Financial Reporting Flashcards

Under IAS 16 Property, Plant and Equipment, which subsequent measurement model allows for upward revaluation of assets?

Answer: Revaluation model

The revaluation model under IAS 16 allows an entity to carry PPE at a revalued amount (fair value at the date of revaluation less subsequent depreciation and impairment). Increases in value are generally recognized in other comprehensive income.

A Canadian public company prepares consolidated financial statements. Under which circumstances can a subsidiary be excluded from consolidation under IFRS 10?

Answer: Subsidiaries cannot be excluded; all controlled entities must be consolidated

IFRS 10 requires consolidation of all entities controlled by the parent. There is no exemption based on dissimilar activities or different year-ends. The only exception is when the parent itself qualifies as an investment entity under IFRS 10.

Under IAS 38 Intangible Assets, which of the following internally generated items can be recognized as an intangible asset?

Answer: Development costs that meet specific recognition criteria

IAS 38 prohibits recognition of internally generated goodwill, brands, mastheads, and similar items. Research costs must be expensed. Development costs can be capitalized only when all six specified criteria are met (technical feasibility, intention, ability, probable future benefits, resources, and reliable measurement).

What is the primary difference between a joint venture and a joint operation under IFRS 11?

Answer: In a joint venture, parties have rights to net assets; in a joint operation, parties have rights to assets and obligations for liabilities

Under IFRS 11, a joint venture gives the parties rights to the net assets of the arrangement (accounted for using the equity method), whereas a joint operation gives the parties rights to the assets and obligations for the liabilities (each party recognizes its share of assets, liabilities, revenues, and expenses).

Under IAS 10, which of the following is an adjusting event after the reporting period?

Answer: Settlement of a court case that confirms a year-end obligation

An adjusting event provides evidence of conditions that existed at the end of the reporting period. Settlement of a court case confirming a year-end obligation is adjusting because the obligation existed at year-end. The other options are non-adjusting events.

Under IAS 21 The Effects of Changes in Foreign Exchange Rates, how are foreign currency monetary items translated at the reporting date?

Answer: At the closing (spot) rate at the reporting date

IAS 21 requires monetary items denominated in a foreign currency to be translated at the closing rate at the reporting date. Non-monetary items measured at historical cost are translated at the rate on the date of the transaction.