Questions & Answers

Lease term when contract is for indefinite period

Should you apply short-term lease exemption when you have a lease contract with indefinite period? Find out here, with real-life example.

Irregular lease payments under IFRS 16 Leases

Question We took the lease contract to rent a building for 6 years with total cost of CU 60 000, of which: CU 30 000 is paid up front before we moved in; and CU 30 000 is paid at the beginning of the 4th…

Deferred tax asset on tax losses carried forward

Question In some countries, tax legislation permits offsetting the tax losses of the company against the future tax profits. For example, the tax loss not fully deducted in the year 1 can be carried forward and set off against the profits in the next three…

Are income tax advances financial instruments?

Question We paid significant amount of cash as advances for income tax liabilities in accordance with our tax legislation. Are these prepayments for tax financial assets? Should we include them in expected credit loss calculation? If not, what standard shall we apply? Answer No,…

Difference between provision and actual expenses

Question We make some provisions and accruals each year in our financial statements. However, the actual expenses incurred are almost always different from the accrual or a provision made. How should we book the difference between actual expenses and a provision? Should we restate the…

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…

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…

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…

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…

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…

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…