Questions & Answers

Missing information about long-term property at IFRS adoption – what to do?

Question We are a state-owned company and we are in the process of adopting IFRS. IFRS 1 First-time Adoption of International Financial Reporting Standards requires applying IAS 16 to our fixed asset as if it has always been applied. This is impossible, because we own…

Accounting for transfer of an asset from the owner-occupied PPE to the investment property

Question We apply the revaluation model for accounting for our buildings in line with IAS 16 Property, plant and equipment. Recently, we stopped using one of our buildings as our head office and we rented the building out to tenants. Consequently, we transferred this building…

Retention in construction contracts

Question We run a construction company and regularly sign contracts for the construction of buildings for our customers. The customers usually pay us at different points of time defined in the contracts (“milestones”). These milestones and payments usually reflect the progress towards completion and we…

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…