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c. At carrying value. d. In accordance with applicable IFRS. 7. Any gain on a subsequent increase in the fair value less cost to sell of a noncurrent asset classified as held for sale should be treated as follows a. The gain should be recognized in full. b. The gain should not be recognized. c. The gain should be recognized but not in excess of the cumulative impairment loss. d. The gain should be recognized but only in retained earnings. 8. An entity has an asset that was classified as held for sale. However, the criteria for it to remain as held for sale no longer apply. The entity should therefore a. Leave the noncurrent asset in the financial statements at its current carrying value. b. Remeasure the noncurrent asset at fair value. c. Measure the noncurrent asset at the lower of its carrying amount before the asset was classified as held for sale (as adjusted for subsequent depreciation, amortization, or revaluations) and its recoverable amount at the date of the decision not to sell. d. Recognize the noncurrent asset at its carrying amount prior to its classification as held for sale as adjusted for subsequent depreciation, amortization, or revaluations. 9. Which of the following criteria do not have to be met in order for an operation to be classified as discontinued? a. The operation should represent a separate line of business or geographical area. b. The operation is part of a single plan to dispose of a separate major line of business or geographical area. c. The operation is a subsidiary acquired exclusively with a view to resale. d. The operation must be sold within three months of the year-end. 10. IFRS 5 states that a noncurrent asset that is to be abandoned should not be classified as held for sale. The reason for this is because a. Its carrying amount will be recovered principally through continuing use. b. It is difficult to value. c. It is unlikely that the noncurrent asset will be sold within 12 months. d. It is unlikely that there will be an active market for the noncurrent asset.
Chapter 37 EXPLORATION FOR AND EVALUATION OF MINERAL RESOURCES (IFRS 6) INTRODUCTION IFRS 6 addresses the financial reporting for the exploration for and evaluation of mineral resources, including minerals, oil, natural gas, and similar nonregenerative resources. The Standard is intended to provide some limited, initial guidance about the accounting for such activities until the International Accounting Standards Board (IASB) has made a more comprehensive review of the accounting for extractive industries. In particular, the Standard modifies the requirements of other Standards so as to minimize disruption to entities in the extractive industries applying International Financial Reporting Standards (IFRS) for the first time. More specifically, IFRS 6 • Identifies expenditures to be included in and excluded from exploration and evaluation assets • Provides an exemption for exploration and evaluation assets from part of the hierarchy in IAS 8, Accounting Policies, Changes in Accounting Estimates, and Errors, of criteria that an entity should use to develop an accounting policy if no IFRS applies specifically to an item • Requires an entity that recognizes exploration and evaluation assets to assess such assets for impairment in accordance with IFRS 6 and to measure such impairment in accordance with IAS 36, Impairment of Assets • Requires disclosures that identify and explain financial statement amounts that arise from evaluation for and exploration of mineral resources, including • The entity’s accounting policies for exploration and evaluation expenditures • The amounts of assets, liabilities, income, and expense, and operating and investing cash flows arising from the exploration for and evaluation of mineral resources IFRS 6 is effective for annual periods beginning on or after January 1, 2006. Earlier application is encouraged. SCOPE IFRS 6 applies to expenditures incurred in the exploration and evaluation of mineral resources. It does not apply to expenditures incurred 1. Before an entity has obtained the legal rights to explore a specific area (i.e., preacquisition or preexploration expenditures). 2. After the technical feasibility and commercial viability of extracting a mineral resource are demonstrable (i.e., development expenditure). (In accordance with IFRS 6) DEFINITIONS OF KEY TERMS Exploration and evaluation expenditures. Expenditures incurred by an entity in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrated. Mineral resources include minerals, oil, natural gas, and similar nonregenerative resources. Exploration for and evaluation of mineral resources. The search for mineral resources after the entity has obtained legal rights to explore in a specific area as well as the determination of the technical feasibility and commercial viability of extracting the mineral resources. Exploration and evaluation assets. Exploration and evaluation expenditures that are recognized as assets in accordance with the entity’s accounting policy under IFRS 6. Such assets are scoped out of IAS 16, Property, Plant, and Equipment, and IAS 38, Intangible Assets. RECOGNITION Development of Accounting Policies IFRS 6 does not contain recognition requirements for exploration and evaluation assets, so an entity needs to develop its own accounting policies for recognition of such assets. PRACTICAL INSIGHT Entities follow a wide variety of accounting practices for exploration and evaluation expenditures. At one end of the spectrum, some entities defer nearly all exploration and evaluation expenditure as assets on the statement of financial position. At the other end of the spectrum, some entities recognize all such expenditure in profit or loss as incurred. An entity is permitted to continue to apply its previous accounting policies upon adoption of IFRS 6 provided that the resulting information is relevant and reliable.
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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
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Chapter 11 LEASES (IAS 17) BACKGROU
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the fair value of the asset. During
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ate in the lease is 9.3% (approxima
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Discuss how this transaction should
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The basic lease accounting model ha
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6. The lease of land and buildings
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Chapter 12 REVENUE (IAS 18) BACKGRO
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• Do not involve the same counter
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• The costs incurred and the cost
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Up to March 31, 20X9, the value of
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e that the real estate developer as
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Turnover is recognized when the ris
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Chapter 13 EMPLOYEE BENEFITS (IAS 1
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The accounting for a defined contri
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The amount of the expense or income
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• Fair value of plan assets: $50
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8. Past service cost: $115 million.
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Pensions Employee costs Employee co
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9. An entity operates a defined ben
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For quite some time, it has been un
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Solution Citimart Inc. would need t
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The Standard does not favor either
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Chapter 15 THE EFFECTS OF CHANGES I
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Facts An entity purchases equipment
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The exchange difference is calculat
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disposal was recognized. The same a
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Difference 7 Total 89.5 (say 90m) T
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ate on December 31, 20X9 is $1 =
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On December 1, 2009, Compassionate
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1. In order to capitalize the borro
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Chapter 17 RELATED-PARTY DISCLOSURE
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Solution Yes, under IAS 24 (revised
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warrant disclosure because it may n
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Facts Zeeba Inc. is part of a major
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The Used Equipment Co (Pty) Limited
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Key management personnel are define
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Chapter 18 ACCOUNTING AND REPORTING
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Total accounts payable 41,000 Accru
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Employee contributions 50,000 Total
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Chapter 19 CONSOLIDATED AND SEPARAT
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2. Noncontrolling interests in the
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When an entity loses control of a s
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Initially, the fair value of the as
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c. The ultimate parent entity produ
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EQUITY METHOD Under the equity meth
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What is the relationship between Co
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What amount should be shown in A’
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(f) (g) (h) December 31 60 73 Assoc
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. The carrying value of the associa
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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
Page 364 and 365: Solution In valuing the shares of V
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Page 368 and 369: Chapter 33 SHARE-BASED PAYMENTS (IF
Page 370 and 371: date of the cancelation is deducted
Page 372 and 373: party, to satisfy its obligations t
Page 374 and 375: Playful has ordered an amount of in
Page 376 and 377: May 31, 20X8 August 1, 20X8 5,000
Page 378 and 379: Should the plans be valued at fair
Page 380 and 381: 4. An entity issues fully paid shar
Page 382 and 383: Chapter 34 BUSINESS COMBINATIONS (I
Page 384 and 385: Future losses or other costs that a
Page 386 and 387: 93 Interest (13) Profit before tax
Page 388 and 389: This choice of method of accounting
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Page 392 and 393: This makes a total NCI of $554m. c)
Page 394 and 395: $m J retained earnings 360 Share of
Page 396 and 397: Intercompany transactions and the r
Page 398 and 399: 11. The “excess of the acquirer
Page 400 and 401: Chapter 35 INSURANCE CONTRACTS (IFR
Page 402 and 403: Required Discuss how the reinsuranc
Page 404 and 405: Guaranteed residual values Guarante
Page 406 and 407: Chapter 36 NONCURRENT ASSETS HELD F
Page 408 and 409: SUNDRY POINTS Exchanges of noncurre
Page 410 and 411: Before classification of the item a
Page 412 and 413: Noncurrent assets Current assets No
Page 416 and 417: IAS 8 specifies a hierarchy of crit
Page 418 and 419: fuel used, rig costs, delay rentals
Page 420 and 421: Chapter 38 FINANCIAL INSTRUMENTS: D
Page 422 and 423: other than credit risk (i.e., chang
Page 424 and 425: 2. Whether fair values are determin
Page 426 and 427: d. Transfers into or out of Level 3
Page 428 and 429: equires that any derivative that do
Page 430 and 431: The amount recognized in the income
Page 432 and 433: a. To provide presentation and disc
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Page 436 and 437: Recreational clubs $ 50 million vs
Page 438 and 439: Chapter 40 FINANCIAL INSTRUMENTS (I
Page 440 and 441: Discussion The entity’s objective
Page 442 and 443: The following are indicators of whe
Page 444 and 445: However as IFRS 9 eliminates the av
Page 446 and 447: Facts CASE STUDY 6 Hant has an equi
Page 448 and 449: Chapter 41 IFRS FOR SMEs INTRODUCTI
Page 450 and 451: the IFRS for SMEs, if an entity can
Page 452 and 453: 2. The subsidiary’s business acti
Page 454 and 455: All grants are measured at the fair
Page 456 and 457: The present value of the fine will
Page 458 and 459: 3. If SMEs choose to follow the Sta
Page 460 and 461: 1. b 2. a 3. a 4. c 5. a 1. a 2. c*
Page 462 and 463: 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
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Recoverable amount, impairment loss
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usiness combinations financial inst
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