Time allowed: 2 hours Total marks: 60

Section A (20 Marks)

Answer all 13 questions. Tick the correct option.

1. Under IAS 1, which of the following is not a primary financial statement?
   1. Statement of profit or loss
   2. Statement of cash flows
   3. Statement of changes in equity
   4. Statement of capital contributions
2. IAS 2 requires inventory to be measured at the lower of cost and net realisable value. Which costing methods are permitted?
   1. FIFO and LIFO only
   2. FIFO, weighted‑average, and specific identification
   3. Weighted‑average and retail method only
   4. Any systematic cost formula
3. Under IFRS 9 the “business model” test for financial assets distinguishes:
   1. Held‑to‑collect only vs trading only
   2. Collect‑and‑sell vs trading vs collect only
   3. FVOCI vs FVTPL only
   4. Amortised cost vs fair value only
4. IFRS 7 requires which of the following disclosures?
   1. Fair value hierarchy for financial instruments
   2. Reconciliation of goodwill movements
   3. Reconciliation of depreciation by class
   4. Details of biological assets
5. IAS 39 (superseded) classified financial liabilities at FVTPL if:
   1. The liability was designated at FVTPL on initial recognition
   2. It was a derivative embedded in a host contract
   3. Either (a) or (b)
   4. Only if it was held for trading
6. IAS 16 allows revaluation of PPE provided:
   1. All items in the class are revalued at the same time
   2. Revaluations are kept to a minimum
   3. Only if the fair value can be reliably measured
   4. Both (a) and (c)
7. IAS 36 requires an impairment test when:
   1. There is an external indicator of decline in asset value
   2. The carrying amount exceeds the recoverable amount
   3. Both (a) and (b)
   4. Annually for all assets with indefinite lives
8. Borrowing costs may be capitalised under IAS 23 when:
   1. They relate directly to the acquisition or construction of a qualifying asset
   2. The entity elects to always capitalise finance costs
   3. They exceed the entity’s average borrowing rate
   4. They are incurred on any long‑term construction contract
9. IAS 38 intangible assets include:
   1. Goodwill arising on a business combination
   2. Research costs incurred internally
   3. Patents acquired in a separate transaction
   4. Brand names generated internally
10. IAS 40 investment property may be measured at:
    1. Cost model only
    2. Fair value model only
    3. Either cost or fair value model
    4. Depreciated replacement cost
11. IAS 12 deferred tax assets are recognised for deductible temporary differences only if:
    1. Probable taxable profits will be available against which they can be utilised
    2. They relate to unused tax losses
    3. They exceed a materiality threshold
    4. They reverse within 12 months
12. IAS 17 (superseded) classified leases as finance if:
    1. Ownership transfers by the end of the lease term
    2. Lease term covers substantially all of the asset’s economic life
    3. Present value of lease payments amounts to substantially all of fair value
    4. Any of the above
13. IAS 37 provisions are recognised when:
    1. a present obligation exists, outflow is probable, and amount can be reliably estimated
    2. an entity decides to make a future payment
    3. expense is incurred
    4. none of the above

Section B (25 Marks)

Inventory & Impairment Case

Moonlight Ltd manufactures specialized instruments. On 31 March 2024:

• Raw materials on hand: cost 300 000; NRV 280 000
• Work‑in‑progress: cost 450 000; NRV 470 000
• PPE carrying amount 2 000 000; indicators of impairment exist; recoverable amount 1 800 000

Required:

1. Value inventory at 31 March 2024, showing write‑downs (IAS 2).
2. Compute and recognise any impairment loss on PPE (IAS 36).
3. Explain the journal entries for (1) and (2).

Section C (15 Marks)

Question 15 – Employee Benefits (IAS 19)

1. Differentiate between short‑term and post‑employment benefits. (6 marks)
2. Outline the accounting for a defined benefit plan, including actuarial gains and losses. (9 marks)

Mock Examination 6

Time allowed: 2 hours Total marks: 60

Section A (20 Marks)

Answer all 13 questions. Tick the correct option.

1. IAS 36 goodwill impairment test compares carrying amount of CGU to:
   1. Fair value less costs of disposal only
   2. Value in use only
   3. Higher of the two
   4. Carrying amount without goodwill
2. IAS 33 earnings per share requires:
   1. Basic EPS and diluted EPS
   2. Only basic EPS
   3. Only diluted EPS
   4. No EPS disclosure if loss incurred
3. IAS 11 construction contracts recognise revenue using:
   1. Completed contract method
   2. Percentage of completion method
   3. Cost recovery method
   4. Cost plus fixed margin
4. IFRS 3 acquisition method requires:
   1. Identifiable net assets at cost
   2. All identifiable net assets at fair value
   3. Goodwill measured at provisional amount only
   4. Non‑controlling interest at book value
5. Under IFRS 10, a change from equity to FV measurement for an associate requires:
   1. Deconsolidation
   2. Reclassification adjustments through P/L
   3. Voluntary reclassification through OCI
   4. No change unless control gained
6. IAS 28 equity method requires recognition of:
   1. Investor’s share of investee profit or loss
   2. Investor’s share of investee OCI
   3. Both (a) and (b)
   4. Only dividends received
7. In a business combination, contingent consideration is measured at:
   1. Fair value at acquisition date
   2. Amount paid when settled
   3. Present value of expected payment
   4. Either (a) or (c)
8. Which of the following is not eliminated on consolidation?
   1. Intercompany receivables/payables
   2. Unrealised intercompany profits in inventory
   3. Parent’s investment in subsidiary vs subsidiary’s equity
   4. Subsidiary’s PPE at book value
9. IAS 10 events after the reporting period require adjusting events to be recognised if they provide evidence of conditions:
   1. Existing at year end
   2. Arising after year end
   3. Either (a) or (b)
   4. None
10. IAS 24 related party disclosures include:
    1. Disclosure of key management personnel compensation
    2. Disclosure of related party transactions
    3. Both (a) and (b)
    4. Only transactions in the notes
11. Reconstruction accounting (mergers/amalgamations) often follows:
    1. Purchase method
    2. Pooling of interests
    3. Equity method
    4. Proportionate consolidation
12. IAS 12 deferred tax on share‑based payments is recognised in:
    1. P/L only
    2. OCI only
    3. Equity when related to equity-settled transactions
    4. Neither
13. Under IFRS 3, acquisition-related costs are:
    1. Capitalised as part of goodwill
    2. Expensed as incurred
    3. Treated as a separate asset
    4. Deducted from NCI

Section B (25 Marks)

Consolidation Case

Alpha Plc acquires 70% of Beta Ltd on 1 Jan 20X4 for \$5 000 000. Beta’s equity at acquisition is \$6 000 000. FV adjustments:

• Patents +1 000 000 (amortised over 10 years)
• Land +500 000 (indefinite life)

Beta’s post-acquisition:

• Profit for the year 800 000
• Dividends paid 200 000
• Amortisation on patents 100 000

Required:

1. Compute goodwill at acquisition (NCI at proportionate share).
2. Prepare consolidated retained earnings at 31 Dec 20X4.
3. Calculate NCI at 31 Dec 20X4.
4. Draft SFP extract: Patents (net), Land, Goodwill, NCI, Equity attributable to owners.

Section C (15 Marks)

Question 15 – Business Combinations (IFRS 3)

1. Explain the key steps in applying the acquisition method. (6 marks)
2. Discuss measurement of NCI and contingent consideration. (9 marks)

Mock Examination 7

Time allowed: 2 hours Total marks: 60

Section A (20 Marks)

Answer all 13 questions. Tick the correct option.

1. IAS 41 biological assets are measured at:
   1. Cost model only
   2. Fair value less costs to sell
   3. Lower of cost and NRV
   4. Depreciated replacement cost
2. IAS 20 government grants related to assets should be presented as:
   1. Deferred income
   2. Deductions from the carrying amount of the asset
   3. Immediate income
   4. Either (a) or (b)
3. Not-for-profit entities under IFRS for SMEs should:
   1. Apply full IFRS
   2. Apply IFRS for SMEs
   3. Disclose no performance indicators
   4. Exclude surplus from equity
4. Business valuation using discounted cash flow requires estimating:
   1. Future free cash flows and discount rate
   2. Book value only
   3. Market comparables only
   4. Replacement cost of assets
5. In merger accounting (pooling-of-interests), goodwill is:
   1. Recognised as asset
   2. Eliminated against equity
   3. Amortised over 20 years
   4. Not permitted under IFRS
6. Preparation of FS using accounting software generally involves:
   1. Manual consolidation only
   2. Importing trial balance, mapping GL, and generating reports
   3. Writing code in the software
   4. No adjustments possible
7. Which of the following is a key step in agricultural accounting (IAS 41)?
   1. Capitalising interest cost
   2. Measuring produce at NRV at point of harvest
   3. Using historical cost for all biological assets
   4. Amortising land improvements
8. IAS 36 requires reversal of impairment for assets (other than goodwill) when:
   1. Recoverable amount increases
   2. Carrying amount exceeds recoverable amount
   3. Either (a) or (b)
   4. Never allowed
9. Environmental liabilities under IAS 37 are:
   1. Recognised when present obligation exists
   2. Not recognised until legal judgment
   3. Disclosed as contingent liabilities only
   4. Capitalised to asset cost
10. Business valuation by multiples uses:
    1. P/E, EV/EBITDA and similar ratios
    2. DCF projections
    3. Cost approach
    4. Sum-of-the-parts
11. Special‑purpose entities are consolidated when:
    1. Parent owns majority voting rights
    2. Parent has control through power & returns
    3. Parent provides most of the funding
    4. Not under IFRS guidance
12. Accounting software audit trail functions:
    1. Record every change made to records
    2. Prevent unauthorised postings only
    3. Generate management reports only
    4. Are optional add‑ons
13. Under IFRS 7 liquidity risk disclosures include:
    1. Maturity analysis of financial liabilities
    2. Concentration of funding sources
    3. Both (a) and (b)
    4. Neither

Section B (25 Marks)

Agricultural & NFP Case

GreenFields Co-op grows cash crops and receives a government grant of 200 000 to purchase new equipment. At harvest:

• Biological assets fair value 500 000; cost 300 000
• Produce at point of harvest 150 000 NRV

Required:

1. Account for biological assets and harvest produce (IAS 41).
2. Recognise and present the government grant (IAS 20).
3. Outline how you would use accounting software to record these transactions and generate the financial statements.

Section C (15 Marks)

Question 15 – Business Valuation Methods

1. Compare DCF and multiples approaches. (8 marks)
2. Discuss advantages and limitations of each method. (7 marks)

Global Mock Examination 5 -7 – Solution Guide

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