Contents Easy Fairly Complicated More Advanced Background Background to financial reporting in South Africa... 3 Conceptual Framework for Financial Reporting 2010 RECENT DEVELOPMENTS REGARDING THE CONCEPTUAL FRAMEWORK... 11 I SPECIFIC OUTCOMES... 13 II SCHEMATIC SUMMARY... 14 III SUMMARY... 15 Question CF.1 Identification and recognition... 19 Question CF.2 The Conceptual Framework comprehensive... 22 Question CF.3 Identification of elements... 24 Question CF.4 Identification and recognition of elements... 26 Question CF.5 Qualitative characteristics... 27 Question CF.6 Identification of elements... 32 Share transactions I SPECIFIC OUTCOMES... 35 II SCHEMATIC SUMMARY... 36 III SUMMARY... 37 Question ST.1 Issue... 40 Question ST.2 Buy-back of shares... 43 Question ST.3 Issue of shares for consideration other than cash... 44 vii
IFRS Applications Question ST.4 Capitalisation issue... 46 Question ST.5 Qualitative characteristics... 47 Question ST.6 Redemption of preference shares... 49 IFRS 5 Non-current assets held for sale and Discontinued Operations I SPECIFIC OUTCOMES... 53 II SCHEMATIC SUMMARY... 54 III SUMMARY... 55 Question IFRS 5.1 Property, plant and equipment: Non-current asset held for sale... 59 Question IFRS 5.2 Intangible asset: Non-current asset held for sale... 62 Question IFRS 5.3 Impairment: Non-current asset held for sale... 63 Question IFRS 5.4 Revaluation model: Non-current asset held for sale... 68 Question IFRS 5.5 Non-current asset held for sale; Disclosure... 72 IFRS 7/IFRS 9/IAS32/IAS39 Financial Instruments (IFRS 7 Financial Instruments: Disclosure, IFRS 9 Financial Instruments, IFRS 32 Financial Instruments: Presentation, IFRS 32 Financial Instruments: Recognition and Measurement) I SPECIFIC OUTCOMES... 77 II SCHEMATIC SUMMARY... 78 III SUMMARY... 79 Question IFRS 7.1 Classification of financial instruments... 99 Question IFRS 7.2 Trade date; Settlement date accounting... 102 Question IFRS 7.3 Classification and disclosure... 103 Question IFRS 7.4 Compound financial instrument... 108 Question IFRS 7.5 Amortised cost... 109 Question IFRS 7.6 Amortised cost-impairment: Fair value... 111 Question IFRS 7.7 Amortised cost; Fair value; Impairment; Derecognition... 112 Question IFRS 7.8 Comprehensive example with disclosure... 117 viii
Contents IFRS 13 Fair Value Measurement I SPECIFIC OUTCOMES... 121 II SCHEMATIC SUMMARY... 122 III SUMMARY... 123 Question IFRS 13.1 Question IFRS 13.2 Question IFRS 13.3 Question IFRS 13.4 Non-Financial asset; principal and most advantageous market; price... 133 Liabilities and equity instruments held by other parties as assets; Debenture; Quoted price... 136 Liabilities and equity instruments held by other parties as assets; No quoted price; Present value... 138 Liabilities and equity instruments not held by other parties as assets... 140 IFRS 15 Revenue from contracts with customers I SPECIFIC OUTCOMES... 145 II SCHEMATIC SUMMARY... 146 III SUMMARY... 147 Question IFRS 15.1 Discussion of recognition and measurement... 160 Question IFRS 15.2 Sale of goods and rendering of services... 164 Question IFRS 15.3 Presentation; journals... 165 Question IFRS 15.4 Right of return; Non-cash consideration; Agent... 170 Question IFRS 15.5 Application of IFRS15; Discount; Variable consideration... 172 Question IFRS 15.6 Application of IFRS15... 178 IAS 1 Presentation of financial statements I SPECIFIC OUTCOMES... 181 II SCHEMATIC SUMMARY... 182 III SUMMARY... 183 Question IAS 1.1 Statement of financial position format... 195 Question IAS 1.2 Structure and content of statement of financial position... 197 Question IAS 1.3 Reclassification adjustments; Statement of profit or loss and other comprehensive income; and Statement of changes in equity... 198 ix
IFRS Applications Question IAS 1.4 Recognise and measure; Basic revaluation... 201 Question IAS 1.5 Reclassification of non-current liability... 202 Question IAS 1.6 Key sources of estimation uncertainty... 204 IAS 2 Inventories I SPECIFIC OUTCOMES... 207 II SCHEMATIC SUMMARY... 208 III SUMMARY... 209 Question IAS 2.1 Journal entries; Disclosure... 213 Question IAS 2.2 Valuation and net realisable value; journal entries... 218 Question IAS 2.3 Lower of cost and NRV; Sales contracts; By-products; Safety equipment... 219 Question IAS 2.4 Allocation of fixed production costs and valuation... 224 Question IAS 2.5 Comprehensive... 225 Question IAS 2.6 Journal entries... 230 IAS 7 Statement of cash flows I SPECIFIC OUTCOMES... 235 II SCHEMATIC SUMMARY... 236 III SUMMARY... 237 Question IAS 7.1 Statement of cash flows; Direct method... 239 Question IAS 7.2 Statement of cash flows; Indirect method... 244 Question IAS 7.3 Statement of cash flows; Direct method... 246 Question IAS 7.4 Statement of cash flows; Indirect method... 251 Question IAS 7.5 Statement of cash flow; Indirect method... 253 Question IAS 7.6 Statement of cash flow; Direct method... 257 x
Contents IAS 8 Accounting policies, changes in accounting estimates and errors I SPECIFIC OUTCOMES... 261 II SCHEMATIC SUMMARY... 262 III SUMMARY... 263 Question IAS 8.1 Change in accounting estimate... 269 Question IAS 8.2 Prior period error... 272 Question IAS 8.3 Material and disclosable items and prior period errors... 273 Question IAS 8.4 Change in accounting policy (inventories)... 277 Question IAS 8.5 Change in accounting policy (retrospective)... 278 Question IAS 8.6 Change in estimate and prior period error... 281 IAS 10 Events after the reporting period I SPECIFIC OUTCOMES... 285 II SCHEMATIC SUMMARY... 286 III SUMMARY... 287 Question IAS 10.1 Liquidation of debtor; Dividends... 289 Question IAS 10.2 Invoice not recognised; Exchange rate; Fire; Securities... 291 Question IAS 10.3 Fire; Expected loss; Legal claim... 292 Question IAS 10.4 Accounting for and disclosure of events after the reporting period... 294 Question IAS 10.5 Events after the reporting period... 296 Question IAS 10.6 Events after the reporting period... 299 IAS 16 Property, plant and equipment I SPECIFIC OUTCOMES... 303 II SCHEMATIC SUMMARY... 304 III SUMMARY... 305 Question IAS 16.1 Recognise and measure; Exchanges... 309 Question IAS 16.2 Recoverable amount; Residual values; Disclosure... 312 xi
IFRS Applications Question IAS 16.3 Recognise and measure; Basic revaluation... 313 Question IAS 16.4 Recognise and measure; Disclose; Basic revaluation... 317 Question IAS 16.5 Disclosure; Impairment; IFRS 5... 319 Question IAS 16.6 Revaluation; Disclosure... 324 IAS 17 Leases I SPECIFIC OUTCOMES... 327 II.(a) SCHEMATIC SUMMARY... 328 II.(b) SCHEMATIC SUMMARY... 329 III SUMMARY... 330 Question IAS 17.1 General ledger accounts... 337 Question IAS 17.2 Question IAS 17.3 Question IAS 17.4 Question IAS 17.5 Question IAS 17.6 Lessee: Finance lease (payable in arrears) and operating lease (even)... 339 Lessee: Finance lease (payable in arrears) and operating lease (uneven)... 341 Lessee: Sale and leaseback operating lease (SP<FV)... 348 Lessee: Sale and leaseback as operating lease; Finance lease... 349 Lessee: Sale and leaseback (SP>CA) as finance lease (payable in arrears)... 355 IAS 21 The effects of changes in foreign exchange rates I SPECIFIC OUTCOMES... 361 II SCHEMATIC SUMMARY... 362 III SUMMARY... 363 Question IAS 21.1 Foreign exchange transaction... 368 Question IAS 21.2 Functional currency; IAS 32... 371 Question IAS 21.3 Foreign exchange transactions... 372 Question IAS 21.4 Sundry foreign exchange transactions... 377 Question IAS 21.5 IAS 16 & IAS 21... 379 Question IAS 21.6 IAS 21; IAS 16; IAS 10 & IAS 2... 382 xii
Contents IAS 33 Earnings per share I SPECIFIC OUTCOMES... 387 II SCHEMATIC SUMMARY... 388 III SUMMARY... 389 Question IAS 33.1 Capitalisation issue; Rights issue at fair value... 393 Question IAS 33.2 Rights issue; Capitalisation issue; Share consolidation... 397 Question IAS 33.3 Rights issues... 399 Question IAS 33.4 Participating preference shares per share... 403 Question IAS 33.5 Bonus element in rights issue... 404 Question IAS 33.6 Correction to earnings; Share dividend... 408 IAS 36 Impairment of assets I SPECIFIC OUTCOMES... 413 II SCHEMATIC SUMMARY... 414 III SUMMARY... 415 Question IAS 36.1 Individual asset... 419 Question IAS 36.2 Recoverable amount... 422 Question IAS 36.3 Reversal of impairment loss... 423 Question IAS 36.4 Reversal of impairment loss... 427 Question IAS 36.5 Revalued asset... 428 Question IAS 36.6 Revalued asset... 431 IAS 37 Provisions, contingent liabilities and contingent assets I SPECIFIC OUTCOMES... 435 II SCHEMATIC SUMMARY... 436 III SUMMARY... 437 Question IAS 37.1 Provisions; Contingent liabilities; Contingent assets... 442 Question IAS 37.2 Provisions; Contingent liabilities; Onerous contract... 450 Question IAS 37.3 Onerous contract... 451 xiii
IFRS Applications Question IAS 37.4 Question IAS 37.5 Provision, contingent liability, Disclosure requirements... 454 Recognition; Measurement; Joint and severable liability; Present value; Expected value... 456 Question IAS 37.6 Recognition; Measurement; Present value; Disclosure... 460 IAS 38 Intangible assets I SPECIFIC OUTCOMES... 463 II SCHEMATIC SUMMARY... 464 III SUMMARY... 465 Question IAS 38.1 Question IAS 38.2 Identify; Recognition; Measurement; Presentation; Disclosure... 473 Research and development expenditure; Impairment; Disclosure... 476 Question IAS 38.3 Revaluations; Disclosure... 478 Question IAS 38.4 Disclosure... 481 Question IAS 38.5 Accounting treatment... 482 Question IAS 38.6 Researchment and development; Accounting treatment; Disclosure... 484 IAS 40 Investment property I SPECIFIC OUTCOMES... 489 II SCHEMATIC SUMMARY... 490 III SUMMARY... 491 Question IAS 40.1 Classification; Fair value model... 498 Question IAS 40.2 Replaced part... 501 Question IAS 40.3 Question IAS 40.4 Transfer of owner-occupied property (cost model) to investment property... 502 Transfer from investment property to owner-occupied property (revaluation model)... 506 Question IAS 40.5 Property interest held by a lessee under an operating lease... 507 Question IAS 40.6 Transfer of investment property to owner-occupied property. 510 xiv