Learn IFRS Through Case Studies Part 1

Analyze six IFRS issues for Sky Airlines as an audit senior, including business combinations, leases, contingent assets, financial instruments, IFRS 15 revenue recognition, and a donation, and propose adjusting entries.

Apply IFRS 3 to a business combination, recognizing fair value assets and liabilities, contingent liabilities, noncontrolling interest, and goodwill, using the four-step process to determine the acquirer and acquisition date.

Explore how IFRS 16 defines leases, distinguishes operating from finance leases, and uses present value and the rate implicit in the lease to determine capitalization, illustrated by Sky's aircraft case.

Analyze contingent assets under IAS 37 with Sky's 75% probable lawsuit. Disclose when the inflow of economic benefits is probable, and recognize only when the inflow becomes virtually certain.

Explore IFRS 9 classification of Sky’s 10 million bonds with a two-year 30% equity conversion option, treated as fair value through profit or loss.

Explore IFRS 15 revenue recognition for a new loyalty program, treating loyalty points as a separate performance obligation and allocating the transaction price to flights and redeemed points.

Analyze an unusual cash donation of 75k under IFRS, determine it's income not liability or direct equity, and record in the P&L as other income.

Explore accounting for foreign subsidiaries and translating balances for IFRS consolidated statements. Analyze IFRS issues on financial instruments, impairment, changes in accounting estimates, correction of past errors, and inspection costs.

Determine the subsidiary’s functional currency under ias 21 and translate assets and liabilities at the closing rate, income at the average rate, with intercompany balances eliminated and oci translation.

Explain IFRS 9 classification for share investments: private airline shares may use OCI with capitalized fees; public shares default to fair value through profit and loss, with fees expensed.

Examine impairment of employee housing loans under IFRS 9, classify as current or long-term, and compute expected credit losses using 12-month and lifetime approaches.

Examine how changes in estimates and corrections of errors under IAS 8 affect depreciation, asset lives, and carrying values after acquisitions under IFRS 3, using prospective and retrospective approaches.

Under IAS 16, capitalize major inspection costs as subsequent assets if they provide probable future benefits and can be measured reliably, potentially componentizing engine and airframe for five-year depreciation.

Explore year-end IFRS case for Ben's Construction Inc., covering non-monetary exchanges under the revaluation model for property, plant and equipment, revenue recognition using the percentage-of-completion method, and deferred tax assets.

Learn the revaluation method for property, plant and equipment, comparing proportional cost and depreciation adjustment with depreciation elimination, yielding a 6 million carrying amount and an other comprehensive income gain.

Allocate impairment loss under IAS 36 to the CGU, first to goodwill, then to other assets by carrying value. Respect value in use and fair value less cost to sell.

Examine warranty expense estimates under IAS 12, creating a deductible temporary difference and a deferred tax asset, shaped by loss carryforwards and a 25% tax rate.

Apply IFRS 15's percentage-of-completion method to a three-year construction contract, recognizing revenue as costs incurred reach the estimated total cost, with construction-in-progress and billing journal entries.

Learn how IFRS 9 classifies a loan receivable as a financial asset, choosing amortized cost or fair value through profit and loss using business model and cash flow tests.

Apply IAS 16 non-monetary exchanges under IFRS to a truck for luxury vehicle swap, using fair value to record a 30k gain.

Analyze the Andes Furniture Inc. case using IFRS to determine accounting for six issues—deferred tax liabilities, consignment sales, onerous contracts, discontinued operations, investment property, and subsequent events.

Analyze how fair value adjustments in a share acquisition create taxable temporary differences and a deferred tax liability, with capital gains taxed at half the rate of income.

Apply the IFRS 15 five-step model to consignment sales and revenue recognition. Determine when to recognize revenue for furniture at a retailer and when to defer to end customers.

Identify onerous contracts under IAS 37 and IFRS when unavoidable costs exceed expected benefits, and recognize a provision at the lower of cost to fulfill or penalties.

Classify the commercial division as a component and its disposal as a discontinued operation under IFRS five, presenting its after-tax results separately with its 30% revenue share.

Evaluate whether AFI's $30 million building for rental income qualifies as investment property under IAS 40, comparing cost and revaluation models and outlining depreciation and lease considerations.

Explore subsequent events under IFRS, distinguishing adjusting events at year end from non-adjusting events after the reporting period, with impairment, acquisition, and disclosure notes.

Analyze IFRS issues in Graham Stein Petroleum, Inc. case, including environmental restoration costs, impairment, and leases under IFRS 16; draft adjusting entries and a revised net income before taxes.

Identify environmental restoration costs as asset retirement obligations under IAS 37 and IFRS 1, recording initial present-value liability and accretion; apply retrospective adjustments for prior errors.

Learn IAS 36 impairment by the diesel division: allocate $3m goodwill to CGUs, compute recoverable amount at 29.1m, record 3.9m impairment, first to goodwill then to P&E.

GSP owns 33% of miners, sits on the board, and has convertible debt to 14%, creating significant influence, exposure to variable returns, and potential control under IFRS 3 for consolidation.

Evaluate how GSP's 33% ownership, board influence, and convertible debt point to significant influence or control, guiding IFRS 3 consolidation decisions.

Explore IFRS 16 capital leases for office space; calculate lease liability and right-of-use asset, including costs, with payments of 40k for five years and 30k for four years at 7%.

Assess whether the procurement system software should be capitalized with the computer terminal as PPE under IAS 38, and adjust net income for bill-and-hold, environmental costs, impairment, and depreciation.

An auditor introduces the Toby's Panda case, guiding you through six IFRS issues, joint arrangements, revenue with rebates and variable consideration, employee termination, impairment, liabilities, and P and E capitalization.

Identify this as a joint arrangement under IFRS 11, determine whether it is a joint operation or joint venture, and apply IAS 28 equity method for Toby's stake.

Examine how rebates via coupons create a provision under IAS 37 and may offset revenue under IFRS 15, using 80,000 coupons valued at $6 and a 60% redemption expectation.

Under IAS 19, recognize termination benefits for involuntary termination when the offer can no longer be withdrawn, here 20 employees at 4,000 each, totaling 80,000.

Under IAS 36, this store as a CGU with the roof is tested for impairment; 22m vs 18m fair value yields 4m impairment allocated pro rata (store 3.3m, roof 0.7m).

Allocate impairment loss proportionally by carrying value, yielding 3.3 million to the store and 0.7 million to the roof, with a 4 million debit and corresponding credits.

Explores whether a verbal management referral promise creates a constructive obligation for terminated employees, evaluating obligation, relevance, faithful representation, and measurement uncertainty to favor expensing.

Assess the store construction under IAS 16 and IAS 23, identifying capitalizable costs for property, plant and equipment and how to apply interest capitalization and prorating.