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ACCA Financial Reporting > 11: Other standards > Flashcards

11: Other standards Flashcards

1
Q

What is IAS 8?

A

ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS

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2
Q

What is described below?

The specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting the financial statements

A

Accounting policies

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3
Q

What does prudent mean?

A

Showing the worst case scenario.

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4
Q

What are the two instances where we change an accounting policy?

A
  • If it is required by a change to an IFRS standard

- It will provide the users with more reliable and relevant information

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5
Q

When changing an accounting standard do we change it retrospectively?

A

Yes

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6
Q

What do we mean by retrospectively changing the statements? 2

A
  • Restatements of opening balances and comparatives

- Prior period adjustment shown in the statement of changes in equity

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7
Q

For a change to be truly a change in accounting policy it must affect any one of the following…

A
  • recognition,
  • presentation; or
  • measurement
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8
Q

Are changes to depreciation policy changes?

A

No

They are changes in estimates

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9
Q

Inherent uncertainties will result in what needing to be made?

A

Revisions of estimates

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10
Q

Give an example of things that result in changes in estimations.

A
  • Economic useful life of assets
  • Residual amount of asset
  • Method
  • Warranty provisions
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11
Q

How to we apply changes in estimates?

A

Prospectively

Current year adjustment

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12
Q

How do we treat prior period material errors?

A

Retrospectively

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13
Q

What is IFRS 13?

A

FAIR VALUE MEASUREMENT

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14
Q

What are level 1 inputs?

A

Observable market prices

Accurate fair value measurements from active market. Asset values are readily available.

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15
Q

What are level 2 inputs?

A

Observable - Market for similar assets.

Use as benchmark. May make adjustments to valuation to ensure its more accurate.

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16
Q

What are level 3 inputs?

A

Unobservable inputs - Use best information we have available to measure

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17
Q

What are the consideration on measurements?

A

Condition and location

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18
Q

What is IAS 2?

A

Inventories

Inventories should be measured at the lower of cost and NRV

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19
Q

What does IFRS 13 not apply to?

A

Leases
IAS 2 Inv
IAS 8
IAS 36

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20
Q

What is cost?

A
  • Costs of purchase
  • costs of conversion; and
  • other cost incurred in bringing the inventories to their present location and condition
21
Q

What does cost of purchase comprise of?

A
  • Purchase price
  • Import duties
  • Irrecoverable taxes
  • Transport
  • Handling

and other costs directly attributable to the acquisition of finished goods, materials and services.

Both trade discounts and expected (probable) settlement discounts are deducted.

22
Q

What does cost of purchase comprise of?

A
  • Purchase price
  • Import duties
  • Irrecoverable taxes
  • Transport
  • Handling

and other costs directly attributable to the acquisition of finished goods, materials and services.

Both trade discounts and expected (probable) settlement discounts are deducted.

23
Q

What does cost of conversion comprise of?

A

Costs directly related to the units of production, such as direct labour.

24
Q

What are excluded from conversion cost?

A

abnormal costs, storage costs, administration costs and selling costs

25
Q

What is NRV?

A

Selling price

less:
costs to sell

26
Q

What is IAS 41?

A

AGRICULTURE

27
Q

What is agricultural activity? 3

A
  • The management by an enterprise
  • of the biological transformation of biological assets for sale,
  • into agricultural produce, or into additional biological assets.
28
Q

What is a biological asset?

A

A biological asset is a living animal or plant.

An example of biological assets would be cows or sheep. Wheat, sugar cane or trees.

29
Q

What is Harvest?

A

A harvest is the detachment of produce from a biological asset or the cessation of a biological asset’s life process.

30
Q

How do we treat harvested products?

A

Under IAS 2 Inventories

31
Q

What is Agricultural produce?

A

Agricultural produce is the harvested produce of biological assets.

After produce has been harvested IAS 41 ceases to apply.

32
Q

What are bearer plants? 3

A
  • A living plant in production or supply of agricultural produce
  • Expected to produce for more than one period.
  • Accounted under IAS 16 (PPE)
33
Q

A biological asset or agricultural produce should only be recognised when, and only when:

A
  • The company controls the asset as a result of past events.
  • It is probable that the future economic benefits will flow to the entity; and
  • The fair value or cost of the asset can be reliably measured.
34
Q

How should biological assets be measured initially at each reporting date?

A

FV - Cost to sell

35
Q

How should biological assets be shown on the statement of financial position?

A

Separately on the face of FS

36
Q

How should harvested products be measured?

A

At FV - Cost to sell

37
Q

How should harvested products be classified?

A

IAS2 Inventories

38
Q

Costs to sell in relation to biological assets and harvested produce include…

A
  • Commissions charged on sale
  • Levies charged by the local agricultural authority.

It does not include transport!!!

39
Q

Where should any gains or losses generated by remeasuring to fair value be recognised?

A

Immediately in the income statement.

40
Q

What is IAS 37?

A

Provisions and Contingencies

41
Q

When should a provision be recognised?

A

▪ an entity has a present obligation, legal or constructive, as a result of a past event;
▪ it is probable that an outflow of resources will be required to settle the obligation;
▪ a reliable estimate can be made of the amount of the obligation

42
Q

What do we mean by legal or constructive?

A

Legal - Required due to legislation/Law

Constructive - Is an obligation because of something you have or have not done

43
Q

What does a legal obligation derive from?

A
  • A contract

- Legislation

44
Q

Is a contingent liability probable or possible?

A

Possible

45
Q

Why is a contingent liability not recognised?

A
  • it is not probable that an outflow of resources will be required to settle the obligation
  • the amount of the obligation cannot be measures with sufficient reliability
46
Q

How is a contingent liability recognised in FS?

A

NOT as liability

It is included in the notes

47
Q

Is a contingent asset probable or possible?

A

Probable (not possible like liability)

48
Q

What is disclosed in the note for a contingent asset?

A
  • The nature of contingency
  • The uncertainties that will effect the ultimate outcome
  • An estimate of the potential effect.

ACCA Financial Reporting (17 decks)

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