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Question 22. Y Co used some but not all IFRSs in its financial statements to 31...

Question 22. Y Co used some but not all IFRSs in its financial statements to 31 December 20X4. In the year to 31 December 20X5, Y Co is to adopt all IFRSs.

Which of the following statements is true under IFRS 1, First time Adoption of International Financial Reporting Standards?

In the year to 31 December 20X4, Y is considered to be a first time adopter

In the year to 31 December 20X5, Y is not considered to be a first time adopter

In the year to 31 December 20X5, Y is considered to be a first time adopter

Y is not a first time adopter in 20X4 or 20X5.

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Question 23. IAS 7 explains the movement of cash and cash equivalents from the start to the end of a period. How does IAS 7 define cash equivalents?

Investments that can be converted to cash within 3 months and carry an insignificant risk of changes in value.

Investments that can be converted to cash within 3 months and have a fixed value.

Short-term highly liquid investments that are readily convertible to cash and have a fixed value.

Short-term highly liquid investments that are readily convertible to cash and carry an insignificant risk of changes in value.

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Question 24. IAS 1 Presentation of Financial Statements envisages that an entity's financial statements should be presented at least every 12 months. Which of the following statements is correct according to IAS 1?

A reporting period can exceed 12 months but the reason must be disclosed.

A reporting period can be less than 12 months; no disclosure of reason is required.

A reporting period can be more or less than 12 months but the reason must be disclosed.

A reporting period can exceed 12 months but not 18 months; no disclosure of reason is required.

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Question 25. Under IFRS 9 Financial Instruments which of the following should be held at fair value?

1. An interest rate swap
2. 7% 2020 bonds acquired with the intention to hold to maturity
3. An investment in the ordinary shares of Milk Plc
4. An investment in a convertible loan note

1 only

2 only

All of the above

1, 3 and 4

Solutions

Expert Solution

22. Answer : In the year to 31 December 20x5, Y is considered to be a first time adopter

Explanation: Under IFRS 1, the entity is considered to be a first time adopter of IFRS in the year in which the entity presents its first financial statements in accordance with all IFRSs.

23. Answer : Short-term highly liquid investments that are readily convertible to cash and carry an insignificant risk of changes in value.

Explanation: As per IAS 7, Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value.

24. Answer : A reporting period can be more or less than 12 months but the reason must be disclosed.

Explanation: According to IAS 1, if the reporting period changes and financial statements are prepared for a different period then the reason must be disclosed for the change.

25. Answer : 1,3 and 4

Explanation : Under IFRS 9, 7% 2020 bonds acquired with the intention to hold to maturity should be measured at Amortised Cost while the derivatives (interest rate swap), equity instruments (investment in ordinary shares of Milk Plc) and investment in a convertible loan note should be measured at fair value.

ekkarill92 answered 1 year ago
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