Training Costs – NBC Institute

CR – May 2015 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Discuss implications of changes in accounting policy for intangible assets and demonstrate retrospective application in financial statements.

Question

LIKELY EFFECT LIMITED

Likely Effect Limited has shown a sincere intention to be IFRS compliant. Among a number of events and transactions, there is the need to change the accounting policies of the company in trying to comply with a few other standards. As the Consultant of the company, your attention was drawn to the fact that prior to 2013, the company had capitalized training costs.

According to IAS 38, training cost is regarded as an internally generated intangible asset and cannot be capitalized. Therefore, there is the need for a change of accounting policy which must be applied retrospectively.

The training costs capitalized in 2012 was N6m while the total for periods before 2012 was N12m.
Training costs incurred in 2013 is N4.5m. Retained earnings were N600m and N649m at the beginning and end of 2012 respectively. The corporate income tax rate is 30% for the relevant periods. Additional information available is given below:

	2013 (N’M)	2012 (N’M)
Income tax expense	24	21
Profit after tax	56	49
Share capital	50	50

Required:

(a) Advise the directors on the implication of the change in accounting standard relating to treatment of intangible assets and tax effect on the company. (5 Marks)

(b) Prepare statements of profit or loss and other comprehensive income and changes in equity showing a retrospective application of the change in policy. (7 Marks)

Answer

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Tags: Accounting Policy Change, Financial Reporting Adjustments, IAS 38, IAS 8, Intangible Assets, Retrospective Adjustment, Tax Effects, Training Costs
Level: Level 3

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

FR – MAY 2021 – L2 – Q5c – Intangible Assets Accounting

Explain accounting for manufacturing software and training costs as per IAS 38.

Question

Sawla Ltd (Sawla) prepares financial statements under International Financial Reporting Standards (IFRSs). On 1 June 2020, Sawla acquired a manufacturing software at the cost of GH¢1.5 million. The software is estimated to have a useful economic life of 5 years with no residual value. To develop staff capacity to a higher level, a training program was organised for production staff on the use of the software at a cost of GH¢250,000 during the year. Management is convinced the staff training will generate more revenue for the entity through future economic benefits. Sawla intends to adopt the revaluation model under IAS 38 Intangible Assets and to revalue the software at the end of each year. Accordingly, the software was valued by a software engineer at GH¢1.7 million on 31 December 2020. Sawla accepted this value and decided to incorporate the valuation in the financial statements.

Required:
In accordance with IAS 38: Intangible Assets, explain how to account for the above transactions for the year to 31 December 2020.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Standards, IAS 38, Intangible Assets, Revaluation Model, Training Costs
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: MAY 2021

CR – May 2015 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Discuss implications of changes in accounting policy for intangible assets and demonstrate retrospective application in financial statements.

Question

LIKELY EFFECT LIMITED

	2013 (N’M)	2012 (N’M)
Income tax expense	24	21
Profit after tax	56	49
Share capital	50	50

Required:

(a) Advise the directors on the implication of the change in accounting standard relating to treatment of intangible assets and tax effect on the company. (5 Marks)

(b) Prepare statements of profit or loss and other comprehensive income and changes in equity showing a retrospective application of the change in policy. (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Policy Change, Financial Reporting Adjustments, IAS 38, IAS 8, Intangible Assets, Retrospective Adjustment, Tax Effects, Training Costs
Level: Level 3

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

FR – MAY 2021 – L2 – Q5c – Intangible Assets Accounting

Explain accounting for manufacturing software and training costs as per IAS 38.

Question

Required:
In accordance with IAS 38: Intangible Assets, explain how to account for the above transactions for the year to 31 December 2020.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting Standards, IAS 38, Intangible Assets, Revaluation Model, Training Costs
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: MAY 2021

Question Tag: Training Costs

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CR – May 2015 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Discuss implications of changes in accounting policy for intangible assets and demonstrate retrospective application in financial statements.

Required:

FR – MAY 2021 – L2 – Q5c – Intangible Assets Accounting

Explain accounting for manufacturing software and training costs as per IAS 38.

Required:
In accordance with IAS 38: Intangible Assets, explain how to account for the above transactions for the year to 31 December 2020.
(5 marks)

CR – May 2015 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Discuss implications of changes in accounting policy for intangible assets and demonstrate retrospective application in financial statements.

Required:

FR – MAY 2021 – L2 – Q5c – Intangible Assets Accounting

Explain accounting for manufacturing software and training costs as per IAS 38.

Required:
In accordance with IAS 38: Intangible Assets, explain how to account for the above transactions for the year to 31 December 2020.
(5 marks)

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CR – May 2015 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Discuss implications of changes in accounting policy for intangible assets and demonstrate retrospective application in financial statements.

Required:

You're reporting an error for "CR – May 2015 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)"

FR – MAY 2021 – L2 – Q5c – Intangible Assets Accounting

Explain accounting for manufacturing software and training costs as per IAS 38.

Required: In accordance with IAS 38: Intangible Assets, explain how to account for the above transactions for the year to 31 December 2020. (5 marks)

You're reporting an error for "FR – MAY 2021 – L2 – Q5c – Intangible Assets Accounting"

CR – May 2015 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)

Discuss implications of changes in accounting policy for intangible assets and demonstrate retrospective application in financial statements.

Required:

You're reporting an error for "CR – May 2015 – L3 – Q4 – Accounting Policies, Changes in Accounting Estimates, and Errors (IAS 8)"

FR – MAY 2021 – L2 – Q5c – Intangible Assets Accounting

Explain accounting for manufacturing software and training costs as per IAS 38.

Required: In accordance with IAS 38: Intangible Assets, explain how to account for the above transactions for the year to 31 December 2020. (5 marks)

You're reporting an error for "FR – MAY 2021 – L2 – Q5c – Intangible Assets Accounting"

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Customer

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Required:
In accordance with IAS 38: Intangible Assets, explain how to account for the above transactions for the year to 31 December 2020.
(5 marks)

Required:
In accordance with IAS 38: Intangible Assets, explain how to account for the above transactions for the year to 31 December 2020.
(5 marks)