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Sol Eg 1: J/Es as if processed in each individual yr (if it was possible to process journals in each of the prior effected years)

2008 Plant cost Interest expense (2010 opening RE) Capitalise interest that was previously expensed Tax expense (2010 opening RE) Deferred tax: NT Tax increases due to decrease in interest expense 2009 Plant cost Interest expense (2010 opening RE) Capitalise interest that was previously expensed Tax expense (2010 opening RE) Deferred tax: NT Tax increases due to decrease in interest expense 2010 Plant cost Interest expense Capitalise interest that was previously expensed Tax expense Deferred tax: NT Tax increases due to decrease in interest expense Debit 15 000 Credit 15 000 4 500 4 500

Debit 17 000

Credit 17 000

5 100 5 100

Debit 9 000

Credit 9 000

2 700 2 700

Sol Eg 1: J/Es as if processed in 2010 (if not possible to process J/Es in the prior affected years. DR 2010 Plant cost Deferred tax: NT Retained earnings 32 000 9 600 22 400 CR

Capitalise int that was previously exped in 2008 & 2009


2010 Plant cost Interest expense (RE) Capitalise interest that was previously exped in 2010 Tax expense (RE) Deferred tax: NT Tax increase due to decrease in interest expense in 2010 Sol to eg 1: Disclosure Notes to Fin Stms (extracts: after the change) 2. Accounting Policies Debit 9 000 Credit 9 000 2 700 2 700

2.1 Borrowing costs


Borrowing costs are capitalised to qualifying assets. This is a change in acc policy (note 5). 5. Change in Accounting Policy The company changed its accounting policy from expensing borrowing costs as they are incurred to capitalising BCs to plant, a qualifying asset.

Moodle - IAS 8 - part 2 - policies - solutions to lecture eg's

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The change was made to comply with revised IAS 23 Borrowing costs issued during year. IAS 23 included transitional provisions in which BCs could be capitalised from 2011 or from earlier date if preferred: The co. has opted to capitalise the BCs from the earliest date possible. The effect on future years is that depreciation expense will be proportionately increased due to BCs being capitalised now. The effect of the change is as follows: Effect on statement of comprehensive income: Expenses increased/ (decreased): - Finance costs - Tax expense Income/ profit decr/ (incr): Profit for the year

2010 (9 000) 2 700 (6 300) 2010 41 000 (12 000) (28 700)

2009 (17 000) 5 100 (11 900) 2009 32 000 (9 600) (22 400) 2008 15 000 (4 500) (10 500)

Effect on statement of financial position: Assets increased/ (decreased): - Plant Liabilities/ equity decr/ (incr): - Deferred tax: NT - Retained earnings

Statement of Comprehensive Income (extracts) For year ended 31 December 2010 2010 2009 restated Profit before finance charges 809 000 717 000 Finance charges 0 0 Profit before tax 809 000 717 000 Tax expense 347 700 325 100 Profit for the period 461 300 391 900 Other comprehensive income 0 0 Total comprehensive income 461 300 391 900 Stm of changes in equity (extract) For the year ended 31 December 2010 Opening ret. earnings: 1/1/2009- restated - as previously reported - change in accounting policy Opening ret. earnings: 1/1/2010- restated - as previously reported - change in accounting policy Total comprehensive income 2010 Closing retained earnings: 31/12/2010 Stm of financial position (extract) as at 31 December 2010 2010 ASSETS Plant EQUITY AND LIABILITIES Retained earnings Deferred tax: NT 5. 5.

130 500 120 000 10 500 391 900 522 400 50 000 22 400 461 300 983 700

Total comprehensive income 2009 - restated

2009 Restated 482 000 522 400 309 600

2008 Restated 315 000 130 500 104 500

541 000 983 700 262 300

Moodle - IAS 8 - part 2 - policies - solutions to lecture eg's

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