[FR/F7: Tài liệu ôn thi] Part B: Accounting for transactions in financial statements - Phần 1

Part B sẽ ôn lại 13 dạng bài tập quan trọng môn Financial Reporting (F7) với chủ đề Accounting for transactions in financial statements phần thứ nhất.

I. Tổng quan

Chủ đề	Dạng bài	Câu hỏi tương ứng
		Trắc nghiệm	Tự luận
1. Tangible non-current assets	1. Feature of non-current assets	Câu 1 - 3
	2. Capitalize & expense	Câu 4,5
	3. Transfer the purpose of use of non-current assets		Câu 6
	4. Complex assets		Câu 7
	5. Revaluation		Câu 8
2. Intangible non-current assets	1. Feature of intangible non-current assets	Câu 1 - 3
	2. Research and Development costs	Câu 4
3. Impairment asset	1. Indicator of impairment	Câu 1
	2. Calculate Impairment loss	Câu 2
	3. Cash-generating unit	Câu 3
4. Revenue	1. Long-term contract		Câu 1
	2. 5 step model to recognize revenue		Câu 2
	3. Type of revenue transactions	Câu 3
5. Introduction to groups	1. Control relationship	Câu 1
	2. Overview about consolidated statements	Câu 2,3
6. Financial Instruments	1. Characteristic of Financial Instruments	Câu 1
	2. Recognise financial instruments	Câu 2,3	Câu 4 - 6
Reference: BPP ACCA F7 - Financial Reporting (FR) StudyText

II. Dạng bài tập chi tiết

1. Topic 1: Tangible non-current assets

Ref: Tóm tắt kiến thức Topic 1: Tangible non-current assets

Mức Độ: Quan trọng

1.1. DẠNG 1: Feature of non-current assets

Câu 1: IAS 20 Government Grants

Learning outcome: Nắm được các vấn đề liên quan đến tài sản từ trợ cấp chính phủ

Question:

Which TWO of the following statements about IAS 20 Accounting for Government Grants and Disclosure of Government Assistance are true?

A.  A government grant related to the purchase of an asset must be deducted from the carrying amount of the asset in the statement of financial position.
B.  A government grant related to the purchase of an asset should be recognised in profit or loss over the life of the asset.
C.  Free marketing advice provided by a government department is excluded from the definition of government grants.
D.  Any required repayment of a government grant received in an earlier reporting period is treated as a prior period adjustment

Guidance (Tips/ Steps/ Cách tư duy)

There are 2 ways to recognise the Grants that related to assets

• Recognise the grant as deferred income
• Deduct the grant in arriving at the carrying amount of the asset

Free marketing advice is treated as Government assistance

Any repayment is corrected in the current period, not retrospectively 

Answer: B-C

Item A is incorrect as the deferred income method can be used. Item D is incorrect as any repayment is corrected in the current period ( not the prior period) 

Câu 2: IAS 23 Borrowing cost

Learning outcome: Nắm được các vấn đề liên quan đến chi phí đi vay

Question:

Apex Co issued the loan stock on 1 April 20X8. Three events or transactions must be taking place for capitalisation of borrowing costs to commence in accordance with IAS 23. Which of the following is NOT one of these?

A.  Expenditure on the asset is being incurred.
B.  Borrowing costs are being incurred.
C.  Physical construction of the asset is nearing completion.
D.  Necessary activities are in progress to prepare the asset for use or sale 

Guidance (Tips/ Steps/ Cách tư duy)

IAS 23 has no requirements in respect of the stage of completion of the asset 

Answer: C. Physical construction of the asset is nearing completion

Câu 3: IAS 40 Investment property

Learning outcome: Nắm được đặc điểm để phân loại 1 tài sản là bất động sản đầu tư

Question:

Which of the following properties owned by Scoop would be classified as investment property?

A.  A property that had been leased to a tenant but which is no longer required and is now being held for resale
B.  Land purchased for its investment potential. Planning permission has not been obtained for building construction of any kind
C.  A new office building used as Scoop’s head office purchased specifically in order to exploit its capital gains potential
D.  A stately home used for executive training 

Guidance (Tips/ Steps/ Cách tư duy)

Investment property is 

• Property (land or a building or part of building or both)
• Held by the owner or the lessee as a right of use asset
• To earn rentals or for capital appreciation or both

Answer: B. Land purchased for its investment potential. Planning permission has not been obtained for building construction of any kind

Asset A would be classed as a non-current asset held for sale under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. 

Assets C and D would both be classified as property, plant, and equipment per IAS 16 Property, Plant, and Equipment.

1.2. DẠNG 2: Capitalize & expense

Câu 4: Identify the cost should capitalize & expense

Learning outcome: Xác định được loại chi phí nào được vốn hoá (capitalize) loại nào được ghi nhận là expense 

Question: IAS 16 Property, Plant, and Equipment require an asset to be measured at cost on its original recognition in the financial statements. EW used its own staff, assisted by contractors when required, to construct a new warehouse for its own use. 

Identify whether the costs listed below should be capitalised or expensed 

	Capitalize	Expense
Clearance of the site prior to commencement of construction
Professional surveyor fees for managing the construction work
EW’s own staff wages for the time spent working on construction
A proportion of EW’s administration costs,  based on staff time spent

Guidance (Tips/ Steps/ Cách tư duy)

Capitalize: Expenditure which results in the acquisition of long-term assets, or an improvement or enhancement of their earning capacity 

Expense: Expenditure which is incurred either: For trade purposes or to maintain the existing earning capacity of long-term assets 

Answer:

	Capitalize	Expense
Clearance of the site prior to commencement of construction	X
Professional surveyor fees for managing the construction work	X
EW’s own staff wages for time spent working on construction	X
A proportion of EW’s administration costs,  based on staff time spent		X

The allocation of EW’s administration costs would not be included as these costs are not directly incurred as a result of carrying out the construction. All of the others are costs which would not have been incurred without the related asset being built. 

Câu 5: Transfer the purpose of use of investment property

Learning outcome: Nắm được cách tính capitalised trong trường hợp là borrowing cost

Question

Fido Feed Ltd has the following loans in place throughout the year ended 31 December 20X8 which constitute its general borrowings for the period. 

	$m
10% bank loan	140
8% bank loan	200

On 1 July 20X8, $50 million was drawn down for construction of a qualifying asset which was completed during 20X9. What amount should be capitalised as borrowing costs at 31 December 20X8 in respect of this asset?

A.  $5.6 million
B.  $2.8 million
C.  $4.4 million
D.  $2.2 million 

Guidance (Tips/ Steps/ Cách tư duy)

Step 1: Calculate weighted capitalisation rate 

Step 2: Calculate borrowing costs = withdrew fund * weighted capitalisation rate

Answer: D. $2.2 million 

Weighted capitalisation rate = (10% × 140 / 340) + (8% × 200 / 340) = 4.1% + 4.7% = 8.8%

Borrowing costs = $50 million × 8.8% × 6/ 12 = $2.2 million

1.3. DẠNG 3: Transfer the purpose of use of non-current assets

Câu 6: Transfer the purpose of use of investment property

Learning outcome: Nắm được cách hạch toán khi chuyển đổi mục đích sử dụng từ IP sang PPE và ngược lại.

Question

Kapital Co owns a building which it has been using as a head office. In order to reduce costs, on 30 June 20X9, it moved its head office functions to one of its production centers and is now letting out its head office. Company policy is to use the fair value model for an investment property.

The building had an original cost on 1 Jan 20X0 of $250,000 and was being depreciated over 50 years. On 30 June 20X9, its Fair value was judged to be $350,000.

How will this appear in the financial statement of Kapital Co on 31 Dec 20X9?

Guidance (Tips/ Steps/ Cách tư duy)

Transfers From	To	Accounting treatment
IP	PPE	DR: PPE - Fair value at the transfer day CR: IP - Fair value at the transfer day
PPE	IP	DR: IP -  Carrying amount at the transfer day CR: PPE - Fair value at the transfer day CR: Revaluation surplus

Answer: 

Dr PPE: $350,000

Cr IP: $202,500

Cr Revaluation surplus: $147,500

The building will be depreciated up to 30 June 20X9.

The difference between the carrying amount and fair value is taken to a revaluation surplus in accordance with IAS 16. However, the building will be subjected to a fair value exercise at each year-end and these gains or losses will go to profit or loss. If at the end of the following year the fair value of the building is found to be $380,000, $30,000 will be credited to profit or loss.

1.4. DẠNG 4: Complex assets

Câu 7: Calculate depreciation of complex assets

Learning outcome: Nắm được cách tính depreciation với complex assets

An aircraft has the following components:

	Cost $’000	Useful life
Fuselage	20,000	20 years
Undercarriage	5,000	500 landings
Engines	8,000	1,600 flying hours

Calculate depreciation at the end of the first year, in which 150 flights totaling 400 hours were made

Guidance (Tips/ Steps/ Cách tư duy)

These are properties that are formed from separate ingredients. Each component is depreciated over its own useful life

Answer: $4,500,000

	$’000
Fuselage= (20000x1/20)	1,000
Undercarriage (5000x150/500)	1,500
Engines(8,000x400/1600)	2,000
Depreciation charge	4,500

2. Topic 2: Intangible non-current assets

Ref: Tóm tắt kiến thức Topic 2: Intangible non-current assets

Mức Độ: Quan trọng

2.1. DẠNG 1: Feature of intangible non-current assets

Câu 1: Condition to capitalise development cost into intangible assets 

Learning outcome: Xác định được loại development cost nào có thể được vốn hoá vào giá trị tài sản vô hình

Question: 

Geek Co is developing a new product and expects to be able to capitalise on the costs. Which of the following would disallow the capitalisation of the costs?

A.  Development of the product is not yet complete.
B.  No patent has yet been registered in respect of the product.
C.  No sales contracts have yet been signed in relation to the product.
D.  It has not been possible to reliably allocate costs to development of the product 

Guidance (Tips/ Steps/ Cách tư duy)

The project that satisfies 6 below conditions can capitalise as intangible non-current assets

• Probable future economic benefit
• Intention to complete and use or sell the asset
• Resources adequate and available to complete and use or sell the asset
• Ability to use or sell the asset
• Technical feasibility
• Expenditures can be reliably measured

Answer: D. It has not been possible to reliably allocate costs to development of the product 

(Violate 6th condition: Expenditures can be reliably measured)

Câu 2: General question

Learning outcome: Nắm được các vấn đề cơ bản của intangible asset bao gồm vốn hoá, khấu hao, ghi nhận

Question: 

Which of the following statements relating to intangible assets is true?

A.  All intangible assets must be carried at amortised cost or at an impaired amount, they cannot be revalued upwards.
B.  The development of a new process which is not expected to increase sales revenues may still be recognised as an intangible asset.
C.  Expenditure on the prototype of a new engine cannot be classified as an intangible asset because the prototype has physical substance.
D.  The title heading, font, and design of the front page of a major broadsheet newspaper are for capitalisation as intangible assets 

Guidance (Tips/ Steps/ Cách tư duy)

A.  Intangible assets can be carried at cost model or revaluation model

B-C-D: Xem lại guidance câu 1

Answer: B. A new process may produce benefits (and therefore be recognised as an asset) other than increased revenues, e.g. it may reduce costs. 

Câu 3: Calculate carrying amount

Learning outcome: Nắm được cách xác định carrying amout của tài sản vô hình

Question: 

Amco Co carries out research and development. In the year ended 30 June 20X5 Amco Co incurred total costs in relation to project X of $750,000, spending the same amount each month up to 30 April 20X5, when the project was completed. The product produced by the project went on sale from 31 May 20X5. The project had been confirmed as feasible on 1 January 20X5, and the product produced by the project was expected to have a useful life of five years.

What is the carrying amount of the development expenditure asset as at 30 June 20X5?

A.  $295,000
B.  $725,000
C.  $300,000
D.  $0 

Guidance (Tips/ Steps/ Cách tư duy)

Carrying amount = Cost – depreciation

The project had been confirmed as feasible 🡪 the project have been capitalised

Answer A. $295,000

The costs of $750,000 relate to ten months of the year (up to April 20X5). Therefore the
costs per month were $75,000. As the project was confirmed as feasible on 1 January 20X5,
the costs can be capitalised from this date  So four months of these costs can be capitalised = $75,000 × 4 = $300,000. 

The asset should be amortised from when the products go on sale, so one month’s amortisation should be charged to 30 June 20X5. Amortisation is ($300,000/5) ×1/12= $5,000. The carrying amount of the asset at 30 June 20X5 is $300,000 – $5,000 = $295,000. 

2.2. DẠNG 2: Research and Development costs

Câu 4: Calculate amount of research and development cost 

Learning outcome: Tính được chi phí liên quan đến research and development cost

Question: 

Assoria Co had $20 million of capitalised development expenditure at cost brought forward at 1 October 20X7 in respect of products currently in production and a new project began on the same date.

The research stage of the new project lasted until 31 December 20X7 and incurred $1.4 million of costs. From that date, the project incurred development costs of $800,000 per month. On 1 April 20X8, the directors of Assoria Co became confident that the project would be successful and yield a profit well in excess of costs. The project was still in development on 30 September 20X8. Capitalised development expenditure is amortised at 20% per annum using the straight-line method.

What amount will be charged to profit or loss for the year ended 30 September 20X8 in respect of research and development costs?

A.  $8,280,000
B.  $6,880,000
C.  $7,800,000
D.  $3,800,000

Guidance (Tips/ Steps/ Cách tư duy)

Step 1: Identify the cost that incurred in the period

Step 2: Identify the cost that should be capitalized

Step 3: Amount will be charged to P/L = Step 1 - Step 2

Answer: C. $7,800,000

Astoria Co is implementing 2 projects:

• Old project: Depreciation on capitalised amount b/f ($20m × 20%) = $4m 🡪 P/L
• New project: 

Research phase from 1 October 20X7 to 31 December 20X7 and incurs $ 1.4m in costs 🡪 P/L

On 1 April 20X8 the directors of Assoria Co became confident that the project would be successful and yield a profit well in excess of costs 🡪 Research costs recorded from April 1, 20X8 to the end of the period ended September 30, 20X8 (6 months) will be capitalized into asset value and not costs during the period.

🡪Total development cost is recognized as a cost during the period = $800,000 * 3 = $2.4m 🡪 P/L 

3. Topic 3: Impairment asset

Ref: Tóm tắt kiến thức Topic 3: Impairment asset

Mức Độ: Quan trọng

3.1. DẠNG 1: Indicator of impairment

Câu 1: Identify indicator of impairment asset

Learning outcome: Xác định được các dấu hiện tài sản bị suy giảm giá trị

Question: 

Select whether the following statements are NOT indicators of impairment or are not indicators of impairment under IAS 36 Impairment of Assets?

A.  Advances in the technological environment in which an asset is employed has an adverse impact on its future use
B.  An increase in interest rates which increases the discount rate an entity uses
C.  The carrying amount of an entity's net assets is lower than the entity's number of shares in issue multiplied by its share price
D.  The estimated net realisable value of inventory has been reduced due to fire damage although this value is greater than its carrying amount

Guidance (Tips/ Steps/ Cách tư duy)

There are 2 types of indicator

• Internal indicators: outdated asset, decreased capacity, change of use purpose…
• External indicators: change in technology, law, impact of market rate…

Impairment loss: carrying amount > NRV

Answer: C-D

A.  External indicator
B.  External indicator
C.  Not relevant to impairment asset
D.  NRV > carrying amount 🡪 No impairment

3.2. DẠNG 2:  Calculate Impairment loss

Câu 2: Calculate impairment loss

Learning outcome: Nắm được kiến thức về cách tính impairment loss

Question:

Lichen Ltd owns a machine that has a carrying amount of $85,000 at the year-end of 31 March 20X9. Its market value is $78,000 and costs of disposal are estimated at $2,500. A new machine would cost $150,000. Lichen Ltd expects it to produce net cash flows of $30,000 per annum for the next three years. The cost of capital of Lichen Ltd is 8%.

What is the impairment loss on the machine to be recognised in the financial statements on 31 March 20X9?

Guidance (Tips/ Steps/ Cách tư duy)

Step 1: Calculate recoverable amount 

Recoverable amount = Higher amount between Value in use & Fair value less cost of disposal

Value in use is calculated by discounting the cash flow earned from a future asset to the present value by a formula: Present value = Future value/ (1+r)n 🡪 Value in use 

Step 2:

Impairment loss = Carrying amount - Recoverable amount

Answer: $7,687

Fair value less cost of disposal = Fair value – Cost of disposal = $78,000 - $2,500 = $75,500

Value in use = $30,000/(1+8%) + $30,000/(1+8%)2 + $30,000/(1+8%)3= $77,312

🡪 Recoverable amount = $77,312

🡪 Impairment loss = $85,000 - $77,312 = $7,687

3.3. DẠNG 3: Cash-generating unit

Câu 3: Calculate carrying amount of cash-generating units after the impairment loss has been recognised

Learning outcome: Nắm được cách xác định carrying amout của đơn vị tạo tiền độc lập (CGU)

Question: 

A cash-generating unit comprises the following assets:

One of the machines, carried at $40,000, is damaged and will have to be scrapped. The recoverable amount of cash-generating unit is estimated at $750,000. What will be the carrying amount of the building after the impairment loss has been recognised? (to the nearest $’000)?

A.  $597,000
B.  $577,000
C.  $594,000
D.  $548,000

Guidance (Tips/ Steps/ Cách tư duy)

Step 1:  Determine how much CGUs is decreased = Book value - Recoverable amount

Step 2: Allocate amount of impairment loss following order

1. Scrapped items
2. Goodwill
3. Allocate other CGUs:  Allocated according to the ratio of the value of that asset to the total value of the property.

Step 3: Carrying amount = Book value – Allocated impairment loss

Answer: C. $594,000

Impairment loss CGUs = $1,010,000 - $750,000 = $260,000

After calculating the decreasing value of CGUs equal to $260,000, we allocate $260,000 in the following order: 

• Allocated $40,000 for scrapped machines
• Allocated $90,000 for goodwill 
• Remained asset

Assets	Book value ($’000)	Proportion	Allocated impairment loss ($’000)
Building	700	(700/860) * 100% = 81.4%	130 * 81.4% = 106
Plant and Equipment	160	(700/860) * 100% = 18.6%	130 * 18.6% = 24

Carrying amout of building = $700,000 - $106,000 = $594,000

4. Topic 4: Revenue

Ref: Tóm tắt kiến thức Topic 4: Revenue

Mức Độ: Quan trọng

4.1. DẠNG 1: Long-term contract

Câu 1: Identify revenue, cost of good sale, profit of contract

Learning outcome: Nắm được cách tính doanh thu, lợi nhuận, giá vốn trong một hợp đồng

Question: 

On 1 January 20X1, Baker entered into a contract with a customer to construct a specialised building. The contract comprises the following information

	$m
Total contract price	750
Cost incurred in 1st year	225
Estimated cost to completion	340
Amount invoice issued	290

1) Calculate revenue, COGS, profit recognised in 1st year (following Input method)

2) Calculate revenue, COGS, profit recognised in 1st year (following Input method) with work certified = 25% and Identify the type of contract (Asset/Liability)

Guidance (Tips/ Steps/ Cách tư duy)

Step 1: Calculate % completion

Input method: % completion = cost incurred / (cost incurred + cost estimated to complete)

Output method: % completion = work certified / Total Contract price

Step 2: Calculate Revenue recognised = Total contract price * % completion

Step 3: Calculate Total contract profit = Total contract price - Total cost

Step 4: Recognize COGS and profit

• If total contract profit > 0

• COGS = Total cost * % completion
• Profit recognised = Total contract profit * % completion

• If total contract profit < 0 🡪 loss

• Loss recognised = Total contract loss
• COGS = revenue recognised - loss recognised

Step 5: Contract asset/liability = Cost incurred + Profit recognised - Amount invoiced = X

(X > 0 contract asset; X <0 contract liability)

Answer: 

1) 

Step 1: % Completion = 225/ (225+ 340) = 0.39823

Step 2: Revenue recognised = 750 * 0.39823 = $298.67m

Step 3: Total profit recognised = 750 – (225 +340) = $185m

Step 4: COGS recognised = (225+340)* 0.39823 = $225m

Profit recognised = 185 * 0.39823 = $73.67m

2)

Step 1: % Completion = % Work certified = 0.25

Step 2: Revenue recognised = 750 * 0.25 = $187.5m

Step 3: Total profit recognised = 750 – (225 +340) = $185m

Step 4: COGS recognised = (225+340)* 0.25 = $141.25m

Profit recognised = 185 * 0.25 = $46.25m

Step 5: Contract asset/liability = 225 + 46.25 -290 = - $18.75m 🡪 Contract liability

4.2. DẠNG 2: 5 step model to recognize revenue

Câu 2: Allocate the transaction price to perform obligations in the contract

Learning outcome: Nắm được cách phân bổ giá giao dịch trong hợp đồng

Question: 

A mobile phone company gives customers a free handset when they sign a two-year contract for the provision of network services. The handset has a standalone price of $100 and the contract is for $20 per month. Allocating the transaction price to the performance obligations.

Guidance (Tips/ Steps/ Cách tư duy)

Before IFRS 15 was applied, the company did not record $ 100 from Handset revenue, and total revenue for both: Network + Handset services was recorded as $ 240.

After IFRS 15 is applied, although Handset is free for customers and does not generate revenue for the business, revenue for both: Network + Handset services must be recognized, as Handset is also a obligation to perform in the contract.

Answer: 

Revenue for the two types of Network + Handset services is distributed proportionally as follows:

	$	%
Handset	100	17% (100/580)
Contract - two years	480	83% (480/580)
Total Values	580	100%

The total amount received from the contract is $ 480 ($ 20 * 12 months * 2 years), this value will be allocated separately for each obligation to perform in the contract. Revenue of each obligation will be recognized as follows:

Year 1:

Handset ($480 x 17%)	82
Contract ($480 - $82)/2	199

Year 2: Contract ($480 - $82)/2 = $199

4.3. DẠNG 3: Type of revenue transactions

Câu 3: Consignment inventory

Learning outcome: Nắm được các đặc điểm của consigment inventory

Question: 

Which TWO of the following indicate that the inventory in question is consignment inventory?

A.  Manufacturer can require the dealer to return the inventory
B.  Dealer has no right of return of the inventory
C.  Manufacturer bears obsolescence risk
D.  Dealer bears slow movement risk 

Guidance (Tips/ Steps/ Cách tư duy)

Consignment inventory means that A sells goods to B, B agrees to buy but sends goods back at A's warehouse. In this case, B bears all risks of the goods, including fire and explosion, B must also bear, and B is not allowed to return the goods to A. Then A will record the revenue.

Answer: A-C

Both A-C indicate that the manufacturer retains ownership of the inventory. The other options would indicate that the risks and rewards have been transferred to the dealer. 

5. Topic 5: Introduction to groups

Ref: Tóm tắt kiến thức Topic 5: Introduction to groups

Mức Độ: Ít quan trọng

5.1. DẠNG 1: Control relationship

Câu 1: Conditions to control a company

Learning outcome: Nắm được điều kiện để kiểm soát 1 công ty con

Question: 

Which of the following situations is unlikely to represent control over an investee?

A.  Owning 55% and being able to select 4 of the 7 directors
B.  Owning 51%, but the constitution requires that decisions need the unanimous consent of shareholders
C.  Having currently exercisable options which would take the shareholding of the company to 55%
D.  Owning 40% of the shares, but having the majority of voting rights within the company  

Guidance (Tips/ Steps/ Cách tư duy)

Parent control over a subsidiary is determined when the parent company holds more than 50% of voting rights in the subsidiary unless it is clearly specified that ownership is not linked with control.

In the following cases, the parent company retains control even if the parent company holds less than 50% of voting rights in the subsidiary:

• Other investors agree to grant the parent company more than 50% of the voting rights;
• The parent company has the right to dominate the financial and operating policies as agreed upon;
• The parent company has the right to appoint or dismiss a majority of the members of the Board of Directors or an equivalent level of management;
• The parent company has the majority of voting rights at the meetings of the Board of Directors or equivalent management level.

Answer: B. Owning 51%, but the constitution requires that decisions need the unanimous consent of shareholders.

5.2. DẠNG 2: Overview about consolidated statements

Câu 2:  Exempt from producing consolidated financial statements

Learning outcome: Nắm được các trường hợp mà công ty mẹ được miễn lập báo cáo tài chính hợp nhất

Question: 

Which of the following is NOT a condition which must be met for the parent to be exempt from producing consolidated financial statements?

A.  The activities of the subsidiary are significantly different from the rest of the group and to consolidate them would prejudice the overall group position
B.  The ultimate parent company produces consolidated financial statements that comply with IFRS Standards and are publicly available
C.  The parent’s debt or equity instruments are not traded in a public market
D.  The parent itself is a wholly-owned subsidiary or a partially-owned subsidiary whose owners do not object to the parent not producing consolidated financial statements

Guidance (Tips/ Steps/ Cách tư duy)

Company is exempt from producing consolidated financial statements in the following situation

• The parent is itself a wholly-owned subsidiary or it is a partially owned subsidiary of another entity and its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the parent not presenting consolidated financial statements.
• Its securities are not publicly traded.
• It is not in the process of issuing securities in public securities markets.
• The ultimate or intermediate parent publishes consolidated financial statements that comply with International Financial Reporting Standards

Answer: A. The activities of the subsidiary are significantly different to the rest of the group and to consolidate them would prejudice the overall group position

Câu 3: Preparing consolidated financial statements

Learning outcome: Nắm được kiến thức liên quan đến lập BCTC hợp nhất

Question: 

Which TWO of the following statements are correct when preparing consolidated financial statements? 

A.  A subsidiary cannot be consolidated unless it prepares financial statements to the same reporting date as the parent. 
B.  A subsidiary with a different reporting date may prepare additional statements up to the group reporting date for consolidation purposes.
C.  A subsidiary's financial statements can be included in the consolidation if the gap between the parent and subsidiary reporting dates is five months or less. 
D.  Where a subsidiary's financial statements are drawn up to a different reporting date from those of the parent, adjustments should be made for significant transactions or events occurring between the two reporting dates 

Guidance (Tips/ Steps/ Cách tư duy)

A subsidiary can be consolidated regardless of its reporting date as the parent.

The allowable gap between reporting dates is three months, 

Answer: B - D

6. Topic 6: Financial Instruments

Ref: Tóm tắt kiến thức Topic 6: Financial Instruments

Mức Độ: Quan trọng

6.1. DẠNG 1: Characteristic of Financial Instruments

Câu 1: Identify financial instruments

Learning outcome: Xác định được đâu là 1 công cụ tài chính

Question: 

Which of the following is NOT classified as a financial instrument under IAS 32 Financial Instruments: Presentation?

A.  Share options
B.  Intangible assets
C.  Trade receivables
D.  Redeemable preference shares

Guidance (Tips/ Steps/ Cách tư duy)

IAS 32 makes it clear that the following items are not financial instruments. 

(a) Physical assets and intangible assets (patents, trademarks, etc) 

(b) Prepaid expenses, deferred revenue, and most warranty obligations 

(c) Liabilities or assets that are not contractual in nature 

Answer: B. Intangible assets

6.2. DẠNG 2: Recognise financial instruments

Câu 2: Method to recognise financial instruments

Learning outcome: Nắm được các phương pháp hạch toán financial instruments

Question: 

For which category of financial instruments are transaction costs excluded from the initial value?

A.  Financial liabilities at amortised cost
B.  Financial assets at fair value through profit or loss
C.  Financial assets at fair value through other comprehensive income
D.  Financial assets at amortised cost

Guidance (Tips/ Steps/ Cách tư duy)

• With amortised cost and FVOCI: Initial measurement = fair value + transaction cost 
• With FVTPL = fair value; transaction cost  🡪 P/L

Answer: B. Financial assets at fair value through profit or loss

Câu 3: Method to recognise financial instruments

Learning outcome: Xác định được loại công cụ tài chính và cách ghi nhận phù hợp

Question: 

For each of the financial instruments below, match them to the appropriate accounting
treatment. 

Instrument		Treatment
Convertible loan notes		Fair value through profit or loss
Equity investments where the entity has an intention to hold long-term and has chosen to apply the alternative treatment		Amortised cost
Financial liability, not held for trading		Split accounting
Equity investments (default position)		Fair value through other comprehensive income

Guidance (Tips/ Steps/ Cách tư duy)

Step 1: Identify type of financial instrument

E.g: Convertible loan notes are compound financial instrument that comprises of 2 parts: Liability element and Equity element 🡪 Split in recognise

Step 2: Rely on the information of each instrument and treatment to choose proper answer

• Amortised: solely payment for principal and interest (not trading)
• FVTOCI: payment for principal, interest, and trading
• FVTPL: Not included in 2 above treatment

Answer: 

Instrument	Treatment
Convertible loan notes	Split accounting
Equity investments where the entity has an intention to hold long-term and has chosen to apply the alternative treatment	Fair value through other comprehensive income
Financial liability, not held for trading	Amortised cost
Equity investments (default position)	Fair value through profit or loss

Câu 4: Amortised cost

Learning outcome: Nắm được cách bước để tính chi phí phân bổ (Amortised cost)

Question: 

On 1 January 20X1 Abacus Co purchased a debt instrument for its fair value of $1,000. The debt instrument is due to mature on 31 December 20X5. The instrument has a principal amount of $1,250 and the instrument carries fixed interest at 4.72% that is paid annually. The effective rate of interest is 10%.

How should Abacus Co account for the debt instrument over its five-year term?

Guidance (Tips/ Steps/ Cách tư duy)

Step 1: Identify opening balance of financial instruments

• First year, opening balance = Fair value 
• From Second year, opening balance = Closing balance at the previous year 

Step 2: Determine the actual financial expense / financial income received in the period.

The actual financial expense / financial income = Opening balance * effective rate

Step 3: Determine interest received/paid

Interest received/paid = Principal amount of instrument * Interest

NOTE: At the last year, the amount received/paid = Interest received/paid + principal amount

Step 4: Identify closing balance of financial instruments

Closing balance = Opening balance +/- the actual financial expense/income received +/- interest received/paid

Answer:

Year	Amortised cost at beginning of year	Profit or loss	Interest received	Amortised cost at end of year
20X1	1,000	100	(59)	1,041
20X2	1,041	104	(59)	1,086
20X3	1,086	109	(59)	1,136
20X4	1,136	113	(59)	1,190
20X5	1,190	119	(59+1250)	-

Câu 5: Fair value through other comprehensive income; Fair value through profit or loss

Learning outcome: Nắm được cách bước tính FVTOCI và FVTPL

Question: 

In February 20X8 a company purchased 20,000 $1 listed equity shares at a price of $4 per share. Transaction costs were $2,000. At the year-end of 31 December 20X8, these shares were trading at $5.50. A dividend of 20c per share was received on 30 September 20X8.

Show the financial statement extracts at 31 December 20X8 relating to this investment on the basis that:

(a) The shares were bought for trading (conditions for FVTOCI have not been met)

(b) Conditions for FVTOCI have been met

Guidance (Tips/ Steps/ Cách tư duy)

Step 1: Identify income/expense from financial instrument

Income/expense from financial instrument comprises of

• Income/expense from dividends
• Income/expense from revaluation of end-of-period financial instruments 🡪 The income (due to the increase in the value of the financial instrument) / the cost (due to the decrease in the value of the financial instrument) will be in P/L (if recorded under FVTPL) or will be in OCI (if it is accounted under FVTOCI) 
• Transaction costs will be recognized as financial expenses during the period (if accounted for under FVTPL) or initial cost (if accounted for under FVTOCI)

Step 2: Calculate income/expense from a financial instrument

• Income/expense from dividends = Dividend per share*number of shares
• Income/expense from revaluation (Investment income) = (Closing price - Opening price)* number of share

Step 3: Calculate the value of financial instrument at the end of period 

Step 4: Present in Financial statement

(a) FVTPL

Investment income, Dividend income, Transaction cost 🡪 Statement of profit or loss

Investment in equity instrument 🡪 Statement of financial position

(b) FVTOCI

Dividend income 🡪 Statement of profit or loss

Gain on investment in equity instruments = Investment income - (Value value of financial instrument at beginning + Transaction cost) 🡪 Other comprehensive income.

Investment in equity instrument 🡪 Statement of financial position

Answer:

(a)

Statement of profit or loss	$
Investment income [20,000 * ($5.5 -$4.0)]	30,000
Dividend income (20,000 * $0.2)	4,000
Transaction cost	(2,000)
Statement of financial position
Investment in equity instrument (20,000 * 5.5)	110,000

(b)

Statement of profit or loss	$
Dividend income (20,000 * $0.2)	4,000
Other comprehensive income
Gain on investment in equity instruments ($20,000 * 5.5) – ($20,000 * 4 + $2,000)	28,000
Statement of financial position
Investment in equity instrument (20,000 * 5.5)	110,000

Câu 6: Compound financial instrument

Learning outcome: 

Question: 

Rathbone Co issues 2,000 convertible bonds at the start of 20X2. The bonds have a three-year term and are issued at par with a face value of $1,000 per bond, giving total proceeds of $2,000,000. Interest is payable annually in arrears at a nominal annual interest rate of 6%. Each bond is convertible at any time up to maturity into 250 ordinary shares. When the bonds are issued, the prevailing market interest rate for similar debt without conversion options is 9%.

What is the value of the equity component in the bond?

Guidance (Tips/ Steps/ Cách tư duy)

This is a compound financial instrument 🡪 split into 2 parts: Debt instrument and Equity instrument

Step 1: Calculate the value of debt instrument

Calculate interest payment for each year = nominal annual interest rate * face value

NOTE: payment for last year = interest payment for each year + total proceeds

Calculate value of debt instrument = Total discounts future payment to present at the % prevailing market interest rate for similar debt without conversion options 

Step 2: Calculate Equity instrument = Total proceeds – Value of debt instrument

Answer:

Time	Payment	Discount rate	Present value
Year 1	$120,000	1/(1+9%)^1=0.917	$110,040
Year 2	$120,000	1/(1+9%)^2=0.842	$101,040
Year 3	$2,120,000	1/(1+9%)^3=0.772	$1,636,640

Value of debt instrument = $110,040 + $101,040 + $1,636,640 = $1,847,720

Value of Equity instruments = $2,000,000 - $1,847,720 = $152,280

 

Author: Dat Le