Time allowed: 2 hours Total marks: 60

Section A (20 Marks)

Answer all 13 questions. Choose the best answer and write the letter only.

1. Under IFRS 15, which criterion must be met before revenue from a contract with a customer is recognized?
   1. The entity has transferred control of goods or services to the customer.
   2. The entity has received cash consideration in full.
   3. The performance obligation is legally enforceable.
   4. All significant risks and rewards have been transferred (per IAS 18).
2. A lessee enters a five‑year lease of machinery. At inception the present value of lease payments is 120 000 and the fair value of the underlying asset is 150 000. Under IFRS 16 the lessee would recognise at initial measurement:
   1. Right‑of‑use asset 150 000; lease liability 120 000
   2. Right‑of‑use asset 120 000; lease liability 120 000
   3. Right‑of‑use asset 120 000; lease liability 150 000
   4. Right‑of‑use asset 150 000; lease liability 150 000
3. Under IFRS 9 an entity accounts for expected credit losses on trade receivables using:
   1. The 12‑month ECL model for all receivables
   2. The lifetime ECL model once there has been a significant increase in credit risk
   3. Always the simplified approach (lifetime ECL) for trade receivables
   4. Either the general approach or the unstructured approach at the entity’s election
4. Which of the following is not a performance condition under IFRS 2 Share‑based Payment?
   1. Achievement of a market‑based vesting condition
   2. Completion of a service period
   3. A vesting period edged by a specified date
   4. Meeting a financial target (e.g. EPS growth)
5. A non‑current asset is classified as “held for sale” under IFRS 5 when:
   1. It is immediately available for distribution to owners
   2. Its carrying amount will be recovered principally through sale rather than continuing use
   3. Management has decided to abandon the asset
   4. It is fully impaired and no future economic benefits are expected
6. Under IFRS 13, fair value measurement of a quoted equity instrument uses:
   1. Level 1 inputs
   2. Level 2 inputs
   3. Level 3 inputs
   4. The entity’s own data model
7. Which statement about IFRS 16 sale and leaseback is correct?
   1. Seller‑lessee always derecognises the asset and recognises a finance lease liability
   2. Seller‑lessee recognises any gain immediately in profit or loss
   3. Seller‑lessee accounts for the transaction as a mortgage if control is retained
   4. Seller‑lessee applies IFRS 15 to the sale component
8. Under IAS 12, deferred tax liabilities are recognised for:
   1. All temporary differences except those arising on initial recognition of goodwill
   2. Only taxable temporary differences that will reverse in the next 12 months
   3. Taxable temporary differences except those arising on initial recognition of an asset in a transaction that is not a business combination and does not affect accounting or taxable profit
   4. All temporary differences
9. A manufacturer holds inventory that has been in stock for 24 months. Net realisable value has fallen below cost due to technological obsolescence. According to IAS 2, the manufacturer must:
   1. Carry at cost subject to regular impairment reviews
   2. Write the carrying amount up to net realisable value
   3. Write down to net realisable value
   4. Continue carrying at cost if replacement cost exceeds cost
10. Under IFRS 10, control exists when an investor has:
    1. More than 50% of voting rights only
    2. Exposure to variable returns and the ability to affect those returns through power over the investee
    3. Significant influence and joint control
    4. The ability to appoint a majority of the board regardless of returns
11. Which of the following transactions is accounted for under the equity method (IAS 28)?
    1. Acquisition of 30% of voting shares in an associate
    2. Purchase of 10% of non‑voting shares
    3. Joint control of a joint operation
    4. Control of a subsidiary
12. Under IFRS 17 Insurance Contracts, the contractual service margin (CSM) represents:
    1. The present value of future cash inflows less outflows
    2. A liability for incurred claims
    3. Unreleased profit to be recognised over the coverage period
    4. The expense of acquisition costs
13. Which of these is not a required element of a consolidated statement of financial position under IFRS 10?
    1. Non‑controlling interest
    2. Goodwill arising on acquisition
    3. Equity‑accounted associates
    4. Deferred tax on consolidation adjustments

Section B (25 Marks)

Global Holdings Ltd acquires 80% of Beta Co on 1 January 20X1 for consideration of 1 200 000 in cash. At acquisition, Beta’s equity (share capital and retained earnings) is 1 000 000. Fair value adjustments at acquisition are:

• Inventory up by 100 000 (Beta’s inventory on hand)
• Plant & equipment down by 200 000

On 31 December 20X1, Beta reports:

• Profit for the year before depreciation on the FV uplift: 300 000
• Depreciation on PPE (based on book values): 80 000
• Dividends paid to its shareholders: 100 000
• Closing inventory still carries 20% of the original FV uplift in unrealised profit

Required:

1. Calculate goodwill at acquisition.
2. Prepare the consolidated retained earnings for the year ended 31 December 20X1.
3. Calculate non‑controlling interest at 31 December 20X1.
4. Draft the consolidated statement of financial position (extract) showing:
   • PPE (net)
   • Goodwill
   • Inventory
   • NCI
   • Equity attributable to owners of Global Holdings

Section C (15 Marks)

Answer either Question 15 or Question 16.

Question 15 – Revenue Recognition & Disclosure

1. Explain the five steps of the IFRS 15 revenue recognition model. (6 marks)
2. A company licences software and provides installation/support for five years for a single upfront fee of 500 000. Discuss how to identify performance obligations and allocate the transaction price. (9 marks)

Question 16 – Lease Accounting under IFRS 16

1. Outline the recognition and measurement requirements for a lessee at lease commencement. (6 marks)
2. Explain how subsequent measurement of the right‑of‑use asset and lease liability is performed, including remeasurements. (9 marks)

Mock Examination 3

Time allowed: 2 hours Total marks: 60

Section A (20 Marks)

Answer all 13 questions. Choose the best option.

1. Under IFRS 3, a business combination requires:
   1. Only net assets acquired to be recognised at fair value
   2. Recognition of identifiable assets acquired, liabilities assumed, and any non‑controlling interest
   3. Deferred tax adjustments only if the combination is for cash
   4. Goodwill measured as excess of FV of net assets over consideration
2. IFRS 16 requires a lessee to test its right‑of‑use asset for impairment under:
   1. IAS 36 only if impairment indicators exist
   2. Always at each reporting date
   3. Only when lease payments are materially changed
   4. IAS 36 at least annually
3. Under IFRS 9, an instrument with contractual cash flows that are solely payments of principal and interest is classified as:
   1. FVOCI debt instrument if held to collect contractual cash flows and sale cash flows
   2. Amortised cost if held to collect contractual cash flows
   3. FVTPL unless the entity elects otherwise
   4. Held at cost
4. Which of the following is not a characteristic of a finance lease for the lessor under IFRS 16?
   1. Lease transfers ownership by end of term
   2. Lessee has the option to purchase at a bargain price
   3. Lease term covers major part of economic life
   4. The lease payments are variable
5. Under IAS 36, which recoverable amount basis should an entity use to test goodwill?
   1. Fair value less costs of disposal
   2. Value in use
   3. Higher of (a) and (b)
   4. Carrying amount
6. A company issues 1 000 share options to employees on 1 Jan 20X2. The grant‑date fair value is 10 per option, vesting over 4 years. Under IFRS 2:
   1. Expense total 10 000 immediately
   2. Recognise 2 500 per year over vesting period
   3. Recognise 10 000 in equity with no P/L impact
   4. Expense 10 000 over expected life of options
7. Under IAS 12, deferred tax assets are recognised only if:
   1. It is probable that taxable profit will be available against which the deductible temporary difference can be utilised
   2. The entity has tax losses
   3. The entity has a history of profitable operations
   4. No restrictions apply
8. Which of the following is not a performance obligation under IFRS 15?
   1. Shipping service that is distinct from the goods sold
   2. Warranty that provides only assurance of product compliance
   3. Product customisation service that is distinct
   4. Installation service billed separately
9. Under IFRS 17, the fulfilment cash flows include:
   1. Only expected claims cash flows
   2. Cash flows to and from policyholders, plus acquisition cash flows
   3. Time value of money adjustments only
   4. Risk adjustment for non‑financial risk
10. A parent holds 60% of an investee and has significant influence over another 20%. Under IFRS 10 and 12, the investee is:
    1. A subsidiary
    2. An associate
    3. A joint venture
    4. A financial asset
11. Under IAS 2, which costing method is not permitted?
    1. FIFO
    2. Weighted‑average cost
    3. Specific identification for homogeneous inventory
    4. Retail method as a cost approximation
12. An entity remeasures its lease liability because of a change in the lease term. The corresponding adjustment to the right‑of‑use asset:
    1. Increases or decreases by the same amount
    2. Is recognised in profit or loss
    3. Is recognised in other comprehensive income
    4. Is capitalised if the right‑of‑use asset is impaired
13. Under IAS 8, a change in an accounting policy is applied:
    1. Prospectively unless impracticable
    2. Retrospectively unless impracticable
    3. Prospectively only to future transactions
    4. In the year of change only

Section B (25 Marks)

Veritas Plc acquires 75% of Delta Ltd on 1 April 20X3 for 2 500 000 in shares. At acquisition Delta’s equity is 2 000 000 and fair value adjustments are:

• Land up by 500 000 (useful life indefinite)
• Customer list up by 300 000 (amortised over 5 years)

Delta’s post‑acquisition results to 31 March 20X4:

• Profit before amortisation: 600 000
• Amortisation on customer list: 60 000
• Dividends paid: 150 000

Closing retained earnings at 31 March 20X4 (post‑dividend) are 1 200 000; closing land is unchanged.

Required:

1. Compute goodwill at acquisition.
2. Calculate consolidated retained earnings at 31 March 20X4.
3. Determine non‑controlling interest at 31 March 20X4.
4. Extract of consolidated statement of financial position at 31 March 20X4 showing:
   • Land
   • Customer list (net)
   • Goodwill
   • NCI
   • Equity attributable to owners

Section C (15 Marks)

Answer either Question 15 or Question 16.

Question 15 – Impairment & Reversals (IAS 36)

1. Describe the indicators of impairment and the steps in an impairment test. (6 marks)
2. Explain how impairment losses and subsequent reversals are recognised for PPE and goodwill. (9 marks)

Question 16 – Share‑based Payments (IFRS 2)

1. Discuss the accounting treatment for cash‑settled versus equity‑settled share‑based payment transactions. (6 marks)
2. A company grants market‑conditioned share options. Explain how the grant‑date fair value is determined and subsequently accounted for. (9 marks)

Mock Examination 4

Time allowed: 2 hours Total marks: 60

Section A (20 Marks)

Answer all 13 questions. Tick the correct option.

1. Under IFRS 17, the risk adjustment for non‑financial risk is:
   1. A component of the contractual service margin
   2. Recognised in profit or loss immediately
   3. Included in fulfilment cash flows
   4. Calculated using the discount rate
2. Which of the following under IAS 37 is not a provision?
   1. Warranty costs for products sold
   2. Restructuring costs after detailed formal plan and reliable estimate
   3. Costs to clean up environmental damage under law
   4. Future operating losses on a contract
3. Under IAS 19 Employee Benefits, past‑service cost for a defined benefit plan is recognised:
   1. Immediately in OCI
   2. Over the remaining service period of employees
   3. Immediately in profit or loss
   4. Over the vesting period
4. Which measurement basis applies to investment property under IAS 40, if an entity elects the fair‑value model?
   1. Cost less accumulated depreciation
   2. Fair value with changes in OCI
   3. Fair value with changes in profit or loss
   4. Cost model only
5. A group sells goods to a subsidiary and 30% of those goods remain in closing inventory. Under consolidation you:
   1. Eliminate the entire revenue and cost of sales only
   2. Eliminate unrealised profit in closing inventory proportionate to parent’s ownership
   3. Eliminate unrealised profit for 100% of intra‑group sales
   4. No elimination for inventory
6. Under IFRS 9, a debt instrument measured at FVOCI:
   1. All fair value changes go to P/L
   2. Coupon interest is recognised in OCI
   3. Fair value changes go to OCI, except impairment and foreign exchange, which go to P/L
   4. No recycling of gains on disposal
7. IAS 12 requires recognition of deferred tax assets for:
   1. All deductible temporary differences
   2. Deductible temporary differences only if probable taxable profits will be available
   3. Only for revenue losses on inventory
   4. Only for tax losses carried forward
8. Under IFRS 10, when is an investor required to consolidate an investee?
   1. When it holds over 20% of the voting rights
   2. When it controls the investee, even if ownership is below 50%
   3. When joint control exists
   4. Only when it holds at least 51%
9. A company changes depreciation method from straight‑line to reducing‑balance. This is a change in:
   1. Accounting estimate (prospectively)
   2. Accounting policy (retrospectively)
   3. Classification (disclosure only)
   4. Accounting assumption
10. Under IFRS 15, variable consideration is included in the transaction price if:
    1. It is probable that a significant reversal in revenue will not occur when the uncertainty is resolved
    2. It is fixed at contract inception
    3. It relates to extended warranty only
    4. It cannot be reasonably estimated
11. Which of the following is not required in the disclosure of consolidated financial statements (IFRS 12)?
    1. Significant judgements made in determining control
    2. A list of all subsidiaries, associates and joint arrangements
    3. Summarised financial information for each subsidiary
    4. The name of the parent’s auditor
12. Under IFRS 11, a joint arrangement where parties have rights to the net assets is classified as:
    1. Joint operation
    2. Joint venture
    3. Jointly controlled asset
    4. Jointly controlled liability
13. Which of these is not an element of the statement of profit or loss under IAS 1?
    1. Profit before tax
    2. Other comprehensive income
    3. Finance income
    4. Income tax expense

Section B (25 Marks)

Orion Ltd enters into a 10‑year lease on 1 July 20X5 for property with an annual lease payment of 100 000 payable in advance. The incremental borrowing rate is 6%.

Required:

1. Calculate the lease liability and right‑of‑use asset at initial recognition.
2. Prepare the entries for the first two years showing:
   • Depreciation on the right‑of‑use asset (straight‑line to zero)
   • Interest expense on the lease liability
   • Lease payments

Section C (15 Marks)

Answer either Question 15 or Question 16.

Question 15 – Deferred Tax (IAS 12)

1. Explain how deferred tax is recognized for temporary differences, including exceptions. (7 marks)
2. A company has the following at year end:
   • Taxable temporary difference on PPE: 200 000
   • Deductible temporary difference on provisions: 80 000
   • Unused tax losses: 50 000 (expiry in 3 years)
   • Tax rate: 25%
   Draft the journal entries for deferred tax and explain any recognition criteria. (8 marks)

Question 16 – Provisions & Contingencies (IAS 37)

1. Describe the criteria for recognizing a provision versus a contingent liability. (6 marks)
2. A manufacturer faces a restructuring: contracts terminate in 6 months, employees will be compensated, no future benefit. Outline how to account for the restructuring provision. (9 marks)

Here’s a complete solution guide for Mocks 2–4, organized by exam and section. I’ve shown the correct answers, step‑by‑step workings, detailed explanations, and all key assumptions noted—plus, where IFRS allows, I’ve indicated two possible treatments.