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June 1, 2019 at 1:51 pm #518104abidaca1
- Topics: 12
- Replies: 19
I have read opentuition notes and kaplan textbook. I have come across the following problems, on which I’d require your help. These are from the whole syllabus and I didn’t want to over-pollute the forum so posted in two parts rather than topic by topic.
1- According to IAS 8, changes in accounting policy and prior period errors are adjusted retrospectively by adjusting the opening balances of equity. Why do we change balance of equity only? Why not the amount of assets/liabilities actually affected? Does changing equity ultimately means the same (as assets-liabilities=equity)?
2- According to IFRS 15, contract costs (of obtaining and fulfilling the contract) are capitalized in SFP and amortized in SPL as revenue is recognised. Under what name should this cost be recognised? As ‘capitalized contract cost’ or ‘contract asset’? Is capitalized contract cost and contract asset same things? or is contract asset another name for ‘accrued income that is conditional’?
3- IAS 16 says costs of opening a new facility should never be capitalized. Does this include cost of newly ‘bought (not rented)’ factory building?
4- Depreciation is charged in SPL unless it is included in carrying amount of another asset. Any example of this? (maybe when dep. is charged to inventory costs as part of conversion costs?).
5- Change in depreciation method in change in accounting policy or estimate?
6- Lease liability is initially recorded at present value of future payments while right of use asset at PV of future payments + amounts already paid + indirect costs + dismantling costs (IFRS 16). SO there’s a statement ” if an entity chooses to recognize compound lease (lease and non-lease component) as a single lease this will increase lease liability at inception of lease giving negative perception of financial statements”. How will it increase liability when actually the amount of the asset recognized will be (as above) more than the liability recognized?
7- In case of short-life/low value assets, lease payments can be recognized in SPL on straight line basis (no right of use asset no liability recognised). Does this mean we expense out the lease payments every year? Like Dr Lease expense Cr Cash/Payable/other ? or Do we still recognize some sort of asset?
8- In finance lease, gain/loss on fair value of the residual fall to the lessee (e.g through rebate of lease payments). Does this mean that if the residual value FV is greater than guaranteed carrying value, lessor will give rebate to the lessee (and will charge lessee if FV is less than promised Carrying amount)?
9- IAS 37 says if expenditure on environmental repair in future (for which a provision has been recognized) will result in future economic benefits then an equivalent asset can be recognized ;depreciated over its useful life (which is same as provision). What will be the double entry for recognizing this asset?
10- IAS 10: inventory sold after reporting date is adjusting event ; gives evidence of NRV of inventory at reporting date. What is the adjustment? Do we recognize the ‘sale (that has happened after rep date)’ at reporting date or ‘change the value of reporting date inventory to NRV’?
*THANK YOUJune 4, 2019 at 7:38 pm #518918P2-D2Keymaster
- Topics: 4
- Replies: 6317
1 – The change in the value of the asset liability is the other side of the journal entry.
2 – It is shown in the SFP as contract asset and is effectively like a work in progress figure that has yet to be invoiced to the customer.
3 – The purchase of the factory is capitalised.
4 – Correct, the depreciation is included as part of the cost of the inventory.
5 – Estimate
6 – The non-lease component will increase the value of the liability.
7 – No asset recognised. Watch the videos and you will see the accounting treatment.
8 – Technically yes, but unlikely to happen.
9 – DR PPE CR Provision
10 – We adjust the closing inventory on the SFP and in cost of sales.
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