Question Tag: IFRS Compliance

Search 500 + past questions and counting.

AAA – Nov 2013 – L3 – A – Q9 – Regulatory Framework and Professional Standards

This question tests understanding of the required components of IFRS-compliant financial statements.

Question

Which of the following is NOT required as part of Financial Statements that are International Financial Reporting Standards (IFRS) compliant?
A. Statement of financial position
B. Statement of cash flows
C. Account receivable
D. Chairman’s statement
E. Non-current assets

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Statements, IFRS Compliance, Reporting Standards
Level: Level 3

Topic: Regulatory Framework and Professional Standards
Series: NOV 2013

CR – May 2024 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)

Analysis of consolidated statements and adjustments for Cabalar PLC's foreign subsidiary under IFRS.

Question

Cabalar Nig. PLC, a company located in Ajao Industrial Estate, Lagos, specializes in the production of Adire T-Shirts. The company has a number of subsidiaries located in the South-South and South-West regions of the country and overseas.

On October 1, 2022, Cabalar PLC acquired 100% of the ordinary shares of Mansa-Konko Limited, an Adire T-Shirts distribution company based in the Gambia, West Africa. The official national currency of The Gambia is known as Gambia Dalasi (GMD).

The draft statement of financial position of Mansa-Konko Limited prepared under Gambia GAAP as at September 30, 2023, is as follows:

Description	GMD ‘000
Non-current assets:
Property, plant, and equipment	308,000
Intangible assets	42,500
Financial investments	38,500
Current assets	118,500
Total assets	507,500
Equity and liabilities:
Share capital (GMD 1 per share)	50,000
Retained earnings	213,000
Revaluation surplus	84,000
Total equity	347,000
Non-current liabilities:
Loan notes	50,000
Provisions	75,000
Current liabilities	35,500
Total equity and liabilities	507,500

Additional Information:
The following are key transactions of Mansa-Konko Limited under Gambia GAAP. There is no deferred tax under Gambia GAAP:

Equipment:
- On January 1, 2023, Mansa-Konko Limited acquired some specialist equipment from the United States of America (USA) for $150 million. Payment for the equipment was made on March 31, 2023.
- In accordance with local Gambia GAAP, the cost of the equipment was recognized on January 1, 2023, at GMD 50 million, using the opening rate of exchange at October 1, 2022.
- Full year’s depreciation of GMD 5 million was charged to cost of sales as Mansa-Konko Limited depreciates the equipment over a ten-year life, with no residual value. The equipment was included in the statement of financial position at GMD 45 million.
- A sum of GMD 12.5 million has been debited to retained earnings, representing the difference between the amount paid to the supplier (GMD 62.5 million on March 31, 2023) and the cost recorded in non-current assets (GMD 50 million).
Impairments:
- Mansa-Konko Limited bought a warehouse on October 1, 2016, for GMD 180 million, depreciated over 20 years with no residual value. On October 1, 2022, due to a rise in property prices, the warehouse was revalued to GMD 210 million, with a revaluation surplus of GMD 84 million recognized. No transfers were made between the revaluation surplus and retained earnings under Gambia GAAP in respect of depreciation.
- Recently, there was a slump in the local property market, prompting an impairment review as of September 30, 2023. The warehouse was assessed as worth GMD 60 million, leading to a charge of GMD 90 million to profit or loss to reflect the difference between the carrying amount of GMD 150 million and the new value of GMD 60 million.
Financial Instruments:
- On April 1, 2023, Mansa-Konko Limited bought five million shares in a local quoted company at GMD 7.7 per share. This represents a 3% shareholding. The company intends to hold the shares until December 31, 2023, for profit. The shares have been recognized at cost in the statement of financial position in accordance with Gambia GAAP. The market value at September 30, 2023, was GMD 12.5 per share.
- Under Gambia tax rules, income tax is charged at 20% on accounting profit recognized on the sales of the investment.
Provisions:
- On October 1, 2022, Mansa-Konko Limited signed an agreement with the Gambian government for exclusive rights for the next 20 years to supply Adire T-shirts for Gambia’s national traditional festival (GNTF).
- The cost of acquiring these rights was GMD 42.5 million, recognized as intangible assets in Mansa-Konko Limited’s statement of financial position. Under the terms of the agreement, Mansa-Konko Limited must replace all damaged T-shirts at the end of the 20-year period.
- There is a 40% probability that the replacement cost of damaged T-shirts would be GMD 75 million and a 60% probability of GMD 50 million.
- For prudency, a provision of GMD 75 million was made in the financial statements and debited to operating costs.
- Mansa-Konko Limited has a pre-tax discount rate of 8%. The replacement cost will be allowed for tax purposes when paid. The relevant income tax rate is expected to remain at 20%.
Exchange Rates:

Date USD to GMD GMD to NGN

October 1, 2022 $3.00 GMD 4.2 = N1

January 1, 2023 $2.50

March 31, 2023 $2.40

September 30, 2023 $2.00 GMD 5.0 = N1

Note: In Gambia, the tax treatments of property, plant, and equipment, as well as exchange differences, are similar to IFRS treatments.

Date	USD to GMD	GMD to NGN
October 1, 2022	$3.00	GMD 4.2 = N1
January 1, 2023	$2.50
March 31, 2023	$2.40
September 30, 2023	$2.00	GMD 5.0 = N1

Required:
(a) As the financial controller of Cabalar Nig. PLC, draft a report addressed to the finance director of your company explaining any adjustments needed to ensure that the subsidiary company’s (Mansa-Konko Limited’s) financial statements comply with IFRS requirements. (18 Marks)

(b) Prepare a revised statement of financial position for Mansa-Konko Limited that will be suitable for consolidation with the parent’s (Cabalar PLC’s) financial statements as of September 30, 2023, in accordance with IFRS. (12 Marks)

Note: Show all workings.
(Total: 30 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidation, Currency Translation, IFRS Compliance, Subsidiaries
Level: Level 3

Topic: Consolidated Financial Statements (IFRS 10)
Series: MAY 2024

CR – Nov 2017 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain IFRS accounting treatment and ethical issues in Enugun Industries Ltd.’s draft financial statements for the year ended Dec 31, 2014.

Question

Enugun Industries Limited
Atikun has recently been appointed as Financial Controller to Enugun Industries Limited. Until a month ago, Enugun Industries had a Finance Director, who resigned suddenly, due to ill health. Since Atikun joined the company, he has learned that his resignation was related to stress caused by a series of disagreements with the Managing Director about the performance of the business. The directors have not yet appointed a replacement.

It is now March 2015, and you have been asked to finalize the financial statements for the year ended December 31, 2014. The draft statement of profit or loss extract and statement of financial position are shown below:

Draft statement of profit or loss for the year ended December 31, 2014:

Profit before tax	₦’000
	2,500

Draft statement of financial position as of December 31, 2014:

Item	Amount (₦’000)
Property, plant, and equipment	12,000
Current assets	3,500
Total assets	15,500
Share capital	2,000
Retained earnings	6,000
Equity	8,000
Non-current liabilities	5,000
Current liabilities	2,500
Total equity and liabilities	15,500

During the year ended December 31, 2014, Enugun Industries entered into the following transactions:

Just before the year-end, Enugun Industries signed a contract to deliver consultancy services for a period of 2 years at a fee of ₦500,000 per annum. The full amount of this fee has been paid in advance and is non-refundable.
Enugun Industries has constructed a new factory. The construction has been financed from the pool of existing borrowings. Land at a cost of ₦1.8 million was acquired on February 1, 2014, and construction began on June 1, 2014. Construction was completed on September 30, 2014, at an additional cost of ₦2.7 million. Although the factory was usable from that date, full production did not commence until December 1, 2014. Throughout the year, the company’s average borrowings were as follows:

Borrowing Type Amount (₦) Annual Interest Rate (%)

Bank overdraft 1,000,000 9.75

Bank loan 1,750,000 10

Loan notes 2,500,000 8

An amount of ₦450,000 has been included in property, plant, and equipment in respect of borrowing costs relating to the construction of the factory. The useful life of the factory has been estimated at 20 years. No depreciation has been charged for the year. The reason for this is that the factory has only been in use for one month and that the depreciation charge would be immaterial.
A blast furnace with a carrying amount at January 1, 2014, of ₦3.5 million has been depreciated in the draft financial statements based on a remaining life of 20 years. In December 2014, the directors carried out a review of the useful lives of various significant items of plant and machinery, including the blast furnace. They concluded that the furnace’s useful life was 20 years as of December 31, 2014. The reasoning behind this judgment was that the lining of the furnace had been replaced in the last week of December 2014 at a cost of ₦1.4 million. Provided that the lining is replaced every five years, the life of the furnace can be extended accordingly. You have found a report commissioned by the previous Finance Director and prepared by a firm of asset valuation specialists, which assesses the remaining useful life of the main structure of the furnace as 15 years at January 1, 2014, and the lining of the furnace as 5 years. You have also found evidence that the Managing Director has seen this report.

Borrowing Type	Amount (₦)	Annual Interest Rate (%)
Bank overdraft	1,000,000	9.75
Bank loan	1,750,000	10
Loan notes	2,500,000	8

Atikun has had a conversation with the Managing Director, who told him, “We need to make the figures look as good as possible, so I hope you’re not going to start being difficult. The consultancy fee is non-refundable, so there’s no reason why we can’t include it in full. I think we should look at our depreciation policies. We’re writing off our assets over far too short a period. As you know, we’re planning to go for a stock market listing in the near future, and being prudent and playing safe won’t help us do that. It won’t help your future with this company either.”

Required:

Explain the required IFRS accounting treatment of these issues, preparing relevant calculations where appropriate.
(16 Marks)
Discuss the ethical issues arising from your review of the draft financial statements and the actions that you should consider.
(4 Marks)

Total: 20 Marks

Answer

Find Related Questions by Tags, levels, etc.

Tags: Borrowing Costs, Depreciation, Ethics, IFRS Compliance, Revenue Recognition
Level: Level 1

Topic: Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)
Series: NOV 2017

AAA – May 2019 – L3 – Q1c – Group Audits

Assess the validity of the non-consolidation of an acquired subsidiary and determine appropriate audit evidence.

Question

Abuakwa Ltd acquired a property in April 2018 at a cost of GH¢2.64 million. The property was not in a good state of repair, but Abuakwa needed office space for critical administration functions in a central location and moved some staff in immediately. In January 2019, more suitable accommodation became available for the staff, who were quickly relocated. A decision was taken to sell the property. Hence, it was decided not to provide any depreciation on the property in respect of the year under review.

However, significant remedial work was needed before the sale could be completed. This was commenced in early February 2019. The cost of this work is being expensed as ‘Repairs and Maintenance’ as incurred.

The property has a reserve price of at least GH¢4.2 million at a public auction scheduled for 30 June 2019. The property is classified as ‘Held for Sale’ at the year-end under IFRS 5: Non-current Assets held for Sale and Discontinued Operations at a value of GH¢4.2 million, and a gain of GH¢1.56 million has been recognised in the draft Consolidated Statement of Profit or Loss and Other Comprehensive Income.

(8 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidation, Equity Method, IFRS Compliance, Subsidiary Accounting
Level: Level 3

Topic: Group audit
Series: MAY 2019

AAA – Nov 2013 – L3 – A – Q9 – Regulatory Framework and Professional Standards

This question tests understanding of the required components of IFRS-compliant financial statements.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Statements, IFRS Compliance, Reporting Standards
Level: Level 3

Topic: Regulatory Framework and Professional Standards
Series: NOV 2013

CR – May 2024 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)

Analysis of consolidated statements and adjustments for Cabalar PLC's foreign subsidiary under IFRS.

Question

The draft statement of financial position of Mansa-Konko Limited prepared under Gambia GAAP as at September 30, 2023, is as follows:

Description	GMD ‘000
Non-current assets:
Property, plant, and equipment	308,000
Intangible assets	42,500
Financial investments	38,500
Current assets	118,500
Total assets	507,500
Equity and liabilities:
Share capital (GMD 1 per share)	50,000
Retained earnings	213,000
Revaluation surplus	84,000
Total equity	347,000
Non-current liabilities:
Loan notes	50,000
Provisions	75,000
Current liabilities	35,500
Total equity and liabilities	507,500

Additional Information:
The following are key transactions of Mansa-Konko Limited under Gambia GAAP. There is no deferred tax under Gambia GAAP:

Equipment:
- On January 1, 2023, Mansa-Konko Limited acquired some specialist equipment from the United States of America (USA) for $150 million. Payment for the equipment was made on March 31, 2023.
- In accordance with local Gambia GAAP, the cost of the equipment was recognized on January 1, 2023, at GMD 50 million, using the opening rate of exchange at October 1, 2022.
- Full year’s depreciation of GMD 5 million was charged to cost of sales as Mansa-Konko Limited depreciates the equipment over a ten-year life, with no residual value. The equipment was included in the statement of financial position at GMD 45 million.
- A sum of GMD 12.5 million has been debited to retained earnings, representing the difference between the amount paid to the supplier (GMD 62.5 million on March 31, 2023) and the cost recorded in non-current assets (GMD 50 million).
Impairments:
- Mansa-Konko Limited bought a warehouse on October 1, 2016, for GMD 180 million, depreciated over 20 years with no residual value. On October 1, 2022, due to a rise in property prices, the warehouse was revalued to GMD 210 million, with a revaluation surplus of GMD 84 million recognized. No transfers were made between the revaluation surplus and retained earnings under Gambia GAAP in respect of depreciation.
- Recently, there was a slump in the local property market, prompting an impairment review as of September 30, 2023. The warehouse was assessed as worth GMD 60 million, leading to a charge of GMD 90 million to profit or loss to reflect the difference between the carrying amount of GMD 150 million and the new value of GMD 60 million.
Financial Instruments:
- On April 1, 2023, Mansa-Konko Limited bought five million shares in a local quoted company at GMD 7.7 per share. This represents a 3% shareholding. The company intends to hold the shares until December 31, 2023, for profit. The shares have been recognized at cost in the statement of financial position in accordance with Gambia GAAP. The market value at September 30, 2023, was GMD 12.5 per share.
- Under Gambia tax rules, income tax is charged at 20% on accounting profit recognized on the sales of the investment.
Provisions:
- On October 1, 2022, Mansa-Konko Limited signed an agreement with the Gambian government for exclusive rights for the next 20 years to supply Adire T-shirts for Gambia’s national traditional festival (GNTF).
- The cost of acquiring these rights was GMD 42.5 million, recognized as intangible assets in Mansa-Konko Limited’s statement of financial position. Under the terms of the agreement, Mansa-Konko Limited must replace all damaged T-shirts at the end of the 20-year period.
- There is a 40% probability that the replacement cost of damaged T-shirts would be GMD 75 million and a 60% probability of GMD 50 million.
- For prudency, a provision of GMD 75 million was made in the financial statements and debited to operating costs.
- Mansa-Konko Limited has a pre-tax discount rate of 8%. The replacement cost will be allowed for tax purposes when paid. The relevant income tax rate is expected to remain at 20%.
Exchange Rates:

Date USD to GMD GMD to NGN

October 1, 2022 $3.00 GMD 4.2 = N1

January 1, 2023 $2.50

March 31, 2023 $2.40

September 30, 2023 $2.00 GMD 5.0 = N1

Note: In Gambia, the tax treatments of property, plant, and equipment, as well as exchange differences, are similar to IFRS treatments.

Date	USD to GMD	GMD to NGN
October 1, 2022	$3.00	GMD 4.2 = N1
January 1, 2023	$2.50
March 31, 2023	$2.40
September 30, 2023	$2.00	GMD 5.0 = N1

Note: Show all workings.
(Total: 30 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidation, Currency Translation, IFRS Compliance, Subsidiaries
Level: Level 3

Topic: Consolidated Financial Statements (IFRS 10)
Series: MAY 2024

CR – Nov 2017 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain IFRS accounting treatment and ethical issues in Enugun Industries Ltd.’s draft financial statements for the year ended Dec 31, 2014.

Question

Draft statement of profit or loss for the year ended December 31, 2014:

Profit before tax	₦’000
	2,500

Draft statement of financial position as of December 31, 2014:

Item	Amount (₦’000)
Property, plant, and equipment	12,000
Current assets	3,500
Total assets	15,500
Share capital	2,000
Retained earnings	6,000
Equity	8,000
Non-current liabilities	5,000
Current liabilities	2,500
Total equity and liabilities	15,500

During the year ended December 31, 2014, Enugun Industries entered into the following transactions:

Just before the year-end, Enugun Industries signed a contract to deliver consultancy services for a period of 2 years at a fee of ₦500,000 per annum. The full amount of this fee has been paid in advance and is non-refundable.
Enugun Industries has constructed a new factory. The construction has been financed from the pool of existing borrowings. Land at a cost of ₦1.8 million was acquired on February 1, 2014, and construction began on June 1, 2014. Construction was completed on September 30, 2014, at an additional cost of ₦2.7 million. Although the factory was usable from that date, full production did not commence until December 1, 2014. Throughout the year, the company’s average borrowings were as follows:

Borrowing Type Amount (₦) Annual Interest Rate (%)

Bank overdraft 1,000,000 9.75

Bank loan 1,750,000 10

Loan notes 2,500,000 8

An amount of ₦450,000 has been included in property, plant, and equipment in respect of borrowing costs relating to the construction of the factory. The useful life of the factory has been estimated at 20 years. No depreciation has been charged for the year. The reason for this is that the factory has only been in use for one month and that the depreciation charge would be immaterial.
A blast furnace with a carrying amount at January 1, 2014, of ₦3.5 million has been depreciated in the draft financial statements based on a remaining life of 20 years. In December 2014, the directors carried out a review of the useful lives of various significant items of plant and machinery, including the blast furnace. They concluded that the furnace’s useful life was 20 years as of December 31, 2014. The reasoning behind this judgment was that the lining of the furnace had been replaced in the last week of December 2014 at a cost of ₦1.4 million. Provided that the lining is replaced every five years, the life of the furnace can be extended accordingly. You have found a report commissioned by the previous Finance Director and prepared by a firm of asset valuation specialists, which assesses the remaining useful life of the main structure of the furnace as 15 years at January 1, 2014, and the lining of the furnace as 5 years. You have also found evidence that the Managing Director has seen this report.

Borrowing Type	Amount (₦)	Annual Interest Rate (%)
Bank overdraft	1,000,000	9.75
Bank loan	1,750,000	10
Loan notes	2,500,000	8

Required:

Explain the required IFRS accounting treatment of these issues, preparing relevant calculations where appropriate.
(16 Marks)
Discuss the ethical issues arising from your review of the draft financial statements and the actions that you should consider.
(4 Marks)

Total: 20 Marks

Answer

Find Related Questions by Tags, levels, etc.

Tags: Borrowing Costs, Depreciation, Ethics, IFRS Compliance, Revenue Recognition
Level: Level 1

Topic: Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)
Series: NOV 2017

AAA – May 2019 – L3 – Q1c – Group Audits

Assess the validity of the non-consolidation of an acquired subsidiary and determine appropriate audit evidence.

Question

(8 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidation, Equity Method, IFRS Compliance, Subsidiary Accounting
Level: Level 3

Topic: Group audit
Series: MAY 2019

Question Tag: IFRS Compliance

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

AAA – Nov 2013 – L3 – A – Q9 – Regulatory Framework and Professional Standards

This question tests understanding of the required components of IFRS-compliant financial statements.

CR – May 2024 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)

Analysis of consolidated statements and adjustments for Cabalar PLC's foreign subsidiary under IFRS.

CR – Nov 2017 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain IFRS accounting treatment and ethical issues in Enugun Industries Ltd.’s draft financial statements for the year ended Dec 31, 2014.

AAA – May 2019 – L3 – Q1c – Group Audits

Assess the validity of the non-consolidation of an acquired subsidiary and determine appropriate audit evidence.

AAA – Nov 2013 – L3 – A – Q9 – Regulatory Framework and Professional Standards

This question tests understanding of the required components of IFRS-compliant financial statements.

CR – May 2024 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)

Analysis of consolidated statements and adjustments for Cabalar PLC's foreign subsidiary under IFRS.

CR – Nov 2017 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain IFRS accounting treatment and ethical issues in Enugun Industries Ltd.’s draft financial statements for the year ended Dec 31, 2014.

AAA – May 2019 – L3 – Q1c – Group Audits

Assess the validity of the non-consolidation of an acquired subsidiary and determine appropriate audit evidence.

Our offerings

Contact Info

Customer

Get In Touch

Question Tag: IFRS Compliance

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

AAA – Nov 2013 – L3 – A – Q9 – Regulatory Framework and Professional Standards

This question tests understanding of the required components of IFRS-compliant financial statements.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q9 – Regulatory Framework and Professional Standards"

CR – May 2024 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)

Analysis of consolidated statements and adjustments for Cabalar PLC's foreign subsidiary under IFRS.

You're reporting an error for "CR – May 2024 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)"

CR – Nov 2017 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain IFRS accounting treatment and ethical issues in Enugun Industries Ltd.’s draft financial statements for the year ended Dec 31, 2014.

You're reporting an error for "CR – Nov 2017 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)"

AAA – May 2019 – L3 – Q1c – Group Audits

Assess the validity of the non-consolidation of an acquired subsidiary and determine appropriate audit evidence.

You're reporting an error for "AAA – May 2019 – L3 – Q1c – Group Audits"

AAA – Nov 2013 – L3 – A – Q9 – Regulatory Framework and Professional Standards

This question tests understanding of the required components of IFRS-compliant financial statements.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q9 – Regulatory Framework and Professional Standards"

CR – May 2024 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)

Analysis of consolidated statements and adjustments for Cabalar PLC's foreign subsidiary under IFRS.

You're reporting an error for "CR – May 2024 – L3 – SA – Q1 – Consolidated Financial Statements (IFRS 10)"

CR – Nov 2017 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Explain IFRS accounting treatment and ethical issues in Enugun Industries Ltd.’s draft financial statements for the year ended Dec 31, 2014.

You're reporting an error for "CR – Nov 2017 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)"

AAA – May 2019 – L3 – Q1c – Group Audits

Assess the validity of the non-consolidation of an acquired subsidiary and determine appropriate audit evidence.

You're reporting an error for "AAA – May 2019 – L3 – Q1c – Group Audits"

Our offerings

Contact Info

Customer

Get In Touch

admin