ICAN Financial Reporting 2023 past questions and answers

1. Management assesses only the 12 months before the reporting date.
2. Management assesses at least 12 months from the reporting date, and considers information beyond that period where relevant.
3. Management assesses exactly 12 months from the date the financial statements are authorised, with no consideration of later information.
4. Management assesses going concern only when the entity has reported a loss.

Answer: B. Management assesses at least 12 months from the reporting date, and considers information beyond that period where relevant.

IAS 1 requires management to consider all available information about the future for at least, but not limited to, 12 months from the end of the reporting period. The assessment is not restricted to loss-making entities or to the 12 months before year-end.

1. Restate all prior periods as if the machine had always had a six-year life.
2. Recognise the effect directly in retained earnings at the start of the year.
3. Apply the revised estimate prospectively in the current and future periods affected.
4. Treat the revision as an accounting policy change and apply it retrospectively.

Answer: C. Apply the revised estimate prospectively in the current and future periods affected.

A useful-life revision resulting from new information is a change in accounting estimate, so its effect is recognised prospectively. Retrospective restatement applies to material prior-period errors and, generally, changes in accounting policies, not estimates.

1. ₦1,800,000
2. ₦2,000,000
3. ₦2,200,000
4. ₦9,000,000

Answer: A. ₦1,800,000

Depreciable amount is cost less residual value: ₦10,000,000 − ₦1,000,000 = ₦9,000,000. Straight-line depreciation is ₦9,000,000 ÷ 5 = ₦1,800,000 per year; option B incorrectly depreciates the residual value.

1. Capitalise all research and development costs once the project is completed.
2. Expense all costs because internally generated software cannot be an intangible asset.
3. Capitalise the research phase, but expense development costs until the software is sold.
4. Expense research expenditure and capitalise qualifying development expenditure only from the date all recognition criteria are met.

Answer: D. Expense research expenditure and capitalise qualifying development expenditure only from the date all recognition criteria are met.

Research expenditure is expensed. Development expenditure is capitalised only from the date the IAS 38 criteria are all demonstrable; costs expensed before that date are not later reinstated as an asset.

1. The undiscounted total of all lease payments, regardless of timing.
2. The present value of lease payments not paid at commencement, discounted using the rate implicit in the lease if readily determinable, otherwise the lessee's incremental borrowing rate.
3. The fair value of the warehouse, irrespective of the agreed payments.
4. The first annual lease payment only.

Answer: B. The present value of lease payments not paid at commencement, discounted using the rate implicit in the lease if readily determinable, otherwise the lessee's incremental borrowing rate.

At commencement, a lessee measures the lease liability at the present value of lease payments not paid at that date, using the implicit rate when readily determinable or otherwise the incremental borrowing rate. Undiscounted payments and the first instalment alone do not represent the liability.