Recognition Criteria

AA – Nov 2023 – L2 – Q6 – Audit of Financial Statements

Assessing development costs under IAS 38 and audit tests for verification.

Question

Your client, Picturescope Limited, intends to produce a motion picture titled “Naija Power”. The development costs before presentation to investors for financing the production is estimated to be N15 million.

Required:

a. As the assurance provider, assess the situation to confirm that the amount spent so far can be recognised as development costs within the provisions of IAS 38 – Intangible Assets.
(6 Marks)

b. Explain the audit tests that you would perform in respect of the development costs expended so far.
(9 Marks)

Answer

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Tags: Audit Procedures, Development Costs, IAS 38, Recognition Criteria
Level: Level 2

Topic: Audit of Financial Statements

FR – Nov 2020 – L2 – Q5c – Impairment of Assets (IAS 36)

Explain disposal group and rules of recognition under IFRS 5, determine impairment loss, and allocate impairment on the assets.

Question

The Board of directors of Adamu Limited has decided to dispose of a group of held-for-sale assets. The extracts of carrying amounts of the assets immediately before classification as held-for-sale were stated as follows:

Assets	N’000
Goodwill	80,000
PPE at revalued amounts	208,000
PPE at cost	320,000
Inventory	84,000
Financial asset	68,000

Total: 760,000

The Board estimated that the fair value of the disposal group is N650,000,000 gross, with selling costs amounting to N10,000,000.

Required:
i. Explain what is meant by disposal group and the rules of recognition under IFRS 5 – Non-current assets held for sale and discontinued operations. (2 Marks)

ii. Determine and allocate the impairments on the disposed-off asset under IFRS 5. (4 Marks)

iii. Prepare necessary journal entries to record the transactions. (1 Mark)

iv. Identify THREE applicable criteria under IFRS 5 for classifying an asset or disposal group as held for sale in the financial statements. (3 Marks)

Answer

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Tags: Disposal group, IFRS 5, Impairment Loss, Journal Entries, Recognition Criteria
Level: Level 2

Topic: Impairment of Assets (IAS 36)
Series: NOV 2020

FR – May 2019 – L2 – Q7a – Property, Plant, and Equipment (IAS 16)

Discussion of the recognition criteria for internally developed intangible assets under IAS 38 and how to account for them.

Question

Soft Solutions Limited is a Nigerian company that specializes in the development of software applications. The company has been in operation for over 16 years and has invested considerable amounts of money internally in developing accounting and banking software. The treatment of these assets is prescribed by IAS 38 – Intangible Assets.

Required:
a. As a partly qualified accountant working in the accounts department of Soft Solutions Limited, the financial controller of the company asked you for a memo which addresses the following:
i. Whether internally developed intangible assets should be recognized and, if so, how should they be recorded initially and subsequently accounted for. (5 Marks)
ii. The criteria for revaluation of intangible assets? (3 Marks)

Answer

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Tags: Capitalization, Development Costs, IAS 38, Intangible Assets, Recognition Criteria
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: MAY 2019

FR – Mar/Jul 2020 – L2 – Q2b – Recognition of Provisions under IAS 37

Explain the recognition criteria for provisions in accordance with IAS 37, including situations when provisions should be recognized.

Question

Explain the recognition criteria on provisions in accordance with International Accounting Standards (IAS 37) on provisions, contingent liabilities, and contingent assets. (5 Marks)

Answer

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Tags: Contingent Liabilities, Financial Reporting, IAS 37, Provisions, Recognition Criteria
Level: Level 2

AA – Nov 2023 – L2 – Q6 – Audit of Financial Statements

Assessing development costs under IAS 38 and audit tests for verification.

Question

Required:

a. As the assurance provider, assess the situation to confirm that the amount spent so far can be recognised as development costs within the provisions of IAS 38 – Intangible Assets.
(6 Marks)

b. Explain the audit tests that you would perform in respect of the development costs expended so far.
(9 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Development Costs, IAS 38, Recognition Criteria
Level: Level 2

Topic: Audit of Financial Statements

FR – Nov 2020 – L2 – Q5c – Impairment of Assets (IAS 36)

Explain disposal group and rules of recognition under IFRS 5, determine impairment loss, and allocate impairment on the assets.

Question

Assets	N’000
Goodwill	80,000
PPE at revalued amounts	208,000
PPE at cost	320,000
Inventory	84,000
Financial asset	68,000

Total: 760,000

The Board estimated that the fair value of the disposal group is N650,000,000 gross, with selling costs amounting to N10,000,000.

Required:
i. Explain what is meant by disposal group and the rules of recognition under IFRS 5 – Non-current assets held for sale and discontinued operations. (2 Marks)

ii. Determine and allocate the impairments on the disposed-off asset under IFRS 5. (4 Marks)

iii. Prepare necessary journal entries to record the transactions. (1 Mark)

iv. Identify THREE applicable criteria under IFRS 5 for classifying an asset or disposal group as held for sale in the financial statements. (3 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Disposal group, IFRS 5, Impairment Loss, Journal Entries, Recognition Criteria
Level: Level 2

Topic: Impairment of Assets (IAS 36)
Series: NOV 2020

FR – May 2019 – L2 – Q7a – Property, Plant, and Equipment (IAS 16)

Discussion of the recognition criteria for internally developed intangible assets under IAS 38 and how to account for them.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capitalization, Development Costs, IAS 38, Intangible Assets, Recognition Criteria
Level: Level 2

Topic: Property, Plant, and Equipment (IAS 16)
Series: MAY 2019

FR – Mar/Jul 2020 – L2 – Q2b – Recognition of Provisions under IAS 37

Explain the recognition criteria for provisions in accordance with IAS 37, including situations when provisions should be recognized.

Question

Explain the recognition criteria on provisions in accordance with International Accounting Standards (IAS 37) on provisions, contingent liabilities, and contingent assets. (5 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Contingent Liabilities, Financial Reporting, IAS 37, Provisions, Recognition Criteria
Level: Level 2

Question Tag: Recognition Criteria

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AA – Nov 2023 – L2 – Q6 – Audit of Financial Statements

Assessing development costs under IAS 38 and audit tests for verification.

FR – Nov 2020 – L2 – Q5c – Impairment of Assets (IAS 36)

Explain disposal group and rules of recognition under IFRS 5, determine impairment loss, and allocate impairment on the assets.

FR – May 2019 – L2 – Q7a – Property, Plant, and Equipment (IAS 16)

Discussion of the recognition criteria for internally developed intangible assets under IAS 38 and how to account for them.

FR – Mar/Jul 2020 – L2 – Q2b – Recognition of Provisions under IAS 37

Explain the recognition criteria for provisions in accordance with IAS 37, including situations when provisions should be recognized.

AA – Nov 2023 – L2 – Q6 – Audit of Financial Statements

Assessing development costs under IAS 38 and audit tests for verification.

FR – Nov 2020 – L2 – Q5c – Impairment of Assets (IAS 36)

Explain disposal group and rules of recognition under IFRS 5, determine impairment loss, and allocate impairment on the assets.

FR – May 2019 – L2 – Q7a – Property, Plant, and Equipment (IAS 16)

Discussion of the recognition criteria for internally developed intangible assets under IAS 38 and how to account for them.

FR – Mar/Jul 2020 – L2 – Q2b – Recognition of Provisions under IAS 37

Explain the recognition criteria for provisions in accordance with IAS 37, including situations when provisions should be recognized.

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AA – Nov 2023 – L2 – Q6 – Audit of Financial Statements

Assessing development costs under IAS 38 and audit tests for verification.

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FR – Nov 2020 – L2 – Q5c – Impairment of Assets (IAS 36)

Explain disposal group and rules of recognition under IFRS 5, determine impairment loss, and allocate impairment on the assets.

You're reporting an error for "FR – Nov 2020 – L2 – Q5c – Impairment of Assets (IAS 36)"

FR – May 2019 – L2 – Q7a – Property, Plant, and Equipment (IAS 16)

Discussion of the recognition criteria for internally developed intangible assets under IAS 38 and how to account for them.

You're reporting an error for "FR – May 2019 – L2 – Q7a – Property, Plant, and Equipment (IAS 16)"

FR – Mar/Jul 2020 – L2 – Q2b – Recognition of Provisions under IAS 37

Explain the recognition criteria for provisions in accordance with IAS 37, including situations when provisions should be recognized.

You're reporting an error for "FR – Mar/Jul 2020 – L2 – Q2b – Recognition of Provisions under IAS 37"

AA – Nov 2023 – L2 – Q6 – Audit of Financial Statements

Assessing development costs under IAS 38 and audit tests for verification.

You're reporting an error for "AA – Nov 2023 – L2 – Q6 – Audit of Financial Statements"

FR – Nov 2020 – L2 – Q5c – Impairment of Assets (IAS 36)

Explain disposal group and rules of recognition under IFRS 5, determine impairment loss, and allocate impairment on the assets.

You're reporting an error for "FR – Nov 2020 – L2 – Q5c – Impairment of Assets (IAS 36)"

FR – May 2019 – L2 – Q7a – Property, Plant, and Equipment (IAS 16)

Discussion of the recognition criteria for internally developed intangible assets under IAS 38 and how to account for them.

You're reporting an error for "FR – May 2019 – L2 – Q7a – Property, Plant, and Equipment (IAS 16)"

FR – Mar/Jul 2020 – L2 – Q2b – Recognition of Provisions under IAS 37

Explain the recognition criteria for provisions in accordance with IAS 37, including situations when provisions should be recognized.

You're reporting an error for "FR – Mar/Jul 2020 – L2 – Q2b – Recognition of Provisions under IAS 37"

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