International Financial Reporting Standard- IFRS Study

IFRS 13

In accounting, non-controlling interest refers to:

A. The portion of a subsidiary's shares that the parent company holds
B. The portion of a subsidiary's equity not owned by the parent company
C. The interest earned on investments in subsidiary companies
D. The debt of subsidiary companies
E. Minority Asset

On 1 October 20X1, Bash Co borrowed $6m for a term of one year, exclusively to finance the construction of a new piece of production equipment. The interest rate on the loan is 6% and is payable
on maturity of the loan. The construction commenced on 1 November 20X1 but no construction took place between 1 December 20X1 to 31 January 20X2 due to employees taking industrial action. The asset was available for use on 30 September 20X2 having a construction cost of $6m.

What is the carrying amount of the production equipment in Bash Co's statement of financial position as at 30 September 20X2?

A. $5,016,000
B. $6,270,000
C. $6,330,000
D. $6,360,000

Biological assets in the scope of the standard are measured at fair value less costs to sell unless it is not possible to measure fair value reliably, in which case they are measured at cost.

Gains and losses from changes in fair value less costs to sell are recognised in profit or loss.

If the fair value of a biological asset cannot be measured reliably at the date of initial recognition, then the asset is stated at cost less any accumulated depreciation and impairment losses.

1. Which of the following is NOT one of the five steps for recognizing revenue outlined in IFRS 15?
a. Identify the contract with a customer
b. Allocate the transaction price to the performance obligations
c. Recognize revenue when (or as) the entity satisfies a performance obligation
d. Determine the transaction price
e. Identify the performance obligations in the contract

2. Which of the following is NOT an example of variable consideration under IFRS 15?
a. A discount offered to a customer for early payment
b. A refund offered to a customer for a defective product
c. A rebate offered to a customer for reaching a certain volume of purchases
d. A fixed price agreed upon in a contract

3. When must an entity recognize revenue under IFRS 15?
a. When the entity transfers a promised good or service to a customer
b. When the entity receives payment from the customer
c. When the entity completes the contract
d. When the customer approves the goods or services

4. How should an entity account for contract costs under IFRS 15?
a. As an expense when incurred
b. As an asset when incurred, and then amortized over the life of the contract
c. As an asset when incurred, and then recognized as an expense when the related revenue is recognized
d. As an expense when the related revenue is recognized

5. When must an entity disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers under IFRS 15?
a. Only in the financial statements
b. Only in the notes to the financial statements
c. In both the financial statements and the notes to the financial statements
d. In the management's discussion and analysis section of the annual report

6. When can an entity recognize revenue for a performance obligation satisfied over time under IFRS 15?
a. When the entity transfers control of the good or service to the customer
b. When the entity receives payment from the customer
c. When the entity completes the contract
d. When the entity satisfies the performance obligation

7. When must an entity recognize revenue for a performance obligation satisfied at a point in time under IFRS 15?
a. When the entity transfers control of the good or service to the customer
b. When the entity receives payment from the customer
c. When the entity completes the contract
d. When the entity satisfies the performance obligation

8. How should an entity account for a contract modification under IFRS 15?
a. As a separate contract
b. As a termination of the original contract and the creation of a new contract
c. As a continuation of the original contract
d. The entity has the option to choose between (a) and (b)

9. Which of the following is NOT an example of a promised good or service under IFRS 15?
a. The transfer of a physical product to a customer
b. The rendering of a service to a customer
c. The transfer of a non-physical product, such as a license
d. The transfer of ownership of an asset to a customer
e. The transfer of a right to use an asset

IFRS 15, "Revenue from Contracts with Customers," is an International Financial Reporting Standard (IFRS) issued by the International Accounting Standards Board (IASB). It provides a single, comprehensive model for companies to use in accounting for revenue from contracts with customers.

The standard outlines a five-step process for recognizing revenue:

Identify the contract with a customer: A contract exists when an entity has approval and commitment from a customer to perform a service or transfer goods.

Identify the performance obligations in the contract: A performance obligation is a promise to transfer a good or service to a customer.

Determine the transaction price: The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

Allocate the transaction price to the performance obligations: The transaction price is allocated to each performance obligation based on the relative stand-alone selling price of each promise to transfer a good or service.

Recognize revenue when (or as) the entity satisfies a performance obligation: An entity satisfies a performance obligation and recognizes revenue when it transfers a promised good or service to a customer.

IFRS 15 also provides guidance on how to account for variable consideration, such as discounts, rebates, and refunds, and how to account for contract costs.

Overall, the standard aims to provide a consistent and transparent approach to revenue recognition, which is important for financial reporting as it helps users of financial statements understand the performance and financial position of a company.

Ready

Definition of “control of an investee”

An investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Control (IFRS 10)

Ownership of more than half the voting right of another entity
Power over more than half of the voting rights by agreement with investors
Power to govern the financial and operating policies of the other entity under statute/ agreement
Power to remove/appoint majority of directors
Power to cast majority of votes.

IAS 23 defines Borrowing costs as "Borrowing costs are interest and other costs incurred by an entity in connection with the borrowing of funds".

Borrowing costs may include which of the following?

A. Interest on bank overdrafts and short-term and long-term borrowings (including intercompany borrowings)

B. Amortisation of discounts or premiums relating to borrowings

C. Amortisation of ancillary costs incurred in connection with the arrangement of borrowings

D. Finance charges in respect of finance leases

E. Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

[You may choose more than one option]

IAS 37

An entity incurred the following costs in connection with the construction of an item of plant:

1. $23,000 to purchase raw materials, including recoverable sales taxes of $3,000.
2. $10,000 directly incurred in the construction of the asset.
3. $8,000 of the entity's general administrative overheads allocated to this
construction using the entity's normal allocation model.

What is the cost of the property, plant and equipment?
A $30,000
B $33,000
C $38,000
D $41,000
E $36,000