PART I.

MCQ (3 marks)

1. Which, if any, of the following statements regarding impairment reviews is/are correct?
(1) At the end of each reporting period, an entity should assess: đánh giá if there is any indication: dấu hiệu
that assets have been impaired.
(2) Annual impairment reviews are required on all intangible assets with “definite” lives  (indefinite)
Nếu thay definite  indefinite
A. 1 only C. Both 1 and 2
B. 2 only D. Neither 1 or 2
Solution: IAS 36 – Impairment of Assets – CHAPTER 10: PPE & IMPAIRMENT LOSS
• When there are indications that an impairment loss may have occurred
• At each SoFP date a company must assess whether there are any indications
• If so – carry out the impairment test by estimating the recoverable amount and comparing with
carrying amount
• Note – intangible assets with indefinite useful lives, intangible assets not yet available for use and
goodwill arising on consolidation must be tested annually for impairment

External indicators examples

• Market value declines for specific assets
• Significant adverse changes in the business, technological, market, economic or legal environment
where assets are used (e.g. in recessionary times)
• Increases in market interest rates (affects value in use)
Internal indicators examples
• Obsolesce or physical damage to an asset
• Significant internal changes to a company’s operations
• Indicators that the economic performance of an asset is (or will become) worse than previously
anticipated
• Idle assets
• Change of use of an asset

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2. A company incurred the following costs related to the production of inventory in the current year:
Cost of materials $100,000
Cost of direct labor 60,000
Allocation of variable manufacturing overhead costs 30,000
Allocation of fixed manufacturing overhead costs 25,000
(Based on normal production levels): (Dựa trên mức sản xuất bình thường)
Storage costs (after production, prior to sale) 2,000
Selling costs 8,000
The cost of materials included abnormal waste of $10,000.
What is the cost of inventory in the current year?
A. $190,000 C. $215,000
B. $205,000 D. $217,000

Solution: IAS 2 – CHAPTER 12: INVENTORY

a/ inventories increases
- case 1: Purchase from outsiders
- case 2: Self production
+ DM
+ DL: Direct labor
+ MOH: Manufacturing overhead
- Variable OH
- Fixed OH
- Note: Cost of materials excludes:
+ Selling costs
+ Admin cost
+ Over (extra) wasted products

Đáp án:
 Cost of inventory = DM + DL + MOH (Fix cost + Variable cost)
= (100,000 – 10,000) + 60,000 + 30,000 + 25,000 = $205,000
 Cost of sale = Opening inventory + Purchases - Closing inventory

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3. Which of the following are outlined in IAS 37 Provisions, Contingent Liabilities and Contingent Assets
as criteria required for recognising a provision?
(i) An entity has a present obligation from a past event.
(ii) It is possible that an outflow of resources will be required.
(iii) A reliable estimate can be made of the amount of the obligation.
A (i), (ii) and (iii) C (i) and (iii) only
B (i) and (ii) only D (ii) and (iii) only

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4. Riley Co acquired a Non-current asset on 1 October 20W9 (10 years before 20X9) at a cost of $100,000
which had a useful life of 10 years and a nil residual value. The asset had been correctly depreciated up to 30
September 20X4. At that date the asset was damaged and an impairment review was performed. On 30
September 20X4, the fair value of the asset less costs of disposal was $40,000 and the expected future cash
flows was $10,500 $7,000 per annum for the next 4 (5) years. The current cost of capital is 10% and a 4-year
annuity of $1 per annum at 10% would have present value of $3.17.
What amount would be charged to profit or loss for the impairment of this asset for the year ended 30
September 20X4?
A. $10,000 C. $16,715
B. $10,205 D. $17,785

Solution: IAS 36 – Impairment of Assets – CHAPTER 10: PPE & IMPAIRMENT LOSS
 Tóm tắt đề:

- Cost: 100,000

- Residual value: nil

- Useful life: 10 years

- 30/09/30x4: the fair value of the asset less costs of disposal: 40,000

- The expected future cash flows: 7,000 per annum (5 years)

- Current cost of capital 10%

 Các bước làm:

Bước 1:

Làm chậm:

- Tính: Annual acc depreciation (Khấu hao hàng năm) = Cost – Residual value / Useful life

- Tính: Total annual depreciation (khấu hao lũy kế) = Annual acc dep * Year(s)

- Carry Amount = Cost (nguyên giá) – Total annual depreciation (khấu hao lũy kế)

Làm tắt:

- Carry Amount (CA) = Cost – ((Cost – Residual value / Useful life) * years))

Bước 2:

Recoverable Amont bao gồm:

- Net FV (FV – cost to sale/cost to disposal)

- Value in use = PV = Net cash flow / (1+r) ^n

So sánh HIGHER OF (Value in use & Net FV)  RA

Bước 3:

Impairment loss = CA – RA

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5. On 7 Jan 20X5, Hermione was informed that it was being sued by an employee in respect of workplace accident that
took place in October 20X4. Legal advisors advised that Hermione is certain to lose the case. They have provided the
following information:
Estimated pay-out Probability of payment occurring
$1 million 35%
$2 million 60%
$3 million 5%
What amount should be recognized as a provision in respect of the workplace accident claim in the year
ended 31 Dec 20X4?
A. $1.55 million C. $3 million
B. $1.8 million D. $2 million

6. In which of the following scenarios, the mentioned asset is classified as an investment property of
Changsha under IAS 40?
A. The asset is a new office that Changsha occupied immediately after the purchase
B. The asset is a broadcasting license with an indefinite useful life
C. The asset is an office building that is being rented under an operating lease
D. The asset is an apartment building held for sale in the ordinary course of business

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7. According to IAS 38 Intangible Assets, which of the following statements about research and
development expenditure are correct?
1. If certain conditions are met, an entity may decide to capitalise development expenditure. (Wrong)
2. Research expenditure, other than capital expenditure on research facilities, must be written off as incurred.
3. Capitalised development expenditure must be amortised over a period not exceeding 5 years.(W)
 Thời gian khấu hao phụ thuộc vào thời gian sử dụng hữu ích của tài sản vô hình. Điều này có thể dài
hoặc ngắn hơn tùy thuộc vào từng trường hợp.
4. Capitalised development expenditure must be reported in the statement of financial position under
intangible non-current assets.
(C )
A. 1, 2 and 4 only C. 3 and 4 only
B. 1 and 3 only D. 2 and 4 only

Solution: IAS 38 – CHAPTER 11: INTANGIBLE ASSET

1. Khái niệm, Phân loại & Ghi nhận:
- Khái niệm: “A resource controlled by an entity as a result of past events, and from which future
economic benefits are expected to flow to the entity.”
- Phân loại & ví dụ: “Any resource that is both intangible (lacking physical substance) and of
economic value to the firm. This includes all types of:
+ intellectual capital
+ process-related capital
+ external relations
- Ghi nhận:
+ To be controlled
+ To be separable (expected goodwill)
+ To be probable flows of economic benefits
+ To be measured reliably
 Note: No recognizing internally generated intangible asset (goodwill, b,...), except development cost
- Research and Development cost:
- For research: Chi phí nghiên cứu
 What is research (slides 25)
 Accouting treatment: all expenditures of research stage are recognized as expense
- For development: Chi phí triển khai
 What is development (slides 26)
 Accouting treatment: All expenseditures of development stage are recorgnized as intangible asset.
If 6 criteria is met!!!
1. Technical feasibility
2. Intention to complete and use or sell the asset
3. Ability to use or sell the asset
4. The asset will generate future economic benefits – i.e. a market exists for the asset or the output
from the asset, or it will be used internally
5. Adequate technical, financial and other resources are available to complete, sell or use the asset
6. Development expenditure can be measured reliably

2. Đo lường:

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8. The following items have to be considered in finalising the financial statements of Q, a limited liability
company:
(1) The company gives warranties on its products. The company's statistics show that about 5% of
sales give rise to a warranty claim.
(2) The company has guaranteed to pay the overdraft of another company. The likelihood of a liability arising
under the guarantee is assessed as possible.
According to IAS 37 Provisions, Contingent Liabilities and Contingent assets, what is the correct action
to be taken in the financial statements for these items?
A. Create a provision in (1) and Disclose by the Notes in (2)
B. Disclose by the Notes in (1) and Do nothing in (2)
C. Create a provision in both (1) and (2)
D. Disclose by the Notes in both (1) and (2)

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9. In the 4th quarter of Year 1, Beach Corporation produced 3 products that it still has in inventory at Dec 31,
the end of its fiscal year.
Cost Replacement Cost Selling price
X $140 $145 $150
Y $160 130 $145
Z $100 $90 $100
Beech Corporation expects to incur selling costs equal to 5% of the selling price on each of the products.
Determine the amount at which Beech should report its inventory on the December 31 Year 1 Balance
sheet?

A. $375.25 C. $365.75
B. $372.75 D. $362.25

Solution: IAS 2 – CHAPTER 12: INVENTORY

c/ at the end year

Basic principle: Inventories are measured at the LOWER OF [COST AND NET REALISABLE VALUE]
- Cost of inventory (net book value) (a)
+ costs of purchase
+ costs of conversion and
+ other costs incurred
- Net realizable value (NRV) (b)
NRV = Estimated selling price - Estimated cost to sales - Estimated cost to complete
 TH1: (b) > hoặc = (a): no reduction value of inventory (không ghi nhận giá trị hàng tồn kho)
=> no adj => is used for reporting B/S
 TH2: (b) < (a): reduction value of inventory incurrs
=> must be adjusted
=> (b) is used reporting B/S
=> (a) - (b) = c => included in COS (Số tiền này đưa vào Chi Phí bán hàng (COS) cho kỳ kế toán)
 Prudence/conservatism principle

Cách 1:
Items Cost Selling price NRV LOWER OF
X 140000 150000 142500 140000
Y 160000 145000 137750 137750
Z 100000 100000 95000 95000
372750

Cách 2:
Items Cost Selling price - Selling cost = NRV LOWER OF
X 140000 150000 7500 142500 140000
Y 160000 145000 7250 137750 137750
Z 100000 100000 5000 95000 95000
372750

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10. In its first year of trading to 31 July 20X6, Camp Co incurred the following expenditure on research and
development, none of which related to the cost of non-current assets: $12,000 on successfully inventing
processes for converting seaweed into chemicals X, Y and $60,000 on developing a headache pill. No
commercial uses have yet been discovered for chemicals X and Y. Commercial production and sales of the
headache pill commenced on 1 April 20X6 and are expected to produce steady profitable income during a 5-
year period before being replaced. Adequate resources exist to achieve this.
* What is the amount of development costs that must be capitalized on 1 Apr 20X6 under IAS 38?

Solution: IAS 38 – CHAPTER 11: INTANGIBLE ASSET

Phân Tích Chi Phí:

1. $12,000 Chi Phí Cho Việc Phát Minh Quy Trình Hóa Chất X và Y:
- Do chưa có ứng dụng thương mại cho hóa chất X và Y, các chi phí này không đáp ứng tiêu
chí ghi nhận. Chúng nên được ghi nhận là chi phí nghiên cứu.
2. $60,000 Chi Phí Phát Triển Viên Thuốc Đau Đầu:
- Sản Xuất Thương Mại Bắt Đầu: Viên thuốc đau đầu đã bắt đầu sản xuất và bán từ ngày 1
tháng 4 năm 20X6, cho thấy rằng tài sản này đã sẵn sàng để sử dụng.
- Khả Năng Kỹ Thuật: Có thể giả định rằng khả năng kỹ thuật đã được thiết lập vì sản xuất
thương mại đã bắt đầu.
- Ý Định và Khả Năng Sử Dụng: Công ty có ý định bán viên thuốc đau đầu và đã bắt đầu sản
xuất.
- Lợi Ích Kinh Tế Tương Lai: Có dự đoán về thu nhập ổn định và có lợi từ viên thuốc trong
vòng 5 năm, đáp ứng tiêu chí về lợi ích kinh tế tương lai.
- Tài Nguyên Sẵn Có: Câu hỏi đã nêu rằng có đủ tài nguyên để đạt được sản xuất thương mại.

* What is the balance of development costs that must be capitalized on 31 July 20x6 under IAS 38?

- Cost of development: 60,000

- Dep expense from 1/4/20x6 ===== 31/7/20x6 : 4 months
= 60,000 / 5years / 12months*4 = 4,000
 Balance of development cost at 31/07/20x6 : 60,000 – 4,000 = 56,000
A. $60,000 C. $48,000
B. $56,000 D. $72,000

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11. A company bought a property four years ago on 1 January 20X2 for $ 170,000. Since then property price
has risen substantially and the property has been revalued at $160,000 on 31 Dec 20X5. The property was
estimated as having a useful life of 20 years when it was purchased.
Determine the amount to be recognized as depreciation expense in
20X6 related to the property using straight-line method?

Revalued amount: 160,000

Remaing useful life: 20 – 4 = 16 years
Dep expense for 20x6: 160,000 / 16 = 10,000

A. $8,500 C. $24,000
B. $10,000 D. $10,625

Solution: IAS 36 – Impairment of Assets – CHAPTER 10: PPE & IMPAIRMENT LOSS
 Tóm tắt đề:

 1/1/20x2

- Cost: 170,000

- Residual value: nil

- Useful life: 20 years

 31/12/20x5 - 1/1/20x6

- Remaining useful life: 20 – 4 = 16 years

- RA = 160,000

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12. When an entity chooses the revaluation model as its accounting policy for measuring PPE, which of
the following statements is correct in accordance with IAS 16?
A. When an asset is revalued, individual assets within a class of PPE to which that asset belongs may be
selectively revalued. Ví dụ: ĐHQH có nhiều builing, 1 khi đánh giá lại thì phải đánh giá lại hết
B. Revaluations of PPE must be made annually  Đúng
C. Increase in an asset’s carrying value as a result of the first revaluation must be recognized in net income
(other comprehensive income) => Wrong  Phải tính vào OCI
D. The asset must continue to be depreciated following the revaluation. Đúng

Solution: IAS 16 – Revaluation model – CHAPTER 10: PPE & IMPAIRMENT LOSS
Lí thuyết:

1. No cherry-picking permitted – if an item of PPE is revalued, the entire class of PPE to which the
item belongs is revalued.
2. Revaluations must be made with sufficient regularity to ensure carrying amount does not differ
from an up-to-date fair value in practice often carried out every 3-5 years
3. On revaluation, fair value compared to carrying amount:
- If fair value > carrying amount, accounting is:
Dr Asset (carrying amount)
Cr Revaluation surplus (an equity reserve)
 Recognised in Other comprehensive income (also disclosed in statement of changes in equity)
 Increase recognised in profit and loss to the extent it reverses any previous revaluation decrease
previously recognised in profit and loss:
Dr Asset (carrying amount)
Cr Profit and loss (SoPL)
- If fair value < carrying amount, accounting is:
Dr Profit and loss (SoPL)
Cr Asset (carrying amount)
Unless a credit balance relating to the asset exists on the revaluation surplus, when decrease is:
Dr Loss on revaluation
Cr Asset (carrying amount)
- Recognised in Other comprehensive income (as an expense) (also disclosed in statement of changes
in equity)

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- Impact of revaluation on asset cost and accumulated depreciation accounts can be treated in two
ways:
+ Accumulated depreciation eliminated against Cost account, and resulting NBV in Cost account
then restated to revalued amount. Often used for buildings.
+ Cost and accumulated depreciation accounts restated proportionately so that carrying amount
(i.e. Cost – Accumulated depreciation) equals revalued amount. Often used when fair value
determined by using a current replacement cost.
5. Treatment of revaluation surplus following revaluation – two alternative methods:
- Transferred to Retained earnings when asset is derecognised (i.e. disposed of)
- Transferred to Retained earnings as the asset is used – amount transferred is difference between
depreciation based on revalued amount and depreciation based on original cost
Note – Transfer is through reserves only - not made through profit and loss

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PART II. EXERCISES (7 points)
13. Merlin has a machine that cost $150,000 with accumulated depreciation of $80,000 on Dec 31,
Year 1. On that date, Merlin determines that the market value for these buildings is $90,000. Merlin
wishes to use revaluation method to report buildings.
Remaining useful life of the machine on Dec 31, Year 1 is 5 years. On Dec 31, Year 3, due to the
change in technological environment, the machine is tested for impairment. In accordance with the
test, the following information has been identified:
- Selling price: $45,000
- Costs of disposal: $1,000
- Expected future cash flows: $55,000
- Present value of expected future cash flows: $46,000 = Value in use
Required:
a, Calculate the revaluation gain on 31 Dec, Year 1 and prepare appropriate journal entries. (1 mark)
b, Determine whether the equipment has been impaired in accordance with IAS 36 and prepare
appropriate journal entries (if any) on 31 Dec, Year 3. (1,5 mark)
Answer:

14. A division of an entity has the following balances in its financial statements:
$
Goodwill 840,000
Plant 1,140,000
Building 2,760,000
Intangibles 960,000
Current assets 516,000
Following a period of losses, the recoverable amount of the division is deemed to be $4.8 million.
During the period, a specific plant with carrying amount of $180,000 was destroyed fully and was
scrapped. A recent valuation of the building showed that the building has a market value of $2.9m.
The entity uses the cost model for valuing building and plant.
Required: Allocate impairment loss for each asset of division and calculate post-impairment
value of them. (2 mark)
Answer:
Assets Before impairment / Impairment After impairment /
CA RA
Goodwill 840,000
Other Plant 960,000
Destroyed plant 180,000
Building 2,760,000
Intangibles 960,000
Current assets 516,000
Total 6,216,000 4,800,000

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Assets Before impairment / Impairment After impairment /
CA RA
Goodwill 840,000 840,000 0
Other Plant 960,000 198,000 762,000
Destroyed plant 180,000 180,000 0
Building 2,760,000 0 2,760,000
Intangibles 960,000 198,000 762,000
Current assets 516,000 0 516,000
Total 6,216,000 1,416,000 4,800,000

15. On 1 January 20X3 Rabbit leases a machine for 5 years under the following agreement:
An initial payment of $15,000 will be payable immediately. 5 further annual payments of $30,000 will be due,
commencing 1 January 20X3. The interest rate implicit in the lease is 8%. The present value of the lease
payments, excluding the initial payment of $15,000, is $129,364
Requirement:
a, Prepare journal entries for Right of use asset recognition on 1 Jan 20X3? (1 mark)
b, Prepare journal entries for depreciation expense and interest charge for the year ended 31 Dec 20X3? (1
mark)
c, Calculate closing balance for lease liability on 31 Dec 20X3? (0,5 mark)

Answer:

---The End-----

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