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Ms,its related to June 2015 Q2(a)(i) and due to the outdated standard being used in the examiner answer,I have reference to the Kaplan practice kits for the updated answer.
1.General question:is it for “matters to be considered” need to include suggest an adjustment to management to correct the possible misstatement as well as a journal entry or its included by examiner just for reference?
2. Why the depreciation charge over the final four-month is based on 20 years rather than 21 years as the question stated that the remaining useful life was 21years at the date of disposal?
3.as the Kaplan kits also included the following evidence” A copy of insurance documents stating that the Group is responsible for insuring the property complex”
Will it more relevant to old standard IAS 17 for differentiating the operating and finance lease?
Thank you.
1. Saying what the correct treatment should be – whether in words or by journal would earn marks but would not be necessary to be awarded full marks – as there are always more valid points that can be made.
2. I don’t have Kaplan kit to know how this has been adapted but perhaps it is the right-of-use asset that is written off over a 20-year lease term rather than the useful life of the underlying physical asset.
3. Is an example of evidence which might corroborate ownership – i.e. Adder insures an asset that it owns. It’s relevant to assessing whether risk and rewards of ownership have been transferred – is there a sale? Whether a sale is recognised (IFRS 15) is fundamental to accounting for sale and leaseback – if no sale it’s a financing arrangement – if a sale, the leaseback gives rise to the right-of-use asset.
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