RFJPIA-R12

2
ND
Annual Regional Convention 2008
QUIZ BEE PA1 !"A
A#ERA$E R"UND
1. According to IAS29 Financial reporting in hyperinfationary economies, which
TWO of the following are monetary items?
a. Trade payales
. In!entories
c. Administration costs paid in cash
d. "oan repayale at par !al#e
Que%tion & - A D
$onetary items are to e recei!ed %or settled& in '(ed monetary terms %per
IAS29 para 12&. This incl#des trade payales and loans to e repaid at par
!al#e.
2. The )op*ins +ompany is a man#fact#ring company. The cost per #nit of an
item of in!entory is shown on its card as follows,
P'P
$aterials -.
/rod#ction laor costs --
/rod#ction o!erheads 12
0eneral administration costs 1.
$ar*eting costs 1
According to IAS2 Inventories, what is the !al#e of one completed item of
in!entory in )op*ins2s statement of 'nancial position?
a. /)/3-
. /)/41
c. /)/51
d. /)/9.
Que%tion 11 - C
/)/51 is the correct answer.
IAS2 paras 1.612 de'ne the cost of in!entory. In this e(ample the cost
incl#des materials, prod#ction laor and prod#ction o!erheads, #t not
general administration or mar*eting costs.
-. On 1 7an#ary 2.84 The 9ro +ompany commenced trading to pro!ide *ey
s*ills ed#cation facilities in a region identi'ed for technology de!elopment.
Also on 1 7an#ary 2.84, the company recei!ed two grants from its
go!ernment for setting #p its operations in this location,
0rant %a& : was paid to gi!e 'nancial assistance for start6#p costs already
inc#rred.
0rant %& : was paid to s#sidi;e the costs of p#rchasing comp#ter software
o!er the '!e6year period. The company is almost certain to *eep the facilities
operational for the ne(t '!e years.
The company2s acco#nting year end is -1 <ecemer. Are the following
statements concerning recognition of the income from the two go!ernment
grants tr#e or false, according to IAS2. Government grants and government
assistance?
%1& Income from 0rant %a& sho#ld e recogni;ed in f#ll on receipt in 2.84.
%2& Income from 0rant %& sho#ld e recogni;ed in f#ll at the end of 1 years.
Statement (1) Statement (2)
a =alse =alse
( =alse Tr#e
) Tr#e =alse
* Tr#e Tr#e
Que%tion 2 - C
IAS2. para 2. re>#ires grants for e(pendit#re already inc#rred to e
recogni;ed immediately. /ara 12 re>#ires grants s#ch as that for the software
to e matched against the related costs, so that grant wo#ld e recogni;ed
o!er the '!e6year period.
?. The Scandi#m +ompany is commencing a new constr#ction pro@ect, which is
to e 'nanced y orrowing. The *ey dates are as follows, 11 $ay 2.84 "oan
interest relating to the pro@ect starts to e inc#rred
- 7#ne 2.84 Technical site planning commences
12 7#ne 2.84 9(pendit#res on the pro@ect start to e inc#rred
14 7#ly 2.84 +onstr#ction wor* commences
According to IAS2- Borrowing costs, from what date can Scandi#m
commence the capitali;ation of orrowing costs?
a 11 $ay 2.84
( - 7#ne 2.84
) 12 7#ne 2.84
* 14 7#ly 2.84
Que%tion & - C
All rele!ant conditions in IAS2- para 15 are f#l'lled y the date when
e(pendit#res on the pro@ect start to e inc#rred.
1. The /alila +ompany p#rchased a !arnishing machine for /)/11.,... on 1
7an#ary 2.85.
The company recei!ed a go!ernment grant of /)/1-,1.. in respect of this
asset. +ompany policy was to depreciate the asset o!er ? years on a straight6
line asis and to treat the grant as deferred income. Ander IAS2.
Government grants and government assistance, what sho#ld e the carrying
amo#nts of the machine and the deferred income %B<IB& alance at -1
<ecemer 2.84?
Carrying amount I !alance
a /)/51,... /)/3,51.
( /)/112,1.. /)/1.,121
) /)/41,51. /)/3,51.
* /)/51,... /)/1-,1..
Que%tion + - A
+arrying amo#nt /)/51,..., <eferred income /)/3,51. is the correct answer.
See IAS2. para 23, where the grant is recogni;ed as income on a systematic
and rational asis o!er the life of the asset. The deferred income in the
statement of 'nancial position is red#ced each year y the amo#nt credited to
pro't or loss.
The asset is depreciated o!er its #sef#l life per IAS13.
3. The +oral +ompany acco#nts for non6c#rrent assets #sing the cost model. On
2. 7#ly 2.85 +oral classi'ed a non6c#rrent asset as held for sale in
accordance with I=CS1 "on#current assets held $or sale and discontinued
operations. At that date the asset2s carrying amo#nt was /)/1?,1.., its fair
!al#e was estimated at /)/21,1.. and the costs to sell at /)/1,?1.. The
asset was sold on 14 Octoer 2.85 for /)/21,2... In accordance with I=CS1,
at what amo#nt sho#ld the asset e stated in +oral2s statement of 'nancial
position at -. Septemer 2.85?
A /)/2.,.1.
B /)/21,1..
C /)/21,2..
D /)/1?,1..
Que%tion 8 - D
I=CS1 para 11 re>#ires that a non6c#rrent asset held for sale sho#ld e
stated at the lower of %i& the carrying amo#nt and %ii& the fair !al#e less costs
to sell.
5. The $ar*a +ompany has ac>#ired a trademar* relating to the introd#ction
of
a new man#fact#ring process. The costs inc#rred were as follows,
+ost of trademar* /)/ -,1..,...
9(pendit#re on promoting the new prod#ct /)/ 1.,...
9mployee ene'ts relating to the testing of the
proper f#nctioning of the new process /)/ 2..,...
According to IAS-4 Intangi!le assets, what is the total cost that sho#ld e
capitali;ed as an intangile non6c#rrent asset in respect of the new process?
A /)/-,51.,...
B /)/-,5..,...
C /)/-,1..,...
D /)/-,11.,...
Que%tion 11 - B
IAS-4 paras 25629 specify the costs attri#tale to a separately ac>#ired
intangile asset. This re>#ires the trademar* costs and costs of testing to e
incl#ded.
4. The <ipper +ompany operates chemical plants. Its p#lished policies incl#de
a commitment to ma*ing good any damage ca#sed to the en!ironment y its
operations. It has always honored this commitment. Which OD9 of the
following scenarios relating to <ipper wo#ld gi!e rise to an en!ironmental
pro!ision as de'ned y IAS-5 %rovisions& contingent lia!ilities and contingent
assets?
a. On past e(perience it is li*ely that a chemical spill which wo#ld res#lt in
<ipper ha!ing to pay 'nes and penalties will occ#r in the ne(t year
. Cecent research s#ggests there is a possiility that the company2s actions
may damage s#rro#nding wildlife
c. The go!ernment has o#tlined plans for a new law re>#iring all
en!ironmental damage to e recti'ed
d. A chemical spill from one of the company2s plants has ca#sed harm to the
s#rro#nding area and wildlife
Que%tion 11 - D
The p#lished policy creates a constr#cti!e oligation as de'ned y IAS-5
para 1.. The spill is a past e!ent which gi!es rise to a present oligation and
the need for a pro!ision #nder para 1?.
The go!ernment plans and any chemical spill relate to f#t#re e!ents, while the
BpossileB damage to wildlife gi!es rise to a contingent liaility which sho#ld
e disclosed.
9. The White +ompany set #p a de'ned ene't post6employment plan with
eEect from 1 7an#ary 2.85. In the 'rst year the e(pected ret#rn on plan
assets was /)/1,..., the act#al ret#rn on plan assets was /)/?,..., the
c#rrent ser!ice cost was /)/12,... and White2s contri#tions paid into the
plan were /)/5,1...
What is the net e(pense to e recogni;ed in pro't or loss for the year ended
-1 <ecemer 2.85, according to IAS19 'mployee !ene(ts?
A /)/4,...
B /)/-,1..
C /)/5,...
D /)/2,1..
Que%tion 11 - C
The amo#nts to e recogni;ed as an e(pense in pro't or loss are the c#rrent
ser!ice cost less the e(pected ret#rn on plan assets. See IAS19 para 31.
Dote that the diEerence etween the e(pected and the act#al ret#rn on plan
assets is an act#arial loss, while the employer contri#tions increase plan
assets.
1..The /inder +ompany is completing the preparation of its draft 'nancial
statements for the year ended -1 $ay 2.85. On 2? 7#ly 2.85, a di!idend of
/)/151,... was declared and a contract#al pro't share payment of
/)/-1,... was made, oth ased on the pro'ts for the year to -1 $ay 2.85.
On 2. 7#ne 2.85, a c#stomer went into li>#idation ha!ing owed the company
/)/-?,... for the past 1 months. Do allowance had een made against this
det in the draft 'nancial statements. On 15 7#ly 2.85, a man#fact#ring plant
was destroyed y 're, res#lting in a 'nancial loss of /)/23.,....
According to IAS1. 'vents a$ter the reporting period, which TWO amo#nts
sho#ld e recogni;ed in /inder2s pro't or loss for the year to -1 $ay 2.85 to
reFect ad@#sting e!ents after the end of reporting period?
A /)/151,... di!idend
B /)/-1,... on#s
C /)/-?,... allowance for #ncollectile trade recei!ales
D /)/23.,... loss on man#fact#ring plant
Que%tion , - B C
The correct answers are /)/-1,... on#s and /)/-?,... allowance.
See IAS1. paras 9, 12 and 22. Also, di!idends are recogni;ed in the
statement of changes in e>#ity, not pro't or loss