CA (Chartered Accountancy) Intermediate: Advanced Accounting Flashcards

24 sample cards from the Intermediate: Advanced Accounting deck

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

1. Under AS 16, what happens to capitalisation of borrowing costs during an extended interruption of active development of a qualifying asset?

   Capitalisation of borrowing costs is suspended during extended periods in which active development of the qualifying asset is interrupted, and resumes when active development restarts.

2. Under AS 16, when does capitalisation of borrowing costs cease?

   Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

3. Under AS 7, how are incentive payments and claims included in contract revenue?

   They are included in contract revenue to the extent that it is probable they will result in revenue and they are capable of being reliably measured.

4. Under AS 19, how is a finance lease accounted for by a lessor?

   The lessor recognises assets held under a finance lease as a receivable equal to the net investment in the lease. Finance income is recognised based on a pattern reflecting a constant periodic rate of return on the lessor's net investment.

5. Under AS 19, how is a sale and leaseback transaction resulting in a finance lease treated?

   Any excess of sale proceeds over the carrying amount is not immediately recognised as income; it is deferred and amortised over the lease term, because the transaction is essentially a financing arrangement.

6. Under AS 20, how are partly paid equity shares treated in computing the weighted average number of shares?

   Partly paid equity shares are treated as a fraction of an equity share to the extent they were entitled to participate in dividends relative to a fully paid equity share during the period.

7. Under AS 22, why might the deferred tax balance differ from the difference between book profit and taxable profit multiplied by the tax rate?

   Because deferred tax arises only on timing differences (which reverse), not on permanent differences. The total difference between book and taxable profit includes permanent differences, which never create deferred tax.

8. Under AS 10, how is the gain or loss on derecognition (disposal) of an item of PPE determined and presented?

   It is the difference between the net disposal proceeds and the carrying amount of the item, recognised in the statement of profit and loss; such gains are not classified as revenue.

9. Under AS 10, how are spare parts, stand-by equipment and servicing equipment classified?

   They are recognised as PPE when they meet the definition of PPE (used during more than one period); otherwise they are classified as inventory.

10. Under AS 12, how is a non-monetary government grant given at a concessional rate or free of cost accounted?

    A non-monetary asset given free of cost is recorded at a nominal value; if given at a concessional rate, it is accounted for at its acquisition cost.

11. Under AS 12, how is the refund of a government grant related to a fixed asset accounted?

    It is recorded by increasing the carrying amount of the asset (if the grant was deducted from cost) or by reducing the deferred income/capital reserve balance, with the additional depreciation that would have been charged charged immediately to profit and loss.

12. Under AS 5, define 'Extraordinary Items' and how they are disclosed.

    Extraordinary items are income or expenses arising from events or transactions clearly distinct from the ordinary activities of the enterprise and not expected to recur frequently or regularly. They are disclosed separately in the statement of profit and loss as part of net profit/loss for the period.

13. Under AS 18, list transactions that do NOT require related party disclosure even between related parties.

    Disclosure is not required for state-controlled enterprises' transactions with other state-controlled enterprises, and where providing it would conflict with duties of confidentiality under statute. Also, no disclosure is needed of compensation that an entity pays in the capacity of an employer.

14. Under AS 26, can internally generated goodwill, brands, mastheads, publishing titles and customer lists be recognised as intangible assets?

    No. Internally generated goodwill is not recognised. Internally generated brands, mastheads, publishing titles, customer lists and similar items are not recognised because expenditure on them cannot be distinguished from the cost of developing the business as a whole.

15. Under AS 28, how is a reversal of a previously recognised impairment loss treated?

    An impairment loss is reversed (and income recognised) if there has been a change in the estimates of recoverable amount, but the increased carrying amount must not exceed the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior years.

16. Under AS 29, how should the amount recognised as a provision be measured?

    At the best estimate of the expenditure required to settle the present obligation at the balance sheet date. Where the time value of money is material, provisions under Ind AS may be discounted, but AS 29 generally does not permit discounting to present value.

17. Compare the carrying basis of current versus long-term investments under AS 13 in one line each.

    Current investments: lower of cost and fair value (decline and any reversal both recognised). Long-term investments: cost less provision for other-than-temporary decline (temporary declines are ignored).

18. Under AS 17, what does a 'business segment' versus a 'geographical segment' represent?

    A business segment is a distinguishable component providing an individual product/service or group of related products/services subject to different risks and returns. A geographical segment provides products/services within a particular economic environment subject to risks and returns different from other environments.

19. Under AS 4, give an example of an adjusting event and a non-adjusting event after the balance sheet date.

    Adjusting: insolvency of a customer occurring after year-end confirming a debt was doubtful at the balance sheet date (adjust receivables). Non-adjusting: a fire destroying a factory after the balance sheet date (disclose only, no adjustment).

20. Under AS 9, when should revenue recognition be postponed?

    When at the time of raising any claim there is significant uncertainty regarding the ultimate collection of the consideration; revenue is recognised only when it becomes reasonably certain that the consideration will be collected.

21. Under AS 14, how are statutory reserves of the transferor company treated in an amalgamation in the nature of purchase?

    Statutory reserves (such as those required by law) are preserved by crediting an 'Amalgamation Adjustment Reserve' (shown as a debit) so the identity of the statutory reserve is retained for as long as legally required, after which it is reversed.

22. Under AS 22, present the Statement of Profit and Loss treatment showing how current and deferred tax affect profit.

    $$\text{Profit after tax} = \text{Profit before tax} - \text{Current tax} - \text{Deferred tax (net)}.$$ Current tax is on taxable income; deferred tax is the net charge/credit from origination/reversal of timing differences.

23. Under AS 20, define 'potential equity share' and give three examples.

    A potential equity share is a financial instrument or contract that may entitle its holder to equity shares. Examples: convertible debentures or preference shares, share warrants and options (e.g., ESOPs), and shares issuable on satisfaction of contractual conditions.

24. Under AS 10, how is depreciation treated when an asset is revalued, and how does the revaluation surplus move on retirement?

    After revaluation, depreciation is charged on the revalued (carrying) amount over the remaining useful life. On retirement/disposal of the revalued asset, any related revaluation surplus may be transferred directly to retained earnings (general reserve), not through profit and loss.

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