IFRS for SMEs - World Banksiteresources.worldbank.org/EXTCENFINREPREF/...Question 10*: A property developer classify properties held for sale in the ordinary course of business as:

1

International Financial Reporting Standards

IFRS for SMEsIFRS Foundation-World Bank

23–24 May 2011

Minsk, Belarus

Copyright © 2010 IFRS Foundation.

All rights reserved.

© 2010 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org

2The IFRS for SMEs

Topic 2.5

Quiz and Discussion

Assets

Sections 13–18 & 27

Andrei Busuioc


3Section 13 – Discussion questions

Question 9*: To avoid obsolescence a perishable produce retailer arranges produce in such a way that customer are most likely to purchase the oldest inventory first. The cost formula which is most appropriate for the entity is:

a. first-in-first out FIFO?b. last-in-first-out LIFO?c. weighted average?d. specific identification?

* see question 9 in Module 13 of the IFRS Foundation training material



Question 9: To avoid obsolescence a perishable produce retailer arranges produce in such a way that customer are most likely to purchase the oldest inventory first. The cost formula which is most appropriate for the entity is:

a. first-in-first out FIFO?b. last-in-first-out LIFO?c. weighted average?d. specific identification?



Question 10*: A property developer classify

properties held for sale in the ordinary

course of business as:

a. inventories?

b. property, plant and equipment?

c. financial asset?

d. investment property?




Question 10: A property developer classify

properties held for sale in the ordinary

course of business as:

a. inventories?

b. property, plant and equipment?

c. financial asset?

d. investment property?



Question 9*: Which of the following provide

evidence to support the existence of

significant influence by an investor?

a. representation on board of directors?b. material transactions between the

investor and the investee?c. interchange of managerial personnel?d. provision of essential technical info?e. all of the above?




Question 9: Which of the following provide

evidence to support the existence of

significant influence by an investor?

a. representation on board of directors?b. material transactions between the

investor and the investee?c. interchange of managerial personnel?d. provision of essential technical info?e. all of the above?



Question 10*: Which statement is false?a. Significant influence (SI) can be lost

without a change in ownership levels.b. In determining whether SI exists,

consider the effects of potential voting rights that are currently exercisable.

c. In determining whether an entity has SI over another entity, only present ownership interests are considered. The possible exercise or conversion of potential voting rights are not considered.




Question 10: Which statement is false?a. Significant influence (SI) can be lost

without a change in ownership levels.b. In determining whether SI exists,

consider the effects of potential voting rights that are currently exercisable.

c. In determining whether an entity has SI over another entity, only present ownership interests are considered. The possible exercise or conversion of potential voting rights are not considered.



Question 7*: On 31/12/X1 A acquired 30% of Z for 100 + 1 transactions costs. Z is a JV & A is a venturer. A uses cost model for JVs. No published price quotation for Z. On 5/1/X2 Z declared & paid a dividend of 20. At 31/12/X1, X2 & X3, for impairment testing purposes management assessed the fair values of investment in Z as 102, 110 & 90 respectively. Costs to sell = 4 throughout.

A must measure its investment in Z on 31/12/X1, X2 & X3 respectively at:




Question 7 continued:

a. 100, 100, 100?

b. 95, 95, 86?

c. 98, 106, 86?

d. 98, 101, 86?

e. 102, 110, 90?

f. 101, 101, 101?.




a. 100, 100, 100?

b. 95, 95, 86?

c. 98, 106, 86?

d. 98, 101, 86?

e. 102, 110, 90?

f. 101, 101, 101?.



Question 9*: An investor in a joint venture that does not have joint control accounts for that investment in accordance with:

a. Section 11 Basic Financial Instruments?

b. Section 14 Investments in Associates?c. Section 11 Basic Financial Instruments

or, if it has significant influence in the joint venture, in accordance with Section 14 Investments in Associates.




Question 9: An investor in a joint venture that does not have joint control accounts for that investment in accordance with:

a. Section 11 Basic Financial Instruments?

b. Section 14 Investments in Associates?c. Section 11 Basic Financial Instruments

or, if it has significant influence in the joint venture, in accordance with Section 14 Investments in Associates.

© 2009 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org


Question 3*: A operates a bed & breakfast

from a building it owns. It also provides its

guests with other services including

housekeeping, satellite television and

broadband internet access. The daily room

rental is inclusive of these services.

Furthermore, upon request, A conducts tours

of the surrounding area for its guests.

Tour services are charged for separately.





A should account for the building as:

a. inventory?

b. investment property?

c. property, plant & equipment?

d. intangible asset?




A should account for the building as:

a. inventory?

b. investment property?

c. property, plant & equipment?

d. intangible asset?



Question 6*: A building is owned by a

subsidiary (lessor) to earn rentals under an

operating lease from its parent (lessee). The

parent manufactures its products in the

rented building. The fair value of the building

can be measured reliably without undue cost

or effort on an ongoing basis.

The building is:





a. accounted for as property, plant & equipment by the subsidiary & investment property by the group?

b. accounted for as investment property by the subsidiary & as property, plant and equipment by the group?

c. accounted for as investment property by both the subsidiary and the group?

d. accounted for as property, plant and equipment by both the subsidiary and the group?




a. accounted for as property, plant & equipment by the subsidiary & investment property by the group?

b. accounted for as investment property by the subsidiary & as property, plant and equipment by the group?

c. accounted for as investment property by both the subsidiary and the group?

d. accounted for as property, plant and equipment by both the subsidiary and the group?



Question 8: On 1/1/20X1 A buys a building

for 100 and occupies it. Useful life = 40 yrs.

Residual value = 20. A expects to consume

the building’s benefits evenly over 40 yrs.

The building’s fair value at 31/12/20X1 = 130.

What is its carrying amount at 31/12/20X1?

a. 100. b. 98 c. 130 d. 127



Question 8: On 1/1/20X1 A buys a building

for 100 and occupies it. Useful life = 40 yrs.

Residual value = 20. A expects to consume

the building’s benefits evenly over 40 yrs.

The building’s fair value at 31/12/20X1 = 130.

What is its carrying amount at 31/12/20X1?

a. 100. b. 98 c. 130 d. 127



Question 10: On 1/1/20X1 A buys land for an undetermined purpose. On 1/1/20X4 A begins constructing its head office building on the land. On 1/1/20X8 A’s staff moved out & the building is rented out under an operating lease. On 31/12/20X9 A accepts an unsolicited offer from the tenant to purchase the building from A immediately.

The fair value of the building can be determined reliably without undue cost or effort on an ongoing basis.

A accounts for the building as:




a. investment property from 1/1/20X1 to

31/12/20X9?

b. investment property during 20X1–20X3

& PP&E during 20X4–20X10?

c. investment property during 20X1–20X3

& 20X8–20X9 and PP&E during 20X4–

20X7?

d. PP&E during 20X1–20X7 & investment

property during 20X8–20X9?




a. investment property from 1/1/20X1 to

31/12/20X9?

b. investment property during 20X1–20X3

& PP&E during 20X4–20X10?

c. investment property during 20X1–20X3

& 20X8–20X9 and PP&E during 20X4–

20X7?

d. PP&E during 20X1–20X7 & investment

property during 20X8–20X9?



Question 1: The cost of an intangible asset

at initial recognition is measured at its fair

value when:

a. it is internally generated?

b. it is separately acquired?

c. it is acquired in a business

combination?



Question 1: The cost of an intangible asset

at initial recognition is measured at its fair

value when:

a. it is internally generated?

b. it is separately acquired?

c. it is acquired in a business

combination?



Question 2: A purchased a trademark. Remaining legal life = 5 yrs. However, is renewable every 10 yrs at little cost. A intends to renew the trademark continuously & evidence supports its ability to do so. An analysis of (i) product life cycle studies, (ii) market, competitive and environmental trends, & (iii) brand extension opportunities provides evidence that the trademarked product will generate net cash inflows for A for an indefinite period. The useful life of the intangible asset is:

a. 5 yrs b. 10 yrs c. 15 yrs d. 100 yrs



Question 2: A purchased a trademark. Remaining legal life = 5 yrs. However, is renewable every 10 yrs at little cost. A intends to renew the trademark continuously & evidence supports its ability to do so. An analysis of (i) product life cycle studies, (ii) market, competitive and environmental trends, & (iii) brand extension opportunities provides evidence that the trademarked product will generate net cash inflows for A for an indefinite period. The useful life of the intangible asset is:

a. 5 yrs b. 10 yrs c. 15 yrs d. 100 yrs



Question 3: On 1/1/20X1 A received (for free)

an unconditional transferable 9-year taxi

licence from a government (fair value = 120).

On 1/1/20X1 A must recognise:

a. 120 intangible asset & 120 income?

b. 120 intangible asset & 120 liability?

c. 0 as intangible asset & 0 income & 0

liability?



Question 3: On 1/1/20X1 A received (for free)

an unconditional transferable 9-year taxi

licence from a government (fair value = 120).





liability?



Question 4: On 1/1/20X1 A received (for free) a non-transferable 9-year taxi licence from a government (fair value = 90). The licence will be revoked immediately A does not operate at least 10 taxis in a deprived area of the city.





liability?



Question 4: On 1/1/20X1 A received (for free) a non-transferable 9-year taxi licence from a government (fair value = 90). The licence will be revoked immediately A does not operate at least 10 taxis in a deprived area of the city.





liability?



Question 1: At reporting date the carrying

amount (cost) of raw materials = 200;

replacement cost = 130; est. selling price of

finished good = 300; est. costs to convert

the raw material into finished good = 100;

est. costs to sell the finished good = 50.

A must recognise an impairment expense of

a. nil. b. 70 c. 50 d. 170



Question 1: At reporting date the carrying

amount (cost) of raw materials = 200;

replacement cost = 130; est. selling price of

finished good = 300; est. costs to convert

the raw material into finished good = 100;

est. costs to sell the finished good = 50.

A must recognise an impairment expense of

a. nil. b. 70 c. 50 d. 170



Question 2: At 31/12/20X1 CA of a CGU’s assets = 500 (ie 200 boat, 200 fishing licence & 100 goodwill)

Impairment indicated & RA estimated = 350.

Fair value of boat = 180.

How much of the 150 impairment loss is allocated to the fishing licence?

a. 25. b. 30 c. 60 d. 150



Question 2: At 31/12/20X1 CA of a CGU’s assets = 500 (ie 200 boat, 200 fishing licence & 100 goodwill). Useful life = 2 yrs. RV = 0.

Impairment indicated & RA estimated = 350.

Fair value of boat = 180.

How much of the 150 impairment loss is allocated to the fishing licence?

a. 25. b. 30 c. 60 d. 150



Question 3: Same as question 2.

At 31/12/20X2 CA of a CGU’s assets = 175 (ie 90 boat & 85 fishing licence)

Impairment reversal indicated & RA estimated = 375.

How much of income is recognised on the reversal of the CGU’s impairment loss?

a. 25. b. 50 c. 150 d. 200



Question 3: Same as question 2.

At 31/12/20X2 CA of a CGU’s assets = 175 (ie 90 boat & 85 fishing licence)

Impairment reversal indicated & RA estimated = 375.

How much of income is recognised on the reversal of the CGU’s impairment loss?

a. 25. b. 50 c. 150 d. 200

© 2010 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org© 2010 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org

41Questions or comments?

Expressions of individual views by

members of the IASB and its staff

are encouraged.

The views expressed in this

presentation are those of the

presenter.

Official positions of the IASB on

accounting matters are determined

only after extensive due process

and deliberation.

© 2010 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

42

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The accounting requirements applicable to small and medium-sized entities (SMEs) are set out in the International Financial Reporting Standard (IFRS) for SMEs, which was issued by the IASB in July 2009.

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IFRS for SMEs - World Banksiteresources.worldbank.org/EXTCENFINREPREF/...Question 10*: A property developer classify properties held for sale in the ordinary course of business as: