42 Questions
What are the two models that an entity may choose for recognizing investment property after recognition?
Cost model and fair value model
Under the cost model, how are investment properties held?
At cost less accumulated depreciation
Under the fair value model, how often does the entity remeasure its investment properties?
To fair value each year
In what circumstances should an entity adopt the cost model for investment property?
If it is impossible to measure the fair value of an individual investment property reliably
When can transfers to or from investment property be made?
If there is a change of use
What is the treatment of depreciation under the fair value model for investment properties?
No depreciation is charged
How are gains and losses on revaluation of investment properties treated under the fair value model?
Reported in the statement of profit or loss
Which standard applies to property held for use in the production or supply of goods or services?
IAS 16 Property, Plant and Equipment
What should the cash flow projections be based on according to IAS 36?
Reasonable assumptions and the most recent budgets and forecasts
How should management extrapolate from earlier budgets when estimating cash flows?
Using a steady, declining, or zero growth rate
What should the discount rate used to calculate value in use reflect according to IAS 36?
The time value of money and the risks specific to the asset
What are the options to compare against carrying amount in an impairment test?
Fair value less costs to sell and Value in use
What is the finance director asking the accountant to perform for JonJon assets?
Impairment test for the year ended 31 December 20X5
What was the condition of realised cash flows for JonJon in 20X5 compared to forecasted cash flows?
Negative and far below forecasted cash flows for that period
When should expenditure to improve or enhance an asset be excluded from cash flow projections?
For periods in excess of five years
What should management assess when investigating differences between forecast and actual cash flows?
The accuracy of their budgets
When should an entity start amortising an intangible asset?
Amortisation starts when the asset is available for use.
What method is typically used for amortisation of intangible assets with a finite useful life?
The straight-line method with a zero residual value should be used.
How should an asset with an indefinite useful life be treated?
An asset with an indefinite useful life should not be amortised, but be subject to an annual impairment review.
How are gains and losses on remeasurement to fair value of intangible assets accounted for?
They are accounted for in the same way as revaluation gains and losses of tangible assets.
In the case of the Our Sports brand, why was it valued at $20 million by the directors?
Based on the cash flow projections for the next five years of the series.
What action should be taken if an intangible asset's useful life is assessed as finite?
It should be amortised on a systematic basis over that life.
What is the key difference in treatment between intangible assets with finite and indefinite useful lives?
Assets with finite useful lives are amortised, while assets with indefinite useful lives are not amortised but subject to annual impairment review.
What triggers the start of the amortisation process for an intangible asset?
Amortisation starts when the asset is available for use.
What is the depreciation charge for the year ended 31 December 20X5 for the asset with a carrying amount of $80,000?
$20,000
When should Clock Government grants be recognized?
When there is reasonable assurance that the entity will comply with any conditions attached and the grant will be received.
What are the two options Clock could choose regarding the $1 million grant due from the local government?
Reduce the cost of the building by $1 million or Recognize deferred income of $1 million.
What will be the depreciation charge in profit or loss for the year ended 31 December 20X1 if Clock chooses to reduce the cost of the building by $1 million?
$15,000
What will be the carrying amount of the building as at 31 December 20X1 if Clock recognizes deferred income of $1 million?
$8,985,000
How long will the building be depreciated over if Clock chooses to reduce the cost of the building by $1 million?
50 years
What is the revised life for the asset with a carrying amount of $80,000?
4 years
What is the cost of the building after reducing it by $1 million?
$9 million
What is the total impairment charged to profit or loss?
$650,000
How much was the asset written down to in the year ended 31 December 20X2?
$16,000
What will be the depreciation charge per annum in future periods after the write-down in 20X2?
$2,000
What happened in the year ended 31 December 20X5 with regards to the recoverable amount of the asset?
nil
What was the depreciation historical cost in Year 5?
$15,000
How much was the reversal of the loss in Year 5?
$5,000
What is the carrying amount of the asset at 31 December 20X5 after the reversal of the loss?
$10,000
How was the impairment allocated among the various assets?
Goodwill (100) Patents (2,250) Machines (300) Computers (50) Buildings (150)
Why was no further impairment allocated to the machines?
Already written down to their recoverable amount
What was the recoverable amount in the year ended 31 December 20X2?
$24,000
Test your knowledge on the classification of investment property according to IFRS standards. Learn about the different criteria that determine whether a property can be classified as investment property or not.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
