Acid’s P2 CORPORATE REPORTING Exam Gear Notes

These notes are based on the questions which appear in June 2009 BPP Exam Tips as important
questions for the exams. The questions can be found in both BPP Revision Kit and Kaplan Exam Kit (2009
editions). The important points from the answers are summarized for revision purposes.

40 BARKING

- If type of pension plan change i.e. from benefit to contribution than an estimate of the asset or
liability arising from this change should be reflected in SOFP.
- Where it is not possible to identify the organizations share of underlying asset in MULTI
EMPLOYER SCHEME than it should be treated as a defined contribution scheme.
- In IAS 18, estate property: revenue is recognized when legal title passes to the buyer.
- According to IAS 36 Impairment review should be carried out annually and cash flow projections
should only cover a max period of five year.

39 GEAR SOFTWARE

- Change in presentation, recognition and measurement results in change in accounting policy.

- Change in depreciation, percentage change of allocation of fixed overheads is not a change in
accounting policy.
- If depreciation charge category is changed from, say, admin to cost of sales, this represents a
change in accounting policy.
- When there is a provision to be made and probabilities are given than first discount the
estimates to Present values and then multiply them with probabilities, add them up to get figure
of provision.
- If there is a fear of going concern than it should be disclosed.

35 VIDENT

- The fair value of services rendered will be measured by reference to the fair value of share
options at the grant date.
 - IFRS 2 requires that the services received should be recognized irrespective of whether the
market condition is satisfied.
- If directors worked for a company for three years than the expense should be spread over a
period of 3 years.
- Tax base of share options is zero. This gives rise to temporary deductible difference.
- According to IFRS2 estimated future tax deduction should be based on the options intrinsic
value at the year-end as the value at the exercise date will not be known.
- Intrinsic value – Difference between fair value of shares and exercise price of option.
- Share options x intrinsic value x ½ (year) x 30% = Deferred tax asset Compare the
remuneration charge in year to the tax deductions, If tax deductions exceed remuneration
charges in year than the excess goes to equity.

34 RYDER

- Dividends declared after year end before authorization of financial statements is a non adjusting
event. A dividend trend record DOES create a valid expectation.
- IAS 33 EPS requires that if there has been an issue of bonus share after year end but before
authorization than EPS should be calculated on the revised number of shares.
- If IFRS 5 criteria for held for sale is met after the year-end than it should be disclosed only in the
financial statements
- According to IFRS 5 property should be valued at lower of CARRYING VALUE and FAIR VALUE
LESS COST OF SALE
- Share appreciation rights: Liability is recognized at the grant date which is time apportioned for
the vesting period. Any increase in fair value of liability after the vesting period is recognized in
profit and loss.

33 PROCHAIN

- The provision may be recognized according to IAS 37 and should be discounted, do not forget to
include the unwinding of the discount in the SOCI
- Contingent consideration under IFRS3 should be measured at fair value
- The legal fee or professional fee incurred should be expensed
- Any changes in the value of contingent consideration should be directly taken into the equity
- Brands can be recognized separately if they can be measured reliably. Internally generated
brands are NOT recognized
- Market research costs should be expensed
- Employee training costs should be expensed
- Any machinery purchased should be capitalized
- If apartment is given at rent below the value market value than the difference should be
expensed
 - IF lease terminates with contract of employment than the apartment should be treated under
IAS 16 not under IAS 40
- Recognition criteria under IAS 36:
 Technical feasibility
 Financial, technical and other resource availability
 Intention to complete the asset and use or sell it
 Generation of probably future economic benefits
 Ability to reliable measure the cost of asset
 Ability to use or sell it

28 LEIGH

- If there is performance condition attached to the share option than it’s not a market condition
and should be taken into account. The shares should be valued at its grant date and not at
vesting date.
- Transactions that allow choice of settlement are accounted for cash based transactions under
IFRS 2 to the extent that entity has incurred a liability.
- If fair value can be measured reliably than the equity element is determined by taking the fair
value of goods and services less the fair value of the debt element of this instrument. The debt
element is the cash payment that will occur.
- If the fair value of goods and services is measured by reference to the fair value of equity
instrument given then the whole compound instrument should be fair valued. The equity
instrument becomes the difference between fair value of the equity instrument granted less the
fair value of the debt component.

24 EGIN

- Goodwill in foreign subsidiary is translated at CLOSING FOREX and reported in income statement
of parent
- Loan given to subsidiary is by default classified as financial liability at amortized cost. It should
be discounted when it’s initially recorded.

23 SAVAGE

- Amounts to be recognized in SOFP includes:

 Present value of obligation minus Fair value of plan assets
- Expensed to be recognized in PROFIT AND LOSS:
  Current service costs
 Interest costs ( on obligation)
 MINUS expected returns on the asset
 Past service costs
- Amount recognized in OTHER COMPREHENSIVE INCOME:
 Actuarial gain less actuarial loss
- Movement in net liability in SOFP:
 The difference between PV of OBLIGATION and FV of PLAN ASSETS
 Then add Expense in profit and loss, actuarial loss and less contribution paid
- Changes in the present value of obligation:
 PV of Obligation at beginning
 + Interest cost
 +Past service cost
 - Benefits paid
 Actuarial loss (difference in closing PV of obligation)

21 PANEL

- Share option value is divided in its vesting period and recorded as expense
- Deferred tax on intrinsic value recognized. Intrinsic value is divided by 2 over its vesting period
- In next year, D.T provision is recognized on that year intrinsic value and last year provision is
derecognized.
- If estimated tax deduction is less than/equal to cumulative recognized income then the
associated tax benefit are recognized in the profit and loss
- If the estimated or actual tax deduction exceeds the cumulative recognized comprehensive
expense than the excess tax benefit are recognized in other comprehensive income and held
separately in equity
- (b) Difference between Property carrying values i.e. Present value of lease payment less depr.
And Liability-Repayment-Interest is charged as deferred tax asset
- Goodwill does not have any effect on the IAS12 calculation.