1. 1 International Financial Reporting Standards IFRS for SMEs IFRS Foundation-World Bank 18–20 October 2011 Sarajevo, Bosnia and Herzegovina Copyright © 2010 IFRS Foundation. All rights reserved.

2. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 2 The IFRS for SMEs Topic 2.5 Quiz and Discussion Assets Sections 13–18 & 27 Michael Wells

3. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 3 Section 13 – Discussion questions Question 9*: To avoid obsolescence a perishable produce retailer arranges produce in such a way that customer are most likely to purchase the oldest inventory first. The cost formula which is most appropriate for the entity is: a.first-in-first out FIFO? b.last-in-first-out LIFO? c.weighted average? d.specific identification? * see question 9 in Module 13 of the IFRS Foundation training material

4. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 4 Section 13 – Discussion questions Question 9: To avoid obsolescence a perishable produce retailer arranges produce in such a way that customer are most likely to purchase the oldest inventory first. The cost formula which is most appropriate for the entity is: a.first-in-first out FIFO? b.last-in-first-out LIFO? c.weighted average? d.specific identification?

5. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 5 Section 13 – Discussion questions Question 10*: A property developer classify properties held for sale in the ordinary course of business as: a.inventories? b.property, plant and equipment? c.financial asset? d.investment property? * see question 10 in Module 13 of the IFRS Foundation training material

6. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 6 Section 13 – Discussion questions Question 10: A property developer classify properties held for sale in the ordinary course of business as: a.inventories? b.property, plant and equipment? c.financial asset? d.investment property?

7. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 7 Section 14 – Discussion questions Question 9*: Which of the following provide evidence to support the existence of significant influence by an investor? a.representation on board of directors? b.material transactions between the investor and the investee? c.interchange of managerial personnel? d.provision of essential technical info? e.all of the above? * see question 9 in Module 14 of the IFRS Foundation training material

8. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 8 Section 14 – Discussion questions Question 9: Which of the following provide evidence to support the existence of significant influence by an investor? a.representation on board of directors? b.material transactions between the investor and the investee? c.interchange of managerial personnel? d.provision of essential technical info? e.all of the above?

9. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 9 Section 14 – Discussion questions Question 10*: Which statement is false? a.Significant influence (SI) can be lost without a change in ownership levels. b.In determining whether SI exists, consider the effects of potential voting rights that are currently exercisable. c.In determining whether an entity has SI over another entity, only present ownership interests are considered. The possible exercise or conversion of potential voting rights are not considered. * see question 10 in Module 14 of the IFRS Foundation training material

10. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 10 Section 14 – Discussion questions Question 10: Which statement is false? a.Significant influence (SI) can be lost without a change in ownership levels. b.In determining whether SI exists, consider the effects of potential voting rights that are currently exercisable. c.In determining whether an entity has SI over another entity, only present ownership interests are considered. The possible exercise or conversion of potential voting rights are not considered.

11. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 11 Section 15 – Discussion questions Question 7*: On 31/12/X1 A acquired 30% of Z for 100 + 1 transactions costs. Z is a JV & A is a venturer. A uses cost model for JVs. No published price quotation for Z. On 5/1/X2 Z declared & paid a dividend of 20. At 31/12/X1, X2 & X3, for impairment testing purposes management assessed the fair values of investment in Z as 102, 110 & 90 respectively. Costs to sell = 4 throughout. A must measure its investment in Z on 31/12/X1, X2 & X3 respectively at: * see question 7 in Module 15 of the IFRS Foundation training material

12. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 12 Section 15 – Discussion questions Question 7 continued : a.100, 100, 100? b.95, 95, 86? c.98, 106, 86? d.98, 101, 86? e.102, 110, 90? f.101, 101, 101?.

13. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 13 Section 15 – Discussion questions Question 7 continued : a.100, 100, 100? b.95, 95, 86? c.98, 106, 86? d.98, 101, 86? e.102, 110, 90? f.101, 101, 101?.

14. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 14 Section 15 – Discussion questions Question 9*: An investor in a joint venture that does not have joint control accounts for that investment in accordance with: a.Section 11 Basic Financial Instruments? b.Section 14 Investments in Associates? c.Section 11 Basic Financial Instruments or, if it has significant influence in the joint venture, in accordance with Section 14 Investments in Associates. * see question 9 in Module 15 of the IFRS Foundation training material

15. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 15 Section 15 – Discussion questions Question 9: An investor in a joint venture that does not have joint control accounts for that investment in accordance with: a.Section 11 Basic Financial Instruments? b.Section 14 Investments in Associates? c.Section 11 Basic Financial Instruments or, if it has significant influence in the joint venture, in accordance with Section 14 Investments in Associates.

16. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 16 Section 16 – Discussion questions Question 3*: A operates a bed & breakfast from a building it owns. It also provides its guests with other services including housekeeping, satellite television and broadband internet access. The daily room rental is inclusive of these services. Furthermore, upon request, A conducts tours of the surrounding area for its guests. Tour services are charged for separately. * see question 3 in Module 16 of the IFRS Foundation training material

17. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 17 Section 16 – Discussion questions Question 3 continued : A should account for the building as: a.inventory? b.investment property? c.property, plant & equipment? d.intangible asset?

18. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 18 Section 16 – Discussion questions Question 3 continued : A should account for the building as: a.inventory? b.investment property? c.property, plant & equipment? d.intangible asset?

19. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 19 Section 16 – Discussion questions Question 6*: A building is owned by a subsidiary (lessor) to earn rentals under an operating lease from its parent (lessee). The parent manufactures its products in the rented building. The fair value of the building can be measured reliably without undue cost or effort on an ongoing basis. The building is: * see question 6 in Module 16 of the IFRS Foundation training material

20. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 20 Section 16 – Discussion questions Question 6 continued : a.accounted for as property, plant & equipment by the subsidiary & investment property by the group? b.accounted for as investment property by the subsidiary & as property, plant and equipment by the group? c.accounted for as investment property by both the subsidiary and the group? d.accounted for as property, plant and equipment by both the subsidiary and the group?

21. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 21 Section 16 – Discussion questions Question 6 continued : a.accounted for as property, plant & equipment by the subsidiary & investment property by the group? b.accounted for as investment property by the subsidiary & as property, plant and equipment by the group? c.accounted for as investment property by both the subsidiary and the group? d.accounted for as property, plant and equipment by both the subsidiary and the group?

22. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 22 Section 17 – Discussion questions Question 8: On 1/1/20X1 A buys a building for 100 and occupies it. Useful life = 40 yrs. Residual value = 20. A expects to consume the building’s benefits evenly over 40 yrs. The building’s fair value at 31/12/20X1 = 130. What is its carrying amount at 31/12/20X1? a.100. b. 98 c. 130 d. 127

23. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 23 Section 17 – Discussion questions Question 8: On 1/1/20X1 A buys a building for 100 and occupies it. Useful life = 40 yrs. Residual value = 20. A expects to consume the building’s benefits evenly over 40 yrs. The building’s fair value at 31/12/20X1 = 130. What is its carrying amount at 31/12/20X1? a.100. b. 98 c. 130 d. 127

24. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 24 Section 17 – Discussion questions Question 10: On 1/1/20X1 A buys land for an undetermined purpose. On 1/1/20X4 A begins constructing its head office building on the land. On 1/1/20X8 A’s staff moved out & the building is rented out under an operating lease. On 31/12/20X9 A accepts an unsolicited offer from the tenant to purchase the building from A immediately. The fair value of the building can be determined reliably without undue cost or effort on an ongoing basis. A accounts for the building as:

25. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 25 Section 17 – Discussion questions Question 10 continued : a.investment property from 1/1/20X1 to 31/12/20X9? b.investment property during 20X1–20X3 & PP&E during 20X4–20X10? c.investment property during 20X1–20X3 & 20X8–20X9 and PP&E during 20X4– 20X7? d.PP&E during 20X1–20X7 & investment property during 20X8–20X9?

26. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 26 Section 17 – Discussion questions Question 10 continued : a.investment property from 1/1/20X1 to 31/12/20X9? b.investment property during 20X1–20X3 & PP&E during 20X4–20X10? c.investment property during 20X1–20X3 & 20X8–20X9 and PP&E during 20X4– 20X7? d.PP&E during 20X1–20X7 & investment property during 20X8–20X9?

27. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 27 Section 18 – Discussion questions Question 1: The cost of an intangible asset at initial recognition is measured at its fair value when: a.it is internally generated? b.it is separately acquired? c.it is acquired in a business combination?

28. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 28 Section 18 – Discussion questions Question 1: The cost of an intangible asset at initial recognition is measured at its fair value when: a.it is internally generated? b.it is separately acquired? c.it is acquired in a business combination?

29. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 29 Section 18 – Discussion questions Question 2: A purchased a trademark. Remaining legal life = 5 yrs. However, is renewable every 10 yrs at little cost. A intends to renew the trademark continuously & evidence supports its ability to do so. An analysis of (i) product life cycle studies, (ii) market, competitive and environmental trends, & (iii) brand extension opportunities provides evidence that the trademarked product will generate net cash inflows for A for an indefinite period. The useful life of the intangible asset is: a.5 yrs b. 10 yrs c. 15 yrs d. 100 yrs

30. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 30 Section 18 – Discussion questions Question 2: A purchased a trademark. Remaining legal life = 5 yrs. However, is renewable every 10 yrs at little cost. A intends to renew the trademark continuously & evidence supports its ability to do so. An analysis of (i) product life cycle studies, (ii) market, competitive and environmental trends, & (iii) brand extension opportunities provides evidence that the trademarked product will generate net cash inflows for A for an indefinite period. The useful life of the intangible asset is: a.5 yrs b. 10 yrs c. 15 yrs d. 100 yrs

31. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 31 Section 18 – Discussion questions Question 3: On 1/1/20X1 A received (for free) an unconditional transferable 9 ‑ year taxi licence from a government (fair value = 120). On 1/1/20X1 A must recognise: a.120 intangible asset & 120 income? b.120 intangible asset & 120 liability? c.0 as intangible asset & 0 income & 0 liability?

32. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 32 Section 18 – Discussion questions Question 3: On 1/1/20X1 A received (for free) an unconditional transferable 9 ‑ year taxi licence from a government (fair value = 120). On 1/1/20X1 A must recognise: a.120 intangible asset & 120 income? b.120 intangible asset & 120 liability? c.0 as intangible asset & 0 income & 0 liability?

33. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 33 Section 18 – Discussion questions Question 4: On 1/1/20X1 A received (for free) a non ‑ transferable 9 ‑ year taxi licence from a government (fair value = 90). The licence will be revoked immediately A does not operate at least 10 taxis in a deprived area of the city. On 1/1/20X1 A must recognise: a.90 intangible asset & 90 income? b.90 intangible asset & 90 liability? c.0 as intangible asset & 0 income & 0 liability?

34. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 34 Section 18 – Discussion questions Question 4: On 1/1/20X1 A received (for free) a non ‑ transferable 9 ‑ year taxi licence from a government (fair value = 90). The licence will be revoked immediately A does not operate at least 10 taxis in a deprived area of the city. On 1/1/20X1 A must recognise: a.90 intangible asset & 90 income? b.90 intangible asset & 90 liability? c.0 as intangible asset & 0 income & 0 liability?

35. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 35 Section 27 – Discussion questions Question 1: At reporting date the carrying amount (cost) of raw materials = 200; replacement cost = 130; est. selling price of finished good = 300; est. costs to convert the raw material into finished good = 100; est. costs to sell the finished good = 50. A must recognise an impairment expense of a.nil. b. 70 c. 50 d. 170

36. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 36 Section 27 – Discussion questions Question 1: At reporting date the carrying amount (cost) of raw materials = 200; replacement cost = 130; est. selling price of finished good = 300; est. costs to convert the raw material into finished good = 100; est. costs to sell the finished good = 50. A must recognise an impairment expense of a.nil. b. 70 c. 50 d. 170

37. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 37 Section 27 – Discussion questions Question 2: At 31/12/20X1 CA of a CGU’s assets = 500 (ie 200 boat, 200 fishing licence & 100 goodwill) Impairment indicated & RA estimated = 350. Fair value of boat = 180. How much of the 150 impairment loss is allocated to the fishing licence? a.25. b. 30 c. 60 d. 150

38. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 38 Section 27 – Discussion questions Question 2: At 31/12/20X1 CA of a CGU’s assets = 500 (ie 200 boat, 200 fishing licence & 100 goodwill). Useful life = 2 yrs. RV = 0. Impairment indicated & RA estimated = 350. Fair value of boat = 180. How much of the 150 impairment loss is allocated to the fishing licence? a.25. b. 30 c. 60 d. 150

39. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 39 Section 27 – Discussion questions Question 3: Same as question 2. At 31/12/20X2 CA of a CGU’s assets = 175 (ie 90 boat & 85 fishing licence) Impairment reversal indicated & RA estimated = 375. How much of income is recognised on the reversal of the CGU’s impairment loss? a.25. b. 50 c. 150 d. 200

40. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 40 Section 27 – Discussion questions Question 3: Same as question 2. At 31/12/20X2 CA of a CGU’s assets = 175 (ie 90 boat & 85 fishing licence) Impairment reversal indicated & RA estimated = 375. How much of income is recognised on the reversal of the CGU’s impairment loss? a.25. b. 50 c. 150 d. 200

41. © 2011 IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 41 Questions or comments? Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the presenter. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation.

42. © 2011 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org 42 This presentation may be modified from time to time. The latest version may be downloaded from: http://www.ifrs.org/IFRS+for+SMEs/SME+Workshops.htm The accounting requirements applicable to small and medium ‑ sized entities (SMEs) are set out in the International Financial Reporting Standard (IFRS) for SMEs, which was issued by the IASB in July 2009. The IFRS Foundation, the authors, the presenters and the publishers do not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this PowerPoint presentation, whether such loss is caused by negligence or otherwise.