PKF Quiz

Ind as -1 "Presentation of Financial Statements" issues the format for presentation of the general purpose financial statements.

• True

• False

SPK Ltd has transitioned to Ind as for the first time in the FY 22-23, the company is in the process of preparing the financial statements under Ind as and the company has outstanding bank over draft. The company has been classifying the same under financing activity prior to Ind As adoption. The same treatment of classifying the bank over draft under financing activity is carried by SPK ltd in the preparation of Ind as financial statements.

• Action of SPK Ltd is inline with the Ind as-7.
• If the bank overdraft has negative balance on the reporting date then it should be shown as Financing activity or else it can be treated as cash and cash equivalent.
• The management can decide upon the treatment, whether to treat under cash flow from financing activity or treat it as cash and cash equivalent.
• None of the given options are correct

ABC ltd is a manufacturing company and it has invested in 20 year deep discount bonds at Rs. 2,26,200 having face value of Rs. 6,00,000. The effective interest rate of the bond is 5%. At 20th year the company received Rs. 6,00,000 and it is unaware on how to treat this amount in the cash flow statement.

• Present Rs.2,26,200 under financing activity and Rs. 3,73,800 under investing activity.
• Present Rs.2,26,200 under investing activity and Rs. 3,73,800 under operating activity.
• Present only Rs. 2,26,200 under investing activity as the ignore the interest component in the cash flow statement, as it would have been already considered in the past years.
• Present Rs.2,26,200 as redemption of bonds under investing activity and Rs. 3,73,800 as interest received under investing activity.

CJP ltd is a pharma based company which has wholly a owned subsidiary named ASK ltd. CJP ltd has sold 26% of it`s holdings in the open market. How should the sale of 26% holdings should be treated in the cash flow statement as per Ind as - 7.

• The sale of investments should be treated as investing activity.
• The sale of investments can neither be treated as investing activing or operating activity depends upon the management judgement.
• The sale of investments should be treated as operating activity.
• The sale of investments should be treated as financing activity.

RP rental solutions private limited is engaged in the business of renting home appliances to its customers. The company has paid Rs.2 crores for acquiring the 200 washing machines, 100 Televisions and 100 Air conditioners and these assets are also purchased for the purpose of rentals and will be sold in the ordinary course of business. The company has classifed Rs. 2 crores as investing activity.

• Action of RP rental solutions private limited is correct.
• Action of RP rental solutions private limited is incorrect.

Baba Ltd acquired a building for its administrative purpose and presented the same as PPE in the Financial year 2017-18. During the Financial year 2022-23, it relocated the office to a new building and leased the acquired building to the third party. Following change in the usage, Baba Ltd reclassified the building from PPE to investment property. The auditor of Baba ltd argued that this should be accounted as change in accounting policy as per Ind As 8.

• The argument of the auditor is correct and in line with Ind As 8.
• Ind As 8 does not provide any guidance to the given case and hence judgement of the auditor is correct by referring to Ind As 16 and Ind As 40.
• ICAI pronouncement or EAC opinion should be considered to decide whether this change tant amounts to change in accounting policy.
• The argument of the auditor is incorrect and not in line with Ind As 8.

DU ltd is engaged in the business of manufacturing and have been using Machine hours rate of depreciation till date, However now the management has decided to charge depreciation on WDV basis. The management of DU ltd is unaware about the accounting treatment for this change.

• The change in method of deprectaion should be treated as change in accounting estimate and requires retrospective ammendments.
• The change in method of deprectaion should be treated as change in accounting policy and requires retrospective ammendments.
• The change in method of deprectaion should be treated as change in accounting policy and requires prospective ammendments.
• The change in method of deprectaion should be treated as change in accounting estimate and requires prospective ammendments.

ADC ltd is a company which is engaged in the business of construction. The company has voluntarily adopted to Ind As -115 using the transition guidance. The company was earlier recognising the revenue as per Ind as -18 and now the auditor argued that this change should be treated as a voluntary change in accounting policy as per Ind as -8.

• Argument of the auditor is correct.
• Argument of the auditor is incorrect.

The Board of directors of K Ltd approved the financial statements for the reporting period FY 22-23 on 15th June 2023. The management of K Ltd discovered a major fraud and has decided to reopen the books of accounts. The financial statements were subsequently approved by the board of directors on 30th June 2023. What is the date of approval for issue as per Ind As 10.

• The date of approval as per Ind As 10 is 15th June 2023.
• The date of approval as per Ind As 10 is the date on which AGM is held for the approval of FS.
• None of the given options are correct.
• The date of approval as per Ind As 10 is 30th June 2023.

XYZ Ltd. has completed the construction of a building (a qualifying asset) but is not permitted to use it until certain safety approvals are obtained as per the government regulations. Should capitalisation of borrowing costs be continued when the qualifying asset has been constructed and is ready for use but is not permitted to be used until safety approvals are obtained?

• Safety approvals does not require any activity pending from XYZ Ltd`s side and hence capitalisation should not be continued.
• XYZ ltd can decide as to whether to continue the borrowing cost capitalisation or writing off in P&L.
• EAC opinion to be obtained as to whether to continue with capitalisation or to cease the capitalisation.
• None of the given options are correct