAS 8 and IAS 10.
1. Describe the eight general principles to be applied in the presentation of fi nancial statements. Which principles are more subjective? Explain your answer.
8 distinguish between adjusting and non-adjusting events after the reporting period in accordance with IAS 10.
7 apply the requirements of IAS 8 regarding the selection and application of accounting policies, and in respect of accounting for changes in accounting policies, changes in accounting estimates and
6 discuss other disclosures required by IAS 1 in the notes to the fi nancial statements
5 apply the requirements for the presentation of information in the statement of changes in equity and/or in the notes
4 apply the requirements for the presentation of information in the statement of profi t or loss and other comprehensive income and/or in the notes
3 apply the requirements for the classifi cation of items reported in the statement of fi nancial position, and apply the requirements for the presentation of information in the statement of fi
2 explain the general principles underlying the preparation and presentation of fi nancial statements
1 describe the main components of fi nancial statements
Exercise 15.13 ★ ★ ★ IMPAIRMENT LOSS Casey Ltd prepared the following draft statement of fi nancial position at 30 June 2017: Cash Receivables Land (at fair value 1/7/16) $ 5 000 15 000 160 000
Exercise 15.12 ★ ★ ★ CORPORATE ASSETS, ALLOCATED AND UNALLOCATED Ararat Ltd has three divisions, Aramac, Alpha and Amby, which operate independently of each other to produce milk products. The
Exercise 15.11 ★ ★ ★ ALLOCATION OF CORPORATE ASSETS AND GOODWILL Liao Ltd has two cash-generating units, Division One and Division Two. At 30 June 2017, the net assets of the two divisions were
Exercise 15.10 ★ ★ ALLOCATION OF CORPORATE ASSETS AND GOODWILL Cheng Ltd acquired all the assets and liabilities of Roma Ltd on 1 January 2017. Roma Ltd’s activities were run through three
Exercise 15.9 ★ ★ ASSET IMPAIRMENT Parkes Ltd acquired a network facility for its administration section on 1 July 2014. The network facility cost $550 000 and was depreciated using a
Exercise 15.8 ★ ★ 15.8 WRITE-DOWN Joburg Enterprises Ltd acquired a building in which to conduct its operations at a cost of $10 million. The building generates no cash fl ows on its own and is
Exercise 15.7 ★ ★ VALUE IN USE Management is assessing the future cash fl ows in relation to an entity’s assets, and considers that there are two possible scenarios for future cash fl ows. The
Exercise 15.6 ★ ★ IDENTIFICATION OF CGUS Marla Macalister is in the business of making rubber tubing that comes in all sorts of sizes and shapes. Marla has established three factories in the
Exercise 15.5 ★ ★ IDENTIFICATION OF CGUS Burger Queen is a chain of fast-food restaurants — most reasonably sized towns in the country have a Burger Queen outlet. The key claim to fame of the
Exercise 15.4 ★ IMPAIRMENT LOSS Tambo Ltd has determined that its fi ne china division is a cash-generating unit. The carrying amounts of the assets at 30 June 2016 are as follows: Factory Land
Exercise 15.3 ★ FREQUENCY OF IMPAIRMENT TEST In setting up its systems to apply IAS 36 Impairment of Assets, management of Durban Ltd wants to know how often the company needs to apply an
Exercise 15.2 ★ IMPAIRMENT TESTING AND GOODWILL At 30 June 2016, Longreach Ltd is considering undertaking an impairment test. Having only recently adopted the international accounting standards,
Exercise 15.1 ★ CASH-GENERATING UNITS Fresh Milk Ltd owns a large number of dairy farms. It has a number of factories that are used to produce milk products that are then sent to other factories
16. What are the steps involved in reversing an impairment loss?
15. When can an entity reverse past impairment losses?
14. How are corporate assets tested for impairment?
13. What is a corporate asset?
12. How is goodwill tested for impairment?
11. Are there limits in adjusting assets within a cash-generating unit when impairment losses occur?
10. How are impairment losses accounted for in relation to cash-generating units?
9. What is a cash-generating unit?
6. What is meant by recoverable amount?
5. What are some internal indicators of impairment?

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