CA (Chartered Accountancy) Final: Financial Reporting and Advanced FM Flashcards

24 sample cards from the Final: Financial Reporting and Advanced FM deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. Under Ind AS 12, at what rate are deferred tax assets and liabilities measured, and are they discounted?

   They are measured at the tax rates expected to apply when the asset is realised or the liability settled, based on tax rates/laws enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are NOT discounted.

2. Under Ind AS 12, when is a deferred tax asset recognised?

   A deferred tax asset is recognised for deductible temporary differences, unused tax losses and unused tax credits only to the extent that it is probable that future taxable profit will be available against which the deductible difference/loss/credit can be utilised.

3. Under Ind AS 19, what are the four categories of employee benefits?

   (1) Short-term employee benefits (e.g., wages, paid leave within 12 months); (2) Post-employment benefits (e.g., pensions, gratuity); (3) Other long-term employee benefits; and (4) Termination benefits.

4. Under Ind AS 19, distinguish defined contribution plans from defined benefit plans.

   In a defined contribution plan the entity pays fixed contributions and has no obligation beyond them (the employee bears actuarial/investment risk; expense = contribution payable). In a defined benefit plan the entity guarantees a defined benefit and bears actuarial and investment risk; the obligation is measured actuarially using the Projected Unit Credit Method, recognising the net defined benefit liability/asset.

5. Under Ind AS 19, how are remeasurements of the net defined benefit liability/asset (actuarial gains and losses) recognised?

   Remeasurements — actuarial gains/losses, return on plan assets (excluding amounts in net interest) and changes in the effect of the asset ceiling — are recognised in Other Comprehensive Income and are NOT subsequently reclassified to profit or loss (may be transferred within equity).

6. Under Ind AS 102, what are the three types of share-based payment transactions?

   (1) Equity-settled (entity receives goods/services in exchange for its own equity instruments); (2) Cash-settled (liability for amounts based on the price/value of equity instruments); and (3) transactions with a choice of settlement (cash or equity, by the entity or the counterparty).

7. Under Ind AS 102, how is an equity-settled share-based payment to employees measured and recognised?

   Measured at the fair value of the equity instruments granted at the grant date (not remeasured for subsequent changes in fair value). The amount is recognised as an expense over the vesting period, with a corresponding increase in equity, and the estimate of the number of instruments expected to vest is revised for non-market vesting conditions.

8. Under Ind AS 37, what three conditions must be met to recognise a provision?

   (1) The entity has a present obligation (legal or constructive) as a result of a past event; (2) it is probable (more likely than not) that an outflow of economic resources will be required to settle the obligation; and (3) a reliable estimate of the amount can be made.

9. Under Ind AS 37, distinguish a provision, a contingent liability and a contingent asset.

   A provision is recognised (probable outflow, reliable estimate). A contingent liability is NOT recognised but disclosed — a possible obligation, or a present obligation that is not probable or cannot be reliably measured. A contingent asset is NOT recognised but disclosed when an inflow is probable; it is recognised only when realisation becomes virtually certain.

10. Under Ind AS 103, what is a business combination and which method is used to account for it?

    A business combination is a transaction or event in which an acquirer obtains control of one or more businesses. All business combinations within scope are accounted for using the acquisition method.

11. List the four steps of the acquisition method under Ind AS 103.

    (1) Identify the acquirer; (2) determine the acquisition date; (3) recognise and measure the identifiable assets acquired, liabilities assumed and any non-controlling interest (generally at fair value at acquisition date); and (4) recognise and measure goodwill or a gain from a bargain purchase.

12. Under Ind AS 103, write the formula for goodwill arising in a business combination.

    $$\text{Goodwill} = (\text{Consideration transferred} + \text{NCI} + \text{FV of previously held interest}) - \text{FV of identifiable net assets acquired}$$ If the result is negative, it is a bargain purchase gain recognised in profit or loss (after reassessment).

13. Under Ind AS 103, what two options are available for measuring non-controlling interest (NCI), and how does each affect goodwill?

    (a) Fair value method (full goodwill) — NCI at acquisition-date fair value, giving goodwill attributable to both parent and NCI; (b) Proportionate share method — NCI at its proportionate share of the acquiree's identifiable net assets, giving only the parent's share of goodwill (partial goodwill). The choice is made on a transaction-by-transaction basis.

14. Under Ind AS 103, how is contingent consideration classified and subsequently measured?

    It is measured at fair value at the acquisition date and included in consideration. If classified as equity, it is not remeasured; settlement is within equity. If classified as a liability (or asset), it is remeasured to fair value at each reporting date with changes recognised in profit or loss.

15. Under Ind AS 110, what is the definition of control?

    An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee AND has the ability to affect those returns through its power over the investee. All three elements — power, exposure to variable returns, and the link between power and returns — must exist.

16. Under Ind AS 110, what is the basic procedure to prepare consolidated financial statements?

    Combine like items of assets, liabilities, equity, income, expenses and cash flows of parent and subsidiaries line-by-line; eliminate the parent's investment against its portion of each subsidiary's equity (recognising goodwill); eliminate intragroup balances, transactions, income, expenses and unrealised profits in full; and present non-controlling interests separately within equity.

17. Under Ind AS 110, how is a change in a parent's ownership interest that does NOT result in loss of control accounted for?

    It is accounted for as an equity transaction (transaction between owners). No gain or loss is recognised in profit or loss and goodwill is not adjusted; the carrying amounts of controlling and non-controlling interests are adjusted, with any difference between the consideration and the NCI adjustment recognised directly in equity attributable to the parent.

18. Under Ind AS 110, how does a parent account for the loss of control of a subsidiary?

    The parent derecognises the subsidiary's assets, liabilities and NCI; recognises the fair value of any consideration received and of any retained interest; and recognises the resulting gain or loss in profit or loss. Amounts previously recognised in OCI are reclassified or transferred as required.

19. Under Ind AS 111, what are the two types of joint arrangements and how is each accounted for?

    (1) Joint operation — parties (joint operators) have rights to the assets and obligations for the liabilities; each recognises its own assets, liabilities, revenue and expenses (and its share of jointly held/incurred ones). (2) Joint venture — parties (joint venturers) have rights to the net assets; accounted for using the equity method under Ind AS 28.

20. Under Ind AS 111, what is the definition of joint control?

    Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

21. Under Ind AS 28, what is significant influence and what presumption is used to identify it?

    Significant influence is the power to participate in the financial and operating policy decisions of the investee, but not control or joint control. It is presumed when the investor holds 20% or more (but less than 50%) of the voting power, unless clearly demonstrated otherwise; below 20% it is presumed absent unless demonstrated.

22. Under Ind AS 28, describe the equity method of accounting for associates and joint ventures.

    The investment is initially recognised at cost and subsequently adjusted for the investor's share of the investee's post-acquisition profit or loss (recognised in P&L) and OCI (recognised in OCI). Dividends received reduce the carrying amount. The carrying amount is also reduced for impairment, and losses are recognised until the investment reaches nil (then suspended).

23. Under Ind AS 28, how are unrealised profits on transactions between an investor and its associate/joint venture treated?

    Profits and losses resulting from upstream (associate to investor) and downstream (investor to associate) transactions are eliminated to the extent of the investor's interest in the associate/joint venture; the investor's share of the associate's profits/losses from such transactions is removed.

24. Compare the accounting outcomes for control (Ind AS 110), joint control of a joint venture (Ind AS 111/28), and significant influence (Ind AS 28).

    Control → full consolidation (line-by-line, with NCI). Joint control of a joint venture and significant influence over an associate → equity method (single-line investment adjusted for share of profit/OCI). Joint control of a joint operation → recognise the entity's own share of assets, liabilities, income and expenses.

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Final: Financial Reporting and Advanced FM flashcards FAQ