Reporting Financial Performance

Question 1

PROVISIONS

IAS 37

Answer 1

RECOGNISE

• Present obligation
• Probable outflow of resources
• Reliable estimate

TYPES
(A) Future operating losses (don’t recognise)
(B) Onerous contracts (recognise)
(C) Restructuring (recognise)

CONTINGENT
Contingent Assets - Probable
Contingent Liabilities - Unless Remote

DISCLOSE (Liabilities)

• Nature
• Estimate
• Indication of uncertainties of timing and amount
• Possibility of any reimbursement

Question 2

LEASES

IAS17

Answer 2

Finance vs Operating

• If provisions of lease change that effect classification, then treated as new lease
• Lease Term - earliest point at which the break option is exercisable by the lessee unless termination fee then clause disregarded in determining the term
• Contingent Rent - excluded from Minimum Lease Payments and accounted as expense/income in period incurred

CLASSIFICATIONS OF FINANCE LEASE
+ Transfer of asset at end of lease term
+ Lease term is for major part of economic life
+ At inception PV of MLP amounts to all of FV of asset
+ Asset of specialised nature
+ If option to cancel, lessee bares the loss
+ Gains of loses in FV borne by lessee
+ Can continue lease at residual value

SALE AND LEASEBACK
• If sale matches FV, recognise in PL
• If sale above FV then Artificial gain and the excess over FV deferred and credited to PL lover life of leaseback
• If sale below FV then Artificial Loss and excess deferred and amortised to expenses over life of lease
• If small differences above or below FV then indicates genuine attempt at FV and recognised in full immediately

Question 3

NON CURRENT ASSETS

IAS16

Answer 3

Revaluation of FV recognised in OCI (DR Property, CR OCI - if increase)

Depreciation
(DR PL, CR Property)

Question 4

IMPAIRMENT

IAS 36

Answer 4

Value in use > FV less cost to sell = no impairment

Question 5

FINANCIAL INSTRUMENTS

IFRS 9

Answer 5

Xx