Non-current Assets

AA – L2 – SA – Q5.5 – Sampling Non-Current Assets Level

Factors affecting sample size for valuation testing.

Question

When testing non-current assets for the valuation assertion, identify whether each of the below factors would necessitate a decrease in the sample size, an increase in the sample size or would have minimal impact on the sample size.

Stratification of the population
A significant increase in the number of other substantive procedures directed at the same assertion
A Decrease
B Increase
C Minimal impact
D Decrease
E Increase
F Minimal impact

Answer

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Tags: ICAG, Non-current Assets, Sampling, Valuation Assertion
Level: Level 2

Topic: Audit and Assurance Evidence

AA – L2 – SA – Q4.7 – Financial Statement Assertions

Assertions for non-current asset procedures.

Question

Identify which financial statement assertion is addressed for each of the below substantive procedures performed on a non-current asset schedule (which agrees to the financial statements).

Confirming whether the costs on the schedule are correct
Tracing items from the non-current asset register to the schedule
A Existence
B Accuracy and valuation
C Completeness
D Accuracy
E Existence
F Completeness

Answer

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Tags: Assertions, ICAG, Non-current Assets, Substantive Procedures
Level: Level 2

Topic: Audit and Assurance Evidence

FR – L2 – Q44 – Provisions

Explain accounting treatment for decommissioning costs of a mining site under IAS 37, including calculations.

Question

The following information relates to the financial statements of Kumasi Ltd for the year to 31 March 20X4.

The mining division of Kumasi Ltd has a 3 year operating licence from an overseas government. This allows it to mine and extract copper from a particular site. When the licence began on 1 April 20X3, Kumasi Ltd started to build on the site. The cost of the construction was GH¢500,000.

The overseas country has no particular environmental decommissioning laws. In response to the global sustainability agenda, Kumasi Ltd has developed its own policy for sustainable operations. It has made information about this policy public and has provided examples to demonstrate that it is a responsible company that believes in restoring mining sites at the end of the extraction period. The cost of removing the construction at the end of the three years is estimated to be GH¢100,000.

The cost of the site currently shown in the trial balance is GH¢500,000. The company has a cost of borrowing of 10%.

Required

Explain the correct accounting treatment for the above (with calculations if appropriate).

Answer

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Tags: Decommissioning Costs, Financial Reporting, IAS 37, Non-current Assets, Provisions, Sustainability
Level: Level 2

Topic: Provisions

FR – L2 – Q35 – Financial Reporting Standards and Their Applications

Explain accounting treatment for revalued properties of Peak Limited, including depreciation and impairment for the year ended 31 March 20X4.

Question

Peak Limited conducts its activities from two properties, a main office in the centre and a property in the rural area where staff training is conducted. Both properties were acquired on 1 April 20X1 and had estimated lives of 25 years with no residual value. The company has a policy of carrying its land and buildings at current values. However, until recently property prices had changed for some years. On 1 October 20X3 the properties were revalued by a firm of surveyors. Details of this and the original costs are:

Land	Main office	Training premises
Cost 1 April 20X1	500	300
Valuation 1 October 20X3	700	350
Buildings	Main office	Training premises
Cost 1 April 20X1	1,200	900
Valuation 1 October 20X3	1,350	600

Required
Show the effect of the above transactions on the statement of profit or loss and statement of financial position of Peak Limited for the year ended 31 March 20X4.

Answer

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Tags: Depreciation, Financial Statements, IAS 16, Impairment, Non-current Assets, Profit or Loss, Property Valuation, Revaluation, Revaluation Reserve
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q34 – Impairment of Assets

Calculate the impact of impairment, revaluation, and sale of three machines on profit or loss, OCI, and revaluation reserve for Chantelle (Ghana) Ltd in Year 7.

Question

The following is relevant to three tangible non-current assets held by Chantelle (Ghana) Ltd.

Machine 1 was purchased on 1 January Year 1 for GH¢420,000. It had an estimated residual value of GH¢50,000 and a useful life of ten years and was being depreciated on a straight-line basis. On 1 January Year 6 Chantelle (Ghana) Ltd revalued this machine to GH¢275,000 and reassessed its total useful life as fifteen years. On 1 January Year 7 an impairment review showed machine 1’s recoverable amount to be GH¢100,000 and its remaining useful life to be five years.

Machine 2 was purchased on 1 January Year 1 for GH¢500,000. It had an estimated residual value of GH¢60,000 and a useful life of ten years and was being depreciated on a straight-line basis. On 1 January Year 7 this machine was classified as held for sale, at which time its fair value was estimated at GH¢200,000 and costs to sell at GH¢5,000. On 31 March Year 7 the machine was sold for GH¢210,000.

Machine 3 was purchased on 1 January Year 1 for GH¢600,000. In Year 1 depreciation of GH¢30,000 was charged. On 1 January Year 2 this machine was revalued to GH¢800,000 and its remaining useful life assessed as eight years. On 1 January Year 7 this machine was classified as held for sale, at which time, its fair value was estimated at GH¢550,000 and costs to sell at GH¢5,000. On 31 March Year 7 the machine was sold for GH¢550,000.

Tax is at the rate of 30%.

Required
For each machine show the effect of the above on profit or loss, other comprehensive income and revaluation reserve of Chantelle (Ghana) Ltd in Year 7. You should also show the brought forward balance on the revaluation reserve (at 1 January Year 7) in respect of machines 1 and 3.

Answer

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Tags: Depreciation, Held for Sale, IAS 36, IFRS 5, Impairment, Non-current Assets, Other Comprehensive Income, Profit or Loss, Revaluation, Revaluation Reserve
Level: Level 2

Topic: Impairment of Assets

FR – L2 – Q25 – Financial Reporting Standards and Their Applications

Disclose non-current asset movements for FAMCO LTD under IAS 16, including revaluation, depreciation, and disposals for 20X4.

Question

FAMCO LTD
FAMCO LTD had the following tangible non-current assets at 31 December 20X3.

	Cost	Depreciation	Carrying amount
	GH¢000	GH¢000	GH¢000
Land	500	–	500
Buildings	400	80	320
Plant and machinery	1,613	458	1,155
Fixtures and fittings	390	140	250
Assets under construction	91	–	91
	2,994	678	2,316

In the year ended 31 December 20X4 the following transactions occur.
(1) Further costs of GH¢53,000 are incurred on buildings being constructed by the company. A building costing GH¢100,000 is completed during the year.
(2) A deposit of GH¢20,000 is paid for a new computer system which is undelivered at the year end.
(3) Additions to plant are GH¢154,000.
(4) Additions to fixtures, excluding the deposit on the new computer system, are GH¢40,000.
(5) The following assets are sold.

	Cost	Depreciation b/f	Proceeds
	GH¢000	GH¢000	GH¢000
Plant	277	195	86
Fixtures	41	31	2

(6) Land and buildings were revalued at 1 January 20X4 to GH¢1,500,000, of which land is worth GH¢900,000. The revaluation was performed by Messrs Jackson & Co, Chartered Surveyors, on the basis of existing use value on the open market.
(7) The useful economic life of the buildings is unchanged. The buildings were purchased ten years before the revaluation.
(8) Depreciation is provided on all assets in use at the year end at the following rates.
Buildings 2% per annum straight line
Plant 20% per annum straight line
Fixtures 25% per annum reducing balance

Required
Show the disclosure under IAS 16 in relation to non-current assets in the notes to the published accounts for the year ended 31 December 20X4.

Answer

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Tags: Asset Valuation, Cost Model, Depreciation, Financial Statements, IAS 16, Inventory, Non-current Assets, Property Plant and Equipment, Revaluation, Revaluation Model
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q23 – Financial Reporting Standards and Their Applications

Prepare PPE analysis for Crest Ltd for 20X4, including revaluation, disposal, and depreciation method change.

Question

The following is an extract from the financial statements of Crest Ltd on 31 December 20X3.

Property, plant and equipment

	Land and buildings GH₵	Plant and equipment GH₵	Computer equipment GH₵	Total GH₵
Cost
On 31 December 20X3	1,500,000	340,500	617,800	2,458,300
Accumulated depreciation
On 31 December 20X3	600,000	125,900	505,800	1,231,700
Carrying amount
On 31 December 20X3	900,000	214,600	112,000	1,226,600

Accounting policies
Depreciation
Depreciation is provided at the following rates.
On land and buildings: 2% per annum straight line on buildings only
On plant and equipment: 25% reducing balance
On computers: 33.33% per annum straight line

During 20X4 the following transactions took place.
(1) On 31 December the land and buildings were revalued to GH₵1,750,000. Of this amount, GH₵650,000 related to the land (which had originally cost GH₵500,000). The remaining useful life of the buildings was assessed as 40 years.
(2) A machine which had cost GH₵80,000 and had accumulated depreciation of GH₵57,000 at the start of the year was sold for GH₵25,000 in the first week of the year.
(3) A new machine was purchased on 31 March 20X4. The following costs were incurred:
Purchase price, before discount, inclusive of reclaimable sales tax of GH₵3,000: 20,000
Discount: 1,000
Delivery costs: 500
Installation costs: 750
Interest on loan taken out to finance the purchase: 300
(4) On 1 January it was decided to change the method of providing depreciation on computer equipment from the existing method to 40% reducing balance.

Required
Produce the analysis of property, plant and equipment as it would appear in the notes to the financial statements of Crest Ltd for the year ended 31 December 20X4.

Answer

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Tags: Accounting policies, Asset Valuation, Cost Basis, Depreciation, Disposals, Financial Statements, IAS 16, Non-current Assets, Property Plant and Equipment, Revaluation
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q22 – Property, Plant and Equipment

Explain accounting treatment for revaluation and depreciation of Tema Limited's head office property under IAS 16.

Question

The following information relates to the financial statements of Accra Enterprises Limited for the year to 31 March 20X4.
The head office of Accra Enterprises Limited was acquired on 1 April 20X1 for GH¢1million. Accra Enterprises Limited intend to occupy the building for 25 years. On 31 March 20X3 it was revalued to GH¢1.15 million. On 31 March 20X4, a surplus of vacant commercial property in the area had led to a fall in property prices and the fair value was now only GH¢0.8 million.

Required
Explain the correct accounting treatment for the above (with calculations if appropriate).

Answer

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Tags: Accounting Treatment, Depreciation, Fair Value, Financial Statements, IAS 16, Non-current Assets, Property Revaluation, Revaluation Reserve
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

PSAF- L2 – Q10.4 – International Public Sector Accounting Standards

Determine recoverable amount of three intangible assets for Nandom Technical University.

Question

The following information relates to three intangible assets in respect of Nandom Technical University.

	Brands (GHC)	Software (GHC)	Trade Marks (GHC)
Carrying amount	200,000	300,000	240,000
Net realisable value	220,000	250,000	200,000
Value in use	240,000	260,000	180,000

Required:
(a) What is the recoverable amount of each asset?

(b) Calculate the impairment provision for each of the assets.

Answer

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Tags: Accounting Standards, Asset Valuation, Financial Reporting, Impairment, Impairment Loss, Intangible assets, IPSAS, Non-current Assets, Public Sector Accounting, Recoverable Amount
Level: Level 2

Topic: International Public Sector Accounting Standards

PSAF – L2 – Q10.3 – International public sector accounting standards

Account for the treatment of a property reclassified as investment property in 2024 financial statements of the National Retirement Oversight Agency.

Question

The National Retirement Oversight Agency acquired a property on 1 January 2021 at a cost of GHc40,000,000 and immediately occupied it as office premise. On acquisition, it was estimated to have a useful life of 50 years. Subsequent to its acquisition, the asset was measured at depreciated cost until 1 October 2024 when management decided to use the building mainly for rentals. Following this decision, the property was fair valued at GHc38,000,000. The National Retirement Oversight Agency adopted the fair value model for subsequent measurement. At 31 December 2024, it was fair valued at GHc39,000,000.

Required:

Account for the treatment of this property in the 2024 financial statements of The National Retirement Oversight Agency.

Answer

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Tags: Depreciation, Fair value gain, Fair value model, Financial Statements, Investment property, IPSAS 16, IPSAS 17, Non-current Assets, Property reclassification, Public Sector Accounting
Level: Level 2

Topic: International Public Sector Accounting Standards

Tag (SQ): Non-current Assets

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AA – L2 – SA – Q5.5 – Sampling Non-Current Assets Level

Factors affecting sample size for valuation testing.

AA – L2 – SA – Q4.7 – Financial Statement Assertions

Assertions for non-current asset procedures.

FR – L2 – Q44 – Provisions

Explain accounting treatment for decommissioning costs of a mining site under IAS 37, including calculations.

FR – L2 – Q35 – Financial Reporting Standards and Their Applications

Explain accounting treatment for revalued properties of Peak Limited, including depreciation and impairment for the year ended 31 March 20X4.

FR – L2 – Q34 – Impairment of Assets

Calculate the impact of impairment, revaluation, and sale of three machines on profit or loss, OCI, and revaluation reserve for Chantelle (Ghana) Ltd in Year 7.

FR – L2 – Q25 – Financial Reporting Standards and Their Applications

Disclose non-current asset movements for FAMCO LTD under IAS 16, including revaluation, depreciation, and disposals for 20X4.

FR – L2 – Q23 – Financial Reporting Standards and Their Applications

Prepare PPE analysis for Crest Ltd for 20X4, including revaluation, disposal, and depreciation method change.

FR – L2 – Q22 – Property, Plant and Equipment

Explain accounting treatment for revaluation and depreciation of Tema Limited's head office property under IAS 16.

PSAF- L2 – Q10.4 – International Public Sector Accounting Standards

Determine recoverable amount of three intangible assets for Nandom Technical University.

PSAF – L2 – Q10.3 – International public sector accounting standards

Account for the treatment of a property reclassified as investment property in 2024 financial statements of the National Retirement Oversight Agency.

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AA – L2 – SA – Q5.5 – Sampling Non-Current Assets Level

Factors affecting sample size for valuation testing.

You're reporting an error for "AA – L2 – SA – Q5.5 – Sampling Non-Current Assets Level"

AA – L2 – SA – Q4.7 – Financial Statement Assertions

Assertions for non-current asset procedures.

You're reporting an error for "AA – L2 – SA – Q4.7 – Financial Statement Assertions"

FR – L2 – Q44 – Provisions

Explain accounting treatment for decommissioning costs of a mining site under IAS 37, including calculations.

You're reporting an error for "FR – L2 – Q44 – Provisions"

FR – L2 – Q35 – Financial Reporting Standards and Their Applications

Explain accounting treatment for revalued properties of Peak Limited, including depreciation and impairment for the year ended 31 March 20X4.

You're reporting an error for "FR – L2 – Q35 – Financial Reporting Standards and Their Applications"

FR – L2 – Q34 – Impairment of Assets

Calculate the impact of impairment, revaluation, and sale of three machines on profit or loss, OCI, and revaluation reserve for Chantelle (Ghana) Ltd in Year 7.

You're reporting an error for "FR – L2 – Q34 – Impairment of Assets"

FR – L2 – Q25 – Financial Reporting Standards and Their Applications

Disclose non-current asset movements for FAMCO LTD under IAS 16, including revaluation, depreciation, and disposals for 20X4.

You're reporting an error for "FR – L2 – Q25 – Financial Reporting Standards and Their Applications"

FR – L2 – Q23 – Financial Reporting Standards and Their Applications

Prepare PPE analysis for Crest Ltd for 20X4, including revaluation, disposal, and depreciation method change.

You're reporting an error for "FR – L2 – Q23 – Financial Reporting Standards and Their Applications"

FR – L2 – Q22 – Property, Plant and Equipment

Explain accounting treatment for revaluation and depreciation of Tema Limited's head office property under IAS 16.

You're reporting an error for "FR – L2 – Q22 – Property, Plant and Equipment"

PSAF- L2 – Q10.4 – International Public Sector Accounting Standards

Determine recoverable amount of three intangible assets for Nandom Technical University.

You're reporting an error for "PSAF- L2 – Q10.4 – International Public Sector Accounting Standards"

PSAF – L2 – Q10.3 – International public sector accounting standards

Account for the treatment of a property reclassified as investment property in 2024 financial statements of the National Retirement Oversight Agency.

You're reporting an error for "PSAF – L2 – Q10.3 – International public sector accounting standards"

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