Topic 1: CONCEPTUAL FRAMEWORK

Exercise 1.9 An enterprise starts its operation on 1 Jan 20X1 with a capital of 2000 CU. This amount is for
purchasing 200 units of merchandise (each costs 10 CU). On 31 December 20X1, all merchandise is sold at
2.200 CU. The merchandise's current cost was increased to 10,75 CU for each unit by the end of the year.
During the year, the purchasing power increased by 5%. Required: Calculate the profit for the year under
different capital maintenance views. (Physical, Financial-monetary items, Financial-Constant purchasing
power)
TOPIC 2_ IAS 16
PROPERTY, PLANT AND EQUIPMENT (PPE)
Exercise 2.1. Mad Hatter Enterprises purchased new equipment for $365,000, terms f.o.b. shipping point. Other
costs connected with the purchase were as follows:
Sales tax 29,200
Freight cost 5,600
Insurance while in transit 800
Insurance after equipment placed in service 1,200
Installation cost 2,000
Insurance for the first year of operation 2,400
Testing and trial runs 700
Required: Determine the capitalized cost of the equipment on the assumption that
a/ The sales tax is deductible
b/ The sales tax is NOT deductible

Exercise 2.2. Watson purchased assets of Holmes Ltd at auction for $ 2,886,000. The fair value of these assets
are:
Land $ 476,190
Building $ 793,650
Equipment $ 1,269,840
Inventories $ 634,920
Required: Record the purchase of Watson

Exercise 2.3. Montgomery Industries spent $600,000 in 20X2 on a construction project to build a library.
Montgomery also capitalized $30,000 interest on the project in 20X2. Montgomery financed 100% of the
construction with 12% construction loan. The project is completed on 30 September 20X3. Additional
expenditures in 20X3 were as follows. Required: Determine the capitalized cost of the library

Exercise 2.4. On January 1, Hobart Mfg. Co. purchased a drill press at a cost of $66,000. The drill press is
expected to last 10 years and has a residual value of $6,000. During its 10-year life, the equipment is expected to
produce 500,000 units of product. In year one 25,000 units were produced. In year two 84,000 units were produced
Required: What is the amount of depreciation for year one and year two and the book value of the drill press at
December 31, year one and year two, under the following depreciation methods:
 1. Straight-line method
2. Double declining balance method
3. Unit-of-production method

Exercise 2.5. On Jun 30, 20X1, Synthetic Fuels purchased equipments for $420,000. The equipment is expected
to has 7 year useful life with no residual value. Synthentic Fuels use straight-line depreciation method for all
depreciable assets. On December 31 20X1, the end of the company’s fiscal year, Synthentic choose to revalue the
machinery to its fair value of $358,800.
Required:
1. Calculate depreciation expense for 20X1
2. Record the revaluation of the equipment at the end of 20X1
3. Calculate depreciation expense for 20X2
4. Repeat the requirement 2 &3, assuming that the fair value of the equipment at the end of 20X1 is $405,600.
Assuming that Synthetic choose to realize revaluation surplus while using assets, record the realize
revaluation surplus at the end of 20X2.

Exercise 2.6. Sizemores purchased a piece of land for $600,000 in 20X2. The company choose to revalue the
land to its fair value at the end of each year, under revaluation model. Information on the fair value of the land at
the end of several following years are: 20X2: $675,000; 20X3: $540,000; 20X4: $580,000 ; 20X5: $615,000
Required: Record the revaluation of the land at the end of each year.

Exercise 2.7.Wendell exchanged an old truck and $51,000 cash to get a new van. The carrying amount of the old
truck is $12,000 (cost of $50,000 less accumulated depreciation of $38,000). Its fair value is $15,400.
Required:
1. Prepare journal entry to record exchange transaction. Assuming this exchange has commercial substance.
2. Prepare journal entry to record exchange transaction. Assuming it lacks commercial substance

Exercise 2.8.The Boston Beer Company 20X2 financial reports disclosure the following information
PPEs at the fiscal years ended December 25 20X2 and December 26 20X1 are as follows: (Unit: $1,000)
20X2 20X1
Containers 43,706 47,591
Plant 126,136 118,711
Office equipments 12,367 10,813
Machine 3,899 3,887
Land 25,259 25,176
Building 22,645 21,617
Total PPEs, cost 234,012 227,795
(-) Accumulated Depreciation 91,123 80,774
PPEs, net amount 142,889 147,021
For the year ended December 25 20X2 and December 26 20X1, depreciation expenses related to the above assets
are: (Unit: $1,000)
For 20X2 For 20X1

Depreciation expenses 17,300 16,800

For the year ended December 25 20X2 and December 26 20X1, cash flows related to the above assets are:
(Unit: $1,000)
Cashflows from investing activities For 20X2 For 20X1
Purchases of PPEs (13,608) (16,997)
Proceeds on disposal of PPEs 20 8
The note also states that the company has written off $300,000 of the cost of assets
Required:
1. Prepare T-account of PPEs and Accumulated Depreciation for 20X2
2. Prepare journal entry for the disposal of PPEs

Exercise 2.9. H company applies revaluation model under IAS 16 for its PPEs and choose to transfer the
revaluation surplus when assets are sold. On January 2 20X2, H purchased an equipment for $500,000, which has
10 year useful life and no residual value. H does not intend to change the estimation on the useful time and residual
value throughout the equipment’s life.
However, on January 2 20X5, H sold the equipment for $330,000. There is no impairment for the assets from
20X2 to 20X5. H’s fiscal year ended at 31 December. Following are information about this equipment:
Date Fair value
2 January 20X2 $500,000
31 December 20X2 $468,000
31 December 20X3 $380,000
31 December 20X4 $ 335,000
Required:
1. Prepare journal entries related to this equipment in 20X2, 20X3, 20X4 and on the date of 2 Jan 20X5
2. Present information related to this equipment on the Statement of Financial Position at the end of 20X2,
20X3, 20X4

Exercise 10. Casper Chemical recently acquired a building located on two acres of land for a lump-sum price of
$3.2 million. In your job as assistant controller, you determined the allocation of the price using the relative fair
values to be $1 million and $2.2 million for the land and building, respectively. When you reported these initial
values to Jake Reese, the company's controller, he told you to change the allocation to $1.5 million for the land
and $1.7 million for the building. When you asked him why the change, he explained that the company is having
a difficult time meeting profitability goals and that his proposed allocation will help the bottom line for future
years.
Required:
1. How will the controller's proposed allocation help the bottom line in future years?
2. Discuss the ethical dilemma faced by the assistant controller.

Exercise 11: On 1 April 20X0 Slow and Steady Co held non-current assets that cost $312,000 and had
accumulated depreciation of $66,000 at this date. During the year ended 31 March 20X1, Slow and Steady Co
disposed of non-current assets which had originally cost $28,000 and had a carrying amount of $11,200. Slow
and Steady Co’s policy is to charge depreciation of 40% on a reducing balance basis, with no depreciation
charged in the year of disposal.

Required: What is the depreciation charge to the statement of profit or loss for the year ended 31 March 20X1?

Exercise 12: An entity purchased the property for $6 million on 1 July 20X3. The land element of the purchase
was $1 million. The expected life of the building was 50 years and its residual value was nil. On 30 June 20X5,
the property was revalued to $7 million, of which the land element was $1.24 million and the buildings $5.76
million. On 30 June 20X7, the property was sold for $6.8 million.

Required: Record transactions during this property's life.

Topic 3_IAS 36_Impairment of assets

Exercise 3.1 On 1 January Year 1 Entity A purchased for $ 240.000 a machine with an estimated useful life of 20
years and an estimated residual value of $ 50, straight – line depreciation applied. On 1 January Year 4 an
impairment review showed the machine’s recoverable amount to be $ 100,000 and its remaining useful life to be
10 years.
Required: Calculate the amounts to be included in the statement of comprehensive income for Year 4 if
the asset had been revalued on 1 January Year 3 to $ 250,000, with non-change in useful life at that date.

Exercise 3.2: Swimmers Co. operates a set of water parks in Aqualandia. During January 20X1, Swimmers
acquired a boat for organizing boat trips across the river Aquatica.
At the end of 20X3, Swimmers estimated that revenues from boat trips will go down by 12% as a result of new
competitor. Managers adjusted projection of cash flows from boat during its remaining useful life of 7 years based
on most recent budgets, all available supporting information and economic conditions surrounding boat business
(refer to table below). Managers believe that at the end of boat's useful life, boat will be sold for 20 000 EUR (not
included in cash flow projections below).
Year Cash flow
20X4 72,000
20X5 69,000
20X6 64,000
20X7 59,000
20X8 52,000
20X9 45,000
20X10 38,000
399,000
According to management, appropriate pre-tax discount rate reflecting risks associated with boat including
inflation is 7.1% p.a.
Required: Calculate boat's value in use.

Exercise 3.3: (apply the same data from exercise 3.2)

During preparation of financial statements for the year ended 31 December 20X3, management of Swimmers Co.
performs impairment testing of its assets. There was an external indication that boat operating in Aquatica river
might be impaired.
Acquisition cost of boat was 600 000 EUR (in January 20X1), its useful life is 10 years and Swimmers apply cost
model with straight-line depreciation method. Based on current market research, Swimmers' managers estimate
current market value of boat to 316 000 EUR. In the case of sale, Swimmers would have to bear costs of final
cleaning and preparation estimated to 14 000 EUR.
Required
a. Calculate impairment loss of boat as of 31 December 20X3 and show the appropriate accounting treatment.
b. Calculate depreciation charge of boat for the year 20X4.

Exercise 3.4: CGU Impairment

Electra Corp. owns a number of nuclear power plants. At the end of 20X3, Electra Corp. is testing a plant in
Alandia for impairment. The plant consists of the following items (with their carrying amounts as of 31 December
20X3):
Atomic reactors, cooling tower, store of nuclear fuel, all with equipment - EUR 55 mil. (includes initial
estimate of decommissioning costs)
Other technical facilities directly related to power plant - EUR 8 mil.
Administrative building with equipment (fully used in plant) - EUR 2 mil.
Receivables of the plant - EUR 2 mil.
Liabilities of the plant - EUR 1 mil.
Provision for decommissioning costs - EUR 15 mil. (equal to their present value).
Remaining useful life of this plant is 10 years (ending 20X13). New electricity producers from alternative
sources forced Electra to decrease production in this plant. With respect to this situation, Electra's management
prepared new financial forecasts for the plant, excluding decommissioning and restoration costs, financial
assets and other liabilities (in table below). Plant generates cash inflows as a whole.
Electra received offer to sell the plant at the price around EUR 42 mil. This price reflects the fact that the
buyer will assume obligation to decommission the plant and restore the site. Cost to sell the plant is negligible.
 in EUR '000
Year Cash flow
20X4 10,200
20X5 9,550
20X6 8,900
20X7 8,250
20X8 7,600
20X9 6,950
20X10 6,300
20X11 5,650
20X12 5,000
20X13 4,350
72,750
Table 3.4: Financial forecasts for the plant, excluding decommissioning and restoration costs, financial assets
and other liabilities
Required: (i) Calculate any impairment loss and allocate the impairment to assets. Appropriate pre-tax discount
rate is 5% p.a. (ii) Prepare journal entries to record the impairment loss.

Exercise 3.5: (Reversal) At the beginning of Year 1, Company X acquires an equipment with a useful life of 20
years for 200 CU. The equipment is carried at cost, straight-line depreciation applied. At the end of Year 2, the
equipment’s recoverable amount is 144. At the end of Year 4, X identifies indicators of impairment reversal and
determines that the investment property’s recoverable amount is 178.

Required: Determine the reversal of impairment loss at the end of year 4. Prepare journal entries related
to the impairment loss at the end of year 2 and year 4.

Topic 4_IAS 40_ INVESTMENT PROPERTY

Exercise 4.1 Classify the following properties into the appropriate categories in the separated financial
statements of Entity A: Investment property, Inventory, or Owner-occupied property
a. Entity A gives the right to use a building to independent third parties under in 15-year operating lease with
annual payments of $2,000
b. Entity A acquires land worth $30,000. A expects that in the next 6 years, the market for the purchase and sale of
this type of asset will be on the rise. For this reason, the company expects the asset to appreciate in the long term
and thus obtain a profit.
c. Entity A acquires land at the beginning of year 1. The entity is uncertain whether it will use the asset to build a
luxury housing project or whether it will use the asset to generate capital appreciation. The decision will be made
at the end of year 2, considering the demand for housing of this type.
d. Entity A acquires land at the beginning of year 1. At first, the entity is uncertain whether it will use the asset to
build a luxury housing project or whether it will use the asset to generate capital appreciation. At the end of year
 2, considering the demand for housing, Entity A decided to start the construction of the housing project for sale
in a near future.
e. Entity A owns a resort that provides room rental and leisure tourism services. The ancillary services comprise a
significant part of the whole contract for the guests
f. Entity A owns a building that includes two parts: Block 1 and Block 2. Block 1 is used as their retail store, block
2 is leased out under an operating lease contract. These two blocks can be sold separately.
g. Entity A owns a building that includes two portions: P1: The rooftop and P2: the rest. P1 is used as their
administrative office, and P2 is leased out under an operating lease contract. These two portions cannot be sold
separately. P1 is rather an insignificant part of the whole building.
h. Entity A owns a building that includes two portions: P1: The rooftop and P2: the rest. P1 is used as their
administrative office, and P2 is leased out under an operating lease contract. These two portions could not be sold
separately. P1 makes up a significant part of the whole building.
i. Entity A (parent) owns a building that it leases to its subsidiary under an operating lease in exchange for annual
payments of 2,000. The subsidiary uses the building to sell inventory.
j. Entity A owns a property that had been leased to a tenant but which is no longer required and is now being held
for resale
k. Entity A owns the land for its investment potential. Planning permission has not been obtained for building
construction of any kind.
l. A new office building used as entity A’s head office was purchased specifically in the center of a major city to
exploit its capital gains potential
m. A stately home used for executive training

Exercise 4.2 At the beginning of 20X8, ABC company acquires a plot of land for 400 CU, with the intention
of build-to-rent. Other expenditures during the acquisition are property transfer tax of 10 CU, and
commission cost of 5CU. During 20X8, start the construction of a building, the costs of construction are
listed as follows:
- Labor costs: 80CU (8 CU of which is wasted labor cost incurred due to restoring faulty work
performed by inexperienced workers)
- Material costs: 320 CU (4 CU of which is wasted materials due to the above incident)
- Other direct construction costs: 16 CU
The construction is completed on 30 November 20X8. The property tax paid for the year 20X8 is 12 CU. Because
of the low initial occupancies, this property would cause a loss of 5 CU during its first year of operation. ABC
estimated that the rental property would achieve the break-even point in late 20X9.
Required: Determine the cost of this investment property
Exercise 4.3: Smith Co purchased a new office building with a 25‐year life for $20 million on 1 January 20X3,
applied cost model and straight-line basis depreciation method.
On 30 June 20X5, Smith Co moved out of the building and rented it out to third parties on a short‐term lease
Smith Co uses the fair value model for investment properties. The fair value of the property was as follows
On 30 Jun 20X5 21 million
On 31 Dec 20X5 21.5 million
On 31 Dec 20X6 20 million
Requires: Record transactions & present information on the statement of financial position and the statement
of profit or loss in respect of the property for the year ended 31 December 20X5 and 20X6

Exercise 4.4: Repeat the requirement of exercise 4.3, using the assumption that Smith applies the cost
model for investment properties.
Exercise 4.5: On 1 July 20X8, Chag Ltd. transferred an investment property to an owner-occupied property.
Investment property has been acquired since 1 Jan 20X2 and has originally cost $30 million; 10-year useful life.
The property’s fair value on 1 Jan 20X8 was $20 million and its fair value on 1 July 20X8 was 21 million
Required: Record the transaction on the date of 1 July 20X8 using the following assumption:
a/Chag chooses a fair value model for investment properties, the cost model for PPE
b/Chag chooses a fair value model for investment properties, a revaluation model for PPE
c/Chag chooses a cost model for both investment properties and PPE

Topic 5_IAS 38_ Intangible asset

Do the quizzes on the LMS

Topic 6_IFRS 16_ LEASES

Exercise 6.1
Case 1: Lessee enters into a contract with ship owner for the transportation of cargo from Rotterdam to
Sydney. The ship is explicitly specified in the contract, and ship owner does not have substitution rights. Lessee
has not specified any modifications to the ship. The cargo will occupy substantially all of the capacity of the ship.
The contract specifies the cargo to be transported on the ship and the dates of loading and discharging. Ship owner
operates and maintains the ship and is responsible for the safe passage of the cargo on board the ship. Lessee is
prohibited from hiring another operator for the ship or operating the ship itself during the term of the contract.
Also, Lessee cannot alter the routes or the dates for the transportation. Question: Does the contract contain a
lease?
 Case 2: Lessee enters into a contract with ship owner for the use of a specified ship for a five-year period.
The ship is explicitly specified in the contract, and ship owner does not have substitution rights. Lessee decides
what cargo will be transported, and whether, when and to which ports the ship will sail, throughout the five-year
period of use, subject to restrictions specified in the contract. Those restrictions prevent charterer from sailing the
ship into waters at a high risk of piracy or carrying hazardous materials as cargo. Ship owner operates and
maintains the ship and is responsible for the safe passage of the cargo on board the ship. Lessee is prohibited from
hiring another operator for the ship or operating the ship itself during the term of the contract.
Require: Do the above contracts contain leases?
Exercise 6.2
At the beginning of year N, a lessee enters into a 10-year lease of a building to be used as a retail store, with an
option to extend for a further five years. This contract contains a lease according to IFRS 16. Lease payments are
$800,000 per year during the initial term and $900,000 per year during the optional period, all payable at the end
of each year (ie. Payment in arrears). To obtain the lease, the lessee incurred initial direct costs at the
commencement date of $250,000. The interest rate implicit in the lease is 6% per annum. At the commencement
date, the lessee estimates that it is not reasonably certain to exercise the option to extend the lease.
Require: Prepare journal entries to record the lessee’s transactions at the commencement date and at the end of
the year N.
Exercise 6.3: Use the same facts & assumptions as exercise 6.2, except for:
The contract states that the lease payments will increase by 5% whenever the Consumer Price index (CPI) is
increased by more than 5% compared to the previous year’s CPI.
The CPI at the beginning of the year N is 100, and The CPI at the beginning of the year N+1 is 108.
Require: Prepare journal entries to record the lessee’s transactions for the year N+1.
Exercise 6.4: Use the same assumption as exercise 6.2, except for:
The contract states that the lease payments will increase by 1% whenever the retail store (located in the leased
building) made a profit of more than 1 million per year.
The profit for the year N is 800,000
The profit for the year N+1 is 1,2 million
Require: Prepare journal entries to record the lessee’s transactions for the year N+1.

Exercise 6.5: Use the same assumption & requirement as exercise 6.2, except for:
At the commencement date, the lessee estimates that it is certain to exercise the option to extend the lease.
Lease payments are made at the beginning of each year (payment in advance)
Exercise 6.6
Company A enters into an arrangement with an equipment service provider for the use of
• 1 new printer valued at VND 15 million to use for 1 year. The amount A has to pay for this printer is VND 3
million per year
• 1 used laptop valued at VND 20 million (40 million VND when new) to use for 2 years. The amount A has to pay
for this printer is VND 4 million per year.
The contract contains leases according to IFRS 16. All payment is in advance. The incremental borrowing rate of
A is 6% per year. Under the company’s accounting policy, all leased assets valued at or below 30 million qualify
for the low-value lease exemption.
Requires: Prepare journal entries to record the lessee’s transactions at the commencement date and the end of the
year N.

Topic 7_IAS 01
Presentation of Financial statements
Do the quizzes on the LMS

Topic 8_IAS 08
Accounting policies, estimates and errors
Case Study 8.1
Facts
Accurate Inc. was incorporated on January 1, 20X1, and follows IFRS in preparing its financial statements. In
preparing its financial statements for financial year ending December 31, 20X3, Accurate Inc. used these useful
lives for its property, plant, and equipment:
• Buildings: 15 years
• Plant and machinery: 10 years
• Furniture and fixtures: 7 years
On January 1, 20X4, the entity decides to review the useful lives of the property, plant, and equipment. For this
purpose it hired external valuation experts. These independent experts certified the remaining useful lives of the
property, plant, and equipment of Accurate Inc. at the beginning of 20X4 as
• Buildings: 10 years
• Plant and machinery: 7 years
• Furniture and fixtures: 5 years
Accurate Inc. uses the straight-line method of depreciation. The original cost of the various components of
property, plant, and equipment were
• Buildings: $15,000,000
• Plant and machinery: $10,000,000
• Furniture and fixtures: $3,500,000
Required Compute the impact on the income statement for the year ending December 31, 20X4, if Accurate Inc.
decides to change the useful lives of the property, plant, and equipment in compliance with the recommendations
of external valuation experts. Assume that there were no salvage values for the three components of the property,
plant, and equipment either initially or at the time the useful lives were revisited and revised.

Case Study 8.2

Facts
On January 1, 20X1, Robust Inc. purchased heavy-duty equipment for $400,000. On the date of installation, it
was estimated that the machine has a useful life of 10 years and a residual value of $40,000.
Accordingly the annual depreciation worked out to $36,000 = [($400,000 – $40,000) / 10].
On January 1, 20X5, after four years of using the equipment, the company decided to review the useful life of the
equipment and its residual value. Technical experts were consulted. According to them, the remaining useful life
of the equipment at January 1, 20X5, was seven years and its residual value was $46,000.
Required Compute the revised annual depreciation for the year 20X5 and future years.

Case Study 8.3

Facts
(a) The internal auditor of Vigilant Inc. noticed in 200Y that in 200X the entity had omitted to record in its books
of accounts an amortization expense amounting to $30,000 relating to an intangible asset.
(b) An extract from the income statement for the years ended December 31, 200X and 200Y, before correction
of the error follows:
200Y 200X
Gross profit $300,000 $345,000
General and administrative expenses (90,000) (90,000)
Selling and distribution expenses (30,000) (30,000)
Amortization (30,000) XXXX
200Y 200X
Net income before income taxes 150,000 225,000
Income taxes (30,000) (45,000)
Net profit $120,000 $180,000

(c) The “retained earnings” of Vigilant Inc. for 200X and 200Y before correction of the error are
200Y 200X
Retained earnings, beginning of the year $225,000 $45,000
Retained earnings, ending of the year $375,000 $225,000

(d) Vigilant Inc.’s income tax rate was 20% for both years.
Required
Present the accounting treatment prescribed by IAS 8 for the correction of the errors.

Case Study 8.4

Facts
(a) All Change Co. Inc. changed its accounting policy in 200Y with respect to the valuation of inventories. Up to
200X, inventories were valued using a weighted-average cost (WAC) method. In 200Y the method was changed
to first-in, first-out (FIFO), as it was considered to more accurately reflect the usage and flow of inventories in
the economic cycle. The impact on inventory valuation was determined to be
At December 31, 200W: an increase of $10,000
At December 31, 200X: an increase of $15,000
At December 31, 200Y: an increase of $20,000
(b) The income statements prior to adjustment are
200Y 200X
Revenue $250,000 $200,000
Cost of sales 100,000 80,000
Gross profit 150,000 120,000
Administration costs 60,000 50,000
Selling and distribution costs 25,000 15,000
Net profit $65,000 $55,000
(c) The “retained earnings” All Change Co. Inc. for 200X and 200Y before correction of the error are
200Y 200X
Retained earnings, beginning of the year $355,000 $300,000
Retained earnings, ending of the year $420,000 $355,000

Required
Present the change in accounting policy in the Income Statement and the Statement of Changes in Equity in
accordance with requirements of IAS 8.

Topic 9_IAS 10 Events after the reporting period

Do the quizzes on the LMS

Topic 10_IAS 37 Provisions, contingencies

Exercise 10.1 HamburgerPrince, fast food company, organized a birthday party for 20 children where burgers
from minced beef meat were served. After the party, 8 children came to the hospital suffering from food
poisoning and their parents believe that it is due to burgers not being fried properly.
Parents are now suing HamburgerPrince. Lawyer of this company believes that based on past similar court cases
and insufficient evidence against HamburgerPrince there is a 40% chance of losing the case and
HamburgerPrice would have to pay 160 000 EUR to indemnify children for poisoning.
Requires: What should HamburgerPrince do in its financial statements concerning this claim? Choose the right
answer below and explain your choice.
A. Do nothing
B. Disclose contingent liability
C. Recognize Provision for liability
D. Disclose contingent asset

Exercise 10.2 (continue to Ex 10.1) A few months later, court case proceeded further where one employee of
HamburgerPrince , acting as a witness, stated that frozen beef burgers supplied by local meat processing
company Beefers showed signs of potential bacterial infection. Judge ordered immediate inspection in Beefers
to verify its' hygienic and work standards. Inspection proved presence of several bacteria in half products. Court
case against HamburgerPrince has not been closed yet.
Based on this new evidence, lawyer believes that chance to lose the case increased to 80% .
HamburgerPrince then decided to sue Beefers for supplying contaminated burgers and causing them damage.
However, Beefers argue that if HamburgerPrince would have fried burgers properly, every possible infection
would be destroyed. Lawyer believes that HamburgerPrince has 90% chance of winning this case with
compensation of 160 000 EUR from Beefers.
What should HamburgerPrince do in its financial statements in relation to new events?
Choose the right answer belows and explain your choice.
A. Do nothing
 B. Disclose contingent liability
C. Recognise Provision for liability
D. Disclose contingent asset

Exercise 10.3 NiceHome Co. runs 2 main divisions: production of wooden accessories and metal
accessories. On 30 September 20X1, board of directors approved formal restructuring plan that involves
shifting some production away from metal accessories to wooden accessories due to current developments
of customers' preferences.
Managers have prepared details of restructuring plan and have publicly announced it on 30 November
20X1. An implementation of the plan should start on 1 February 20X2 and complete 31 January 20X3.
Managers have estimated the costs of restructuring as follows:
1. Carrying amount of redundant machines for metal accessories production - 2 000 000 EUR, revenue from
their sale (based on offer received recently) - 1 300 000 EUR
2. New computers in accounting department - 50 000 EUR
3. Cost of retraining employees from metal accessories - 100 000 EUR
4. Cost of severance payments to redundant employees from metal accessories - 400 000 EUR
Require:a/ When should Nice Homes recognised a provision for restructuring?
b/ What amount is the provision should be?
Exercise 10.4 Match the events to its appropriate accounting treatment
Events Accounting treatment at the end of year 1
1.CarProd is a car manufacturer who gives
a. Do nothing
warranties to its clients at the time of
purchase. Under the terms of sale contract in
year 1, CarProd undertakes to repair
manufacturing defects or replace defective
parts that become apparent within 5 years
from the date of sale.
Based on previous experience, it is probable
that there will be some claims under
warranties.
How should CarProd deal with the
warranties?
2. PhthalateCorp operating in chemical
b. Disclose contingent liability on the
industry worldwide regularly causes
contamination of land , but cleans up only Notes
when is required so under the laws of
particular country. Country Cleanlandia has
had no such legislation and PhthalateCorp has
been contaminating land for several years.
As at 31 December year 1 it is certain that
draft of law requiring clean-up of
contaminated land (no matter when) will be
enacted after the year-end in Cleanlandia.
 How should the company deal with the
estimated cleaning expense?

3. BenzCorp operating in chemical industry

c. Disclose contingent asset on the Notes
worldwide regularly causes contamination of
land , but has widely published its
environmental policy in which it undertakes
to clean up all contamination.
In year 1, Benz Corp operates in the countries
without any environmental legislation. How
should the company deal with the estimated
cleaning expense?

4. At the end of year 1, government

d. Present Provision on the SoFP
introduces a number of changes to the income
tax system. As a result of these changes,
during the next year, Taxexperts Co will need
to retrain a large number of its financial
services staff in order to continue providing
up-to-date information and advices to its
clients.
How Taxexperts account for the estimated
retraining expenditure?

Topic 11_IFRS 15
Revenue from contract with customers
Do the Exercise 11.1 to 11.7 on the handout Topic 11 (Slide no.54-60)