Free ACCA Strategic Business Reporting (SBR) Flashcards

Question

Which body issues the IFRS Sustainability Disclosure Standards, and how does it sit alongside the IASB?

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State the objective of IFRS S1 and identify the users it is written for.

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Set out the four pillars of core content required by IFRS S1 and IFRS S2.

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What does IFRS S1 mean by ‘connected information’, and why does the exam care about it?

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When must sustainability-related disclosures be published under IFRS S1, and for what period?

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Where an ISSB standard does not address a particular sustainability risk, what does IFRS S1 require an entity to do?

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How does IFRS S1 deal with measurement uncertainty and with errors in sustainability data?

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What relief does IFRS S1 give an entity that argues sustainability information is commercially sensitive?

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A director says the climate disclosures can be omitted because ‘the effects are too far in the future to be reliable’. Evaluate that position.

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Which climate-related risks does IFRS S2 require an entity to distinguish, and why does the split matter?

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Define scope 1, scope 2 and scope 3 greenhouse gas emissions as measured under IFRS S2.

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Why is scope 3 emissions disclosure the most contested part of IFRS S2, and what did the ISSB do about it?

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What is climate resilience analysis under IFRS S2, and what must be disclosed about it?

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How should an investor judge whether an entity’s climate-related disclosures are actually useful?

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Explain the difference between single materiality and double materiality, and state which the ISSB applies.

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Set out the key differences between the IFRS Sustainability Disclosure Standards and the European Sustainability Reporting Standards.

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A group prepares an ESRS-compliant report and asks whether it can also claim compliance with IFRS S1. Advise.

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What does ‘greenwashing’ mean in a reporting context, and which reporting principles does it breach?

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An entity adopts a new IFRS Accounting Standard. What must it consider and disclose about the adoption?

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A hurricane destroys a major production facility two weeks after the reporting date. Explain how this is reported.

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How should a holding of cryptocurrency held for investment be classified and measured?

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A mining group announces a plan to close its coal operations ten years earlier than planned because of climate policy. Identify the financial reporting consequences.

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Explain the reporting implications of a government-imposed carbon emissions trading scheme for a manufacturer.

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Name the five categories into which IFRS 18 requires income and expenses to be classified in the statement of profit or loss.

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Which two subtotals does IFRS 18 make mandatory in the statement of profit or loss?

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What belongs in the investing category under IFRS 18?

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What belongs in the financing category under IFRS 18?

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Why does IFRS 18 give entities with ‘specified main business activities’ different classification rules?

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A retailer that also owns a portfolio of let investment property earns rental income and a fair value gain. Where do these appear under IFRS 18?

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Define a management-defined performance measure (MPM) under IFRS 18.

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What must be disclosed about each management-defined performance measure?

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Why did the IASB decide to bring management-defined performance measures inside the financial statements?

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Explain the roles of aggregation and disaggregation under IFRS 18.

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An entity presents operating expenses by function. What extra disclosure does IFRS 18 require?

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Under IFRS 18, how is the statement of cash flows affected compared with the previous IAS 7 treatment?

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State the principles IFRS 18 sets for making disclosure notes useful.

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When may an entity offset assets and liabilities, or income and expenses?

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On what basis is an asset classified as current in the statement of financial position?

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A loan is repayable in five years but the entity breached a covenant before the year end. How is the liability classified?

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What are the two choices for measuring non-controlling interest at acquisition, and what does each produce?

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Why does the choice of NCI measurement matter when a subsidiary’s goodwill is later impaired?

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How is contingent consideration measured in a business combination, and how are later changes treated?

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A parent agrees to pay $10m in three years’ time for a subsidiary. How is that consideration measured, and what happens between acquisition and payment?

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Which acquisition-related costs may be included in the cost of a business combination?

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Which intangible assets of an acquiree must be recognised on consolidation that the acquiree itself could not recognise?

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How is a bargain purchase (negative goodwill) dealt with, and what must happen first?

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Explain how unrealised profit on intra-group trading is eliminated and who bears the adjustment.

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What consolidation adjustment is needed if a subsidiary uses accounting policies different from the group’s?

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When must a parent measure an investment at fair value through profit or loss rather than consolidate?

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In what circumstances may an intermediate parent avoid preparing consolidated financial statements?

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How does a parent account for its investments in subsidiaries in its own separate financial statements?

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An entity holds a 15% equity investment and then buys a further 45%, obtaining control. How is the goodwill calculated?

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A parent increases its holding in a subsidiary from 70% to 90%. How is the purchase accounted for?

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A parent sells a 15% interest in an 80%-owned subsidiary, retaining 65% and control. What is the accounting?

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A parent disposes of its entire 80% holding in a subsidiary mid-year. How is the group gain or loss on disposal calculated?

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A parent reduces its holding in a subsidiary from 90% to 30%, so the entity becomes an associate. Set out the treatment.

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Why does loss of control trigger remeasurement of the retained interest while a partial disposal that keeps control does not?

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A subsidiary is acquired exclusively with a view to resale within twelve months. How is it presented?

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In a group statement of cash flows, how is the acquisition of a subsidiary during the year presented?

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Explain how the dividend paid to non-controlling interests is derived for the group statement of cash flows.

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How is a subsidiary’s foreign exchange translation dealt with when constructing a group statement of cash flows?

Question

List the five fundamental principles of the ACCA Code of Ethics and Conduct.

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Name the five categories of threat to the fundamental principles and give a corporate reporting example of each.

Question

Set out the process an accountant in business should follow when faced with an ethical conflict over an accounting treatment.

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Explain how confidentiality applies when an accountant discovers a material misstatement that management refuses to correct.

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What is NOCLAR, and what does the Code require an accountant in business to do about it?

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A finance director asks the reporting accountant to classify a recurring restructuring cost as ‘exceptional’ in an adjusted earnings measure. Evaluate.

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Assess the consequences of management deliberately understating a provision to meet a profit forecast.

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Why is aggressive earnings management a reporting problem even when each individual judgement sits within an acceptable range?

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An accountant is asked to prepare an accounting treatment in an area they have never dealt with. What does the Code require?

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What ethical issues arise where a company’s directors have significant influence over the assumptions used in a defined benefit or impairment valuation?

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A director tells the accountant that a related party transaction with the director’s spouse ‘need not be disclosed because it was at arm’s length’. Respond.

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Which stakeholders are harmed by unethical corporate reporting, and how does that shape the accountant’s duty?

Question

On what two tests does IFRS 9 classify a debt instrument held as a financial asset?

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Match the three IFRS 9 measurement categories for debt instruments to their business models.

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How are investments in equity instruments measured under IFRS 9, and what election is available?

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A company issues a bond convertible into a fixed number of its own shares. How is it accounted for on issue?

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Distinguish a financial liability from equity, and give an instrument that looks like equity but is not.

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Why does the fair value gain on a financial liability designated at fair value through profit or loss not go entirely to profit or loss?

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Describe the three stages of the IFRS 9 expected credit loss model.

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What indicates a significant increase in credit risk, and what is the effect of concluding that one has occurred?

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How is a purchased or originated credit-impaired (POCI) financial asset accounted for?

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When is a financial asset derecognised under IFRS 9?

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A borrower renegotiates a loan with its lender. When is this an extinguishment rather than a modification?

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When may a financial asset be reclassified between IFRS 9 measurement categories?

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What are the three criteria, any one of which means a performance obligation is satisfied over time?

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How is variable consideration measured, and what is the constraint?

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How does an entity decide whether it is acting as principal or as agent?

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How is a contract modification accounted for under IFRS 15?

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How is a sale with a right of return accounted for?

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Distinguish an assurance-type warranty from a service-type warranty.

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A company sells goods and agrees to repurchase them in two years at a fixed price above the original selling price. How is this arrangement accounted for, and why is it not revenue?

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Explain when a contract with a customer contains a significant financing component, and the effect.

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Distinguish a contract asset from a trade receivable, and explain why the distinction matters.

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A company revalues a class of PPE upwards. Where does the gain go, and what changes afterwards?

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When can an impairment loss be reversed, and what limits apply?

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Why must goodwill be allocated to cash-generating units, and how is a CGU impairment loss allocated?

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Give three examples of development expenditure failing the IAS 38 capitalisation criteria and state the consequence.

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How is an intangible asset with an indefinite useful life accounted for after initial recognition?

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Explain component depreciation and why IAS 16 requires it.

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What conditions must be met before an asset is classified as held for sale, and how is it then measured?

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What are the two recognition exemptions available to a lessee, and how do they work?

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What is included in the initial measurement of a right-of-use asset?

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In what circumstances must a lessee remeasure the lease liability, and how is the adjustment recorded?

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How should a lessee separate the components of a contract that covers both the use of an asset and related services?

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How does an intermediate lessor account for a sublease?

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How does a lessor decide whether a lease is a finance lease?

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Explain the asset ceiling test for a defined benefit plan in surplus.

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Distinguish a settlement from a curtailment of a defined benefit plan, and state where the gain or loss is recognised.

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What is past service cost and how is it recognised?

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How does accounting for a defined contribution plan differ from a defined benefit plan, and where does risk sit?

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What is an onerous contract and how is it measured?

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How is a decommissioning provision recognised and then unwound?

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How is the amount of a provision measured under IAS 37?

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Why does IAS 37 prohibit a provision for future operating losses, and what should be done instead?

Question

Set out the four types of condition attaching to a share-based payment and how each affects the charge.

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How are a modification, a cancellation and a settlement of an equity-settled share-based payment accounted for?

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Distinguish Level 1, Level 2 and Level 3 inputs in the fair value hierarchy.

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Name the three valuation techniques permitted by IFRS 13 and when each is appropriate.

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Explain the difference between the principal market and the most advantageous market.

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Why is fair value described as an exit price based on market participants, and what does that exclude?

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Explain what a temporary difference is and how the tax base of an asset is determined.

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When is deferred tax recognised on the unremitted profits of a subsidiary, associate or joint venture?

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What is the initial recognition exemption in IAS 12, and why does it exist?

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Distinguish a change of accounting policy from a change in accounting estimate, and state the different treatments.

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Name three significant differences between the IFRS for SMEs Standard and full IFRS Accounting Standards.

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At what amount is inventory measured, and what does ‘net realisable value’ mean?

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Which costs must be excluded from the cost of inventory?

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Why does the measurement of inventory frequently feature as an ethical or judgement issue in an SBR scenario?

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State the objective of general purpose financial reporting and identify the primary users.

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Which measurement bases does the Conceptual Framework identify, and what drives the choice?

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What is measurement uncertainty, and does it prevent recognition?

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When is an asset derecognised under the Conceptual Framework, and what problem does derecognition accounting try to solve?

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Discuss the limitations of the Conceptual Framework.

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How is a joint arrangement classified, and what determines the answer?

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How does a joint operator account for its interest in a joint operation?

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What indicators suggest significant influence over an investee?

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How are transactions between an investor and its associate eliminated?

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What happens under the equity method when an associate makes losses exceeding the investor’s interest?

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Set out the rates used to translate a foreign subsidiary into the group’s presentation currency, and where the difference goes.

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What happens to the foreign exchange translation reserve when a foreign operation is disposed of?

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Distinguish functional currency from presentation currency, and explain the consequence of the distinction.

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A subsidiary’s circumstances change and its functional currency changes. How is this dealt with?

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How is a monetary item that forms part of the net investment in a foreign operation treated?

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What is diluted EPS, and why do users pay attention to it?

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Explain how the information needs of a lender, an equity investor and an employee differ when reading a set of financial statements.

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What should management commentary contain, and what makes it useful?

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Set out the main limitations of ratio analysis for a user comparing two entities.

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Assess the usefulness of operating segment disclosures to an investor.

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How does an entity identify its reportable segments?

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What are the risks to users of alternative performance measures, and how should a user respond to them?

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What are the 6 qualitative characteristics of financial information?

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Define an asset

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Identify 5 headings in other comprehensive income

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Define joint arrangement.

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How are joint ventures accounted for?

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Define Functional Currency.

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In a cash flow statement where would you show dividends from associates, and dividends paid to NCI?

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Should you depreciate PPE and investment properties if held at FV?

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In what circumstances should borrowing costs be capitalised?

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Can you capitalise non purchased intangibles?

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Define value in use and explain its relevance.

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At what value are non-current assets held for sale recognised in the SFP?

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Where in the P&L would you record a discontinued operation?

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Where in the SFP would you record a non-current assets held for sale?

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What is a defined benefit pension scheme?

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Which type of pension scheme will normally appear in an employer’s SFP?

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How do you measure the P&L charge for equity-settled share based pay schemes?

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How do you measure the P&L charge for cash-settled share based pay schemes?

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What is the accounting for negative goodwill?

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Should goodwill be amortised?

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Define liability and financial liability

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Define derivative.

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Andrew owns some sausages and an option to sell the sausages. What sort of hedge accounting can he use?

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Mary expects to sell some sausages to the King of Neverland next year. She enters a currency forward to sell the Neverland dollars when she receives them. What sort of hedge accounting can she use?

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Define a Level 1 input for fair value purposes, and give an example of an asset for which Level 1 would be used.

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Define operating segment.

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What are the five stages of the revenue recognition model?

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Define a lease

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How should the lessee normally reflect a lease in the financial statements?

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In what circumstances should a company recognise a deferred tax asset relating to losses?

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What are the 3 key related party disclosures?

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Define a provision

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In what circumstances can you recognise a provision for reorganisation?

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When should contingent liabilities and contingent assets be disclosed?

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In what 2 situations should you make a prior period adjustment?

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What is the formula for EPS?

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For SMEs what is the accounting treatment of development costs?

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For integrated reporting identify the six capitals.

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If an ACCA accountant does not know the accounting treatment of leases, what is the ethical issue?

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In what circumstances should an asset be recognised in the financial statements?

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Define equity.

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Parent has December year-end. Subsidiary has October year-end. Can parent consolidate subsidiary?

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Give examples of monetary assets and explain their relevance in SBR

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If a company is using the fair value model, how often should it revalue PPE and IP?

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How should a company account for a government grant?

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Define investment property.

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In what 3 circumstances should a company conduct an impairment review?

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How are derivatives recognised in the financial statements?

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If an ACCA accountant deliberately fails to consolidate a subsidiary, what is the ethical issue?

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What are the three attributes of faithful representation?

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In what circumstances should liabilities be recognised, according to the Framework?

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How should fair value be determined for non-financial assets (e.g., investment properties)?

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If directors have a profit-related bonus, what ethical threat does this represent?

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Identify three circumstances when gains recognised in OCI are later recycled to P&L?

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What are the key components of a discontinued operation?

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What is the accounting treatment of a change in depreciation rate?

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What is a performance obligation?

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What are the primary factors in determining functional currency?

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A company buys inventory from a foreign country on credit. At the reporting date, how should the inventory and the payable be translated?

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In what order should losses be allocated to cash-generating units?

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Define cash-generating unit

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In what circumstances is an intangible asset ‘identifiable’?

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What is the accounting treatment if PPE is transferred to IP? The company uses historic cost for PPE and fair value for IP. Prices are rising.

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A company buys a building which it intends to use as a hotel. Can it classify it as an investment property?

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In revenue recognition how should the transaction price be allocated to separate performance obligations?

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How should the lessor reflect a finance lease in the financial statements?

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A company sells PPE with a life of 50 years, and rents it back for 10 years. How will this be accounted for?

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What are the main items recognised in the P&L for a defined benefit pension scheme?

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What is the main item recognised in OCI for a defined benefit pension scheme?

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How do you account for share based pay where the employee has the choice of shares or cash?

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Define an adjusting subsequent event.

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In the context of derivatives, what is an executory contract and how would it be accounted for?

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A company buys an investment property financed by a loan. What is the accounting? (The company prefers to use the fair value model)

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How should a company account for doubtful debts for trade receivables?

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How is deferred tax on an UPWARD REVALUATION of PPE recognised, when the gain will be taxed only on sale?

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How is deferred tax on a PROVISION recognised, where the expense is allowed for tax only when paid?

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How is deferred tax on a FAIR VALUE UPLIFT to a subsidiary's assets recognised on consolidation?

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What are the quantitative thresholds for a reportable segment under IFRS 8, Operating Segments?

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How would you refer to a transaction involving the husband of a company director under IAS 24?

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For SMEs what is the accounting treatment of borrowing costs?

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A company owns 30% of another company. What are the possibilities for accounting?

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How does IFRS 10 define control?

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What is required for a ‘business’ and why is it relevant for group accounts?

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In calculating goodwill, how would you deal with a legal claim against a subsidiary?

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How are DB pension plans dealt with in the operating section of a cash flow statement?

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Define receivable days

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Define PE ratio

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Define Free Cash Flow

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Which body publishes standards on sustainability reporting?

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How should a cryptocurrency be recognised in the SOFP?

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What are three characteristics of materiality?

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Which method of cash flow preparation is preferred by IAS 7 and by accounts preparers? Why?

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How would a revaluation of PPE (upwards) affect ROCE?

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How should goodwill be translated for a foreign subsidiary?

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What is a market-based condition (in the context of share-based pay) and what is its relevance?

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A company sells PPE with a life of 50 years, and rents it back for 50 years? How will this be accounted for and why?

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How should a subsequent event which is non-adjusting but will cause the entity to cease trading be dealt with in FS?

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In what circumstances can financial assets and liabilities be offset?

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Define a financial asset.

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Why does the IASB have a Conceptual Framework, and what is it for?

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What is the objective of financial reporting under the Conceptual Framework?

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What are the two fundamental qualitative characteristics of useful financial information?

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What are the four enhancing qualitative characteristics?

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How does the Conceptual Framework define an asset, a liability and equity?

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When is an item recognised in the financial statements under the Conceptual Framework?

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What does derecognition mean under the Conceptual Framework?

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Within current value measurement, how do fair value and current cost differ?

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Which statement is the primary source of information on performance, and when may an item go to other comprehensive income?

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What happens where the Conceptual Framework conflicts with an accounting standard?

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What does a complete set of financial statements present to users?

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How is the statement of financial position laid out in the chapter proforma?

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What are the two new IFRS 18 profit-or-loss subtotals, and what are the five categories?

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Under IFRS 18, where must operating expenses be analysed, and on what basis?

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How must goodwill be presented under IFRS 18?

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What does IFRS 18 say about using the word 'other' in disclosure notes?

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How should the notes to the financial statements be organised under IFRS 18?

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How is other comprehensive income split in the statement of profit or loss and other comprehensive income?

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In the proforma, what sits between operating profit and profit before income tax?

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What does the statement of changes in equity show?

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What three elements must be present for one entity to control another?

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What must be acquired for IFRS 3 to treat an acquisition as a business combination?

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What is significant influence, and what evidences it?

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How is goodwill calculated on the acquisition of a subsidiary?

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What are the two ways of measuring the non-controlling interest at acquisition?

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How are a subsidiary's net assets measured at acquisition, and what can that add?

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How are consideration and acquisition-related legal fees treated in a business combination in the consolidated accounts?

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How does the treatment of unrealised profit differ between a subsidiary and an associate?

Question

Luke buys 80% of Han for $5,400m. Han's identifiable net assets at acquisition have a fair value of $3,400m and the fair value of the non-controlling interest is $700m. Calculate goodwill under both methods.

Question

Rey bought 70% of Finn on 1 January 2014. Finn's retained earnings were $450m then and $800m at 31 December 2015. A $400m fair value uplift on plant has a 10 year life. Find post-acquisition retained earnings.

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Define a joint arrangement.

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An investor holds 50% of a vehicle and can block key decisions. Why does that matter?

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What are the two types of joint arrangement, and what separates them?

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What characterises a joint venture?

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How is a joint venture accounted for?

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What characterises a joint operation?

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How does a party account for its interest in a joint operation?

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Why do reported revenue and assets differ between a joint venture and a joint operation?

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A joint operator has a 40% share. In the year the operation's revenue was $30m, direct costs $22m, operating costs $1.5m and depreciation $1.5m. What goes in the operator's profit or loss?

Question

A joint operator with a 40% share paid $6m towards a facility costing $15m with a 10 year life, completed at the start of the year. What is the operator's carrying amount at the year end?

Question

Under IFRS 3, when does a group calculate goodwill in a step acquisition, and at what date is the consideration measured?

Question

A company holds 30% of an entity and then buys a further 50%, gaining control. How is the previously held interest dealt with?

Question

List the lines of the goodwill working used when control is obtained in a step acquisition.

Question

Jeremy held 40% of David bought for $40m and buys a further 35% for $45m. Fair value of the existing 40% is $52m, the NCI is $32m and net assets are $105m. Calculate goodwill.

Question

A parent owning 60% of a subsidiary buys a further 10% of its shares. How is the purchase accounted for?

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A owns 75% of B. When the non-controlling interest has a carrying amount of 75, A buys the remaining 25% of the shares for 100. Prepare the journal entry.

Question

A parent owning 80% of a subsidiary sells a 10% holding and keeps control. What is the accounting treatment?

Question

A parent owning 80% of a subsidiary sells 45%, retaining 35%. How is the group profit or loss on disposal calculated?

Question

Socks reduces its 90% holding in Mogs to 40%, receiving $120m. The retained interest has fair value $96m. NCI is $53m, goodwill $38m and net assets $201m. Calculate the group disposal profit.

Question

A company owns 40% of another company and then sells 25%, losing significant influence. How is this accounted for?

Question

Define functional currency under IAS 21 and state the factors management considers in determining it.

Question

How is a transaction in a currency other than the functional currency recorded, and how are monetary balances treated at the reporting date?

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How are non-monetary assets and liabilities treated at the reporting date under IAS 21?

Question

Under IFRS 18, where within profit or loss are exchange differences on foreign currency transactions presented?

Question

Jones has the $USD as its functional currency and buys goods for 400,000 Dinar on 1 December when the rate is 4.1 Dinar to $1. At 31 December the rate is 4.3. Show the year-end treatment.

Question

At what rates are an overseas subsidiary's balances translated for the group statement of financial position?

Question

At what rate are an overseas subsidiary's income and expenses translated for the group statement of profit or loss, and why does this create a difference?

Question

How is goodwill on an overseas subsidiary translated, and what is the effect?

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Which three components make up the exchange gain or loss on translating an overseas subsidiary, and where is it recognised?

Question

What happens to the cumulative exchange differences held in other comprehensive income when a foreign subsidiary is disposed of?

Question

For an ordinary non-financial group, how is the dividend paid to NCI derived? Assume only the listed movements.

Question

The non-controlling interest was $110m at the start of the year and $115m at the end. Profit attributable to the NCI was $6m. Calculate the dividend paid to the non-controlling interest.

Question

For an ordinary non-financial group, how is the dividend received from an associate derived? Assume only profit and dividends affect the investment.

Question

The investment in associate was $190m at the start of the year and $200m at the end. The associate made a profit of $200m for the year and the group owns 20% of it. Calculate the dividend received.

Question

How is the acquisition or disposal of a subsidiary during the year presented in the group statement of cash flows?

Question

Why must the working capital movement be adjusted for a subsidiary acquired during the year?

Question

For an entity without specified main business activities under IFRS 18, how are interest and dividend cash flows classified, and where does the indirect method start?

Question

What is the direct method of presenting operating cash flows, and why does IAS 7 prefer it?

Question

Why is the direct method of presenting operating cash flows not normally used by companies?

Question

How are defined benefit pension amounts dealt with in the operating section of the statement of cash flows?

Question

Under the revaluation model in IAS 16, at what amount is an asset carried and what rules govern the revaluations?

Question

When does depreciation of an item of property, plant and equipment start, and how is a change in the estimated useful life dealt with?

Question

Ecuador bought an asset for $25m on 1 January 2012 and depreciated it over 10 years. On 31 December 2014 the remaining life was estimated as 5 years. Calculate the 2015 charge and closing carrying amount.

Question

Under IAS 23, when does capitalisation of borrowing costs on a qualifying asset start and when must it stop?

Question

Columbia began construction on 1 March 2015, funded by a $10m loan at 5%. A strike stopped construction between 1 October and 1 November. Its year end is 31 December. Calculate the borrowing costs capitalised.

Question

When is a government grant recognised under IAS 20, and on what basis is it released to profit or loss?

Question

How is repayment of an income-related grant presented as deferred income accounted for?

Question

Define investment property under IAS 40 and state what the definition excludes.

Question

Contrast the fair value model and the cost model for investment property.

Question

When may property be transferred into or out of investment property, and how is owner-occupied property transferred to the IAS 40 fair value model?

Question

What is an intangible asset, and give three examples.

Question

How is a separately acquired intangible asset initially measured under IAS 38?

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When does amortisation of a separately acquired intangible asset with a finite useful life begin, and over what period is it charged?

Question

How is research expenditure treated under IAS 38?

Question

List the criteria development expenditure must meet before it is capitalised.

Question

Why can internally generated brands and mastheads not be capitalised?

Question

Booker buys a patent for $15m, incurs $6m research spending, then $8m development spending after all IAS 38 capitalisation criteria are met. How is each amount treated?

Question

How are amounts spent on marketing a new product and on training sales staff to demonstrate it treated?

Question

Capitalised development expenditure relates to a project that is not complete at the reporting date. How is it treated?

Question

What three steps does IAS 36 work through when dealing with the impairment of an asset?

Question

Give two external indicators that an asset may be impaired under IAS 36.

Question

Give three internal indicators that an asset may be impaired under IAS 36.

Question

Apart from where an impairment indicator exists, when is an impairment review required every year?

Question

Define recoverable amount and state when an asset is impaired.

Question

Where is the reduction in carrying value recognised when an individual asset is impaired?

Question

What is a cash generating unit?

Question

In what order is an impairment loss allocated to the assets of a cash generating unit?

Question

Can an impairment loss be reversed if the circumstances that caused it cease to apply?

Question

A CGU suffers $7.2m impairment. Specific losses absorb $1.2m in plant and $0.5m in a patent; goodwill is $2.4m. Buildings of $6m can absorb the remainder; other assets are at their impairment floors. Calculate the buildings write-down.

Question

What must be true before a non-current asset is classified as held for sale under IFRS 5?

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At what amount is a non-current asset held for sale measured under IFRS 5?

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What happens to depreciation once an asset is classified as held for sale?

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What is recognised when an asset previously classified as held for sale is sold?

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Explain the two stages applied to a revalued property on the date it is classified as held for sale.

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A revalued property stands at $14m, depreciation is $300,000 a year, and it is classified as held for sale after four months when fair value is $15.4m and selling costs $300,000. Show the entries.

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Where is a non-current asset held for sale presented in the statement of financial position?

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A board decides in 2015 to close a loss-making operating segment on 31 March 2016. How is that decision treated in the 2015 financial statements?

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When does an operation being abandoned, representing a separate major line of business, become a discontinued operation?

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An entity will abandon a separate major geographical operation rather than sell it. Is it held for sale, and when is it discontinued?

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Distinguish a defined contribution pension plan from a defined benefit plan and say who carries the risk.

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How is a defined contribution scheme accounted for?

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What appears on the statement of financial position for a defined benefit scheme?

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For a defined-benefit plan with a net liability, which recurring amounts enter profit or loss and how are they classified under IFRS 18?

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How is the remeasurement component of a defined benefit scheme found and where is it reported?

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Opening scheme assets are $60m and liabilities $64m. The rate is 5%. Service costs are $17m, contributions $5m, benefits paid $6m. Closing actuarial values are $66m and $75m. What is the remeasurement?

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What is a curtailment of a pension scheme and how is it accounted for?

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What is the asset ceiling and how is a restriction to it recognised?

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How is holiday pay carried forward by employees accounted for under IAS 19?

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How does the accounting for long-term employee benefits differ from that for a defined benefit pension plan?

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What fair value is used to measure an equity-settled share-based payment?

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How is the expense for an employee equity-settled share-based award recognised over its service vesting period?

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How does the measurement of a cash-settled share-based payment differ from an equity-settled one?

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In an equity-settled scheme, which estimate is revised at each reporting date?

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Distinguish a market-based vesting condition from a non-market-based condition in IFRS 2.

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Options vest in three years if the share price reaches $15. At the end of year one the price is $13 and is not expected to rise. What is the effect on the charge?

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20,000 options are granted to each of 10 directors at grant-date fair value $60, vesting after three years of service. At year two, one director is expected to leave before vesting. What is cumulative equity?

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10,000 cash-settled rights are granted to each of 20 directors, vesting after three years of service, with no leavers. Fair value at the end of year two is $13.80. What liability is recognised?

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A supplier accepts share options in exchange for goods that cost $10m, when the shares have a market value of $11.5m. How is the transaction recorded?

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How is a share-based payment accounted for where the employee can choose to receive shares or cash?

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Give two examples of financial assets and distinguish a financial liability from equity under IAS 32.

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At what amount is a financial asset initially measured under IFRS 9?

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How are equity investments measured after initial recognition under IFRS 9?

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How do the business model and contractual cash-flow tests determine the normal IFRS 9 classification of debt assets?

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Debentures with a par value of $2m are issued with issue costs of $100,000, a 2% coupon and an effective rate of 4.58%. What are the year-one finance cost and closing balance?

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When a sale transfers substantially all risks and rewards and qualifies for derecognition, how do debt and designated equity investments at FVOCI differ in recycling?

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Outline the three stages of the IFRS 9 expected credit loss model for debt investments.

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How are expected credit losses measured on trade receivables without a significant financing component?

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How is a convertible debenture whose conversion option qualifies as equity under IAS 32 accounted for on issue?

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Contrast the accounting for a fair value hedge with that for a cash flow hedge.

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What problem does IFRS 13 address, and does it require every asset to be measured at fair value?

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Give the IFRS 13 definition of fair value.

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In arriving at fair value under IFRS 13, how are transaction costs and transport costs treated?

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Distinguish the principal market from the most advantageous market under IFRS 13.

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Accessible markets trade Roy's produce: retailers 7,000 tonnes at $650; manufacturers 5,000 at $500; export 3,000 at $800. Transaction and transport costs are nil. Identify the principal market, most advantageous market and fair value.

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What is a Level 1 input in the IFRS 13 fair value hierarchy?

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How is a quoted price in an active market used when measuring fair value?

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What are Level 2 inputs, and give examples.

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What are Level 3 inputs, and when are they used?

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On what basis does an entity develop Level 3 inputs?

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What does IFRS 8 Operating Segments aim to help users do?

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Define an operating segment under IFRS 8.

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What are the quantitative thresholds for reporting a segment under IFRS 8?

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For the 10% result test in IFRS 8, what is the figure the segment result is compared with?

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For the IFRS 8 10% revenue test, does total revenue mean external revenue only?

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What happens if the reportable segments do not cover enough of the entity's revenue?

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On what basis may two operating segments be combined under IFRS 8?

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What figures should be disclosed for each reportable segment?

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What general, entity-wide disclosures does IFRS 8 require?

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Gulf's CODM reviews domestic rail, international rail and construction. Fares are set by a transport authority for domestic and by Gulf for international. May the two rail segments be combined?

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List the five steps of the IFRS 15 revenue model.

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What must be met before a contract falls within IFRS 15?

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When are goods or services in a contract accounted for as separate performance obligations?

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What is the transaction price under IFRS 15, and what must be considered in arriving at it?

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Richer sells a system plus a two-year maintenance package for $10,000. Stand-alone prices are $9,000 for the system and $2,000 to renew the maintenance. Allocate the price. Ignore discounting.

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Which indicators show that control has transferred at a point in time under IFRS 15?

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How is progress measured where a performance obligation is satisfied over time?

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When a third party is involved in supplying a customer, how does the seller decide whether it is principal or agent, and what does it recognise?

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How is a contract modification treated when it adds distinct goods or services and the extra price reflects their stand-alone selling prices?

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Distinguish a car warranty that only assures compliance with agreed specifications from an optional extended service warranty.

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What recognition exemptions may a lessee take under IFRS 16, and how are those leases accounted for?

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When does a contract contain a lease under IFRS 16?

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What is the effect of the supplier holding a substantive right to substitute the asset?

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Pear pays $100,000 a year for machinery plus maintenance. Stand-alone prices are $95,000 for the rental and $10,000 for maintenance. Split the annual payment.

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How is the lease liability measured at the start of a lease, and what rate is used?

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Under the IFRS 16 cost model, how are the right-of-use asset and lease liability subsequently measured?

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How does a lessor decide that a lease is a finance lease?

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In a sale and leaseback, how is the transaction accounted for if the transfer is not a sale under IFRS 15?

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In a sale and leaseback that does qualify as a sale, how does the seller-lessee account for it?

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At what amount is inventory measured under IAS 2?

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What costs make up the cost of inventory under IAS 2?

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How is the net realisable value of inventory calculated?

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How are biological assets and agricultural produce measured under IAS 41?

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Bravo holds 200,000 finished units costing $1,500 each. The selling price has fallen to $1,450 and selling costs are $10 per unit. Calculate the write-down.

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Bravo holds 100,000 first-stage units costing $1,000 each. Finished units sell for $1,450 with $10 selling costs, and second-stage conversion costs $500 per unit. Calculate the write-down.

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What is a temporary difference, and what is the tax base?

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How does an entity tell whether a temporary difference gives a deferred tax liability or a deferred tax asset?

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How is a movement in a deferred tax liability recognised when it belongs wholly in profit or loss?

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Where is the deferred tax taken when an asset is revalued upwards?

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What are the tax bases of a provision deductible on payment, development costs already deducted for tax, and employee services under an equity-settled award with a future intrinsic-value tax deduction?

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Osborne buys an asset for $150,000 with a six-year life and $30,000 residual value. Capital allowances are 25% reducing balance and tax is 20%. Give the year 1 deferred tax balance.

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When may a deferred tax asset be recognised for unused tax losses carried forward?

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What deferred tax arises on the fair value adjustments made on consolidation?

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Why does goodwill with a nil tax base not create a deferred tax liability on initial recognition?

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What deferred tax arises on an unrealised profit eliminated on consolidation?

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What three conditions must be met before a provision is recognised under IAS 37?

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How does IAS 37 require the amount of a provision to be measured?

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Can an entity recognise a provision for anticipated future operating losses?

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What is an onerous contract under IAS 37?

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When may a restructuring provision be recognised?

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Which costs may be included in a restructuring provision?

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A company builds a wind farm for $40 million cash. Law requires demolition and site clean-up at the end of its life; the present value of that cost is $8 million. Give the double entry on construction.

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York publicises a policy of cleaning up environmental damage. Clean-up costs are $4 million where a law exists, $5 million where no law exists and $6 million where a law starts next period. What is provided?

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What is a contingent liability under IAS 37?

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How is a contingent asset treated as its likelihood rises from remote to virtually certain?

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What distinguishes an adjusting event from a non-adjusting event after the reporting date?

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An outstanding court case against the entity is settled after the reporting date. Is this adjusting or non-adjusting?

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A customer becomes bankrupt after the reporting date, confirming financial difficulties existing at that date. How is this treated under IAS 10?

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Inventory is sold below cost after year end, providing evidence of its net realisable value at the reporting date. How is this treated?

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Investments fall in value because of conditions first arising after the reporting date. Is this adjusting, and what disclosure may be needed?

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A restructuring plan is first agreed and announced after year end, with no restructuring obligation at the reporting date. How is it treated?

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What does IAS 8 mean by an accounting policy?

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How is a change in accounting estimate recognised under IAS 8?

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A company changes its depreciation method from straight line to reducing balance. How is that dealt with?

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What does IAS 8 include within accounting errors?

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How are material prior period errors corrected?

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Which changes under IAS 8 are applied retrospectively and which prospectively?

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How does IAS 8 require an accounting policy to be selected?

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Which three IAS 8 topics are covered in this chapter?

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In what two circumstances does an accounting policy change under IAS 8?

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What does retrospective application of a change in accounting policy involve in practice?

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Under IAS 24, when is a party related to an entity through control?

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Which investment relationships make a party related to an entity without control?

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Which individuals, and which plan, are related parties of an entity under IAS 24?

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Who are key management personnel under IAS 24?

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Which common business contacts are not related parties under IAS 24?

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What must be disclosed about a parent-subsidiary relationship even where no transactions took place?

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Must a related party transaction be disclosed if no price was charged for it?

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What is the minimum information to be disclosed about related party transactions?

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For which categories must related party disclosures be given separately?

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How is key management personnel compensation disclosed?

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What is the formula for basic earnings per share?

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How are shares issued at full price during the year dealt with in the EPS denominator?

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How does a bonus issue affect the EPS calculation?

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How is a rights issue treated in the weighted average number of shares?

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How do bonus issues and rights issues after the reporting date but before authorisation affect EPS?

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When is a diluted earnings per share figure calculated?

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How are earnings adjusted in a diluted EPS calculation?

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How is the share count adjusted for convertible instruments in diluted EPS?

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How is the share count adjusted for share options in diluted EPS?

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Profit attributable to ordinary shareholders is $1,200,000. A company had 4,000,000 ordinary shares in issue all year and made a 1 for 4 bonus issue on 30 June. What is basic EPS?

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Which entities are small and medium sized entities for reporting purposes?

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What is the IFRS for SMEs, and who is it designed for?

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Which topics does the IFRS for SMEs omit as not relevant to SMEs?

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Give four recognition or measurement simplifications in the IFRS for SMEs.

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How do the disclosure requirements of the IFRS for SMEs compare with full IFRS?

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How often is the IFRS for SMEs expected to be revised, and why?

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Why might directors manipulate the information in the financial statements?

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By what means can directors manipulate the financial statements?

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Where do ethical issues most commonly arise in preparing financial statements?

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In which five reporting areas does the chapter say ethical issues over judgement commonly arise?

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What are the first two steps of the exam approach to an ethics question?

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How is the principle of integrity explained when directors manipulate financial information?

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Which principle is breached where directors are unaware of a particular accounting rule?

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When is the principle of professional behaviour relevant to an ethics answer?

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Directors have acted in a particular way to maximise their share-based pay. Which threat does this present?

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Which actions should be recommended at the end of an ethics answer?

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Must an entity comply with the IFRS Practice Statement on Management Commentary in order to comply with IFRS Accounting Standards?

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When interpreting financial statements, what are investors and what are lenders and suppliers primarily interested in?

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What do the alternative performance measures EBITDA and EBITDAR stand for?

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Why is EBITDA widely used to analyse a business, and why is it not a measure of cash flow?

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An entity reports operating profit of 400,000 after charging depreciation of 90,000 and amortisation of 30,000; interest expense is 50,000 and tax is 60,000. Calculate EBITDA.

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What is a management-defined performance measure (MPM) under IFRS 18?

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Explain why average wage paid and operating profit are not MPMs under IFRS 18, while operating profit before restructuring costs may be.

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What disclosures does IFRS 18 require for a management-defined performance measure?

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State the definition of material information used in the IFRS Practice Statement on making materiality judgements.

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What four steps does the IFRS Practice Statement suggest for assessing what is material for inclusion in the financial statements?

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A global event such as a pandemic raises doubt over an entity's future. How is that reflected in the financial statements?

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An entity receives government support during a global crisis, such as payments towards furloughed employees' wages. How is that support reported?

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A global event increases credit losses. What does IFRS 9 require for trade receivables without a significant financing component?

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Which body issues the IFRS Sustainability Disclosure Standards, and which standards has it issued?

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Under what four headings must core content be disclosed by IFRS S1 and IFRS S2?

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Distinguish physical from transition climate-related risks under IFRS S2.

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How do the European Sustainability Reporting Standards (ESRS) differ from the IFRS Sustainability Disclosure Standards?

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Which tools are available on the top bar of the SBR computer-based exam screen, and what is each used for?