March/june 2019 3B

“field work” refers to the “doing” – i.e. when, after the planning, the audit team is actively working (charging up hours!) to the client. You should know that different types of audit work is carried out at the interim (if one), year end and final visits – see page 53 of AA notes.

In this Q: “The audit for the year ENDED 28 February 20X9 … ” – i.e. past tense it must be after the year end in this scenario.

Aha – seems you were posting 2nd question at the same time I was replying to the first – so they overlapped.

It can’t be anything other than transfer from PPE to IP (what possible use could a business have for “residential apartments” other than as investment properties? – none!)

You will have to quote the examiner’s comment – I cannot find the word “wrong” in either the March or June 2019 reports so I don’t know what it is you don’t understand.

You wrote “The examiner mention a wrong accounting treatment which relates to FV which I didn’t understand!” – where is this “mention”? I took it to mean that you were querying a comment in the examiner’s report.

It seems to me to be spelt out in the published answer – FV should be based on highest and best use and given the judgment involved in this scenario there must be a risk of misstatement in the measurement of FV.

Remember IFRS 13 Fair Value MEASUREMENT is not about “treatment” – IFRS 13 applies when another IFRS Standard says that something should be measured at fair value. So IAS 40 says to measure FV (if using the FV model) – but IFRS 13 says how to measure.

“Fair value – 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.”

“Fair value measurement assumes the transaction to sell the asset .. takes place either in:
(a) the principal market ; or
(b) the absence of a principal market, the most advantageous market”

“Fair value measurement of a NON-financial asset takes into account a market participant’s ability to generate economic benefits by USING the asset in its highest and best use or by selling it to another market participant that would USE the asset in its highest and best use.” – i.e. highest and best USE is based on the USE SOMEONE in the market has for it.

“The highest and best use of a non-financial asset takes into account the use of
the asset that is physically possible, legally permissible and financially feasible ….” – this is further commented on in the answer.

FV is not adjusted for costs to sell – consider, for example, per IFRS 5 a non-current asset held for sale is measured at “FV less costs to sell” – so costs to sell can’t have already been deducted from FV.

This is pretty much assumed knowledge of FR (see Chapter 18 of the notes) – also SBR (see Chapter 16 of the notes).

You’re welcome!