The IFRS for SMEs
Topic 2.5
Quiz and Discussion
Assets
Sections 13–18 & 27
© 2011 IFRS Foundation
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The accounting requirements applicable to small and medium-sized entities
(SMEs) are set out in the International Financial Reporting Standard (IFRS)
for SMEs, which was issued by the IASB in July 2009.
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Section 13 – Discussion questions
Question 9*: To avoid obsolescence a
perishable produce retailer arranges
produce in such a way that customer are
most likely to purchase the oldest inventory
first. The cost formula which is most
appropriate for the entity is:
a. first-in-first out FIFO?
b. last-in-first-out LIFO?
c. weighted average?
d. specific identification?
* see question 9 in Module 13 of the IFRS Foundation training material
© 2011 IFRS Foundation
Section 13 – Discussion questions
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Question 10*: A property developer classify
properties held for sale in the ordinary
course of business as:
a.
b.
c.
d.
inventories?
property, plant and equipment?
financial asset?
investment property?
* see question 10 in Module 13 of the IFRS Foundation training material
© 2011 IFRS Foundation
Section 14 – Discussion questions
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Question 9*: Which of the following provide
evidence to support the existence of
significant influence by an investor?
a. representation on board of directors?
b. material transactions between the
investor and the investee?
c. interchange of managerial personnel?
d. provision of essential technical info?
e. all of the above?
* see question 9 in Module 14 of the IFRS Foundation training material
© 2011 IFRS Foundation
Section 14 – Discussion questions
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Question 10*: Which statement is false?
a. Significant influence (SI) can be lost
without a change in ownership levels.
b. In determining whether SI exists,
consider the effects of potential voting
rights that are currently exercisable.
c. In determining whether an entity has SI
over another entity, only present
ownership interests are considered. The
possible exercise or conversion of
potential voting rights are not
considered.
* see question 10 in Module 14 of the IFRS Foundation training material
© 2011 IFRS Foundation
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Section 15 – Discussion questions
Question 7*: On 31/12/X1 A acquired 30% of Z
for 100 + 1 transactions costs. Z is a JV & A
is a venturer. A uses cost model for JVs.
No published price quotation for Z. On 5/1/X2
Z declared & paid a dividend of 20.
At 31/12/X1, X2 & X3, for impairment testing
purposes management assessed the fair
values of investment in Z as 102, 110 & 90
respectively. Costs to sell = 4 throughout.
A must measure its investment in Z on
31/12/X1, X2 & X3 respectively at:
* see question 7 in Module 15 of the IFRS Foundation training material
© 2011 IFRS Foundation
Section 15 – Discussion questions
Question 7 continued:
a.
b.
c.
d.
e.
f.
100, 100, 100?
95, 95, 86?
98, 106, 86?
98, 101, 86?
102, 110, 90?
101, 101, 101?.
© 2011 IFRS Foundation
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Section 15 – Discussion questions
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Question 9*: An investor in a joint venture
that does not have joint control accounts for
that investment in accordance with:
a. Section 11 Basic Financial
Instruments?
b. Section 14 Investments in Associates?
c. Section 11 Basic Financial Instruments
or, if it has significant influence in the
joint venture, in accordance with
Section 14 Investments in Associates.
* see question 9 in Module 15 of the IFRS Foundation training material
© 2011 IFRS Foundation
Section 16 – Discussion questions
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Question 3*: A operates a bed & breakfast
from a building it owns. It also provides its
guests with other services including
housekeeping, satellite television and
broadband internet access. The daily room
rental is inclusive of these services.
Furthermore, upon request, A conducts tours
of the surrounding area for its guests.
Tour services are charged for separately.
* see question 3 in Module 16 of the IFRS Foundation training material
© 2011 IFRS Foundation
Section 16 – Discussion questions
Question 3 continued:
A should account for the building as:
a. inventory?
b. investment property?
c. property, plant & equipment?
d. intangible asset?
© 2011 IFRS Foundation
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Section 16 – Discussion questions
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Question 6*: A building is owned by a
subsidiary (lessor) to earn rentals under an
operating lease from its parent (lessee). The
parent manufactures its products in the
rented building. The fair value of the building
can be measured reliably without undue cost
or effort on an ongoing basis.
The building is:
* see question 6 in Module 16 of the IFRS Foundation training material
© 2011 IFRS Foundation
Section 16 – Discussion questions
Question 6 continued:
a. accounted for as property, plant &
equipment by the subsidiary &
investment property by the group?
b. accounted for as investment property
by the subsidiary & as property, plant
and equipment by the group?
c. accounted for as investment property
by both the subsidiary and the group?
d. accounted for as property, plant and
equipment by both the subsidiary and
the group?
© 2011 IFRS Foundation
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Section 17 – Discussion questions
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Question 8: On 1/1/20X1 A buys a building
for 100 and occupies it. Useful life = 40 yrs.
Residual value = 20. A expects to consume
the building’s benefits evenly over 40 yrs.
The building’s fair value at 31/12/20X1 = 130.
What is its carrying amount at 31/12/20X1?
a. 100.
b. 98
c. 130
d. 127
© 2011 IFRS Foundation
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Section 17 – Discussion questions
Question 10: On 1/1/20X1 A buys land for an
undetermined purpose. On 1/1/20X4 A
begins constructing its head office building
on the land. On 1/1/20X8 A’s staff moved out
& the building is rented out under an
operating lease. On 31/12/20X9 A accepts an
unsolicited offer from the tenant to purchase
the building from A immediately.
The fair value of the building can be
determined reliably without undue cost or
effort on an ongoing basis.
A accounts for the building as:
© 2011 IFRS Foundation
Section 17 – Discussion questions
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Question 10 continued:
a. investment property from 1/1/20X1 to
31/12/20X9?
b. investment property during 20X1–20X3
& PP&E during 20X4–20X10?
c. investment property during 20X1–20X3
& 20X8–20X9 and PP&E during 20X4–
20X7?
d. PP&E during 20X1–20X7 & investment
property during 20X8–20X9?
© 2011 IFRS Foundation
Section 18 – Discussion questions
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Question 1: The cost of an intangible asset
at initial recognition is measured at its fair
value when:
a. it is internally generated?
b. it is separately acquired?
c. it is acquired in a business
combination?
© 2011 IFRS Foundation
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Section 18 – Discussion questions
Question 2: A purchased a trademark.
Remaining legal life = 5 yrs. However, is
renewable every 10 yrs at little cost. A
intends to renew the trademark continuously
& evidence supports its ability to do so. An
analysis of (i) product life cycle studies, (ii)
market, competitive and environmental
trends, & (iii) brand extension opportunities
provides evidence that the trademarked
product will generate net cash inflows for A
for an indefinite period. The useful life of the
intangible asset is:
a. 5 yrs b. 10 yrs c. 15 yrs d. 100 yrs
© 2011 IFRS Foundation
Section 18 – Discussion questions
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Question 3: On 1/1/20X1 A received (for free)
an unconditional transferable 9-year taxi
licence from a government (fair value = 120).
On 1/1/20X1 A must recognise:
a. 120 intangible asset & 120 income?
b. 120 intangible asset & 120 liability?
c. 0 as intangible asset & 0 income & 0
liability?
© 2011 IFRS Foundation
Section 18 – Discussion questions
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Question 4: On 1/1/20X1 A received (for free)
a non-transferable 9-year taxi licence from a
government (fair value = 90). The licence will
be revoked immediately A does not operate
at least 10 taxis in a deprived area of the city.
On 1/1/20X1 A must recognise:
a. 90 intangible asset & 90 income?
b. 90 intangible asset & 90 liability?
c. 0 as intangible asset & 0 income & 0
liability?
© 2011 IFRS Foundation
Section 27 – Discussion questions
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Question 1: At reporting date the carrying
amount (cost) of raw materials = 200;
replacement cost = 130; est. selling price of
finished good = 300; est. costs to convert
the raw material into finished good = 100;
est. costs to sell the finished good = 50.
A must recognise an impairment expense of
a. nil.
b. 70
c. 50
d. 170
© 2011 IFRS Foundation
Section 27 – Discussion questions
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Question 2: At 31/12/20X1 CA of a CGU’s
assets = 500 (ie 200 boat, 200 fishing licence
& 100 goodwill)
Impairment indicated & RA estimated = 350.
Fair value of boat = 180.
How much of the 150 impairment loss is
allocated to the fishing licence?
a. 25.
b. 30
c. 60
d. 150
© 2011 IFRS Foundation
Section 27 – Discussion questions
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Question 3: Same as question 2.
At 31/12/20X2 CA of a CGU’s assets = 175 (ie
90 boat & 85 fishing licence)
Impairment reversal indicated & RA
estimated = 375.
How much of income is recognised on the
reversal of the CGU’s impairment loss?
a. 25.
b. 50
c. 150
d. 200
© 2011 IFRS Foundation