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disposal was recognized. The same accounting treatment would be applied to the loss of joint control of a joint venture or the loss of significant influence over an associate. If an entity applies the IAS 27 amendments to an earlier period it should apply the amendments to IAS 21. The amendments apply to annual periods beginning on or after July 1, 2009. An entity should disclose DISCLOSURE • The amount of exchange differences recognized in profit or loss but not differences arising on financial instruments measured at fair value through profit or loss in accordance with IAS 39 • The net exchange differences classified in a separate component of equity and a reconciliation of the amount of such exchange differences at the beginning and end of the period • When the presentation currency is different from the functional currency, disclosure of that fact together with the functional currency is required, as well as the reason for using a different presentation currency • Any change in the functional currency of either the reporting entity or significant foreign operation and the reasons for the change When an entity presents its financial statements in a currency that is different from its functional currency, it may describe those financial statements as complying with International Financial Reporting Standards (IFRS) only if they comply with all the requirements of each applicable Standard and Interpretation. If an entity displays its financial statements or other financial information in a currency that is different from either its functional or presentation currency or if the requirements just listed are not met, then it should • Clearly identify the information as supplementary information to distinguish it from the information that complies with IFRS. • Disclose the currency in which the supplementary information is displayed. • Disclose the entity’s functional currency and the method of translation used to determine the supplementary information. Assets: CASE STUDY 6 Jocatt Statement of Financial Position Noncurrent assets December 31, 20X9 €m Property, plant, and equipment (PPE) 1,900 Financial assets 250 2,150 Current assets 1,650 Total assets 3,800 Equity and liabilities: Share capital 1,000 Retained earnings 1,500 Total equity 2,500 Noncurrent liabilities 800 Current liabilities 500 Total liabilities 1,300 Total equity and liabilities 3,800 An entity acquired 60% of the share capital of Jocatt on January 1, 20X9 for €1,380 million when Jocatt’s retained earnings were €1,100 million. The fair value of the identifiable net assets of Jocatt on January 1, 20X9, was €2,475 million and related to nondepreciable PPE. The fair value of the noncontrolling interest (NCI) in Jocatt at January 1, 20X9, was €1,250 million. The entity wishes to use the “full goodwill” method to prepare the group
financial statements. Jocatt’s profit for the year is €400 million. The following exchange rates were in force: The average rate for the year to December 31, 20X9, was €5.5 to $1. Required € to $ January 1, 20X9 6 December 31, 20X9 5 Calculate 1. Goodwill arising on the acquisition of Jocatt 2. Any exchange gain arising on goodwill at December 31, 20X9 3. Any exchange difference arising on the retranslation of Jocatt’s net assets Solution a. Jocatt—translation and calculation of goodwill The fair value adjustment at acquisition is 2,475 – (1,000 + 1,100) = €375 million. Goodwill is measured using the full goodwill method. b. Goodwill is treated as a foreign currency asset and is retranslated at the closing rate. Goodwill at December 31, 20X9, will be €155 million divided by 5, that is $31 million. Therefore an exchange gain of $5 million will be recorded in retained earnings ($3 million) and noncontrolling interest ($2 million). c. Exchange difference on Jocatt’s net assets Arising on retranslation of opening net assets $m Opening rate €2,475m @ 6 = $412.5m Closing rate €2,475m @ 5 = $495m Difference 82.5 Arising on retranslation of profits for year €400m @5.5 = $73m €400m @ 5 = $80m
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Title Page Copyright Page Foreword
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DIVIDENDS DISCLOSURE: KEY ELEMENTS
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CONSOLIDATED FINANCIAL STATEMENTS A
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ELABORATION AND INTERPRETATION OF T
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MULTIPLE-CHOICE QUESTIONS Chapter 3
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FOREWORD TO THE FIRST EDITION by th
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PREFACE Achieving consistency in fi
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ABOUT THE AUTHORS Abbas Ali Mirza i
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ecognition and use of IFRS. A major
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SIC 12, Consolidation—Special-Pur
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The IFRS Advisory Council shall com
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Chapter 2 IASB FRAMEWORK INTRODUCTI
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ELEMENTS OF FINANCIAL STATEMENTS Th
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Chapter 3 PRESENTATION OF FINANCIAL
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XYZ Inc. is a manufacturer of telev
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Statement of Comprehensive Income I
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Available-for-sale financial assets
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Notes The notes should disclose the
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equired by the counterparty to sett
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The costs of purchase constitute al
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Based on the FIFO cost flow assumpt
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• Accounting policies adopted for
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f. Choices a and c. g. Choices a, b
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1. They should be “short term”
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2. Proceeds from disposal of debt i
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1. Cash collections from customers
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3. Placements and withdrawals of de
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Additional Information Retained ear
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c. Indirect Method Cash paid to sup
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Notes to the Consolidated Cash Flow
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Chapter 6 ACCOUNTING POLICIES, CHAN
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een applied. The impact of the new
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• For current and each prior peri
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An entity should disclose amounts a
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Notes to the Financial Statements (
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d. The entity would find the determ
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Given these facts, what is the “a
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existed at the end of the reporting
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Chapter 8 CONSTRUCTION CONTRACTS (I
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2. Costs that are attributable to c
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4. Revenue, costs, and profits to b
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Facts 34 Construction contracts Mil
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ecognized as revenue. Therefore, $7
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The Standard Applies to the Account
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ACCOUNTING FOR DEFERRED TAX To acco
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TEMPORARY DIFFERENCES NOT RECOGNIZE
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Required Show the impact on the fin
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Solution Zero. There is no temporar
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Solution Facts CASE STUDY 13 East i
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Since 20X4, Frontier has incurred s
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calculated that the liability and e
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Chapter 10 PROPERTY, PLANT, AND EQU
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Required 2. Initial delivery and ha
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disposal. Any gain on disposal is t
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financing liability and the financi
Page 114 and 115: Chapter 11 LEASES (IAS 17) BACKGROU
Page 116 and 117: the fair value of the asset. During
Page 118 and 119: ate in the lease is 9.3% (approxima
Page 120 and 121: Discuss how this transaction should
Page 122 and 123: The basic lease accounting model ha
Page 124 and 125: 6. The lease of land and buildings
Page 126 and 127: Chapter 12 REVENUE (IAS 18) BACKGRO
Page 128 and 129: • Do not involve the same counter
Page 130 and 131: • The costs incurred and the cost
Page 132 and 133: Up to March 31, 20X9, the value of
Page 134 and 135: e that the real estate developer as
Page 136 and 137: Turnover is recognized when the ris
Page 138 and 139: Chapter 13 EMPLOYEE BENEFITS (IAS 1
Page 140 and 141: The accounting for a defined contri
Page 142 and 143: The amount of the expense or income
Page 144 and 145: • Fair value of plan assets: $50
Page 146 and 147: 8. Past service cost: $115 million.
Page 148 and 149: Pensions Employee costs Employee co
Page 150 and 151: 9. An entity operates a defined ben
Page 152 and 153: For quite some time, it has been un
Page 154 and 155: Solution Citimart Inc. would need t
Page 156 and 157: The Standard does not favor either
Page 158 and 159: Chapter 15 THE EFFECTS OF CHANGES I
Page 160 and 161: Facts An entity purchases equipment
Page 162 and 163: The exchange difference is calculat
Page 166 and 167: Difference 7 Total 89.5 (say 90m) T
Page 168 and 169: ate on December 31, 20X9 is $1 =
Page 170 and 171: On December 1, 2009, Compassionate
Page 172 and 173: 1. In order to capitalize the borro
Page 174 and 175: Chapter 17 RELATED-PARTY DISCLOSURE
Page 176 and 177: Solution Yes, under IAS 24 (revised
Page 178 and 179: warrant disclosure because it may n
Page 180 and 181: Facts Zeeba Inc. is part of a major
Page 182 and 183: The Used Equipment Co (Pty) Limited
Page 184 and 185: Key management personnel are define
Page 186 and 187: Chapter 18 ACCOUNTING AND REPORTING
Page 188 and 189: Total accounts payable 41,000 Accru
Page 190 and 191: Employee contributions 50,000 Total
Page 192 and 193: Chapter 19 CONSOLIDATED AND SEPARAT
Page 194 and 195: 2. Noncontrolling interests in the
Page 196 and 197: When an entity loses control of a s
Page 198 and 199: Initially, the fair value of the as
Page 200 and 201: c. The ultimate parent entity produ
Page 202 and 203: EQUITY METHOD Under the equity meth
Page 204 and 205: What is the relationship between Co
Page 206 and 207: What amount should be shown in A’
Page 208 and 209: (f) (g) (h) December 31 60 73 Assoc
Page 210 and 211: . The carrying value of the associa
Page 212 and 213: PRACTICAL INSIGHT Turkiye Petrol Ra
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Cash 5,150 Share capital (300/100
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Chapter 22 INTERESTS IN JOINT VENTU
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Facts Three entities decide to form
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current period (IFRIC 1.5). Thus in
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Methods of valuation techniques use
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of impairment exists, the carrying
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Chapter 23 FINANCIAL INSTRUMENTS: P
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Contracts for contingent considerat
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has the unconditional right to refu
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principal and interest cash flows)
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On January 15, 20X5, Entity A issue
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instruments. A financial instrument
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The major components of market risk
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Credit risk is the risk that a cust
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1. Are there any circumstances when
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• A purchased put option to sell
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• Sales that are so close to matu
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eceived nothing on entering into th
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price plus interest. In this case,
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CASE STUDY 4 This case illustrates
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financial liabilities measured at f
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Example If Entity A receives a cash
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If the reporting period does not co
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cash flow pattern, credit quality,
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of the cash flows. 2. Entity A purc
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PRACTICAL INSIGHT IAS 39 does not p
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This case illustrates how to accoun
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This case illustrates how to accoun
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This case illustrates when to separ
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change in fair value of the derivat
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A cash flow hedge is a hedge of the
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This case illustrates the accountin
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PRACTICAL INSIGHT It is often possi
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Derivatives are measured on the bal
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15. Which of the following is not o
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• As amounts attributable to the
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The theoretical ex-rights fair valu
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Diluted earnings per share Adjusted
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Earnings: diluted earnings per shar
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• Basic and diluted earnings per
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The numbers of shares included in t
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Chapter 26 INTERIM FINANCIAL REPORT
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should be applied and previously re
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Consolidated balance sheet at June
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1. Under IAS 34, interim financial
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was $5 million. It was planned at t
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development costs. An impairment lo
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The fair value less cost to sell of
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can be reasonably allocated. 3. Thi
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PRACTICAL INSIGHT Austrian Airlines
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Impairments charge in the year Ther
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. Loss on goodwill. c. Loss on a bu
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Recognition of Provisions Those lia
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An onerous contract is an agreement
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In order to recognize a provision (
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A Singapore-based shipping company
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c. Because Amazon Inc. can avoid th
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In order to meet the definition of
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Examples of activities that may fai
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• These costs can be measured rel
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Entities are to apply the provision
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Future changes in expected cash flo
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Chapter 30 INVESTMENT PROPERTY (IAS
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If, on acquisition, it is not possi
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pool in which the fair value model
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Chapter 31 AGRICULTURE (IAS 41) BAC
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Required Value of biological asset
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2-year-old animal at November 1, 20
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Notes to Group Financial Statements
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d. There is no requirement in the S
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Financial statements presented by a
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Solution In order to prepare the op
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• Identification of assets acquir
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2. No journal entry is required as
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IFRS 1 discusses exemptions under t
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Solution In valuing the shares of V
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• Unilever was an early adopter (
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Chapter 33 SHARE-BASED PAYMENTS (IF
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date of the cancelation is deducted
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party, to satisfy its obligations t
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Playful has ordered an amount of in
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May 31, 20X8 August 1, 20X8 5,000
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Should the plans be valued at fair
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4. An entity issues fully paid shar
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Chapter 34 BUSINESS COMBINATIONS (I
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Future losses or other costs that a
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93 Interest (13) Profit before tax
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This choice of method of accounting
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The error in 20X9, regarding the om
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This makes a total NCI of $554m. c)
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$m J retained earnings 360 Share of
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Intercompany transactions and the r
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11. The “excess of the acquirer
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Chapter 35 INSURANCE CONTRACTS (IFR
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Required Discuss how the reinsuranc
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Guaranteed residual values Guarante
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Chapter 36 NONCURRENT ASSETS HELD F
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SUNDRY POINTS Exchanges of noncurre
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Before classification of the item a
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Noncurrent assets Current assets No
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c. At carrying value. d. In accorda
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IAS 8 specifies a hierarchy of crit
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fuel used, rig costs, delay rentals
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Chapter 38 FINANCIAL INSTRUMENTS: D
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other than credit risk (i.e., chang
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2. Whether fair values are determin
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d. Transfers into or out of Level 3
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equires that any derivative that do
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The amount recognized in the income
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a. To provide presentation and disc
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amongst the top management personne
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Recreational clubs $ 50 million vs
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Chapter 40 FINANCIAL INSTRUMENTS (I
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Discussion The entity’s objective
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The following are indicators of whe
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However as IFRS 9 eliminates the av
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Facts CASE STUDY 6 Hant has an equi
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Chapter 41 IFRS FOR SMEs INTRODUCTI
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the IFRS for SMEs, if an entity can
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2. The subsidiary’s business acti
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All grants are measured at the fair
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The present value of the fine will
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3. If SMEs choose to follow the Sta
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1. b 2. a 3. a 4. c 5. a 1. a 2. c*
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1. b 2. a 3. b 1. d 2. b 3. c 4. c
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2. b 3. b 4. a 5. a 6. b 7. b 8. b
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18. d* 19. b 20. b 21. a 22. b 23.
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INDEX Abandonment Accounting compou
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Control business combinations conso
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interests. See IAS 32, Financial In
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events after the reporting period G
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gross basis versus net basis indire
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IAS 18, Revenue amendment to backgr
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net assets available for benefits n
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fair value per share financial stat
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initial measurement interest income
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scope of share-based payment transa
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credit risk effective date fair val
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property, plant, and equipment Impa
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Market risk Materiality Measurement
Page 494 and 495:
Recoverable amount, impairment loss
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usiness combinations financial inst
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