CPA Intermediate Level
Financial Reporting and Analysis flashcards
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What are the two measurement models for investment property under IAS 40, and how does each treat depreciation?
Cost model: cost less accumulated depreciation and impairment, as for PPE under IAS 16, with fair value disclosed in the notes. Fair value model: carried at fair value, with movements recognised in profit or loss each period and no depreciation at all. An entity chooses one model and applies it to all its investment property.
What are the five steps of the IFRS 15 revenue model?
Identify the contract. Identify the performance obligations. Determine the transaction price. Allocate the price to each obligation. Recognise revenue as each obligation is satisfied, over time or at a point in time.
What three conditions must all hold before a provision is recognised under IAS 37?
A present obligation exists as a result of a past event. An outflow of resources is probable. A reliable estimate of the amount can be made. The provision is then measured at the best estimate of the amount required to settle it.
How are biological assets and agricultural produce measured under IAS 41, and where do the changes go?
At fair value less costs to sell, with produce measured at the point of harvest. Changes go to profit or loss as they occur, capturing growth, degeneration, production and procreation without waiting for a sale. Example: tea bushes valued at KES 180,000,000 at the start of the year and KES 205,000,000 at the end give a gain of KES 25,000,000 in profit or loss.
How does IAS 8 treat a change in accounting policy, a change in accounting estimate and a prior period error?
Change in accounting policy: retrospective, with comparatives restated as if the new policy had always applied, unless impracticable. Change in accounting estimate: prospective, from the period of change forward only. Prior period error: retrospective, restating comparatives, exactly like a policy change.
How is goodwill on acquiring a subsidiary calculated, and how is it treated afterwards?
Goodwill = consideration transferred + non-controlling interest at acquisition - fair value of identifiable net assets acquired. It is recognised as an asset, tested annually for impairment and never amortised. Example: (96,000,000 + 20,000,000) - 100,000,000 = KES 16,000,000.
How does the equity method account for an associate or a joint venture?
The investment is first recognised at cost, then adjusted each period for the investor's share of the investee's profit or loss, instead of being consolidated line by line. Example: cost KES 45,000,000 plus 30% of a KES 12,000,000 profit gives a carrying amount of KES 48,600,000, with KES 3,600,000 recognised as income.
What does IPSAS 24 require, and what makes it different from the other IPSAS in the guide?
A comparison of budgeted and actual amounts, as an additional statement or a note, wherever the entity's approved budget is publicly available. It has no private-sector IFRS or IAS counterpart, and it serves the accountability objective that most sets public sector reporting apart.
What does a lessee recognise for a lease under IFRS 16?
A right-of-use asset and a corresponding lease liability, for almost every lease, replacing the old operating and finance lease distinction for lessees. Each period the liability accretes interest and is reduced by the payment, like a loan, while the asset is depreciated over the lease term, or its useful life if shorter.
What base does each common-size statement use, and what does it show?
Statement of profit or loss: every line as a percentage of revenue, so businesses of very different size can be compared on cost structure. Statement of financial position: every line as a percentage of total assets, showing how the asset base and financing mix are structured.
How is investment property told apart from PPE and from inventory?
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How does IFRS 6 treat exploration and evaluation expenditure?
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When is a non-current asset classified as held for sale under IFRS 5, and how is it then measured?
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When must borrowing costs be capitalised under IAS 23?
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When is a financial asset or liability first recognised under IFRS 9, and at what amount?
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Which financial assets are measured at amortised cost under IFRS 9?
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When is a financial asset measured at FVOCI, and when at FVTPL?
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When may financial assets and financial liabilities be reclassified under IFRS 9?
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When is a financial asset derecognised?
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How is a right-of-use asset measured when a lease starts?
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How is a lease liability first measured, and at what rate is it discounted?
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Which leases may a lessee keep off the statement of financial position under IFRS 16?
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What is the difference between current tax and deferred tax under IAS 12, and at what rate is deferred tax measured?
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What gives rise to a deferred tax liability? Give an example.
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What gives rise to a deferred tax asset, and when may it be recognised?
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How are contingent liabilities and contingent assets treated under IAS 37?
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How is a government grant related to income recognised under IAS 20?
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What are the two ways to present a government grant related to an asset, and what happens if a grant becomes repayable?
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How is revenue split on a hire purchase sale?
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When does a consignor recognise revenue on goods sent to a consignee?
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How are revenue and profit to date worked out on a construction contract?
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How does IAS 21 treat a foreign currency transaction when first recorded and at the year end?
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How is a partnership's conversion to a company accounted for?
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How do a professional firm's financial statements differ from a trading business's?
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What is the difference between a biological asset and agricultural produce, and what happens at harvest?
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How do defined contribution and defined benefit plans report under IAS 26?
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How is a Sacco's equity made up, compared with a company's?
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What makes up a complete set of financial statements under IAS 1?
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Is switching from reducing balance to straight-line depreciation a change in accounting policy or in estimate?
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How do you tell an adjusting event after the reporting period from a non-adjusting one?
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What is a discontinued operation under IFRS 5, and how is it presented?
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When does a parent control a subsidiary under IFRS 10?
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What is non-controlling interest, and where is it presented?
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How may a parent measure its investments in subsidiaries, associates and joint ventures in its separate financial statements?
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What is an associate, and at what holding is significant influence presumed?
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What separates a joint venture from a joint operation under IFRS 11?
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How does a local (dependent) branch differ from an autonomous branch?
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Which private-sector standards do the main IPSAS in the guide mirror?
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What separates exchange revenue (IPSAS 9) from non-exchange revenue (IPSAS 23), and when is tax revenue recognised?
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Why can IFRS 16 raise a company's gearing without any change in its business?
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