Conceptual framework for financial reporting 2017 pdf free download

Whatever degree you are acquiring in any school, we have listed above, complete accounting project topics and PDF research materials document for instant downloads. We are wishing you Good luck while defending your final year accounting project. Related Current Papers. Pin 2. March 23, P6,, c. P5,, b. P7,, d. The following data were available concerning the property:. Land 2,, 1,, Warehouse 3,, 2,, On August 1, , Bamco Company purchased a new machine on a deferred payment basis.

A down payment of P, was made and 4 monthly installments of P, each are to be made beginning on September 1, The cash equivalent price of the machine was P, What is the amount to be capitalized as cost of the machine? Josey Company entered into a contract to acquire a new machine for its factory.

The machine, which had a cash price of P2, , was paid as follows:. The machine has an estimated residual value of P, What is the initial cost of the machine? On December 31, , Anxious Company purchased a machine in exchange for a non-interest bearing note requiring ten payments of P, The first payment was made on December 31, , and the others are due annually on December On December 31, , Anxious Company acquired used machinery by issuing the seller a two-year, non-interest-bearing note for P3, , On December 1, , Bart Company purchased a machine in exchange for a non-interest bearing note requiring eight payments of P, Presents value factors are as follows:.

Dawson Company has received a donation of land from a rich local philanthropist. The land originally had a cost of P1, , On the date of the donation, the land had a market value of P1, , and an assessed value of P1, , What amount if income should be recognized from the donation? The last property tax bill indicated assessed value of P2, , for the land. No payment was required but the entity paid P50, for legal expenses for land transfer.

The land is fairly valued at P1, , Costs of freight and insurance during shipment were P50, and installment cost amounted to P, Additional welding supplies were acquired at a cost of P, Jazz Company purchased land with a current market value of P2, , The carrying amount of the land was P1, , The shares are traded in an established stock exchange. What amount should be recorded as cost of the land? Kirk Company purchased equipment by making a down payment of P, and issuing a note payable for P1, , A payment of P, is to be made at the end each year for three years.

Shipping charges for the equipment of P, and installation charges of P, were incurred. What is the capitalized cost of the equipment? Figaro Company acquired land and paid in full by issuing P, of its 10 percent bonds payable and 40, ordinary shares with par value of P The share was selling at P19 and the bonds were trading at On September 1, , Ron Company issued , treasury shares with P25 par value for parcel of land to be held as investment property.

The treasury shares were acquired at a cost of P30 per share. This share had a fair market value of P40 on September 1, The entity received P50, from the sale of scrap when an existing unusable structure on the site was immediately razed.

What is the initial cost of the land? The following data were taken from the accounting records:. Materials Direct labor. Finished goods 1,, 1,, Office equipment , , Factory overhead amounted to P1, , Normal production of finished goods is 50, units. Due to the fabrication of the office equipment, finished goods produced totaled 35, units only in the current year. The office equipment is to be charged with the overhead which would have been apportioned to the 15, units which were not produced.

Tangible items that are held for use in the production or supply of goods or services, for rental to others, or for administrative purpose; and are expected to be used during more one period.

Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. Any costs directly attributable to bringing the assets to the location and condition necessary for it to be capable of operating in the manner intended by management. Cost directly attributable to bringing the asset to the location and condition necessary for it be capable of operating in the manner intended by management exclude.

Costs for employee benefits arising directly from the construction or acquisition of the item of property, plant and equipment.

Costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management exclude. The period over which an asset is expected to be available for use by an entity. The number of production or similar units expected to be obtained from the asset by an Entity. Accounting for the interest in a non-interest bearing note receivable is an example of what aspect of accounting theory?

Verifiability b. Substance over form c. Form over substance d. What is the balance of note receivable on July 1, ? In June 30, statement of Financial Position, what amount should be reported as a current asset for interest in the note receivable?

Write-offs must be approved by a responsible official after review of credit department recommendations and supporting evidence b. Write-offs must be approved by the accounts receivable department c. Write-offs must be authorized by the shipping department d. Write-offs must be supported by an aging schedule showing that only receivables overdue by several months have been written off.

Frost signed a non-interest bearing note requiring payment of P, annually for seven years. The first payment was made on January 1, What should be the amount to be recorded as sales revenue in January ? What is the carrying amount of the note receivable on January 1, ? What is the interest income for ? What is the carrying amount of the note receivable on December 31, ? FALSE c. Neither true nor false d. Either true or false. Cloud Company sold equipment with a carrying amount of P, , receiving a non-interest bearing note due in three years with a face amount of P1, , There is no established market value for the equipment.

What amount should be reported as gain or loss on sale of equipment? What amount should be reported as interest income for first year?

The face amount of the note and the entire amount of interest are due on the date of the maturity. Interest receivable on December31 of the current year a. The sale agreement made no mention of interest. Rinehart Company made a loan of P8, to one of the company's employees on April 1, The amount of interest revenue that Rinehart would report in and , respectively would be: a. Notes receivable typically earn interest revenue for the lender and interest expense for the borrower.

TRUE b. On December 31, Beacon failed to make the adjusting entry to accrue the related interest. This error will cause: a. Net income for to be overstated and liabilities for to be overstated. Net income for to be understated and net income for to be overstated.

Net income for to be understated and liabilities for to be understated. Net income for to be understated and liabilities for to be overstated. Hamm Co. Hamm is to repay the principal and interest on March 1, If the year-end adjustment is properly recorded, what will be the effects of the accrual on Hamm's financial statements? Increase assets and increase liabilities b. Increase assets and increase revenues c. Increase liabilities and increase expenses d.

No effect. Insurance Contracts KB. Financial Instruments: Disclosures KB. Operating Segments KB. Financial Instruments KB. Consolidated Financial Statements KB. Joint Arrangements KB. Fair Value Measurement KB. Regulatory Deferral Accounts KB. Revenue from Contracts with Customers KB. Leases KB. Unknown February 13, at AM. Unknown February 14, at AM. Immanuel Adamu February 17, at AM. Unknown February 19, at AM. Unknown February 26, at AM.

Unknown March 3, at PM. Unknown April 10, at AM. Patience April 16, at AM. Adedamola Otun April 16, at AM. Unknown April 18, at PM. Adedamola Otun April 19, at AM. Unknown April 20, at PM. Ifeanyi April 23, at AM. Unknown April 26, at AM. Anonymous April 30, at PM. Adedamola Otun May 2, at AM. Unknown May 8, at PM. Unknown May 10, at AM. Aliyunbuba May 18, at AM. Unknown May 20, at AM. Emma May 25, at AM. Unknown June 3, at AM.

Unknown June 17, at AM. June 21, at AM. Unknown June 28, at PM. Unknown July 3, at PM. Unknown July 8, at AM. Anonymous July 11, at PM. Anonymous July 13, at PM. Unknown July 18, at AM. Anonymous July 24, at AM. Unknown July 28, at AM. Unknown August 1, at AM. Unknown August 8, at AM. Unknown August 11, at AM. Nwachukwu Gift August 15, at AM. Unknown August 15, at AM. Ojay August 20, at PM. Loluwa August 22, at AM.

Adedamola Otun August 29, at AM. Anonymous August 27, at AM. Niaso August 28, at AM. Unknown August 29, at AM. Anonymous August 29, at PM. Anonymous August 31, at AM. Damilare September 2, at AM.

Adedamola Otun September 2, at AM. Unknown September 7, at AM. Onimisi Aliyu September 9, at AM. Adedamola Otun September 9, at AM. Unknown September 22, at AM. Anonymous October 2, at AM. Unknown October 7, at PM. Unknown October 14, at AM. Tochukwu Deltus October 20, at PM. Adedamola Otun October 20, at PM. Unknown November 4, at PM. Chidinma Umeh November 19, at AM. Unknown November 26, at AM.

Adedamola Otun November 26, at AM. Unknown November 29, at PM. Unknown December 2, at AM. Bolanle December 16, at AM. Unknown December 16, at AM. Nse Daniel December 19, at AM. Unknown December 21, at AM. Unknown December 29, at AM. Unknown January 11, at PM. Admin January 15, at PM. Unknown January 16, at PM. Unknown January 21, at AM. Unknown January 22, at PM. Emma January 30, at AM. Atunu February 2, at AM. Malachi Semali February 7, at AM. The directors of the company are unsure as to whether a provision for deferred taxation is required.

The goals of the project are to build on the existing frameworks and converge them into a common framework. Required: a Discuss why there is a need to develop an agreed international conceptual framework SA and the extent to which an agreed international conceptual framework can be used to resolve practical accounting issues.

It could be argued that additional accounting and disclosure standards would only distort a market mechanism that already works well and would add costs to the reporting mechanism, with no apparent benefit.

It could be said that financial reporting standards create costly, inefficient, and unnecessary regulation. It could be argued that increased disclosure reduces risks and offers a degree of protection to users. However, increased disclosure has several costs to the preparer of financial statements. Required: E a Explain why financial reporting standards are needed to help the market mechanism work effectively for the benefit of preparers and users of corporate reports.

The Lucky Dairy produces milk for supply to various customers. The company owns farms and has a stock of 70, cows and 35, heifers young female cows which are being raised to produce milk in the future. The cows had contracted a disease at the beginning of the financial year which had been passed on in the food chain to a small number of consumers.

The publicity surrounding this event had caused a drop in the consumption of milk and as a result the dairy was holding , kilograms of milk in storage. Additionally, on 1 May , Lucky received a letter from its lawyer saying that legal proceedings had been started against the company by the persons affected by the disease.

The lawyers, however, feel that the company may receive additional compensation from a government fund if certain quality control procedures had been carried out by the company. The only region affected by the disease was Dale and the government has decided that it is to restrict the milk production of that region significantly. Lucky was not sure that the fair value of the cows in the region could be measured reliably at the date of purchase because of the problems with the diseased cattle.

The cows in this region amounted to 20, in number and the heifers 10, in number. All of the animals were purchased on 1 June However, there PL was a minority of directors who opposed the planned sale and it was decided to defer the public announcement of sale pending the outcome of the possible receipt of the government compensation.

The Board had decided that the potential sale plan was highly confidential but a national newspaper had published an article stating that the sale may occur and that there would be many people who would lose their employment. The Board approved the planned sale of Dale farms on 31 May and are actively seeking a buyer. The directors of Lucky have approached your firm for professional advice on the above matters.

Your answer should include a table which shows the changes in value of the cattle stock for the year to 31 May due to price change and physical change excluding the Dale region, and the value of the herd of the Dale region as at 31 May Ignore the effects of taxation.. The entity wishes to seek advice on how it will deal with the following accounting issues in its financial statements for the year ended 30 November The entity already prepares its financial statements under full IFRS.

Whitebirk has used the full goodwill method to account for business combinations and the estimated life of goodwill cannot be estimated with any accuracy. The loan agreement stipulates that such default leads to an M obligation to repay the whole of the loan immediately, including accrued interest and expenses.

The bondholders, however, issued a waiver postponing the interest payment until 31 May On 17 May , Alexandra felt that a further waiver was required, so requested a meeting of the bondholders and agreed a further waiver of the interest payment to 5 July , when Alexandra was confident it could make the payments. Alexandra classified the loan as long-term debt in its statement of financial position at 30 April on the basis that the loan was not in default at the end of the reporting period as the bondholders had issued waivers and had not sought redemption.

The supplier solves system problems and provides new releases and updates for software. Alexandra provides maintenance services for its customers. In previous years, Alexandra recognised revenue and related costs on software maintenance contracts when the customer was invoiced, which was at the beginning of the contract period. Contracts typically run for two years. During , Alexandra had acquired Xavier Co, which recognised revenue, derived from a similar type of maintenance contract as Alexandra, on a straight-line basis over the term of the contract.

Alexandra considered both its own and the policy of Xavier Co to comply with the requirements of IAS 18 Revenue but it decided to adopt the practice of Xavier Co for itself and the group.

Alexandra concluded that the two recognition methods did not, in substance, represent two different accounting policies and did not, therefore, consider adoption of the new practice to be a change in policy. In the year to 30 April , Alexandra recognised revenue and the related costs on a straight-line basis over the contract term, treating this as a change in an accounting estimate. No further breakdown of the remuneration was E provided. The management board comprises both the executive and non-executive directors.

The remuneration of the non-executive directors, however, was not included in the key management disclosures. Some members of the supervisory and management boards are of a particular nationality. Alexandra was of the opinion that in that jurisdiction, it is not d PL acceptable to provide information about remuneration that could be traced back to individuals.

Consequently, Alexandra explained that it had provided the related party information in the annual accounts in an ambiguous way to prevent users of the financial statements from tracing remuneration information back to specific individuals. In the year ended 30 April , Alexandra changed the accounting method used for the scheme and accounted for it as a defined contribution plan, restating the comparative financial information. The effect of the restatement was significant.

In the financial statements, Alexandra explained that, during the year, the arrangements underlying the retirement benefit plan had been subject to detailed review. Since the pension liabilities are fully insured and M indexation of future liabilities can be limited up to and including the funds available in a special trust account set up for the plan, which is not at the disposal of Alexandra, the plan qualifies as a defined contribution plan under IAS 19 Employee Benefits rather than a defined benefit plan.

Furthermore, the trust account is built up by the insurance company from the surplus yield on investments. The pension plan is an average pay plan in respect of which the entity pays insurance premiums to a third party insurance company to fund the plan.

If an employee leaves SA Alexandra and transfers the pension to another fund, Alexandra is liable for, or is refunded the difference between the benefits the employee is entitled to and the insurance premiums paid.

The revenue recognition standard, IAS 18 Revenue, has been criticised because an entity applying the standards might recognise amounts in the financial statements that do not faithfully represent the nature of the transactions.

It has been further argued that current standards are inconsistent with principles used in other accounting standards, and further that the notion of the risks and rewards of ownership has also been subjectively applied in sale transactions. Required: a i Discuss the main weaknesses in the current standard on revenue recognition; E 11 marks ii Discuss the reasons why it might be relevant to take into account credit risk and the time value of money in assessing revenue recognition.

The terms are that payment is due one month after the sale of the goods. Venue has also been offering discounts to customers if products were sold with terms whereby payment was due now but the transfer of the product was made in one year. SA Required: Discuss how both of the above transactions would be treated in subsequent financial statements under IAS 18 and also whether there would be difference in treatment if the collectability of the debt and the time value of money were taken into account.

The sale is expected to be completed on 1 July and the financial statements of the group were signed on 15 May Rockby was at 15 May negotiating the consideration for the sale of Bye but no contract has been signed or public announcement made as of that date. These leases have now expired. The company is undecided as to whether to sell the ii PL plant or lease it to customers under finance leases. The company had decided at 31 March to maintain the plant in workable condition in case of a change in economic conditions.

The Board of Rockby approved the relocation of the head office site on 1 March The head office land and buildings were renovated and upgraded in the year to 31 March with a view to selling the site. During the improvements, subsidence was found in the M foundations of the main building. The work to correct the subsidence and the renovations were completed on 1 June However, the market for commercial property had deteriorated significantly and as at 31 SA March , a buyer for the property had not been found.

At that time the company did not wish to reduce the price and hoped that market conditions would improve. Non-current assets are shown in the financial statements at historical cost. The costs incurred in relation to maintaining the games at the same standard of performance are expensed to the statement of comprehensive income.

The accounting policy note states that intangible assets are valued at historical cost. Scramble considers the games to have an b PL indefinite useful life, which is reconsidered annually when the intangible assets are tested for impairment.

Scramble determines value in use using the estimated future cash flows which include maintenance expenses, capital expenses incurred in developing different versions of the games and the expected increase in turnover resulting from the above mentioned cash outflows.

Scramble does not conduct an analysis or investigation of differences between expected and actual cash flows. Tax effects were also taken into account. The recoverable amount of the CGUs is defined, in this case, as value in use.

Specific discount rates are not directly available from the market, and M Scramble estimates the discount rates, using its weighted average cost of capital. In calculating the cost of debt as an input to the determination of the discount rate, Scramble used the risk-free rate adjusted by the company specific average credit spread of its outstanding debt, which had been raised two years previously.

As Scramble did not have any need for additional financing and did not need to repay any of the existing loans before , Scramble did not see any reason for using a different discount rate. Scramble did not disclose either the events and circumstances that led to the recognition of the impairment loss or the SA amount of the loss recognised in respect of each cash-generating unit. Scramble felt that the events and circumstances that led to the recognition of a loss in respect of the first CGU were common knowledge in the market and the events and the circumstances that led to the recognition loss of the second CGU were not needed to be disclosed.

Rashing does not sell these tickets nor has any discretion over the pricing of the tickets. Rashing wishes to show these rights as intangible assets in its financial statements. The mark allocation is shown against each of the three accounting treatments above. Professional marks for clarity and expression of your discussion. The company applies newly issued IFRSs at the earliest opportunity. The group financial statements at first appeared to indicate that the group was solvent and in a good financial position.

However, after the year end, but prior to the approval of the financial statements mistakes have been found which affect the financial position of the group to the extent that loan covenant agreements have been breached.

PL As a result the loan creditors require Ashlee to cut its costs, reduce its operations and reorganise its activities. Therefore, redundancies are planned and the subsidiary, Pilot, is to be reorganised. Ashlee had already decided prior to the year end to sell the other subsidiary, Gibson. Gibson will be M sold after the financial statements have been signed.

The contract for the sale of Gibson was being negotiated at the time of the preparation of the financial statements and it is expected that Gibson will be sold in June The directors of Ashlee had signed a contract on 1 March to sell two of its development properties which are carried at the lower of cost and net realisable value under IAS 2 Inventories. The sale of the properties was completed on 1 May when the legal title passed.

The policy used in the prior year was to recognise revenue when the sale of such properties had been completed. There is no goodwill arising in the group financial statements other than that set out above. Required: a PL Discuss the implications, with suitable computations, of the above events for the group financial statements of Ashlee for the year ended 31 March Question 12 KEY 25 marks Key, a public limited company, is concerned about the reduction in the general availability of credit and the sudden tightening of the conditions required obtaining a loan from banks.

There has been a reduction in credit availability and a rise in interest rates. It seems as though there has ceased to be a clear relationship between interest rates and credit availability, and lenders and investors are seeking less risky investments. The directors are trying to determine the practical implications for the financial statements particularly because of large write M downs of assets in the banking sector, tightening of credit conditions, and falling sales and asset prices.

They are particularly concerned about the impairment of assets and the market inputs to be used in impairment testing. They are afraid that they may experience significant impairment charges in the coming financial year. They are unsure as to how they should test for impairment and any considerations which should be taken into account.

Required: SA Discuss the main considerations that the company should take into account when impairment testing non-current assets in the above economic climate. The company holds certain non-current assets, which are in a development area and carried at cost less depreciation. At 30 November , the directors used the same cash flow projections and noticed that the resultant value in use was above the carrying amount of the assets and wished to reverse any impairment loss calculated at 31 May Key committed itself at the beginning of the financial year to selling a property that is being under-utilised following the economic downturn.

As a result of the economic downturn, the E property was not sold by the end of the year. The asset was actively marketed but there were no reasonable offers to purchase the asset. Key is hoping that the economic downturn will change in the future and therefore has not reduced the price of the asset. Required: The markets are volatile and illiquid.

The central government is injecting liquidity into the economy. The directors are concerned about the significant shift towards the use of fair values in financial SA statements. The directors are uncertain of the relevance of fair value measurements in these current market conditions. Required: a Briefly discuss how the fair value of financial instruments is determined, commenting on the relevance of fair value measurements for financial instruments where markets are volatile and illiquid.

If the investor did not convert to shares they would have been redeemed at par. No bonds could be converted before that date. The company wishes to know how the exchange of shares in Smart for the shares in Given should be accounted for in its financial records. Aron has a wholly-owned foreign subsidiary, Gao, whose functional currency is the zloti.

Gao owns a debt instrument which is held for trading. M At 31 May , the fair value of the debt instrument had increased to 12 million zloti.

The loans will be paid back on 31 May as a single payment by the employees. The mark allocation is shown against each of the transactions above. PL Preparers, auditors and users of financial statements have found the requirements for reporting financial assets and liabilities to be very complex, problematical and sometimes subjective.

The result is that there is a need to develop new standards of reporting for financial instruments that are principle-based and significantly less complex than current requirements. It is important that a standard in this area should allow users to understand the economic substance of the transaction and preparers to properly apply generally accepted accounting principles. Required: a i Discuss how the measurement of financial instruments under International Financial Reporting Standards can create confusion and complexity for M preparers and users of financial statements.

Both financial liabilities are repayable on 30 November and are single payment notes, whereby interest and capital are repaid on that date. Required: Discuss the accounting for the above financial liabilities under current financial reporting standards using amortised cost, and additionally using fair value as at 30 November The new standard purports to enhance the ability of investors and other users of financial information to understand the accounting of financial assets and reduces complexity.

Required: Discuss how the financial asset will be accounted for in the financial statements of Grainger in the year ended 30 April The issue with the incurred loss model is that impairment losses and resulting write-downs in the reported value of financial assets can only be M recognised when there is evidence that they exist and have been incurred.

Reporting entities are not allowed currently to consider the effects of expected losses. There is a view that earlier recognition of loan losses could potentially reduce the problems incurred in a credit crisis. The number of loans are fixed without any new lending or any other impairment provisions. Required: i Discuss briefly the issues related to considering the effects of expected losses in dealing with impairment of financial assets. The following proposals had been drafted in an attempt to improve the cash flow of the club.

However, the directors need advice on their implications. The stadium will have a remaining life of 20 years at 31 December , and the club uses straight line depreciation. It is proposed to sell the stadium to a third party institution on E 1 January and lease it back under a 20 year finance lease.

The agreement transfers the title of the stadium back to the football club at the end of the lease at nil cost. The directors do not wish to treat this transaction as the raising of a secured loan. The club has sold most of its valuable players during the current financial year but still has two valuable players under contract.

Steel 20 4 1 January 31 December R. Seejoy are currently performing very poorly in the league. The money from the bond will be used to pay for ground improvements and to pay the wages of players. There will be no active market for the bond and the company does not wish to use valuation models to value the bond. The players are to be offered for sale at the end of the current football season on 1 May Candidates do not need knowledge of the football finance sector to answer this question.