Questions & Answers

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…

Non-controlling interest in a private company

Question Under IFRS 9, equity instruments must be revalued at fair value through profit and loss or OCI. What happens if a company purchases non-controlling interest in a private company? Is the private company revalued every year to comply with IFRS 9? Answer Before…

Journal entries – finished goods

Question When you produce finished goods from raw materials, labour and other items, what are the journal entries to reflect that? For example, in the lecture #5 Solved Examples in Inventories section, you calculated the cost of one unit of finished product as follows: Item…

Testing goods: inventories, expense or PPE?

Question I work with an antivirus software company in the cybersecurity industry. 95% of our sales are software but we also sell some hardware products. For the hardware products, we use some units as “proof of concept” stock; our Sales Engineers ship to our customers…

Annual license fees on software

Question We have bought SAP system for accounting from a vendor and we need to pay annual license fees to maintain this software. Kindly advise whether we can capitalise annual license fees? Answer If it is a software that is not necessary for the…

Impairment and subsequent depreciation

Question We recognized impairment loss on one of our buildings because its fair value was by CU 40 000 lower than its carrying amount. We depreciated that building on a straight-line basis over 40 years. How should we continue depreciating the building after recognition of…

The first job or the actual job?

Question IAS 19 requires an entity to recognise a liability when an employee has provided service in exchange for employee benefits to be paid in the future. What is our starting point when to recognize a liability related to defined benefit plan? Is it: The…