Scribd Logo
Upload

Welcome to Scribd!

  • 18 views

    Tutorial 2 AFAR MMU

    Uploaded by

    yuyin.gohyy
    The document discusses IFRS accounting requirements for a company that signed a 3-year lease with annual payments and received an incentive. It must record a right-of-use asset and lease liability on its statement of financial position and record depreciation and interest expense over the lease term. It also discusses IAS 20 accounting for government grants received by another company for various projects and assistance, requiring certain grants to be recognized as deferred income and amortized over periods that match related expenses.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Tutorial 2 AFAR MMU

    Uploaded by

    yuyin.gohyy
    18 views2 pages
    The document discusses IFRS accounting requirements for a company that signed a 3-year lease with annual payments and received an incentive. It must record a right-of-use asset and lease liability on its statement of financial position and record depreciation and interest expense over the lease term. It also discusses IAS 20 accounting for government grants received by another company for various projects and assistance, requiring certain grants to be recognized as deferred income and amortized over periods that match related expenses.

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses IFRS accounting requirements for a company that signed a 3-year lease with annual payments and received an incentive. It must record a right-of-use asset and lease liability on its statement of financial position and record depreciation and interest expense over the lease term. It also discusses IAS 20 accounting for government grants received by another company for various projects and assistance, requiring certain grants to be recognized as deferred income and amortized over periods that match related expenses.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    18 views2 pages

    Tutorial 2 AFAR MMU

    Uploaded by

    yuyin.gohyy
    The document discusses IFRS accounting requirements for a company that signed a 3-year lease with annual payments and received an incentive. It must record a right-of-use asset and lease liability on its statement of financial position and record depreciation and interest expense over the lease term. It also discusses IAS 20 accounting for government grants received by another company for various projects and assistance, requiring certain grants to be recognized as deferred income and amortized over periods that match related expenses.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    Tutorial 2

    Question – Murgese (IFRS 16)

    On 1 April 2019 Murgese Ltd signed a lease for a new head office building. The
    lease is for three years and lease payments are £15,000 paid annually in arrears.
    The building is estimated to have a useful life of 30 years.

    As an incentive to enter into the lease, Murgese Ltd received £2,500 from the
    lessor on 1 April 2019. The only accounting entries made were to credit cash with
    the net £12,500 payment (£15,000 less the incentive), credit revenue with the
    £2,500 incentive and debit operating expenses with £15,000. The interest rate
    implicit in the lease is 7% pa.

    Requirement

    Explain the required IFRS financial reporting treatment of Issue above in


    Murgese Ltd’s financial statements for the year ended 31 March 2020, preparing
    all relevant calculations.

    Question - Ticktoe Ltd (IAS 20)


    Ticktoe Ltd is an unlisted UK company that prepares its financial statements in
    accordance with IFRS. During its financial year ended 30 June 2010, the
    company obtained, for the first time, various forms of government assistance, as
    follows:
    1. Advice was given by a government department on the export markets
    available for Ticktoe Ltd's products. The advice was free, but Ticktoe Ltd's
    marketing director estimates that the cost of obtaining similar advice from
    a firm of consultants would be £30,000. The advice is likely to be useful to
    Ticktoe Ltd for a period of at least three years.

    2. A grant of £200,000 was received in respect of jobs created as part of an


    urban regeneration project in which Ticktoe Ltd was involved. The project
    started on 1 July 2009 and £150,000 was received during the year ended
    30 June 2010. The remaining £50,000 will be received on 30 June 2011
    provided that the jobs are still in existence at that date. The project has been
    successful, and Ticktoe Ltd's directors think it is likely that the jobs will
    continue to exist for the foreseeable future.

    3. A grant application for £2 million in respect of a new factory building was


    successful. The grant was received on 1 October 2009, the day the building

    1
    was completed. The cost of the building was £10 million, and its estimated
    useful life is 50 years. Ticktoe Ltd's policy is to depreciate factory
    buildings on a straight-line basis. The land on which the factory was built
    was granted under a 50-year lease by the local government authority. The
    formal commencement of the lease was 1 October 2009, and the rent is a
    nominal sum of £1 per year. The fair value of the leasehold interest in this
    land was £400,000 on 1 October 2009.

    Ticktoe Ltd's directors are uncertain about the financial reporting treatment of
    government assistance under IFRS.

    Requirement

    Write a report to the directors of Ticktoe Ltd that explains the IFRS financial
    reporting treatment of the three issues above in Ticktoe Ltd's financial statements
    for the year ended 30 June 2010. Where a choice of accounting treatment or
    presentation exists, explain and quantify the impact of the possible treatments on
    the financial statements. (15 marks)

    You might also like