WorksheetsIAS 23, IAS 24 & IAS 10
Total questions: 10
Worksheet time: 17mins
Question 1:
Under IAS 23, when does capitalisation of borrowing costs cease?
When the asset is ready for its intended use or sale.
When the asset is substantially complete.
When the borrowing is repaid.
When the asset reaches its maximum market value.
Question 2:
What disclosure requirements does IAS 10 impose for material non-adjusting events occurring after the reporting period and before the financial statements are authorised for issue.
No specific disclosure requirements.
Disclosure of the nature of the event only.
Disclosure of the nature of the event and an estimate of the financial impact.
Disclosure of the financial impact only.
Question 3:
Which of the following best describes the objective of IAS 24, Related Party Disclosures?
To establish guidelines for related party transactions.
To ensure that an entity's financial statements contain adequate disclosures regarding transactions with related parties.
To provide guidance on the presentation of transactions with related parties.
To define who a related party is to an entity.
Question 4:
An entity does not suspend capitalizing borrowing costs when a temporary delay is a necessary part of the process of getting an asset ready for its intended use or sale. This statement is:
True
False
Question 5:
Company ABC has a current financial year end on 31 December 2023. Their annual financial statements are authorised for issue on 31 March 2024.
On 15 Jan 2024, a leak in the warehouse was discovered by the warehouse manager. All inventory items of Company ABC are kept in this warehouse. On 15 Jan 2024 an inspection revealed that the leak has been present since the 15 November 2023.
Upon inspection Company ABC realises that its inventory is damaged, however it can be sold to a third party for 50% of its original selling price.
How does the following event affect Company ABC financials for the year ended 31 December 2023:
No effect because the leak was only found after the year ended 31 December 2023, thus this is a non-adjusting event in terms of IAS 10.
Inventory is impaired and must be written down to its net realisable value as this is an adjusting event in terms of IAS 10.
Inventory is always carried at cost; net realisable value is not considered.
Inventory must be disposed of, and the relevant accounting journal entries must be processed.
Question 6:
Company XYZ started constructing a new office building on 31 January 2023. The new office building meets the definition of a qualifying asset in terms of IAS 23 Borrowing costs. On
31 January 2023 XYZ borrowed R500 000 from AB Bank in order to finance the construction. The loan bears interest at 9%. The total amount of accumulated expenditures on the construction project until 31 December 2023, was R500 000. The construction of the building was completed and ready for its intended use on 31 December 2023. No interest is earned on unspent amounts.
Calculate the total amount of borrowing costs capitalised to the construction of the new building.
R48 750
R7 500
R45 000
R41 250
Question 7:
Company Z has a current financial year end of 31 August 2023. Their annual financial statements are authorised for issue on 31 December 2023.
The directors of Company Z declared a dividend to all the holders of its equity instruments on 30 November 2023.
How must the above transaction be accounted for in the books of Company Z for the year ended 31 August 2023?
This is an adjusting event, therefore a liability must be recognised in the financial records of Company Z.
This transaction is after the 2023 financial year end and will only have an accounting effect in the 2024 financial year.
This is a non-adjusting event; therefore no liability must be recognised for the declared dividend, however the declared dividend needs to be disclosed in the 2023 financials.
No effect.
Question 8:
The following is required in respect of the information for the 2023 financial year end?
All payments to directors need to be disclosed in the notes to the financial statements as Company Z and its directors are related parties.
Directors are employees of the company and thus there is no disclosure required by IAS 24.
No effect on the financials as only transactions with parties outside of the company are recorded.
All compensation needs to be accounted for in the financials, however no disclosure is required by IAS 24.
Question 9:
State in short what you find tricky when thinking of:
- IAS 23
- IAS 24
- IAS 10
Question 10:
I own (you as a student) the GAAP textbook (Purple book that has explanations and examples)
True, I do own this textbook.
False, I do not own this textbook.
