The IFRS for SMEs
Topic 1.7
Quiz and Discussion
Section 23 Revenue
© 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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accept responsibility for loss caused to any person who acts or refrains
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Questions about
Section 23 Revenue
© 2011 IFRS Foundation
Section 23 – Discussion questions
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Question 1: Which of the following are not
covered by Section 23 Revenue?
a. Revenue from lease agreements?
b. Changes in FV of financial assets and
financial liabilities or their disposal?
c. Change in FV of biological assets relating
to agricultural activity?
d. All of the above?
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Section 23 – Discussion questions
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Question 2: Goods with list price of 1,000
sold to customer on normal credit terms.
Customer pays 690 in full settlement. The
690 = 1,000 list, less 200 trade discount, less
100 volume rebate, less 10 prompt payment
discount. Of the 690, 50 is sales tax to be
remitted to government. How much revenue
should be recognised?
a. 640? b. 1,000? c. 700? d. 690?
© 2011 IFRS Foundation
Section 23 – Discussion questions
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Question 3: Percentage of completion must
be used to recognise revenue from:
a. rendering of services and construction
contracts?
b. rendering of services only when the
outcome can be estimated reliably?
c. construction contracts only when the
outcome can be estimated reliably?
d. both b and c?
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Section 23 – Discussion questions
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Question 4: Car dealer sales promotion –
free servicing and 2-years zero interest
credit. Recognise revenue separately for:
a. entirely sale of goods?
b. sale of goods and rendering of maintenance
services?
c. sale of goods, rendering of services, and a
financing element (interest) related to the
deferred payment?
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Section 23 – Discussion questions
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Question 5: A sells goods to B for 950 on
1/1/20X1, and incurs selling cost of 20 at the
same time. B negotiates one year interestfree credit (payment due 31/12/20X1). If B
had borrowed to pay up front, interest rate =
10%. How much revenue from sale of goods
does A recognise at 1/1/20X1?
a. 950? b. 864? c. 970 d. 930?
© 2011 IFRS Foundation
Section 23 – Discussion questions
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Question 6: Fixed price construction
contract 1,000,000. Contractor incurs costs
of 10,000, 890,000, and 200,000 in Years 1,
2, 3. At end of Year 1 outcome cannot be
estimated reliably, but 10,000 costs are
recoverable. At end of Year 2, can make a
reliable estimate of 200,000 future costs to
complete. How much revenue and cost
should contractor recognise in Year 2?
See next slide...
© 2011 IFRS Foundation
Section 23 – Discussion questions
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Question 6, continued: How much revenue
and cost should contractor recognise in
Year 2?
a.
b.
c.
d.
Revenue 818,182 and costs 900,000?
Revenue 808,182 and costs 890,000?
Revenue 808,182 and costs 908,182?
Revenue 808,182 and costs 900,000?
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Section 23 – Discussion questions
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Question 7: Fixed price construction
contract 1,000,000. Contractor incurs costs
of 200,000, 400,000, and 100,000 in Years 1,
2, 3. At end of Year 1 reliable estimate of
future cost was 400,000. At end of Year 2
estimated future costs were 150,000.
Contract completed in Year 3. How much
revenue should contractor recognise in
Years 1, 2, 3?
See next slide...
© 2011 IFRS Foundation
Section 23 – Discussion questions
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Question 7, continued: How much revenue
should contractor recognise in Years 1, 2,
and 3?
Choice
(a)
(b)
(c)
(d)
Year 1
333,333
1,000,000
0
333,333
Year 2
Year 3
466,667
200,000
0
0
0 1,000,000
333,333
333,333
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Questions about Sections 3 to 8
Financial Statement Presentation.
Questions are based on the
illustrative financial statements
published along with the IFRS for
SMEs (in separate printed booklet).
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Financial Statement Presentation Case
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Question (a): Consolidated statement of
comprehensive income and retained
earnings
Could the group present two statements
(separate consolidated statement of
comprehensive income and consolidated
statement of changes in equity) instead of
presenting a single consolidated statement of
income and retained earnings?
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Financial Statement Presentation Case
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Question (b): Consolidated statement of
comprehensive income and retained
earnings
How would the presentation of the consolidated
statement of income and retained earnings
change if the XYZ Group had a discontinued
operation in the year ended 31 December
20X2?
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Financial Statement Presentation Case
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Question (c): Consolidated statement of
comprehensive income and retained
earnings
How would the presentation of the consolidated
statement of income and retained earnings
change if the XYZ Group had a partly owned
subsidiary?
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Financial Statement Presentation Case
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Question (d): Consolidated statement of
comprehensive income and retained
earnings
Could the XYZ Group choose to present an
analysis of expenses by function instead of an
analysis of expenses by nature?
What are examples of expenses by function?
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Financial Statement Presentation Case
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Question (e): Consolidated statement of
comprehensive income and retained
earnings
Is the group required to disclose this line item
‘Profit before tax’?
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Financial Statement Presentation Case
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Question (f): Consolidated statement of
financial position
Could this statement have been called ‘Balance
Sheet’ instead of ‘Statement of Financial
Position’?
What about ‘Statement of Asset and Liability
Values’?
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Financial Statement Presentation Case
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Question (g): Consolidated statement of
financial position
Does the IFRS for SMEs prohibit presenting the
statement of financial position before the
statement of income and retained earnings?
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Financial Statement Presentation Case
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Question (h): Consolidated statement of
financial position
Does the IFRS for SMEs require a statement of
financial position at the beginning of the earliest
comparative period?
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Financial Statement Presentation Case
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Question (i): Consolidated statement of
financial position
Instead of presenting its current assets /
liabilities separately from its non-current assets
/ liabilities, could the XYZ Group choose to
present its assets and liabilities in order of their
liquidity (no current / non-current split)?
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Financial Statement Presentation Case
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Question (j): Consolidated statement of
financial position
When an entity presents its assets and
liabilities in order of their liquidity, is that order
ascending or descending?
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Financial Statement Presentation Case
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Question (k): Consolidated statement of
cash flows
This statement has a sub-heading “Cash flow
included in investing activities” within “Cash
flows from operating activities”.
Why is this item there?
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Financial Statement Presentation Case
Question (l): Consolidated statement of
cash flows
Does the IFRS for SMEs require the XYZ
Group to separately disclose the amount of
finance costs paid in cash?
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Financial Statement Presentation Case
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Question (m): Consolidated statement of
cash flows
Does the IFRS for SMEs require the group to
separately disclose the amount of income taxes
paid in cash?
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Financial Statement Presentation Case
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Question (n): Note 2 Accounting Policies
If the presentation currency is different from the
functional currency, what additional information,
if any, would the XYZ Group disclose?
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Financial Statement Presentation Case
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Question (o): Note 2 Accounting Policies –
Investments in Associates
What other measurement bases, if any, could
the XYZ Group adopt as its accounting policy
for investments in associates?
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Financial Statement Presentation Case
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Question (p): Note 2 Accounting Policies –
Borrowing costs
Could the XYZ Group change its accounting
policy for borrowing costs such that borrowing
costs that are directly attributable to the
acquisition, construction or production of a
qualifying asset form part of the cost of that
asset (ie can the group account for borrowing
costs in accordance with the requirements of
IAS 23 Borrowing Costs of full IFRSs)?
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Financial Statement Presentation Case
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Question (q): Note 2 Accounting Policies –
Intangible assets
If the XYZ Group had purchased a trademark
whose useful life management considers to be
indefinite, would the group still account for the
trademark at cost less accumulated
depreciation and any accumulated impairment
losses?
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Financial Statement Presentation Case
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Question (r): Note 2 Accounting Policies –
Leases
Because of some guarantees made in a lease
agreement, the lessee’s management found it
difficult to classify the lease as operating or
financing. In the end, they concluded it is
operating. Is any special disclosure required?
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Financial Statement Presentation Case
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Question (s): Note 2 Accounting Policies –
Employee benefits – long-service payment
Could XYZ Group have chosen another method
to measure its defined benefit obligation rather
than the projected unit credit method?
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Financial Statement Presentation Case
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Question (t): Note 6 Gain on sale of
equipment
XYZ Group has never before disposed of any
PP&E. Could XYZ present this gain as a
separate line item in the consolidated
statement of income and retained earnings
described as ‘Extraordinary item – Gain on
Sale of Equipment’?
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Financial Statement Presentation Case
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Question (u): Note 10 Trade and other
receivables
Instead of presenting a single line ‘Trade and
other receivables’ in the balance sheet and
then disclosing ‘Trade debtors’ and
‘Prepayments’ separately in the notes, could
XYZ present these two items as separate line
items in the balance sheet?
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Financial Statement Presentation Case
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Question (v): Note 15 Deferred tax
Note 15 discloses that XYZ has both deferred
tax assets and deferred tax liabilities. Yet the
statement of financial position shows only a
deferred tax asset. Why?
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Financial Statement Presentation Case
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Question (w): Note 15 Deferred tax
If a material amount of the deferred tax asset is
expected to be received in cash in 20X3, would
the XYZ Group present the amount to be
received in 20X3 as a current asset in its
consolidated statement of financial position at
31 December 20X2?
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Financial Statement Presentation Case
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Question (x): Note 16 Bank overdraft and
loan
Instead of presenting cash (current asset)
separately from bank overdraft (current liability)
could XYZ choose to present the net amount
(eg 20X2: 54,900) as a current liability ‘Cash
and cash equivalents’ in its consolidated
statement of financial position (ie in the same
way that it is presented in the consolidated
statement of cash flows)?
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Financial Statement Presentation Case
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Question (y): Note 18 Provision for warranty
obligations
If the warranty was for a longer period (eg 3
years) what additional line item, if any, would
you expect to see in the disclosure about the
changes in the provision for the period?
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Financial Statement Presentation Case
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Question (z): Note 25 Events after end of
reporting period
The 16,000 reimbursement from the insurance
company was received in cash before the
statements were approved on 10 March X3.
So it is ‘virtually certain’. Why is it not shown
as a receivable in the statement of financial
position?
© 2011 IFRS Foundation