- 5 Marks
Question
ii) Recommend the accounting treatment of the above transaction to the directors of Gyamfi for the year ended 31 March 2021, including financial statements extracts in accordance with relevant International Financial Reporting Standards.
Answer
A number of IASs are required to answer this question, which include the
knowledge of IAS 16, IAS 36, IAS 12 and IAS 21
- Carrying amount of building at 31 March 2021 = GH¢12 million (25 dinars – 1 depreciation), i.e., 24 million dinars/2 = GH¢12 million.
(0.5 marks) - Recoverable amount of building at 31 March 2021 = GH¢7 million (17.5 million dinars/2.5) = GH¢7 million.
(0.5 marks) - Impairment loss to profit or loss = GH¢5 million (GH¢12 million – GH¢7 million).
(0.5 marks) - The tax base and carrying amount of the non-current assets are the same before the impairment charge. After the impairment charge, there will be a difference of GH¢5 million. This will create a deferred tax asset of GH¢5 million x 25%, = GH¢1.25 million.
(1.5 marks)
As Gyamfi Ltd expects to make profits for the foreseeable future, this can be recognized in the financial statements.
Statement of profit or loss for the year ended 31/3/2021 (Extract):
Impairment of building: GH¢(5 million)
Depreciation of building (25 dinars/25 years = 1 dinar/2): GH¢(0.5 million)
(1 mark)
Statement of financial position extracts as at 31/3/2021:
Non-current assets:
- Deferred tax assets: GH¢1.25 million
- Building (12 – 5): GH¢7 million
(1 mark)
- Tags: Deferred Tax, Depreciation, Impairment, Non-current Assets, overseas asset
- Level: Level 3
- Topic: IAS 12: Income taxes, IAS 36: Impairment of assets
- Series: MAY 2021
- Uploader: Olaoluwa