CPA Advanced Level

Advanced Financial Reporting and Analysis flashcards

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In a sale and leaseback that is a genuine sale under IFRS 15, how does the seller-lessee measure the right-of-use asset, and what gain does it recognise?

The right-of-use asset is measured at the proportion of the previous carrying amount that relates to the right retained. Only the gain or loss relating to the rights transferred to the buyer-lessor is recognised.

How do equity-settled and cash-settled share-based payments differ in measurement under IFRS 2?

Equity-settled: fair value of the equity instruments at grant date, expensed over the vesting period with a credit to equity, and not remeasured for later changes in fair value. Cash-settled: fair value of the liability, remeasured at each reporting date until settlement, with changes in profit or loss (for example a share appreciation right paid in cash).

How is the gain or loss worked out when a group loses control of a subsidiary?

Derecognise 100% of the subsidiary's assets, liabilities, goodwill and any NCI, whatever percentage was held or sold. Remeasure any retained interest to fair value at the disposal date. Gain or loss = consideration received plus the retained interest's fair value, compared with what was derecognised, taken to profit or loss.

Under IAS 29, which items are restated and which are not?

Monetary items are not restated, since they are already in the measuring unit current at the reporting date. Non-monetary items at historical cost are restated: cost x (index at reporting date / index at acquisition). Example: KES 5,000,000 of land bought at index 100, now 340, is restated to KES 17,000,000.

How are basic and diluted EPS defined under IAS 33?

Basic EPS = profit attributable to ordinary shareholders / weighted average number of ordinary shares outstanding. Diluted EPS adjusts both the profit and the share count for all dilutive potential ordinary shares (convertible bonds, share options), so it is always lower than or equal to basic EPS.

What does IPSAS 21 govern, and how does it measure impairment?

Impairment of non-cash-generating assets, held for their service potential rather than cash flows, such as a public hospital or a school. It uses service-potential-based measures such as depreciated replacement cost or restoration cost instead of a cash-flow-based value in use. It has no direct private-sector counterpart.

What do IFRS S1 and IFRS S2 each cover?

IFRS S1 (general requirements): material information about sustainability-related risks and opportunities that could reasonably be expected to affect cash flows, access to finance or cost of capital over the short, medium and long term. IFRS S2 (climate-related disclosures): the first topic-specific standard built on S1, covering governance, strategy, risk management, and metrics and targets such as greenhouse gas emissions.

What are the three levels of the IFRS 13 fair value hierarchy?

Level 1: quoted prices in active markets for identical items, such as an NSE-listed share's closing price. Level 2: other observable inputs, such as a bond priced from a comparable traded instrument's yield curve. Level 3: unobservable inputs, such as a discounted cash flow valuation of an unlisted subsidiary on management's own assumptions.

Where do these appear in a group statement of cash flows: cash paid to acquire a subsidiary, and dividends paid to NCI?

Cash paid to acquire a subsidiary: investing activities, shown net of the cash acquired with it. Dividends paid to non-controlling interest: financing activities. Cash received on disposing of a subsidiary also needs particular care.

How does IAS 34 treat interim periods: discrete or integral?

Generally discrete: each interim period is a reporting period in its own right. The exception is costs genuinely incurred unevenly through the year, such as annual maintenance or a bonus provision, which are anticipated or deferred to reflect the expected full-year pattern.

Which earlier asset and liability standards remain examinable at Advanced level?