During the year to 31 March 2013, a firm earns £50,000 sales revenue. During the year it spent £24,000 purchasing goods for resale. Inventory as at 1 April 2012 was valued at £8,500 and by the end of the year this had risen to £9,900. £ £ Sales 50,000 Less Cost of goods sold: Opening inventory 8,500 Purchases 24,000 32,500 Less Closing inventory 9,900 22,600 […]

Previous GAAP impairment of goodwill embedded in equity method investment Scenario 1 – Impairment was recognised on the notional goodwill element embedded in the investment under previous GAAP On 1 January 2007, Entity A acquired an investment in Entity B, which it accounts for using the equity method (the investment would qualify as an associate under IFRSs). The cost of investment was CU 1,500 compared […]

Earn-out clause in acquisition Entity C acquired a business before its date of transition to IFRSs and agreed to make an initial payment to the seller together with further payments based on a multiple of future profits of the acquiree. The fair value of the earn-out, which is contingent on future profits, changes after the acquisition date but was never recognised under previous GAAP. Under […]

Subsidiary not consolidated under previous GAAP Background Entity A”s date of transition to IFRSs is 1 January 2012. Under its previous GAAP, Entity A did not consolidate its 75 percent interest in Entity B, which it acquired in a business combination on 15 July 2009. On 1 January 2012: (a) the cost of Entity A”s investment in Entity B is $180. (b) under IFRSs, Entity […]

Restatement of intangible assets, deferred tax and non-controlling interests Entity A”s first IFRS financial statements are for a period that ends on 31 December 2013 and include comparative information for 2012 only. On 1 July 2009, Entity A acquired 75% of subsidiary B. Under its previous GAAP, Entity A assigned an initial carrying amount of £200 to intangible assets that would not have qualified for […]

Fire An audit team has worked for a number of months to create the city pre department audit program and audit document. They are now ready to begin scheduling the audit for each of the city save stations. Upon contacting Station 3, they speak to Chief Dawson, who is very excited about the audit process. She wants to make improvements in her station and hopes […]

safety Acme Manufacturing has determined that all annual safety audits will be managed as attorney-client privileged. The auditor will be responsible for conducting the audit and completing the report to be submitted directly to the in-house legal counsel. The in-house legal counsel will then distribute the report to a select group of people within the organization. Shelly, the manager for the east region, would like […]

Security Dave is the new security manager for Acme Logistics. He is a recent graduate with a bachelor’s degree in security management and has only been with Acme for three months. Dave had not yet been hired when the annual security audit was conducted six months ago. He is appreciative of the effort the auditor has made to follow up through e-mail. However, Dave’s lack […]

On 5 June 2013 inventory is purchased for resale on credit from Henwood Ltd for the value of £550. Purchases 2013 £ 2013 £ 5-Jun Capital 550 Henwood Ltd. 2013 £ 2013 £ 5-Jun Purchases 550

Meaning of ‘available for immediate sale 1 Disposal of a headquarters building An entity is committed to a plan to sell its headquarters building and has initiated actions to locate a buyer. (a) The entity intends to transfer the building to a buyer after it vacates the building. The time necessary to vacate the building is usual and customary for sales of such assets. The […]