Questions & Answers

Acquisition of asset after testing period

Question We ordered a machine from a supplier. The details are as follows: 1 January 20X1: We pay the prepayment of 40%. 1 March 20X1: The supplier delivers a machine and we pay 50% of its price. The machine is ready to use. We have…

Accounting for loan refinancing fees

Question We took a mortgage loan 3 years ago and we paid the loan origination fees. We classify the loan at amortized cost and we adjusted the effective interest method for that fee. Now, after 3 years, we want to refinance mortgage loan with the…

Can we avoid an impairment loss by the change in asset’s use?

Question Our company produces a few categories of products. Due to increasing competition in our country, one of our divisions started to make loss and we performed the impairment review of the assets within that division. We estimated future cash flows and found out that…

Accounting for adjustments at the first-time adoption of IFRS

Question We are working on the first-time adoption of IFRS in our company. How shall we account for the adoption adjustments? Answer In line with IFRS 1 First-time Adoption of International Financial Reporting Standards (par.11), all adjustments are debited or credited to opening retained…

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…