SBR

Question 1

Definition of control - subsidiaries (3)

Answer 1

Power over investee
Exposure or rights to variable returns from the investee
The ability to use power over the investee to affect the reporting entity’s returns from the other
company - dividends?

So usually 50%+ but can be lower if above are met

Question 2

Principles of CSFP. Treatment, Reason

Share capital and premium

Answer 2

P’s only
Group accounts are prepared for P’s shareholders

Question 3

Consolidated Profit and Loss basics

Answer 3

100% of subsidiary time apportioned added first

Profit then apportioned. Unrealised profit, movement in fair value and impairment of goodwill.

Question 4

Intragroup transactions and balances P&S

Answer 4

Make balances agree, e.g cash/goods in transit
Cancel balances on rec/payables
Cancel sales/purchases
Remove unrealised profit on PPE, Inv. DR COS/RE, CR INV/PPE

Question 5

Fair Value adjustments to subsidiaries net assets

Answer 5

PPE, Intangibles, Contingent Liability

At acqu’n - goodwill
Movement - retained earnings working (sub)
At year end - To individual asset/liability in SCFP

Question 6

NCI at fair value (given, or shares x SP) - Goodwill, CSFP and CSPL

Answer 6

Goodwill - Recognise 100% of goodwill

CSFP - Deduct all impairment in GW
Deduct group share in RE
Deduct NCI share in NCI

CSPL - Add all impairment to expenses
Deduct impairment from subs PFY in NCI

Question 7

NCI at proportionate share of subs net assets (sub net assets x NCI%) - Goodwill, CSFP and CSPL

Answer 7

Goodwill - Recognise only group % of goodwill - higher %

CSFP - Deduct all impairment in GW
Deduct all impairment in RE

CSPL - Add all impairment to expenses
Deduct impairment from subs PFY in NCI

Question 8

CGU Impairment

Answer 8

First goes to Goodwill. If GW calc at prop net assets then need to gross this up and then back down when impairing

Question 9

Exemption from preparing group accounts

Answer 9

It is itself a wholly-owned subsidiary, or partially-owned with the consent of the non-controlling
interest and
Its debt or equity instruments are not publicly traded and
The ultimate or any intermediate parent produces group accounts that comply with IFRS
Standards.

Question 10

Fundamental Qualitative Characteristics

Answer 10

Relevance - capable of making a difference in decisions. Predictive value and confirmatory value

Faithful representation - showing economic substance of transactions not just legal form. Neutral, Free from Error, Complete

Question 11

Enhancing Qualitative Characteristics

Answer 11

Verifiability - can be double checked
Comparability - same entity across periods, similar entities
Understandability - users of FS assumed to have reasonable business knowledge
Timeliness

Question 12

Asset Definition

Answer 12

A present economic resource controlled by the entity as a result of past events

Question 13

Economic resource

Answer 13

A right that has the potential to product economic benefits. Right - receive cash, or use

Question 14

What is control - Asset

Answer 14

Present ability to:
Direct the use of the asset
Obtain economic benefits

Question 15

Liability Definition

Answer 15

A present obligation of the entity to transfer economic resources as a result of past events

Question 16

Obligation

Answer 16

A responsibility that the entity has no practical ability to avoid
Legal or contructive obligation (past practice creates expectation)

Question 17

Goods/service are distinct if 2 conditions are met

Answer 17

Customer can benefit from the G/S on its own or together with other readily available resources

The entitys promise to transfer the G/S is separately identifiable from other promises in the contract. Integrating, modify/customise

Question 18

Contract modification. How to treat

Answer 18

Scope increases because of addition of G/S
Price increases by amount that reflects stand alone selling prices - no discount. both of these have to be distinct

Yes - Account for as separate contract
No - termination of existing and creation of new contract

otherwise part of original contract

Question 19

Sale and Repurchase. Call Option, forward and put option

Answer 19

Call option - seller has right to repurchase asset. can buy back if seller wants
Forward - obligation to repurchase the asset. seller must buy it back
Put option - obligation to repurchase asset only if customer requests

Question 20

Sale and repurchase agreement. Call option and forward treatment

Answer 20

repurchase price more than original - loan
Repurchase price less than original price - lease

Question 21

Sale and repurchase agreement. Put option treatment

Answer 21

Repurchase price higher than expected MV - obligation as will be forced to buy so either loan or lease
Expected MV higher than repurchase price - sale with right of return, refund liability could be recognised

Question 22

Derivative meaning and treatment

Answer 22

EG forwards, futures, options etc. Change in exchange rate, interest rate etc

Measured at fair value through P/L, any transaction costs expensed to P/L

Question 23

A PERSON is a related party of the reporting entity if (3)

Answer 23

 have control or joint control over the reporting entity;
 have significant influence over the reporting entity;
 are a member of the key management personnel of the reporting entity or of a parent of the
reporting entity.

Question 24

AN ENTITY is a related party of reporting entity if (6)

Answer 24

 They are members of the same m
 One is an associate or a joint venture of the other
 Both entities are joint ventures of the same third party
 The entity is a post-employment benefit plan for the benefit of employees
 The entity is controlled or jointly controlled by any of the persons identified above
 A person (or close family member) with control or joint control of the reporting entity has
significant influence over the entity or is key management personnel of the entity.

Question 25

Disclosure for related parties

Answer 25

The name of entity's parent and ultimate controlling party irrespective even if no transactions; Where there have been transactions: (i) nature of the related party relationship (ii) information about the transactions. As a minimum, this includes:  Amount of the transaction  Amount of outstanding balances  Provisions for doubtful debts and bad debt expenses  Key management compensation - total

Question 26

Tangible and intangible assets are recognised if (2)

Answer 26

 It is probable that the entity will receive probable future economic benefits from the asset, and  The cost of the asset can be measured reliably

Question 27

Intangible PIRATE

Answer 27

– Probable future economic benefits – Intention to complete the asset and use or sell it – Resources available to complete the development and to use or sell the asset – Ability to use or sell the asset – Technical feasibility of completing the asset – Expenditure can be measured reliably.

Question 28

Investment property

Answer 28

Either cost and dep or FV Model - FV Annually - gains/losses to P/L - no dep All inv prop has to be valued with same method Land and buildings held for rental income and/or capital appreciation

Question 29

An asset is impaired if

Answer 29

An asset is impaired if its carrying amount is greater than its recoverable amount, where recoverable amount is the higher of:  Fair value less costs of disposal  Value in use = the present value of the future cash flows that the asset is expected to generate

Question 30

NCA Held for sale. SALE. Classification

Answer 30

Seeking. Available. Likely. Expected. Do to date Next: revalue at lower of carrying amount and fair value less costs to sell – this is similar to performing an impairment review. Any loss is recognised in profit or loss. Move to. CA Any subsequent downwards movement in fair value less costs to sell is recognised as a further loss in profit or loss.  However, if fair value less costs to sell increases in the future (a bit like a revaluation), this increase cannot exceed cumulative impairment losses to date

Question 31

Intangible Assets Definition

Answer 31

Identifiable (separable), non monetary, without physical substance

Question 32

Recognition & Derecognition criteria

Answer 32

Recog: Meets the definition of an element and provides useful info Derecog: Assets control lost. Liabilities no present obligation

Question 33

Revenue 5 Step Model - Use this in answers!

Answer 33

1. Identify contract with customer - probable to collect consideration 2. Identify the separate performance obligations: 2 rules 3. Determine transaction price - variable, time value etc 4. Allocate the transaction price - based on standalone prices 5. Recognise revenue as perf obligation is satisfied - ove time, point in time. When control transferred

Question 34

Revenue - Warranties (3)

Answer 34

Standard warranty - provision IAS 37, not perf obligation Extended warranty (can be bought separately) - separate perf ob Warranty & Service - Provision & Separate perf ob

Question 35

Revaluation Model

Answer 35

FV then subsequent acc depreciation Gain - OCI/RV surplus Excess depreciation between revaluation surplus and retained earnings

Question 36

Exam Technique: Accounting standards

Answer 36

1. Rule - state rules from the acc standard 2. Apply/conclude - apply to scenario: Initial measurement Subsequent measurement YE Balances Incorrect treatment

Question 37

Borrowing costs

Answer 37

complete this lol

Question 38

Discontinued operation

Answer 38

P/L - Single item Post tax P/L + Post tax gain/loss on disposal or remeasurement to FV - cost to sell separate major line of business or geographical area

Question 39

Financial Instrument - Financial Asset Definition

Answer 39

Cash + contractual right to receive cash / financial asset or equity instrument of another entity

Question 40

Financial Instrument - Financial Liability Definition

Answer 40

Contractual obligation to deliver cash/financial asset or settled in a variable amount of entities own equity instruments

Question 41

Financial Instrument - Equity instruments Definition

Answer 41

Any contract that evidences residual interest in assets after deducting all liabilities - eg ordinary shares, share options, irredeemable pref shares

Question 42

Financial Instruments

Answer 42

STILL TO NOTE

Question 43

IFRS for SME's leaves out (4)

Answer 43

EPS Interim Financial Reporting Segment Reporting Assets held for sale For entities with no public accountability

Question 44

SMES Intangible Assets

Answer 44

Measured using cost model - no revaluation Development costs must be expensed Useful life cannot exceed 10 years

Question 45

SMES : purchased Goodwill Borrowing costs Financial instruments

Answer 45

GW: Amortised over useful life, presumed 10 years Borrowing costs: all expenses Financial instruments: simplified reporting, measured at amortised cost (not if publicly traded or whose FV can be reliably measured)

Question 46

Conditions of a lease

Answer 46

transfers to the lessee the right to control the use of an identified asset for a period of time in exchange for consideration

Question 47

Depreciate a lease

Answer 47

Shorter of lease term and useful life

Question 48

Lessor accounting - operating lease treatment

Answer 48

lease payments received taken to P/L

Question 49

Lessor accounting - finance lease STOMP

Answer 49

Specialised asset Transfer of ownership Option to purchase Major part of the useful life PV of lease payments = FV of asset

Question 50

Defined benefit plan - dr/cr - contributions

Answer 50

Dr plan assets SOFP Cr cash

Question 51

Defined benefit plan - dr/cr - interest on plan assets (estimate on day 1 of the year)

Answer 51

Dr plan assets SOFP (x% x bf plan assets) Cr interest on plan assets P/L - netted off against interest cost/unwinding of discount (later on)

Question 52

Defined benefit plan - dr/cr - benefits to former employees

Answer 52

dr pension liability sofp cr plan assets sofp

Question 53

Defined benefit plan - dr/cr - current service cost

Answer 53

dr current service cost PL cr pension liability sofp

Question 54

Defined benefit plan - dr/cr - interest cost/unwinding of discount (estimate on day 1 of the year)

Answer 54

at each YE the PV of each employees pension will inc due to time value of money dr int cost PL (X% x bf pension liability) - netted off against int on plan assets cr pension liability sofp

Question 55

Defined benefit plan - dr/cr - past service cost/curtailment

Answer 55

past service cost normally arise when rules of pension scheme change, additional obligation now. P/L IMMEDIATELY dr past service cost PL cr pension liability SOFP curtailment - material reduction of employees dr pension liability sofp cr profit or loss

Question 56

Befined benefit plan - asset ceiling test

Answer 56

Net pension asset must not be above recoverable amount Measured lower of: net pension plan asset PV of any refunds/reduction of future contributions available from plan (asset ceiling) Diff recognised immediately in OCI

Question 57

Deferred tax - temporary difference / deferred tax a/l

Answer 57

carrying amount v tax base = temporary difference temporary difference x tax rate = deferred a/l

Question 58

Deferred tax asset or liability

Answer 58

Asset : carrying amount > tax base = liability Liability : carrying amount > tax base = asset

Question 59

Recognition criteria for provision

Answer 59

Present obligation as a result of past events - legal vs constructive obligation (past practice creates ob) Probable outflow of economic resources Amount can be measured reliably

Question 60

Contingent assets / liabilities

Answer 60

Assets - disclosed if probable Liabilities - disclosed if possible

Question 61

Future operating losses provision

Answer 61

NO - do not meet definition of a liability

Question 62

Onerous contracts - provision

Answer 62

UNAVOIDABLE costs of fulfilling the contract exceed economic benefits expected to receive under it Measured at lower of net cost of fulfilling the contract and any penalties payable as a result of exiting from it

Question 63

Share based payments - c/f equity/liability for employee services calculation

Answer 63

no of employees entitled (remove estimated leavers over whole period) x no of instruments per employee x FV (at grant date if equity, YE of cash settled) x portion vested

Question 64

share based payment - choice of cash / equity

Answer 64

if company has the choice - treat as equity unless obligation to settle in cash if other party has the choice - compound financial instrument, like convertible debt.

Question 65

Share based payment - vesting conditions, market non market

Answer 65

Market, eg achieving certain share price - ignored as already inc in FV Non market - eg growth in profit or working for certain period of time. Best estimate and revised each year

Question 66

Share based payment - deferred tax

Answer 66

Carrying amount - equity so no asset/liability Tax base = no of employees entitled x no of shares per employee x intrinsic value (diff between SP at YE and the exercise price (price employee has to pay to obtain shares))

Question 67

Fair value is an exit price in either

Answer 67

Principal market, market with greatest volume of activity for asset In absense of ^ the most advantageous market

Question 68

Non financial assets (buildings) highest and best use

Answer 68

Highest and best use of an asset by market participants Uses which are physically possible, legally permissable and financially feasible Current use is persumed to be best but not always

Question 69

Fair value heirarchy (3)

Answer 69

Level 1 - Unadjusted quote prices in active markets for identical things Level 2 - Inputs other than quoted prices in level 1 that are observable for that a/l - similar assets in active market Level 3 - Unobservable inputs, based on best info available eg estimated PV of future CF relating to an item

Question 70

Government grant recognise criteria

Answer 70

It will comply with the conditions attached to the grant The grant will be received

Question 71

Biological Assets measurement

Answer 71

Measured on ititial recognition YE at FV less costs to sell

Question 72

Agricultural produce measurement

Answer 72

Measured at point of harvest at FV less costs to sell. Then becomes inventory subsequently recorded as inv at lower of cost/initial FV less costs to sell and NRV

Question 73

Bearer plants measurement

Answer 73

Non current asset eg apple tree But apple would be agricultural produce

Question 75

Gain on sale and lease back calculation

Answer 75

Gain x (FV - lease liability) / FV

Question 76

IAS 32 Financial Instruments presentation - classified in ..... rather than ......

Answer 76

Substance rather than legal form Aka what it represents rather than what it looks like

Question 77

Remeasurement of Employee Benefits

Answer 77

OCI straight away

Question 78

Offset deferred tax/lia rule

Answer 78

Legally enforcable right to offset Own asset/l & same tax authority

Question 79

Deferred tax from difference in P/L, OCI and Equity - where will the deferred tax go?

Answer 79

PL = PL OCI = OCI Equity = Equity

Question 80

How to work out Functional Currency (4)

Answer 80

Primary economic enviroment 1. Currency mainly influences selling P & labour/materials etc cost 2. Currency of country whos regulations determine SP 3. Currency of financing activities 4. Currency profit is held in

Question 81

Functional currency of foreign operating (4)

Answer 81

1. Are transactions an extension of parent or autonomous 2. Are transactions between parent and FO a high % of transactions 3. Does CF of Fo directly affect CF of

Question 82

Translation of foreign operations: A&L, goodwill, Equity, Post acqu'n RE, Profit, Dividends, SPL

Answer 82

A&L - CR Goodwill - CR each year. Original at HR so causes difference Equity (Pre RE) - HR Post acqu'n RE: Profit - AVG Dividends - Actual SPL - AVG

Question 83

Exchange Difference: Goodwill

Answer 83

Prop: PL - All in OCI SOFP - All in translation reserve FV: PL - All OCI. NCI: Bottom of PL in OCI SOFP - Group %: Translation reserve NCI%: NCI

Question 84

Exchange Difference: Net Assets/Profit

Answer 84

PL Full amount OCI NCI %: NCI Bottom of OCI/PL SOFP Group % : Translation reserve NCI %: NCI

Question 85

Exchange Difference: Associate

Answer 85

OCI then translation reserve

Question 86

Disposal of foreign operation: translation reserve

Answer 86

Cumulative diff recognised in OCI then taken to translation reserve (only P) reclassified to PL when disposal of G/L recognised

Question 87

Group: NCI at acqu'n two methods

Answer 87

FV/Full method : GW belongs to parent & NCI Proportionate: GW belongs only to parent

Question 88

Step acquisition: CSOFP Steps (4)

Answer 88

1. Account for pre existing investment as approp until control is obtained 2. Remeasure prev inv to FV and derecognise. Any G/L in CSP/COCI, RE. 3. From acqu'n date, account as nomrla subsidiary - GW NCI calc and recognised at acqu'n date and as at YE 4. If sub then A&L line by line

Question 89

Step acquisition: CPL COCI Steps (4)

Answer 89

Up to date of control: 1. Account for pre existing inv as appropriate When control is gained: 2. Remeasure the pre existing inv to FV and record G/L in PL/OCI 3. Add line by line income and expenses of the now sub, time apportion 4. Show NCI share of profit at bottom of consol P/L - time app

Question 90

Disposal with loss of control: CSOFP Steps (4)

Answer 90

1. Inc in group RE, parents % of post a RE of the sub (to losing control) 2. Calc group G/L on disposal and record in Group RE (sales+fv retained - carrying amount of sub at disposal(NA+GW-NCI)) 3. As no sub - no A&L, GW, NCI of sub 4. Retained inv is measured to FV and accounted as approp

Question 91

Disposal with loss of control: CPL Steps (4)

Answer 91

Up to date of losing control: 1. Add inc and ex of sub - time app 2. Show NCI share of prof at bottom of PL - Time app When control is lost: 3. Calc Group P/L on disposal and inc in PL 4. Acc for inv as approp If discontinued operation: Single line after profit from continuing operations: total of 1&3 above.

Question 92

The six capitals - FISHMAN

Answer 92

Financial Intellectual - eg patents, software Social and relationship Human MAnufactured Natural

Question 93

Segment info is required to be disclosed about any segment that meets these thresholds (3)

Answer 93

Revenue is 10% or more of combined Profit/loss is 10% or more of greater of: profit of all segments that didnt make a loss and reported loss of all loss segments Assets are 10% more of the combined assets

Question 94

Joint operation / joint venture

Answer 94

JO - jointly controlled parties have rights to the assets and obligations for the liabilities relating to the arrangement JV - separate entity and the jointly controlled parties have rights to the net assets of the arrangement

Question 95

WC adjustments SOcashflow - word

Answer 95

AIMLIP - assets increase minus, liabilities increase plus Add or remove sub for comparison

Question 96

SOcashflow - cash generated from operations

Answer 96

Before interest and tax

Question 97

CF from operating activities

Answer 97

PBT Depreciation Impairment of GW Profit on disposal of PPE, subsidiary Share of associate profit Inv income Interest expense Changes in WC cash generated from operations Interest paid income taxes paid Net cash from op activities

Question 98

Cash from investing activities

Answer 98

Acqu’n of subsidiary, net of cash acquired Disposal of subsidiary Y, net of cash disposed of Purchase of PPE/proceeds Div rec from associate Interest received Dividends received

Question 99

advantages of indirect CF method to stakeholders

Answer 99

More disaggregated info - additional useful info Adj clearly show accrual - cash See the impact of accounting policies on profit assess WC management Indication of the quality of operating profit

Question 100

Disadvantages of indirect method to stakeholders

Answer 100

Risk of info overload Complex adjustments Harder to compare to other companies Less helpful at predicting future CF

Question 101

Define a business IFRS 3. NOt asset acquisition

Answer 101

Integrated set of activities and assets capable of providing goods or services to customers, generating investment income or generating other income from ordinary activities

Question 102

Contingent consideration changes

Answer 102

Adjust goodwill only if: changes arise from info about facts that existed at the date of acquisition; and occur within 12 months of the acquisition date. Example: errors in the original estimate. Otherwise, recognise in profit or loss (unless the contingent consideration is equity which is not remeasured). Example: consideration dependent on future profits and these turn out to be higher than expected

Question 103

The ......... states that the going concern assumption is .....

Answer 103

Conceptual Framework an underlying assumption

Question 104

Fair value definition

Answer 104

orderly transaction to sell an asset or to transfer a liability between market participants at the measurement date under current market conditions

Question 105

Negative Goodwill

Answer 105

Bargain on purchase Straight to PL Check if this is defo correct because if so why would investors invest

Question 106

SOcash flow financing activities

Answer 106

Proceeds from issue of share capital Proceeds from long-term borrowings Dividends paid to non-controlling interests Dividends paid by parent company

Question 107

Deferred tax on acqu'n of sub - how

Answer 107

Tax base and FV of assets/lia is different Tax difference then DTL So increases Goodwill

Question 108

Ethical Questions - how to answer

Answer 108

1 Facts from the case 2 Ethical Principle / Ethical Threat involved 3. Why is it a problem? 4. Actions/recommendations (probably just a para at end)

Question 110

conceptual framework

Answer 110

absence of ifrs relevance faithful representation enhancing characteristics elements, recognition, de recognition objectives rather than rules

Answer 111

(a) Using exhibit 1 only, discuss how the principles set out in IAS® 21 The Effects of Changes in Foreign Exchange Rates are applied in order to determine the functional currency of Zian Co. (6 marks) (b) Explain how goodwill in respect of a foreign subsidiary should be calculated and treated in the consolidated financial statements. Noted: There is no requirement to refer to any exhibit when answering part (b). (4 marks) (c) Using the pre-populated spreadsheet response option with exhibits 2 and 3, adjust the draft consolidated statement of financial position in order to prepare a corrected consolidated statement of financial position at 31 May 20X9. The spreadsheet should take into account the following: the requirement of IAS 21 The Effects of Changes in Foreign Exchange Rates to report exchange differences on translation as a separate component of equity the non-controlling interest (12 marks)

Question 112

SME: pensions, consolidated FS, foreign operations and investments in A and JV

Answer 112

pension - all remeasurement in pl not oci consolidated - prop method foreign - OCI not reclassified inv in a and fv - can use cost/FV OR equity