Questions & Answers

Should we apply ECL model under IFRS 9 if we have only trade receivables?

Question: We do not have any financial assets, except for trade receivables. Do we have to apply Expected Credit Loss rules under IFRS 9? Answer Yes, of course, because the trade receivables are in fact financial assets at amortized cost under IFRS 9. However,…

Are contract assets and contract liabilities monetary or non-monetary?

Question: We are a shipbuilding company with the functional currency of USD. We entered in the long-term contract to build a ship for a customer in China. The contract price is set in CNY. How do we account for a contract asset under IFRS 15?…

Irregular lease payments under IFRS 16 Leases

Question We took the lease contract to rent a building for 6 years with total cost of CU 60 000, of which: CU 30 000 is paid up front before we moved in; and CU 30 000 is paid at the beginning of the 4th…

Deferred tax asset on tax losses carried forward

Question In some countries, tax legislation permits offsetting the tax losses of the company against the future tax profits. For example, the tax loss not fully deducted in the year 1 can be carried forward and set off against the profits in the next three…

Amendment of IAS 16: Proceeds before intended use

Question In May 2020, IASB issued the amendment to IAS 16 applicable for the periods starting on or after January 1, 2022. This amendment says that we should not deduct any proceeds from selling items produced in the process of bringing the asset to the…

Are income tax advances financial instruments?

Question We paid significant amount of cash as advances for income tax liabilities in accordance with our tax legislation. Are these prepayments for tax financial assets? Should we include them in expected credit loss calculation? If not, what standard shall we apply? Answer No,…

Failed to comply with IFRS

Question We adopted IFRS two years ago. We applied all accounting policies as required by IFRS, except for defined benefit plan accounting under IAS 19. We did not use projected unit credit method in accounting for defined benefit plans. We also did not use the…

Change in the reporting period and comparatives

Question Our company decided to change its financial year. The current reporting year is from 1st January to 31st December and the new one will be from 1st April to 31st March. How shall we present this change? Are there any disclosures we need to…

Testing goodwill for impairment

Question Our company acquired a subsidiary and goodwill on acquisition arose. According to IFRS, we have to test the goodwill for any impairment at least annually. How can we do it? The goodwill does not have any fair value and it’s not possible to determine…

Difference between provision and actual expenses

Question We make some provisions and accruals each year in our financial statements. However, the actual expenses incurred are almost always different from the accrual or a provision made. How should we book the difference between actual expenses and a provision? Should we restate the…

Provision based on a budget or orders

Question Our company operates on budgets and if the budget is not spent during the year, the cash cannot be used in the next year. We have to refund the cash to our parent company and what’s worse the budget for the same item will…

Revenue under different Incoterms (EXW, DAP)

Question Our company sells goods to the wholesalers and other distributors. The individual contracts contain different Incoterms, such as as EXW or DAP. Does the recognition of revenue depend on the specific Incoterm? Answer Incoterms are pre-defined commercial terms of sales and they relate…