SEGI BAC Adv. Financial Accounting & Reporting 2
Coursework
Questions.
1.
You are the financial
controller of DD which currently prepares financial statements in accordance
with local GAAP. Your finance director has been in discussions with your
corporate reporting advisors about whether to move to reporting under IFRS and
has forwarded to you the following note received from them:
“There are a number of
differences between the local GAAP and the IFRS recognition and measurement
rules. Using information on our files, we have conducted a preliminary review
of how your most recent financial statements might change if you had reported
under IFRS. Below we show our estimates of the effect on equity at the end of
the last year, together with brief notes on the different rules.
$’000 $’000
Equity as reported under
local GAAP 6,688
Adjustments:
Amortisation of goodwill
acquired in business combination 250
Valuation of property
measured under revaluation model 1,200
Depreciation thereof (350)
850
Development expenditure 180
Amortisation thereof (40)
140
Equity as reported under
IFRS 7,928
|
Recognition and Local GAAP IFRS measurement rules |
Goodwill You, like
most local companies, Goodwill
amortisation is
Amortise goodwill over 20 years prohibited
 |
Property –
revaluation Existing use value,
that is taking Fair value, that
is the open
model –basis of into account what you use it for market value taking into
valuation account
all possible uses.
 |
Development You, like most local
companies, Recognition as an
asset is
Expenditure choose to write off
development compulsory when
certain
Expenditure as incurred conditions
are met.
|
Your finance director is aware that those
making economic decisions use financial information for various purposes,
including for the assessment of financial performance. He is pleased that the
introduction of IFRS increases equity, remarking: íf equity increases, then
profit must increase both in the year of change and in future years. This will
improve our performance. Shouldn’t we move to IFRS as soon as possible?
Requirement:
In advance of a meeting with your finance
director to discuss his remark, prepare an essay about the likely effect on
performance if DD adopts IFRS.
