NON-CURRENT
ASSETS
HELD
FOR
SALE
AND
DISCONTINUED
OPERATIONS
1. A non-current asset should be classified as held for sale only if: a) Its carrying amount will be recovered principally through a sale transaction rather than through continuing use b) Its carrying amount will be recovered wholly who lly through a sale transaction rather than through continuing use c) Its carrying amount will be recovered principally through continuing use rather than through a sale transaction d) Its carrying amount will be recovered wholly through continuing use rather than through a sale transaction 2. The conditions which must be satisfied in order for the sale of an asset to be deemed "highly probable" include: a) Management is considering a plan to sell the asset b) The asset is being marketed at a price which greatly exceeds its fair value c) A completed sale is expected within five years d) None of the above 3. A disposal group always consists of a number of cash-generating units. True or False? a)TRUE b)FALSE 4. A non-current asset held for sale should be b e measured at: a) The higher of the asset's carrying amount when originally classified as held for sale and its fair value less costs to sell b) The asset's carrying amount when originally classified as held for sale, less any an y accumulated depreciation since that date c) Fair value less costs to sell d) The lower of the asset's carrying amount when originally classified as held for sale and its fair value less costs to sell 5. On 1 November 2013, a company which prepares financial statements to 31 March each year classifies a non-current asset as held for sale. The asset's carrying amount on 1 November 2013 is £40,000 and its fair value less costs to sell is £35,000. The asset is still held on 31 March 2014, when its fair value less costs to sell is £27,500. The impairment losses that should be recognized are: a) 1/11/2013 £nil; 31/3/2014 £12,500 b) 1/11/2013 £5,000; 31/3/2014 £12,500 c) 1/11/2013 £5,000; 31/3/2014 £7,500 d) 1/11/2013 £nil; 31/3/2014 £nil 6. If certain types of asset are classified as held for sale, they should continue to be measured in accordance with the standard that normally applies to that type of asset rather than being measured in accordance with the requirements of standard IFRS5. True or False? a)TRUE b)FALSE 1
7. An asset which ceases to be classified as held for sale should be measured at the lower of its carrying amount before being classified as held for sale (less any depreciation that would normally have been charged in the meantime) and: a) Fair value less costs to sell at the date of the decision not to sell b) Value in use at the date of the decision not to sell c) The higher of fair value less costs to sell and value in use at the date of the decision not to sell d) The lower of fair value less costs to sell and value in use at the date of the decision not to sell 8. Non-current assets held for sale should be presented separately from other assets in the statement of financial position. True or False? a)TRUE b)FALSE 9. A discontinued operation is defined as a component of an entity which: a) Has been disposed of b) Is classified as held for sale c) Has been disposed of or is classified as held for sale d) Is expected to be disposed of within the next 12 months 10. With regard to discontinued operations, an entity's statement of comprehensive income should show a single amount comprising: a) The post-tax profit or loss of discontinued operations b) The post-tax profit or loss of discontinued operations and the post-tax gain or loss on the remeasurement or disposal of the assets of discontinued operations c) The pre-tax profit or loss of discontinued operations d) The pre-tax profit or loss of discontinued operations and the pre-tax gain or loss on the remeasurement or disposal of the assets of discontinued operations
2
RELATED PARTIES AND CHANGES IN FOREIGN EXCHANGE RATES
1. The fact that an entity has related parties cannot have any effect on the entity's financial performance unless there are transactions between the entity and those parties. True or False? a) True b) False 2. International standard IAS24 requires an entity's financial statements to be restated so that transactions with related parties are reported at the prices that would have applied if the transactions had been carried out at arm's length. True or False? a)True b)False 3. A person (P) is necessarily related to a reporting entity (R) if: a) P owns ordinary shares in R b) P's grandfather has control over R c) P is an employee of R d) P is the domestic partner of a director of R 4. A person (P) is not necessarily related to a reporting entity (R) if: a) P is a major customer of R b) P is a director of R c) P is a director of R's parent company d) P's father has significant influence over R 5. An entity (E) is necessarily related to a reporting entity (R) if: a) E owns ordinary shares in R b) E is a major supplier of R c) E and R are both subsidiaries of the same parent d) E is a bank which lends money to R 6. An entity (E) is not necessarily related to a reporting entity (R) if: a) E is an associate of R b) E has significant influence over R c) E is a subsidiary of a subsidiary of R d) E and R have a director in common 7. An entity's functional currency is defined by international standard IAS21 as the currency in which the entity's financial statements are presented. True or False? a)True b)False 8. Factors which might help to determine an entity's functional currency include: a) The currency that mainly influences sales prices for the entity's goods and services b) The currency that mainly influences the costs of providing goods and services c) The currency in which funds from financing activities are generated d) All of the above 3
9. A company prepares financial statements to 31 December each year and has the pound sterling as its functional currency. On 29 October 2013, the company buys inventory for $28,380. This amount is still unpaid at 31 December 2013. The inventory is all sold during the month of December. Exchange rates are £1 = $1.65 on 29 October 2013 and £1 = $1.72 on 31 December 2013. Calculate: (a) the amount in £ at which the purchase and the trade payable should be recorded on 29 October 2013 (b) the amount in £ at which the trade payable should be shown in the statement of financial position at 31 December 2013 (c) the exchange difference which arises. a) £17,200 (b) £17,200 (c) £nil b) £17,200 (b) £16,500 (c) £700 (favourable) c) £16,500 (b) £16,500 (c) £nil d) £17,200 (b) £16,500 (c) £700 (adverse) 10. When translating from an entity's functional currency to a presentation currency, any resulting exchange differences are recognised in other comprehensive income. True or False? a)True b)False
4
ANSWER KEY: NON-CURRENT
ASSETS
HELD
FOR
SALE
AND
DISCONTINUED
OPERATIONS
1) A - Its carrying amount will be recovered principally through a sale transaction rather than through continuing use 2) D - None of the above 3) B - False 4) D - The lower of the asset's carrying amount when originally classified as held for sale and its fair value less costs to sell 5) C - 1/11/2013 £5,000; 31/3/2014 £7,500 The asset should be written down to £35,000 on 1 November 2013 (impairment loss £5,000) and then again to £27,500 on 31 March 2014 (impairment loss £7,500). 6) A - True 7) C - The higher of fair value less costs to sell and value in use at the date of the decision not to sell 8.) A - True 9) C - Has been disposed of or is classified as held for sale 10) B - The post-tax profit or loss of discontinued operations and the post-tax gain or loss on the remeasurement or disposal of the assets of discontinued operations
ANSWER KEY: RELATED PARTIES AND CHANGES IN FOREIGN EXCHANGE RATES
1) B – False 2) B – False 3) D - P is the domestic partner of a director of R 4) A - P is a major customer of R 5) C - E and R are both subsidiaries of the same parent 6) D - E and R have a director in common 7) B – False 8) D – All of the above 9) B - £17,200 (b) £16,500 (c) £700 (favorable) 10) A – True
Source: http://wps.pearsoned.co.uk/ema_uk_he_dyson_accnas_7/
5
