Accounting (IFRS/UK GAAP) Flashcards

Under IFRS 16, the discount rate used to calculate the lease liability is typically:

Answer: The rate implicit in the lease, or the lessee's incremental borrowing rate

IFRS 16 requires use of the rate implicit in the lease; if that cannot be readily determined, the lessee's incremental borrowing rate is used instead.

Which of the following is an example of a constructive obligation under IAS 37?

Answer: A published policy of refunds that creates a valid expectation

A constructive obligation arises from an established pattern of past practice, published policies, or specific statements that create a valid expectation in others that the entity will discharge the obligation.

Under IAS 40, investment property carried at fair value:

Answer: Changes in fair value are recognised in profit or loss

Under IAS 40's fair value model, gains and losses from changes in fair value of investment property are recognised in profit or loss in the period they arise.

In a group context, which of the following is eliminated on consolidation?

Answer: Intragroup transactions and balances

Consolidation requires elimination of intragroup transactions, balances, income, and expenses to prevent double-counting, as the group is presented as a single economic entity.

Under IAS 8, a change in accounting policy is applied:

Answer: Retrospectively by restating prior period comparatives

IAS 8 requires retrospective application of a change in accounting policy, with restatement of prior period comparatives, as if the new policy had always been applied.

Which qualitative characteristic of financial information under the IASB Conceptual Framework ensures information is free from material error?

Answer: Faithful representation

Faithful representation requires that financial information is complete, neutral, and free from material error; it does not have to be perfectly accurate but must faithfully depict economic phenomena.