CFAS Chapter 19 Problem 2

1. Financial statements prepared in accordance with PFRSs are said to be the entity first PFRS
financial statements if the previous financial statements any of these (choices presented:
were prepared in accordance with other reporting standards not consistent with the
PFRSs, did not contain an explicit and unreserved statement of compliance with PFRSs,
and contained an explicit and unreserved statement of compliance with some, but not all,
PFRSs)

NURTURE REAR Co. uses a calendar year accounting period. In 20x9, NURTURE Co. decides
to adopt the PFRSs for the first time. NURTURE Co. reports one year comparative
information.

2. What is the date of transition to PFRSs? January 1,20x8

3. What is the date of the opening PFRS statement of financial position? January 1,20x8
4. How many balance sheets will be prepared on December 31,20x9? 3
5. What if NURTURE Co. reports two years of comparative information, what is the date of
transition to PFRSs? January 1,20x7
6. If NURTURE Co. reports two years of comparative information, how many balance sheets will
be prepared on December 31,20x9? 4
7. PFRS 1 requires first-time adopters to apply their selected accounting policies
retrospectively, but with some exceptions
8. A retrospective application under PFRS 1 requires restating assets and liabilities in the
opening statement of financial position to conform with PFRSs. The resulting adjustments
are recognized directly in retained earnings, or recognized directly in other category of
equity.
9. Entity a is adopting the PFRSs for the first time in this 20x3 financial reporting. Entity a has
recognized 300,000 advertising costs for billboards and tarpaulins as deferred charges and
are being amortized over 3 years. The billboards and tarpaulins have already been displayed
to the public. The contracts for those advertisements require the counter-party to publicly
display the billboards and tarpaulins over the next 3 years. How should entity a account for
the deferred charges in its first PFRS financial statements? Derecognize the deferred
advertising costs and charge them directly to retained earnings.
10. ABC’s statement of financial position as of January 1,20x2 (prepared under previous GAAP)
shows an allowance for bad debts of 456,000. A review of the aging schedule revealed a
mathematical mistake. The correct amount should have been 546,000. Does ABC Co. need
to revise its previous estimate of bad debts as of January 1,20x2 (date of transition) on
December 31,20x3 (end of first PFRS reporting period) yes. ABC needs to correct the error.
The correction shall be recognized in January 1,20x2 retained earnings.