Question 1 - Lobby Plc

Note 1 IAS 16 - Revaluation and depreciation

Land
Cost 200,000
Less Acc. Depreciation
Net book value
Fair market value
Revaluation surplus
Depreciation

IAS 20 - Government grant - charge to revenue over 5 years (seperated into current and no

Note 2
IAS 8 - Prior period error adjustment (which year the error affected? Is it distintive?)
Opening retain earnings need to be adjusted (because only 1 year)
Internally generated brands cannot be capitalise under IAS 38
Capitalising and amortising is an accounting error which is to be adjusted
Amortisation was expensed - reverse
Net impact 38k

During the year, land was revalued therefore revaluation reserve is affected
Land is not depreciated
Company purchased a new building completely funded by the government

Note 4
Loss on fair value of investment (100k - 95k)
Explain IAS 40
Property under investment has to be adjusted to fair value every year

Note 5
IAS 37 - 3 elements: provision, contingent liability, contingent asset
Contingent asset
How will you adjust it? What has the company done?
The company has shown it as receivable from supplier 70k
The company has debited receivable and credited income
Contingent asset not to be recorded or given rise to recording as asset
It cant be brought into the books of accounts and so it has to be reversed
Disclose as potential receivable
Debit COGS and credit receivables
Legal cost - expense
Dr legal cost Cr payables
Legal cost - already happen must pay no matter what results
DONT EXPLAIN PROVISION
 Building Equipment
240,000 190,000

into current and non current liability)

distintive?)
Question 2 - IAS 38

Part a
It must be controlled by the entity as a resut of events in the past
Something from which the entity expects future economic benefits to flow
The cost can be measured reliably
economic usage must be detainable,

Part b
IAS 38 distinguishes research and development cost
Research cost should be written off as an expense as they incurred
Development costs may be qualify for recognition as intangible assets provided the followi
criteria can be demonstrated.
1. The technical feasibility of completing the intangible asset so that it will be available for
2. Its intention to complete
3. Resource availability
4. Ability to use/sell - future economic benefits/how long the revenue can be generated

Part c
i. Patents - begin
Write off 4/6 (1/6 written off in 2013, 1/6 w

ii. Research & Development

2m research cost expense off
Wash and Go - Capitalise 1,000,000
Definite revenue in the next 4 years (reliable, identifiable, measurable, future revenues)
Amortisation 25% each year
Wipe Clear - cannot capitalise
High level uncertainty - expense out 400,000
Soft and clean - Capitalise 600,000
Purchased patent - can capitalise
Amortisation is 1/6 of the cost per year. However, it will be subject to FMV of each year

iii. Training cost, conference cost and etc are not allowed to be capitalise - so expense it off

Part d
Disclosure
Which assets are capitalise and provide reason
Which of the cost you cannot capitalise and provide reasons for doing so
For each asset, state the useful life
Assets being impaired (patents) must be mentioned and why the impairment was required

EXAM - 1 QUESTION IS PURELY INTANGIBLE

 IAS 1 - definition of asset

provided the following strict

will be available for use or sale

n be generated

future revenues)

MV of each year

e - so expense it off

rment was required

Question 3 - Hearty Plc