1. International Financial Reporting Standards The views expressed in this presentation are those of the presenter, not necessarily those of the IASB or IFRS Foundation. © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org Quiz: liabilities Joint World Bank and IFRS Foundation ‘train the trainers’ workshop hosted by the ECCB, 30 April to 4 May 2012 The views expressed in this presentation are those of the presenter, not necessarily those of the IASB or IFRS Foundation.

2. 2 Quiz: liabilities Question 1: Provisions are measured at the best estimate of the amount required to settle the obligation at the reporting date. When the provision involves a large population of items, the estimate of the amount: a.reflects the weighting of all possible outcomes by their associated probabilities? b.is determined to be the individual most likely outcome? c.is the individual most likely outcome adjusted to consider the other possible outcomes? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

3. 3 Quiz: liabilities Question 1: Provisions are measured at the best estimate of the amount required to settle the obligation at the reporting date. When the provision involves a large population of items, the estimate of the amount: a.reflects the weighting of all possible outcomes by their associated probabilities? b.is determined to be the individual most likely outcome? c.is the individual most likely outcome adjusted to consider the other possible outcomes? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

4. 4 Quiz: liabilities Question 2: Provisions are measured at the best estimate of the amount required to settle the obligation at the reporting date. When the provision arises from a single obligation, the estimate of the amount: a.reflects the weighting of all possible outcomes by their associated probabilities? b.is determined to be the individual most likely outcome? c.is the individual most likely outcome adjusted to consider the other possible outcomes? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

5. 5 Quiz: liabilities Question 2: Provisions are measured at the best estimate of the amount required to settle the obligation at the reporting date. When the provision arises from a single obligation, the estimate of the amount: a.reflects the weighting of all possible outcomes by their associated probabilities? b.is determined to be the individual most likely outcome? c.is the individual most likely outcome adjusted to consider the other possible outcomes? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

6. 6 Quiz: liabilities Question 3: A is defending a patent infringement lawsuit. Court is expected to rule in 12/20X2. 30% chance court will dismiss the case. If not, 20% chance A pays CU200,000 & 80% chance pay CU100,000. Apply a 7% risk adjustment factor to the probability-weighted expected cash flows to reflect the uncertainties in the cash flow estimates. © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

7. 7 Quiz: liabilities Question 3 continued: An appropriate discount rate is 10% per year. At 31/12/20X1 A recognise a provision of? a.0? b.CU100,000? c.CU84,000? d.CU89,880? e.CU81,709? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

8. 8 Quiz: liabilities Question 3 continued: An appropriate discount rate is 10% per year. At 31/12/20X1 A recognise a provision of? a.0? b.CU100,000? c.CU84,000? d.CU89,880? e.CU81,709? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

9. 9 Quiz: liabilities Question 4: Same as Question 3 except, disclosure of some of the information about the case can be expected to prejudice seriously A’s position in the dispute over the alleged breach of patent. At 31 December 20X1, A would: © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

10. 10 Quiz: liabilities Question 4 continued: a.not recognise a provision. Disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed? b.recognise a provision measured at the best estimate and disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed. c.recognise a provision measured at the best estimate and disclose the necessary information. © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

11. 11 Quiz: liabilities Question 4 continued: a.not recognise a provision. Disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed? b.recognise a provision measured at the best estimate and disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed. c.recognise a provision measured at the best estimate and disclose the necessary information. © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

12. 12 Quiz: liabilities Question 5: 10-year non ‑ cancellable operating lease over a building. Lease rentals for years 1–5 = 0 & CU5,000 for each of years 6–10. In Y1 the lessee must recognise expense of: a.CU0? b.CU2,000? c.CU2,500? d.CU5,000? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

13. 13 Quiz: liabilities Question 5: 10-year non ‑ cancellable operating lease over a building. Lease rentals for years 1–5 = 0 & CU5,000 for each of years 6–10. In Y1 the lessee must recognise expense of: a.CU0? b.CU2,000? c.CU2,500? d.CU5,000? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

14. 14 Quiz: liabilities Question 6: On 1/1/20X1 A sold a machine to a bank and leased it back for 3 yrs. Facts about the machine & the leaseback: SP = CU200,000; CA = CU70,000; FV = CU200,000; remaining economic life = 3 yrs; residual value = 0; lease payments = CU77,606 per year (payable in arrears); interest rate implicit in the lease = 8% per year. What would A recognise in profit or loss for the year ended 31/12/20X1? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

15. 15 Quiz: liabilities Question 6 continued : a.CU130,000 gain on sale of PPE & CU77,606 lease rental expense. b.CU23,333 depreciation expense & CU16,000 finance cost (no income). c.CU43,333 income (amortised deferred gain on sale of PPE); CU23,333 depreciation expense; & CU16,000 finance cost. d.CU43,333 income (amortised deferred gain on sale of PPE); CU66,667 depreciation expense; & CU16,000 finance cost. © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

16. 16 Quiz: liabilities Question 6 continued : a.CU130,000 gain on sale of PPE & CU77,606 lease rental expense. b.CU23,333 depreciation expense & CU16,000 finance cost (no income). c.CU43,333 income (amortised deferred gain on sale of PPE); CU23,333 depreciation expense; & CU16,000 finance cost. d.CU43,333 income (amortised deferred gain on sale of PPE); CU66,667 depreciation expense; & CU16,000 finance cost. © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

17. 17 Section 20 – Discussion questions Question 7: Same as question 6, except the remaining economic life of the machine = 30 years & the lease rental = CU23,000 per year of the three ‑ year lease term. What would A recognise in profit or loss for the year ended 31/12/20X1? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

18. 18 Section 20 – Discussion questions Question 7 continued : a.CU130,000 gain on sale of PPE & CU23,000 lease rental expense. b.CU23,333 depreciation expense & CU16,000 finance cost (no income). c.CU43,333 income (amortised deferred gain on sale of PPE); CU23,333 depreciation expense; & CU16,000 finance cost. d.CU43,333 income (amortised deferred gain on sale of PPE); CU66,667 depreciation expense; & CU16,000 finance cost. © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

19. 19 Section 20 – Discussion questions Question 7 continued : a.CU130,000 gain on sale of PPE & CU23,000 lease rental expense. b.CU23,333 depreciation expense & CU16,000 finance cost (no income). c.CU43,333 income (amortised deferred gain on sale of PPE); CU23,333 depreciation expense; & CU16,000 finance cost. d.CU43,333 income (amortised deferred gain on sale of PPE); CU66,667 depreciation expense; & CU16,000 finance cost. © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

20. 20 Quiz: liabilities Question 8: A’s employees are each entitled to 20 days of paid holiday leave per calendar year. Unused holiday leave cannot be carried forward and does not vest. The entity has a 31 December annual reporting date. The holiday leave is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

21. 21 Quiz: liabilities Question 8: A’s employees are each entitled to 20 days of paid holiday leave per calendar year. Unused holiday leave cannot be carried forward and does not vest. The entity has a 31 December annual reporting date. The holiday leave is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

22. 22 Quiz: liabilities Question 9: Same as question 8, except unused holiday leave is paid out on 31 December of each year (ie it vests at the end of each calendar year but does not accumulate). The holiday leave is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

23. 23 Quiz: liabilities Question 9: Same as question 8, except unused holiday leave is paid out on 31 December of each year (ie it vests at the end of each calendar year but does not accumulate). The holiday leave is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

24. 24 Quiz: liabilities Question 10: Same as question 8, except unused holiday leave may be carried forward for two calendar years (ie it accumulates but does not vest). The holiday leave is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

25. 25 Quiz: liabilities Question 10: Same as question 8, except unused holiday leave may be carried forward for two calendar years (ie it accumulates but does not vest). The holiday leave is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

26. 26 Quiz: liabilities Question 11: A publicly announces its commitment to a voluntary redundancy plan. It has an obligation to pay a lumpsum to employees that elect redundancy. The obligation is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

27. 27 Quiz: liabilities Question 11: A publicly announces its commitment to a voluntary redundancy plan. It has an obligation to pay a lumpsum to employees that elect redundancy. The obligation is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

28. 28 Quiz: liabilities Question 12: A reimburses 50% of past employees’ post-employment medical costs if the employee provides +25 years of service. The obligation is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

29. 29 Quiz: liabilities Question 12: A reimburses 50% of past employees’ post-employment medical costs if the employee provides +25 years of service. The obligation is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

30. 30 Quiz: liabilities Question 13: A profit sharing plan requires A pay a specified portion of its cumulative profit for a 5-year period to employees who serve throughout the 5-year period. The obligation is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

31. 31 Quiz: liabilities Question 13: A profit sharing plan requires A pay a specified portion of its cumulative profit for a 5-year period to employees who serve throughout the 5-year period. The obligation is: a.a short ‑ term employee benefit? b.a post ‑ employment benefit? c.an other long ‑ term employee benefit? d.a termination benefit? © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

32. 32 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. © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org

33. © IFRS Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.ifrs.org 33 The requirements are set out in International Financial Reporting Standards (IFRSs), as issued by the IASB at 1 January 2012 with an effective date after 1 January 2012 but not the IFRSs they will replace. 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. 33