Questions and Answers of Applying IFRS Standards

3. Explain how accounting profi t and taxable profi t differ, and how each is treated when accounting for income taxes.
2. Explain the meaning of a temporary difference as it relates to deferred tax calculations and give three examples.
1. What is the main principle of tax-effect accounting as outlined in IAS 12?
13 implement the disclosure requirements of IAS 12.
12 explain the presentation requirements of IAS 12
11 account for amendments to prior year taxes and identify other issues
10 account for changes in tax rates
9 apply the recognition criteria for deferred tax items
8 calculate and account for movements in deferred taxation accounts
7 explain the nature of and accounting for tax losses
6 account for the payment of tax
5 discuss the recognition requirements for current tax
4 calculate and account for current taxation expense
3 explain the concept of tax-effect accounting
2 understand differences in accounting treatments and taxation treatments for a range of transactions
1 understand the nature of income tax
Exercise 5.7 ★ ★ ★ COMPREHENSIVE PROBLEM ChubbyChocs Ltd, a listed company, is a manufacturer of confectionery and biscuits. The end of its reporting period is 30 June. Relevant extracts from
Exercise 5.6 ★ ★ CALCULATION OF A PROVISION In May 2013, Company A relocated employee R from Company A’s head offi ce to an offi ce in another city. As at 30 June 2013, the end of Company A’s
Exercise 5.5 ★ ★ RECOGNISING A PROVISION In each of the following scenarios, explain whether or not Company G would be required to recognise a provision. (a) As a result of its plastics
Exercise 5.4 ★ ★ DISTINGUISHING BETWEEN LIABILITIES, PROVISIONS AND CONTINGENT LIABILITIES Identify whether each of the following would be a liability, a provision or a contingent liability, or
Exercise 5.3 ★ ★ RECOGNISING A PROVISION Company B, a listed company, provides food to function centres that host events such as weddings and engagement parties. After an engagement party held by
Exercise 5.2 ★ RECOGNISING A PROVISION The government introduces a number of changes to the value added tax system. As a result of these changes, Company A, a manufacturing company, will need to
Exercise 5.1 ★ RECOGNISING A PROVISION When should liabilities for each of the following items be recorded in the accounts of the business entity? (a) Acquisition of goods by purchase on credit (b)
8. Compare and contrast the requirements of IFRS 3 and IAS 37 in respect of restructuring provisions and contingent liabilities.
7. At what point would a contingent liability become a provision?
6. What are the recognition criteria for provisions?
5. What is the key characteristic of a present obligation?
4. Defi ne a constructive obligation.
3. What are the characteristics of a provision?
2. Defi ne (a) a contingency and (b) a contingent liability.
1. How is present value related to the concept of a liability?
13 explain the expected future developments for IAS 37.
12 compare the requirements of IFRS 3 regarding contingent liabilities with those of IAS 37
11 describe the disclosure requirements for provisions, contingent liabilities and contingent assets
10 outline the concept of a contingent asset
9 apply the defi nitions, recognition and measurement criteria for provisions and contingent liabilities to practical situations
8 explain how a provision, once recognised, should be measured
7 explain when a provision should be recognised
6 describe how to distinguish a provision from a contingent liability
5 outline the concept of a contingent liability
4 discuss how to distinguish provisions from other liabilities
3 outline the concept of a provision
2 identify which items are included within the scope of the standard
1 describe the background to IAS 37
6. Company A receives a non-refundable upfront fee from Customer B for investment advice, on 1 March 2016. Under the agreement with Customer B, Company A must provide ongoing management services
#!# 5. Company A is an insurance agent and provides insurance advisory services to Customer B. Company A receives a commission from Insurance Company I when Company A places Customer B’s insurance
4. Company A is an insurance agent and provides insurance advisory services to Customer B. Company A receives a commission from Insurance Company I when Company A places Customer B’s insurance
3. A contract for the rendering of services is entered into on 1 May 2016. The services are delivered continuously over a 1-year period commencing on 15 May 2016. The buyer pays for the services on
2. A contract for the rendering of services is entered into on 1 May 2016. The services are delivered continuously over a 1-year period commencing on 15 May 2016. The buyer pays for all the services
1. A contract for the rendering of services is entered into on 1 May 2016. The services are delivered on 15 May 2016. The buyer pays for the services on 30 May 2016.
4. Retail goods are sold with normal provisions allowing the customer to return the goods if the goods do not perform satisfactorily. The goods are invoiced on 1 May 2016 and the customer pays cash
3. A contract for the sale of goods is entered into on 1 May 2016. The goods are delivered on 15 May 2016. The contract contains a clause that states that the buyer shall only pay for those goods
2. A contract for the sale of goods is entered into on 1 May 2016. The goods are delivered on 15 May 2016. The buyer pays for the goods on 30 May 2016. The contract contains a clause that entitles
1. A contract for the sale of goods is entered into on 1 May 2016. The goods are delivered on 15 May 2016. The buyer pays for the goods on 30 May 2016. The contract contains a clause that entitles
5. Collectability of amounts due from customers is a measurement issue, not a recognition issue
4. A swap or exchange for goods or services of a similar nature and value generates revenue.
3. If payment for the goods or services is deferred, the fair value of the consideration will be less than the nominal amount of the cash receivable.
2. Revenue is measured at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
1. Revenue is measured at the fair value of the consideration given by the seller.
6. Services provided under a construction contract are accounted for under IFRS 15.
5. ‘Deferred revenue’ meets the defi nition of a liability under the Conceptual Framework.
4. ‘Gains’ must always be outside of an entity’s ordinary operations.
3. ‘Revenue’ must always be in respect of an entity’s ordinary operations.
2. ‘Gains’ are always recognised net under IFRSs.
1. ‘Income’ means the same as ‘revenue’.
4. Explain the disclosure objectives and general requirements of IFRS 15.
3. Compare and contrast the revenue recognition criteria for the sale of goods with those for the rendering of services.
2. Why might it be necessary to combine individual contracts? Give two examples of these and discuss how IFRS 15 applies to such transactions.
1. What are the main accounting issues associated with the recognition of revenue and how does IFRS 15 address those?
6 explain the presentation and disclosure requirements of IFRS 15.
5 identify other signifi cant application issues associated with IFRS 15
4 understand how to account for contract related costs
3 apply the fi ve-step model for measuring and recognising revenue under IFRS 15
2 identify the types of contracts that are within the scope of IFRS 15
1 discuss the background behind the issuance of IFRS 15
Exercise 3.7 ★ MANAGEMENT BIAS ON FAIR VALUE MEASUREMENT One of the concerns associated with fair value measurement is that management bias may affect the reliability of the information. IFRS 13
Exercise 3.6 ★ MEASUREMENT OF FAIR VALUE The use of fair value to measure assets and liabilities inevitably results in fl uctuations in profi t or loss, which can be large. Users of fi nancial
Exercise 3.5 ★ EXIT PRICES AS FAIR VALUE FOR CLASSES OF ASSETS In its response to the IASB exposure draft, the G100 in Australia stated: The G100 does not believe that an exit price based measure
Exercise 3.4 ★ ASSETS WITHOUT AN ACTIVE MARKET Emily Chasan (2008) reported: ‘It’s ridiculous to apply fair value accounting to assets that have no market,’ said Christopher Whalen, managing
Exercise 3.3 ★ CHARACTERISTICS OF AN ASSET Mr Merman owned a large house on a sizeable piece of land in London. The property had been in his family since around 1889. Mr Merman was 92 years old and
Exercise 3.2 ★ HIGHEST AND BEST USE BGW Ltd is in the business of bottling wine, particularly for small wineries that cannot afford sophisticated technical equipment and want to concentrate on the
Exercise 3.1 ★ VALUATION PREMISE FOR MEASUREMENT OF FAIR VALUE Heel Ltd conducts a business that makes women’s shoes. It operates a factory in an inner suburb of a large European city. The
15. How does the measurement of the fair value of a liability differ from that of an asset?
14. Explain the different levels of fair value inputs.
13. Explain the fair value hierarchy.
12. What valuation techniques are available to measure fair value?
11. What is the difference between the principal market for an asset or liability and its most advantageous market?
10. Explain the difference between the in-combination valuation premise and the stand-alone valuation premise.
9. Explain the difference between the current use of an asset and the highest and best use of that asset.
8. What are the key steps in measuring fair value?
7. Does the measurement of fair value take into account transport costs and transaction costs? Explain.
6. Is the reporting entity a market participant?
5. How does entry price differ from exit price?
4. How does the defi nition of fair value differ from that used in previous accounting standards?
3. What are the key elements of the defi nition of ‘fair value’?
2. What are the main objectives of IFRS 13?
1. Name three current accounting standards that permit or require the use of fair values.
8 prepare the disclosures required by IFRS 13 Fair Value Measurement
7 discuss issues relating to the measurement of the fair value of fi nancial instruments
6 explain how to measure the fair value of an entity’s own equity instruments

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