File 7 CMKTQT (5)

Which one is NOT indicators of impairment of impairment under IAS 36 Impairment of Assets?

• Advances in the technological environment in which an asset is employed has an adverse impact on its future use

• An increase in interest rates which increases the discount rate an entity uses

• The estimated net realizable value of inventory has been reduced due to fire damage although this value is greater than its carrying amount

• 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

The fundamental qualitative characteristics of useful financial information are:

• Relevance and comparability

• Relevance and faithful presentation

• Comparative, timeliness and understanding

• Relevance, complete and faithful presentation

Because of the loss arising from operating the shops, the accountant is considering whether Lisbon is a going concern. If it was decided that Lisbon is a going concern. If it was decided that Lisbon was no longer a going concern at 31 March 20X6, which of the following is correct in accordance with the Conceptual Framework?

• Financial statements do not need to be prepared

• All the assets should be liquidated

• The financial statements should be prepared as normal and the going concern status disclosed in the notes

• The financial statements should be prepared on a different basis

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 at 31 March 20X9?

Which of the following is NOT classified as inventory?

• Raw materials

• A car held for resale

• Work in progress

• A plant

Is this statement true or false? The Conceptual Framework deals with the qualitative characteristics of financial statements.

• True

• False

What will be the appropriate accounting treatment to unsold goods held at the year end?

• Recording them as expense for the year

• Recording them as liability for the year

• Recording them as fixed asset for the year

• Recording them as current asset for the year

A company had CU 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 CU 1.4 million of costs. From that date the project incurred development costs of CU 800,000 per month. On 1 April 20X8 the directors became confident that the project would be successful and yield a profit well in excess of costs. The project was still in development at 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?

• 8,280,000

• 6,880,000

• 7,800,000

• 3,800,000

Whether the following statement is True or False in accordance with IAS 40 Investment Property? If an investment property is held at fair value, this must be applied to all of the entity’s investment properties.

• True

• False

Under the principles of IAS 16 – Property, Plant and Equipment, which TWO of the following should be included in the cost of an item of property, plant and equipment?

• Installation and assembly costs

• Costs of training staff on the new asset

• Apportioned general overhead costs

• Initial delivery and handling costs