ACCA Pakistan Financial Accounting (FA) and Financial Reporting (FR) Syllabus

How is output sales tax (VAT) on a credit sale recorded?

Debit Receivables with the gross amount, Credit Sales with the net amount, and Credit Sales tax (output tax) payable with the tax amount.

What is the difference between a sales return and a purchase return, and which day book records each?

A sales return (return inwards) is goods returned by a customer, recorded in the sales returns day book; a purchase return (return outwards) is goods returned to a supplier, recorded in the purchase returns day book.

What is the imprest system of petty cash?

A system where petty cash is restored to a fixed float at each period end by reimbursing exactly the amount spent, so cash + vouchers always equals the imprest amount.

How is a prepayment of an expense treated in the financial statements?

It reduces the expense in profit or loss for the period and is shown as a current asset (prepayment) in the statement of financial position.

How is an accrued expense treated in the financial statements?

It increases the expense in profit or loss for the period and is shown as a current liability (accrual) in the statement of financial position.

What is the adjustment for accrued income (income earned but not yet received)?

Increase income in profit or loss and recognise a current asset (accrued income/receivable) in the statement of financial position.

What is included in the cost of an item of property, plant and equipment under IAS 16?

Purchase price (less trade discounts/rebates) plus directly attributable costs of bringing the asset to working condition and location, plus the initial estimate of dismantling/restoration costs.

State the two measurement models permitted for PPE after recognition under IAS 16.

The cost model (cost less accumulated depreciation and impairment) and the revaluation model (fair value at revaluation date less subsequent accumulated depreciation and impairment).

Under IAS 16, how is a revaluation surplus and a revaluation deficit accounted for?

A surplus is credited to other comprehensive income and accumulated in a revaluation surplus reserve; a deficit is charged to profit or loss unless reversing a previous surplus on the same asset.

State the formula for the straight-line method of depreciation.

(Cost - Residual value) / Useful life, giving a constant annual depreciation charge.

How does IAS 38 define an intangible asset?

An identifiable non-monetary asset without physical substance.

Under IAS 38, what is the accounting treatment of research costs versus development costs?

Research costs must be expensed as incurred; development costs must be capitalised as an intangible asset only if all the PIRATE/recognition criteria are met.

List the criteria under IAS 38 for capitalising development expenditure.

Probable future economic benefits, Intention to complete, Resources adequate to complete, Ability to use or sell, Technical feasibility, and Expenditure can be measured reliably.

How is internally generated goodwill treated under IAS 38?

It must not be recognised as an asset because it is not identifiable and cannot be measured reliably at cost.

Under IAS 36, when must an entity carry out an impairment review?

At each reporting date if there are indicators of impairment; and annually (irrespective of indicators) for goodwill and intangibles with indefinite useful lives or not yet available for use.

How is an asset's recoverable amount defined under IAS 36?

The higher of its fair value less costs of disposal and its value in use (the present value of future cash flows expected from the asset).

What is an impairment loss and how is the carrying amount adjusted under IAS 36?

An impairment loss is the amount by which carrying amount exceeds recoverable amount; the asset is written down to recoverable amount and the loss recognised in profit or loss (or against revaluation surplus for revalued assets).

How is inventory measured under IAS 2?

At the lower of cost and net realisable value (NRV).

How is net realisable value (NRV) defined under IAS 2?

The estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Which cost formulas are permitted and prohibited for measuring inventory under IAS 2?

FIFO (first-in, first-out) and weighted average cost are permitted; LIFO (last-in, first-out) is prohibited.

What three conditions must be met to recognise a provision under IAS 37?

A present obligation (legal or constructive) from a past event, a probable outflow of economic benefits, and a reliable estimate of the amount can be made.

Under IAS 37, how are a contingent liability and a contingent asset treated?

A contingent liability is disclosed (not recognised) unless the outflow is remote; a contingent asset is disclosed only when an inflow is probable and is recognised only when virtually certain.

Under IFRS 16, how does a lessee initially account for a lease?

By recognising a right-of-use asset and a corresponding lease liability measured at the present value of the future lease payments (single lessee model).

What two exemptions allow a lessee to expense lease payments instead of recognising a right-of-use asset under IFRS 16?

Short-term leases (12 months or less) and leases of low-value assets.

How does a lessee subsequently measure the right-of-use asset and the lease liability under IFRS 16?

The right-of-use asset is depreciated (cost model); the lease liability is increased by interest and reduced by lease payments, with interest charged to profit or loss.

How does IAS 12 define current tax versus deferred tax?

Current tax is the amount payable/recoverable on the taxable profit for the period; deferred tax is the future tax effect of temporary differences between the carrying amounts and tax bases of assets and liabilities.

What is a temporary difference under IAS 12 and how does it create deferred tax?

A difference between the carrying amount of an asset/liability and its tax base; taxable temporary differences create deferred tax liabilities and deductible temporary differences create deferred tax assets.

State the five-step model for recognising revenue under IFRS 15.

1) Identify the contract, 2) Identify the performance obligations, 3) Determine the transaction price, 4) Allocate the transaction price to performance obligations, 5) Recognise revenue as/when each obligation is satisfied.

Under IFRS 15, what determines whether revenue is recognised over time or at a point in time?

Revenue is recognised over time if one of three criteria is met (e.g. the customer simultaneously receives benefits, the asset is enhanced/controlled by the customer, or the asset has no alternative use with a right to payment); otherwise it is recognised at the point in time when control transfers.

Under IFRS 9, what are the three classification categories for financial assets?

Amortised cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL), determined by the business model and the contractual cash flow characteristics test.

How does the IFRS 15/IAS 1 layout distinguish current from non-current items, and what is the normal order of a statement of financial position?

Items are split into non-current and current based on the entity's operating cycle/12 months; the SOFP shows non-current assets, current assets, equity, non-current liabilities and current liabilities, with Assets = Equity + Liabilities.