Q1:

The building on 1st January will be initially recognized at 3m (2.9m+ 0.1m legal fee). The sales tax
recovery is not to be included in cost of asset and the general administrative cost of 0.2m will be
expensed to P&L.

Depreciation per year to be expensed out is (3m/50) 0.06m, which will each year till 20X4 be charged.

As the building is being revalued at 31 Dec 20X4 to 4.6m now, the depreciation for 20X5 will be
calculated over the remaining useful that is 46 years, therefore the depreciation will be (4.6/46) 0.1m.

On 31 Dec 20X5 the building is being disposed of, the carrying amount on this date is (4.6-0.1) 4.5m. The
value of disposal is 5m thus giving rise to a profit on disposal of (5-4.5m) 0.5m.

Carrying amount till 20X4 before revaluation is (3m-(0.06*4)) 2.76m and revalued amount is 4.6m
therefore it can be seen that there is a gain on revaluation of (4.6-2.76) 1.84.

OCE DR 1.84

OCI CR 1.84

Q2: SKIZER
ai) IAS 38 defines intangible assets as a non-monetary asset without physical substance. An entity can
recognize an intangible asset if:

- The cost of the asset can be measured reliably

- Asset is identifiable
- Controlled by entity and
- It is probable that future economic benefits will flow in to the entity.

On the other hand, the conceptual framework says to recognize an element i.e. in this case an asset
if it provides:

- Relevant information
- Faithful representation.

Here it can be seen that IAS 38 and conceptual framework portray different criteria, that is because
the IAS is based on previous conceptual framework whereas the conceptual framework is now
updated.

The conceptual framework can not over rule the IAS; therefore, IAS prevails in any case of any
differences.

aii)

20X7

According to IAS 38 an intangible asset should be derecognized when disposing off or when it is
generating no future economic benefit by being in use. So, if the stakes in development met the criteria
of IAS 38 then the derecognition cannot claimed as reasonable. Skizer should also see whether
impairment has been done.

20X8

Also, the stakes in development phase’s reclassification to R&D costs does not make it a change in
estimate. Change in estimate is basically done when due to adjustments of uncertain amount affect the
figures of elements in the financial statements, therefore they need to be estimated. There is no
indication of uncertainty is determining the cost of stakes therefore it may be possible to determine.

If criteria are not met then Skizer would with the help of IAS 8 correct the error of wrong classification.

aiii) done

Q3: Fiskerton
Done

Q4: Lucky Dairy

C.A at 31 May 20X1 70000x50 3500000

2yr old 1150000

Gain 930000

70000x60 +25000x55 5580000

Q5: Fill
done

Q6: Leria Co.

ai) IFRS 5 NCA held for sale portrays the accounting for assets classified as HFS. The asset must be
available for sale in its present condition and its sale must be highly probable that is within 12 months.
This rule can only be an exception where delay is caused due to events occurring which are not in
control of the entity. Here in case of Leria there is no such circumstance mentioned due to which the
delay can be justified therefore the sale is not highly probable and secondly the arrangement they are
opting for is sale and lease back which is not in the scope of IFRS 5 but of IFRS 16, therefore the stadium
cannot be ‘held for sale’.

aii) The crowd barrier improvements should not be treated as an impairment of the assets carrying
amount on 31 Oct 20X5 as there is no legal or constructive obligation for a probable payment. Secondly,
Leria may not carry out the improvements as the stadium will be sold and then leased back. Therefore
the 2 million should be added back in carrying amount of the asset and P&L credited by that amount
too.

aiii) According to IFRS 16 it should be determined first whether transfer is a sale or not. If transfer is not
a sale the seller-lessee will continue to recognize the asset and also a financial liability by the amount of
proceeds. In this case it seems that the sale will occur on 30 November 20X6 and sale is at fair value so
no below or above market value adjustments.

Leria should prepare the following entry after considering the transaction is a sale as per IFRS 15.

Cash debit by the fair value amount

ROU asset debit by the proportion of carrying amount retained

Underlying asset credit by its amount

Lease liability credit

Recognize gain (cr) or loss (dr) by the balancing figure.

bi) IAS 38 Intangibles says that an intangible asset should be recognized if it is identifiable, controlled the
entity, it is probable that future economic benefits will be generated by it and cost is measured reliably.
All these are actually met but IAS 38 says to classify the assets life as finite or infinite and the issue here
is that amortization is charged on basis of estimates of revenue which is not a matching base as of
revenue and amortization. The useful life is required to be estimated according to IFRS’s at each year
end. Amortization is based on a systematic pattern of consumption of economic benefits which here it
can be seen as revenue and may seem to be a good base too but it does not match with the industry
practice method.

Q7: Digiwire
Done

Q8: Handfood
Done
Q9: Leigh
a)