Questions & Answers

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…

Accounting for “buy two + get one free”

Question We are a FMCG (“fast-moving consumption goods”) company and we often offer the promotional packages “buy 2 + get 1 free”. How shall we account for these offers? Can we recognize the revenue for 2 products, expenses for the same products as costs of…

Preference shares, tax and EPS

Question Our company has issued non-cumulative preference shares paying 4% interest each year. We report the dividends on preference shares in the profit or loss as a finance cost. What adjustment shall we make when calculating earnings per share? Is it after tax or before…

Changing depreciation during the reporting period

Question We are a manufacturing company and we applied straight-line depreciation method for our assets. During the year, our company revised major production plans, compared them with useful lives of our assets and we found out that the change was necessary. Can we make the…

Measurement of trade receivables under IFRS 9

Question IFRS 9 classifies financial assets into several categories: at amortized cost, at fair value through profit or loss or at fair value through other comprehensive income. How do you classify trade receivables and how do you measure them initially, especially when they are not…

Foreign currency rates to use when they are not available

Question We are a trading company and our functional currency is EUR. Occasionally we trade with countries whose currencies do not have a daily quote of exchange rate due to low exchangeability. What closing exchange rates shall we apply? Answer The standard IAS 21…

Accounting for gain or loss on sale of shares classified at FVOCI

Question We have shares (equity instruments) purchased for CU 100. We classified them as at fair value through other comprehensive income (FVOCI), because we collect dividends from them, but occasionally we make profits from trading of these shares. One year after purchase, the fair value…

Acquisition of asset after testing period

Question We ordered a machine from a supplier. The details are as follows: 1 January 20X1: We pay the prepayment of 40%. 1 March 20X1: The supplier delivers a machine and we pay 50% of its price. The machine is ready to use. We have…

Accounting for loan refinancing fees

Question We took a mortgage loan 3 years ago and we paid the loan origination fees. We classify the loan at amortized cost and we adjusted the effective interest method for that fee. Now, after 3 years, we want to refinance mortgage loan with the…

Can we avoid an impairment loss by the change in asset’s use?

Question Our company produces a few categories of products. Due to increasing competition in our country, one of our divisions started to make loss and we performed the impairment review of the assets within that division. We estimated future cash flows and found out that…

Accounting for adjustments at the first-time adoption of IFRS

Question We are working on the first-time adoption of IFRS in our company. How shall we account for the adoption adjustments? Answer In line with IFRS 1 First-time Adoption of International Financial Reporting Standards (par.11), all adjustments are debited or credited to opening retained…