Other standards

Question 1

What includes in IAS8 Accounting Policies, Estimates and Errors

Answer 1

• selection of accounting policies
• changes in accounting policies
• changes in accounting estimates
• correction of prior period errors

Question 2

What are accounting policies?

Answer 2

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

Question 3

By the Interpretations what information needs to provide?

Answer 3

• relevant to the economic decision-making needs of users
• reliable in that the financial statements
• represent faithfully the financial position, financial performance and cash flows of the entity
• reflect the economic substance of transactions, other events and conditions and not merely the legal form
• are neutral
• are prudent
• are complete in all material respects

Question 4

IAS8 requires accounting policies to be changed, conditions:

Answer 4

• is required by an IFRS Standard
• results in the financial statements providing reliable and more relevant information

Question 5

What are the accounting estimates?

Answer 5

• are monetary amounts in financial statements that are subject to measurement uncertainty

Question 6

What are the examples of estimates?

Answer 6

• depreciation expense
• fair value of an asset or liability
• net realisable value of inventory

Question 7

Examples of changes in accounting estimates are changes in

Answer 7

• the useful lives of non-current assets
• the method of depreciating non-current assets
• warranty provisions, based upon more up-to-date information about claims frequency and value

Question 8

What are the prior period errors?

Answer 8

• are omissions from, and misstatements in, the financial statements for one or more prior periods arising from a failure to use information

Question 9

Examples of prior period errors?

Answer 9

• mathematical mistakes
• mistakes in applying accounting policies
• oversights and fraud

Question 10

Prior period errors are dealt with by:

Answer 10

• restating the opening balance of assets, liabilities and equity
• restating the comparative figures presented, as if the error had never occurred
• disclosing within the accounts a statement of financial position

Question 11

IFRS 13 Fair Value Measurement objective

Answer 11

• is to provide a single source of guidance for fair value measurement, where it is required by a reporting standard rather than being spread throughout several reporting standards.

Question 12

What is fair value?

Answer 12

• is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date

Question 13

Hierarchy of inputs to valuation?

Answer 13

Level 1 - inputs comprise quoted prices in active markets for identical assets and liabilities at the measurement date
Level 2 - inputs are observable inputs, other than those included within Level 1 above, which are observable directly or indirectly
Level 3 - inputs are unobservable inputs for an asset or liability, based upon the best information available, including information that may be reasonably available relating to market participants

Question 14

What characteristics of the asset and liability shall be taken into account when measuring the fair value?

Answer 14

• the condition and location of the asset
• restrictions, if any, on the sale or use of the asset

Question 15

What are the exclusions of IFRS 13?

Answer 15

• IFRS 16 Leases
• net realisable value
• value in use

Question 16

What are inventories?

Answer 16

• valued at the lower of cost and net realisable value NRV

Question 17

Definition of cost

Answer 17

• is the cost of bringing items of inventory to their present location and condition

Question 18

Cost of purchase comprises

Answer 18

• purchase price including import duties, transport and handling costs
• any other directly attributable costs, less trade discounts, rebates and subsidies

Question 19

Cost of conversion comprises

Answer 19

• costs which are specifically attributable to units of production, e.g. direct labour, direct expense, subcontracted work
• production overheads, which must be based on the normal level of activity
• other overheads, if any, attributable in the particular circumstances of the business to bringing the product or service to its present location and condition

Question 20

Cost charged as expense

Answer 20

• abnormal waste
• storage costs
• administrative overheads which do not contribute to bringing inventories to their present location and condition
• selling costs

Question 21

Definition of Net Realisable Value NRV

Answer 21

• is the estimated selling price, in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale

Question 22

Inventory valuation methods

Answer 22

• actual unit cost
• first in, first out FIFO
• weighted average cost AVCO

Question 23

Disclosure requirements of IAS2

Answer 23

• accounting policy adopted, including the cost formula used
• total carrying amount, classified appropriately
• amount of inventories carried at NRV
• amount of inventories recognised as an expense during the period
• details of any circumstances that have led to the write-down of inventories to their NRV

Question 24

IAS 41 Agriculture what does it relates to?

Answer 24

• to Biological assets, government grants and agricultural produce at the point of harvest

Question 25

Results of processing after harvest is ?

Answer 25

- dealt with under IAS 2 Inventories

Question 26

Biological assets

Answer 26

-is a living animal or plant recognised if: - it is probable that economic benefits will flow to the entity - the cost or fair value of the asset can be reliably measured - the entity controls the asset

Question 27

Recognition and measurement of biological assets

Answer 27

Initial: - fair value less any estimated ' point of sale' costs - if there is no fair value, then the cost model should be used Subsequent: - revalue to fair value less point of sale costs at year-end, taking any gain or loss to the statement of profit or loss

Question 28

What are the Bearer plants?

Answer 28

- are accounted for under IAS 16 Property, Plant and Equipment, rather than IAS41 Agriculture - is a living plant that: - is used in the production or supply of agricultural produce - is expected to near fruit for more than one period - has a remote likehood of being sold as agricultural produce, expect for incidental scrap sales

Question 29

Which of the following is not the outcome of a biological transformation according to IAS 41 Agriculture? Growth, Harvest, Procreation, Degeneration

Answer 29

Harvest - intervention Growth, procreation, degeneration- natural biological processes