Questions & Answers

Accounting when acquired subsidiary is not a business

Question We (the parent) acquired a company (the subsidiary) and we identified that the company does not constitute a business, therefore we cannot follow the acquisition method under IFRS 3. The subsidiary only owns some assets and liabilities and we need to account for this…

Depreciation when asset is disposed off

Question Can we depreciate assets those are disposed of during the year? For instance, if one asset is used till October 10 and then sold on that day. Do we have to charge depreciation for the asset till October 10, 2020 since we have used…

Decrease in decommissioning provision results in negative asset

Question We operate a power plant and we recognized a provision related to its decommissioning at the end of its useful life. We remeasure the amount of the provision annually based on updated discount rate and estimated cost report. We apply cost model to our…

Asset held for sale not sold after 1 year

Question Our company decided to sell the asset and classified it as held for sale in line with IFRS 5. After 1 year, we are still not able to sell this asset. What shall we do? How shall we report it in our accounts since…

Depreciation of ROU related to land

Question We entered into a contract to lease a plot of land. We will be using the land for 20 years and then we will vacate it and return it to its legal owner. We are aware that under IFRS 16, we need to account…

New window blinds in a leased office

Question We took an office under the lease and we installed the new window blinds. How do we treat the expenses for the window blinds? Do we add it to the ROU asset? Or directly in profit or loss as an expense? Answer These…

Change from revaluation back to cost model

Question We intend to change our accounting policy on land and building from “Revaluation model” to “Cost model”. IAS 16 is silent on that. Please, what are your thoughts on this? Answer It is not prohibited, but it is very rare. I would say…

Expenses for remediation of environmental damage

Question We operate a chiller plant through which we provide cooling services to our customers. However the soil around the plant is of poor quality due to a leakage of water from the plant. It caused some underground leaks. We are able to identify the…

Direct sales with no contract

Question Our company produces detergents and sells directly to supermarkets for resale based on sales orders received (small, multiple orders). We have no ‘contract’. Does IFRS 15 apply in this case since there is no contract? Answer Under IFRS 15 (paragraph 10), a contract…

Agent’s commission when principal fails to perform

Question We have identified that we act as an agent and our partner acts as a principal. We recognize commission received from the principal as a revenue. What shall we do when the principal did not perform and did not satisfy its performance obligations to…

Leases prepaid for years in advance

Question How should we account for leases paid in advance for 25 years? We made a one-off payment for the lease of the land for 25 years at the commencement of the lease, and we will not make any further payments. At the end of…

When to recognize a warranty provision

Question I do understand that we have to make provision for expenses for warranty repairs if we are obliged to make repairs of defects on the product within 5 years after making a sale. But why do we make a provision for all 5 years…