ANSWER ALL THREE PARTS OF THE QUESTION:

a. The financial manager of Hull plc has recruited you to provide trainings on various accounting standards.

You Are Required To:

Describe how an asset impairment loss is determined and explain how IAS 36 deals with the recognition and measurement of the impairment of assets with reference to academic literature.

[Maximum 650 words]

Total 30 Marks

b. Mr. Luis Rodriguez is the financial manager of Hull plc, a UK company which is located in the east of London.

Hull Plc has the following inventory transactions:

Day 1 Opening inventory nil

Day 2 Purchased 50 units at 15 per unit

Day 3 Sold 20 units at 35 per unit

Day 4 Purchased 60 units at 17 per unit

Day 5 Purchased 80 units at 30 per unit

Day 5 Sold 30 units at 40 per unit

You Are Required To:

i) Apply the Average costing method to each transaction and calculate the closing value of inventory.

(6 Marks)

ii) Prepare the report to critically evaluate the LIFO and FIFO inventory valuation methods and advise which method is better. In addition, explain which method Hull plc should use to remain IAS 2 compliant.

(10 Marks)

iii) The Financial Manager of Hull Plc needs your advice on IAS 38. You are required to explain why it is necessary to distinguish between research and development expenditure and how this distinction affects the accounting treatment.

(8 Marks)

iv) Following the financial managers request, you need to explain the criteria that need to be satisfied before expenditure can be recognised in the balance sheet as intangible assets. Also, explain how the criteria is applied to the recognition of separately purchased intangible assets, intangible assets acquired in a business combination and internally generated intangible assets. In your discussion, you are required to discuss IAS 38.

(8 Marks)

v) The Hull plc decides to adopt straight-line depreciation on production equipment. The straight-line depreciation is charged in periods of operation, but if the production equipment is not in active use then no depreciation is charged. The financial managers of Hull plc justify this on the grounds that the economic benefits of the inactive production equipment are not being consumed. Some equipment can remain inactive for many years, although money is spent maintaining them during these periods. The financial manager requires advice as to whether this depreciation policy is in accordance with IAS 16 Property, Plant and Equipment.

(8 Marks)

[Maximum 700 words]

Total 40 Marks

c. Financial manager at Hull plc asks you to consider the following statement:

The Conceptual Framework sets out the fundamental concepts for financial reporting that guide the Board in developing IFRS Standards.

IFRS, 2018

You Are Required To:

Discuss critically how the conceptual framework guides the development of IFRSs with reference to academic literature.