International Financial Reporting Standards
Quiz:
liabilities
Joint World Bank and IFRS Foundation
‘train the trainers’ workshop hosted by the
ECCB, 30 April to 4 May 2012
The views expressed in this presentation are those of the
The
views expressed
in this
presentation
areor
those
presenter,
not necessarily
those
of the IASB
IFRSof the
presenter,
Foundation.
not necessarily those of the IASB or IFRS Foundation.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
2
Question 1: Provisions are measured at the
best estimate of the amount required to settle
the obligation at the reporting date. When the
provision involves a large population of items,
the estimate of the amount:
a. reflects the weighting of all possible
outcomes by their associated
probabilities?
b. is determined to be the individual most
likely outcome?
c. is the individual most likely outcome
adjusted to consider the other possible
outcomes?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
3
Question 1: Provisions are measured at the
best estimate of the amount required to settle
the obligation at the reporting date. When the
provision involves a large population of items,
the estimate of the amount:
a. reflects the weighting of all possible
outcomes by their associated
probabilities?
b. is determined to be the individual most
likely outcome?
c. is the individual most likely outcome
adjusted to consider the other possible
outcomes?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
4
Question 2: Provisions are measured at the
best estimate of the amount required to settle
the obligation at the reporting date. When the
provision arises from a single obligation, the
estimate of the amount:
a. reflects the weighting of all possible
outcomes by their associated
probabilities?
b. is determined to be the individual most
likely outcome?
c. is the individual most likely outcome
adjusted to consider the other possible
outcomes?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
5
Question 2: Provisions are measured at the
best estimate of the amount required to settle
the obligation at the reporting date. When the
provision arises from a single obligation, the
estimate of the amount:
a. reflects the weighting of all possible
outcomes by their associated
probabilities?
b. is determined to be the individual most
likely outcome?
c. is the individual most likely outcome
adjusted to consider the other possible
outcomes?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
6
Question 3: A is defending a patent
infringement lawsuit. Court is expected to rule
in 12/20X2. 30% chance court will dismiss the
case. If not, 20% chance A pays CU200,000 &
80% chance pay CU100,000.
Apply a 7% risk adjustment factor to the
probability-weighted expected cash flows to
reflect the uncertainties in the cash flow
estimates.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
7
Question 3 continued:
An appropriate discount rate is 10% per year.
At 31/12/20X1 A recognise a provision of?
a.
b.
c.
d.
e.
0?
CU100,000?
CU84,000?
CU89,880?
CU81,709?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
8
Question 3 continued:
An appropriate discount rate is 10% per year.
At 31/12/20X1 A recognise a provision of?
a.
b.
c.
d.
e.
0?
CU100,000?
CU84,000?
CU89,880?
CU81,709?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
9
Question 4: Same as Question 3 except,
disclosure of some of the information about
the case can be expected to prejudice
seriously A’s position in the dispute over the
alleged breach of patent.
At 31 December 20X1, A would:
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
10
Question 4 continued:
a. not recognise a provision. Disclose the
general nature of the dispute, together
with the fact that, and reason why, the
information has not been disclosed?
b. recognise a provision measured at the
best estimate and disclose the general
nature of the dispute, together with the
fact that, and reason why, the
information has not been disclosed.
c. recognise a provision measured at the
best estimate and disclose the necessary
information.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
11
Question 4 continued:
a. not recognise a provision. Disclose the
general nature of the dispute, together
with the fact that, and reason why, the
information has not been disclosed?
b. recognise a provision measured at the
best estimate and disclose the general
nature of the dispute, together with the
fact that, and reason why, the
information has not been disclosed.
c. recognise a provision measured at the
best estimate and disclose the necessary
information.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
12
Question 5: 10-year non-cancellable operating
lease over a building. Lease rentals for years
1–5 = 0 & CU5,000 for each of years 6–10.
In Y1 the lessee must recognise expense of:
a.
b.
c.
d.
CU0?
CU2,000?
CU2,500?
CU5,000?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
13
Question 5: 10-year non-cancellable operating
lease over a building. Lease rentals for years
1–5 = 0 & CU5,000 for each of years 6–10.
In Y1 the lessee must recognise expense of:
a.
b.
c.
d.
CU0?
CU2,000?
CU2,500?
CU5,000?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
14
Question 6: On 1/1/20X1 A sold a machine to a
bank and leased it back for 3 yrs. Facts about
the machine & the leaseback: SP = CU200,000;
CA = CU70,000; FV = CU200,000; remaining
economic life = 3 yrs; residual value = 0; lease
payments = CU77,606 per year (payable in
arrears); interest rate implicit in the lease = 8%
per year.
What would A recognise in profit or loss for
the year ended 31/12/20X1?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
Question 6 continued:
a. CU130,000 gain on sale of PPE &
CU77,606 lease rental expense.
b. CU23,333 depreciation expense &
CU16,000 finance cost (no income).
c. CU43,333 income (amortised deferred
gain on sale of PPE); CU23,333
depreciation expense; & CU16,000
finance cost.
d. CU43,333 income (amortised deferred
gain on sale of PPE); CU66,667
depreciation expense; & CU16,000
finance cost.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
15
Quiz: liabilities
Question 6 continued:
a. CU130,000 gain on sale of PPE &
CU77,606 lease rental expense.
b. CU23,333 depreciation expense &
CU16,000 finance cost (no income).
c. CU43,333 income (amortised deferred
gain on sale of PPE); CU23,333
depreciation expense; & CU16,000
finance cost.
d. CU43,333 income (amortised deferred
gain on sale of PPE); CU66,667
depreciation expense; & CU16,000
finance cost.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
16
Section 20 – Discussion questions
17
Question 7: Same as question 6, except the
remaining economic life of the machine = 30
years & the lease rental = CU23,000 per year of
the three-year lease term.
What would A recognise in profit or loss for
the year ended 31/12/20X1?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Section 20 – Discussion questions
Question 7
continued:
a. CU130,000 gain on sale of PPE &
CU23,000 lease rental expense.
b. CU23,333 depreciation expense &
CU16,000 finance cost (no income).
c. CU43,333 income (amortised deferred
gain on sale of PPE); CU23,333
depreciation expense; & CU16,000
finance cost.
d. CU43,333 income (amortised deferred
gain on sale of PPE); CU66,667
depreciation expense; & CU16,000
finance cost.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
18
Section 20 – Discussion questions
Question 7 continued:
a. CU130,000 gain on sale of PPE &
CU23,000 lease rental expense.
b. CU23,333 depreciation expense &
CU16,000 finance cost (no income).
c. CU43,333 income (amortised deferred
gain on sale of PPE); CU23,333
depreciation expense; & CU16,000
finance cost.
d. CU43,333 income (amortised deferred
gain on sale of PPE); CU66,667
depreciation expense; & CU16,000
finance cost.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
19
Quiz: liabilities
20
Question 8: A’s employees are each entitled to
20 days of paid holiday leave per calendar
year. Unused holiday leave cannot be carried
forward and does not vest. The entity has a
31 December annual reporting date. The
holiday leave is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
21
Question 8: A’s employees are each entitled to
20 days of paid holiday leave per calendar
year. Unused holiday leave cannot be carried
forward and does not vest. The entity has a
31 December annual reporting date. The
holiday leave is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
22
Question 9: Same as question 8, except
unused holiday leave is paid out on 31
December of each year (ie it vests at the end of
each calendar year but does not accumulate).
The holiday leave is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
23
Question 9: Same as question 8, except
unused holiday leave is paid out on 31
December of each year (ie it vests at the end of
each calendar year but does not accumulate).
The holiday leave is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
24
Question 10: Same as question 8, except
unused holiday leave may be carried forward
for two calendar years (ie it accumulates but
does not vest).
The holiday leave is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
25
Question 10: Same as question 8, except
unused holiday leave may be carried forward
for two calendar years (ie it accumulates but
does not vest).
The holiday leave is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
26
Question 11: A publicly announces its
commitment to a voluntary redundancy plan.
It has an obligation to pay a lumpsum to
employees that elect redundancy.
The obligation is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
27
Question 11: A publicly announces its
commitment to a voluntary redundancy plan.
It has an obligation to pay a lumpsum to
employees that elect redundancy.
The obligation is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
28
Question 12: A reimburses 50% of past
employees’ post-employment medical costs if
the employee provides +25 years of service.
The obligation is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
29
Question 12: A reimburses 50% of past
employees’ post-employment medical costs if
the employee provides +25 years of service.
The obligation is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
30
Question 13: A profit sharing plan requires A
pay a specified portion of its cumulative profit
for a 5-year period to employees who serve
throughout the 5-year period.
The obligation is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Quiz: liabilities
31
Question 13: A profit sharing plan requires A
pay a specified portion of its cumulative profit
for a 5-year period to employees who serve
throughout the 5-year period.
The obligation is:
a.
b.
c.
d.
a short-term employee benefit?
a post-employment benefit?
an other long-term employee benefit?
a termination benefit?
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Questions or comments?
Expressions of individual views
by members of the IASB and its
staff are encouraged.
The views expressed in this
presentation are those of the
presenter.
Official positions of the IASB on
accounting matters are
determined only after extensive
due process and deliberation.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
32
33
The requirements are set out in International Financial
Reporting Standards (IFRSs), as issued by the IASB at
1 January 2012 with an effective date after 1 January
2012 but not the IFRSs they will replace.
The IFRS Foundation, the authors, the presenters and
the publishers do not accept responsibility for loss
caused to any person who acts or refrains from acting
in reliance on the material in this PowerPoint
presentation, whether such loss is caused by
negligence or otherwise.
© IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org