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Q U EST I O N 1

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SnowLimited(Snow)importsandsellssnowploughs.ThecompanyoperatesinAustraliaanditsfunctionalcurrencyisAustraliandollar.
On1April20X6,SnowreceivedashipmentofasnowploughfromaNewZealandsupplier.TheequipmentcostNZ$200,000.Snowpaid
fortheequipmenton20May20X6.
Thesnowploughisbeingheldasinventoryforresaleandisstillonhandat30June20X6.ThispurchaseismaterialtoSnow.
Therelevantexchangeratesareasfollows:
Exchangerates
Date

A$

NZ$

1April20X6

1.00

1.1051

20May20X6

1.00

1.1400

30June20X6

1.00

1.0955

Averagerate1April30June20X6

1.00

1.1254

WhatwillSnowrecogniseinits30June20X6financialstatementsinrelationtotheabovetransaction?
A. LossonforeignexchangeA$6,980inventoryA$221,020.
B. InventoryA$177,715.
C. GainonforeignexchangeA$5,540inventoryA$180,979.
D. GainonforeignexchangeA$1,586inventoryA$182,565.

Q U EST I O N 2

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On1January20X5GlobalLimited(Global)acquiredallthesharesinOverseasLimited(Overseas),acompanyincorporatedinFrance.
Overseassummarisedstatementoffinancialpositionandincomestatementat31December20X5isshownbelow:
Financialinformation

Assets

1,000,000

Liabilities

(200,000)

Netassets

800,000

Sharecapital

500,000

Retainedearningsb/f

200,000

Profitfortheyear

100,000

800,000

Additionalinformation
GlobalspresentationcurrencyisAustraliandollars.
Overseasfunctionalcurrencyiseuros.
Therearenodividendspaid,orpayable,fortheyearended31December20X5.
Thesharecapitalshownaboveisthesameasthatatacquisitiondate.
Theexchangeratesfortheyearended31December20X5areasfollows:
Exchangerates

Date

$A

1January20X5

1.00

0.6366

31December20X5

1.00

0.7647

1January20X531December20X5averagerate

1.00

0.6856

Whatisthebalanceintheforeigncurrencytranslationreserveat31December20X5asaresultoftranslatingOverseasfinancial
statementsintoAustraliandollars?
A. $199,288credit.
B. $184,200debit.
C. $120,699debit.
D. $199,288debit.

Q U EST I O N 3

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FrugalLimited(Frugal)ownsanassetthatismeasuredatfairvalue.Theassetcanbesoldinthreedifferentmarketsatdifferentprices:

Proceeds(gross)
Transportcosts

MarketA

MarketB

MarketC

168,000

165,000

160,000

(5,000)

Proceedsaftertransportcosts

163,000

Salescommissions(includinglistingfees)

(10,000)

Proceedsaftertransportandcommissioncosts

153,000

(10,000)
155,000
(1,000)
154,000

160,000
(5,000)
155,000

Frugalcanaccessallthreemarketsatthemeasurementdate.
FrugalnormallysellsinmarketB,buthasrecentlyconsideredsellinginoneoftheothermarkets.
Afterresearchingitsoptions,FrugalhasclearevidencethatthegreatestvolumeandnumberoftransactionsoccurinmarketA.
Anewmarket,marketC,islocal,soFrugalwillnotincuranytransportcosts.However,thismarketisverylowvolume.
InaccordancewithIFRS13FairValueMeasurement,whatisthecorrectfairvaluemeasurementfortheassetandwhy?
A. $154,000inmarketB,asthisistheprincipalmarketinwhichFrugalnormallytransacts.
B. $155,000inmarketC,asthisisthemostadvantageousmarketwhichmaximisesthevalueFrugalwillreceive.
C. $155,000inmarketB,asthisistheprincipalmarketinwhichFrugalnormallytransacts.
D. $163,000inmarketA,asthisistheprincipalmarketwhichhasthehighestvolumeandlevelofactivity.

Q U EST I O N 4

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ScottLimited(Scott)hasproperty,plantandequipment(PPE)withacarryingvalueof$2,200,000at1January20X6.Duringtheyear
ended31December20X6,thefollowingtransactionsoccurred:
On1January20X6,warehouseA,whichhadacarryingvalueof$730,000,wasrevaluedto$820,000.WarehouseAhasa
remainingusefullifeof20yearsfromthedateofrevaluation.
On1January20X6,plantandmachineryB,whichhadanoriginalcostof$100,000andacarryingvalueof$85,000,was
assessedtohavearemainingusefullifeoffiveyears.
NoneofScottsPPEisexpectedtohavearesidualvalue.ScottusesstraightlinedepreciationforallPPE.
ExcludingwarehouseAandplantandmachineryB,thedepreciationfortheotherPPEsfortheyearis$72,000.
Ignoringtheimpactofincometax,whatisthecarryingvalueofScott'sPPEasat31December20X6?
A. $2,157,000.
B. $2,160,000.
C. $2,201,000.
D. $2,100,000.

Q U EST I O N 5

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Considerthefollowingscenarios:
I.WhitehavenLimited(Whitehaven)isayachtcompanythatchartersafleetof20yachts.Whitehavenaccountsfortheyachts
underthecostmodelusingdiminishingbalancedepreciation.Whitehavenreviewstheusefullifeoftheyachtseverythreeyears.
II.HaymanLimited(Hayman)isahelicopterchartercompanyoperatingscenicflightsovertheGreatBarrierReef.Thecompany
estimatesthateachhelicopteriscapableof10,000flyinghours.Haymancalculatesdepreciationonthehelicoptersusingtheunits
ofproductionmethod,basedontheflighthourseachhelicopterhasundertakenperyear.Demandforflightsoverthepast12

ofproductionmethod,basedontheflighthourseachhelicopterhasundertakenperyear.Demandforflightsoverthepast12
monthshasbeenlow,andonehelicopterhasbeenidlefortheentireyear.Thecompanyhasassessedthehelicopterforwearand
tearwhileitwasidleandhasnotrecogniseddepreciationonthishelicopterfortheyear.
III.HamiltonLimited(Hamilton)operatesaluxuryresortonaremoteisland.Theresortconsistsoftwosimilarbuildings,theCatseye
andtheHideaway.Hamiltonusestherevaluationmodeltoaccountforbuildings.Inthecurrentyear,bothbuildingswererevalued
downwards.TherewasalargebalanceintherevaluationsurplusfromprioryearsinrespectoftheCatseye.Thetotaltaxeffected
revaluationdecrementforbothbuildingswasoffsetagainsttherevaluationsurplusbalancebeforetheremainderwastakento
profitandloss.
WhichofthescenariosaboveisbeingaccountedforinaccordancewithIAS16Property,PlantandEquipment?
A. IandIIIonly.
B. I,IIandIII.
C. IIonly.
D. IandIIonly.

Q U EST I O N 6

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On1July20X1AntigoneLimited(Antigone)acquiredapatentfor$300,000.Atthattime,Antigonesmanagementassessedthepatents
usefullifeat20yearsandthatAntigonewillconsumethepatentsfutureeconomicbenefitsevenlyoverthatperiod.
On30June20X2Antigoneassessedthefairvalueofthepatentat$333,000however,therewasnoevidenceofanactivemarketforthe
patent.Theusefullifewasnotchangedatthistime.
On1July20X5Antigoneassessedthepatentsremainingusefullifeat10years.
InaccordancewithIAS38IntangibleAssets(IAS38),whatisthecarryingamountofthepatentat30June20X6?
A. $216,000.
B. $296,000.
C. $229,500.
D. $266,400.

Q U EST I O N 7

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KasparLimited(Kaspar)preparesitsfinancialstatementsinNewZealanddollars.InJune20X4itentersintothefollowingtransactions:
1.Recognisesatradereceivableof$75,000fromRaLimited.
2.Borrows$400,000fromBlueLimited(Blue).Underthetermsoftheagreement,thedebtwillnotberepaidincashbutKasparwill
settlethedebtbyissuingequitysharestoBluebasedonthemarketpriceatthedateofconversion.
3.Undertakesafinanceleaseonequipmentfor$10,000permonthforfiveyears.
WhichoftheaboveitemsshouldKasparaccountforasafinancialinstrumentinaccordancewithIAS32FinancialInstruments:
PresentationandIAS39FinancialInstruments:RecognitionandMeasurement?
A. 1and3only.
B. 1and2only.
C. 2only.
D. 1,2and3.

Q U EST I O N 8
On1July20X4RubyLimited(Ruby)issuedbondsasfollows:
Fairvalue:$364,306.
Facevalue:$400,000.
Maturitydate:30June20X8.
Noannualrepaymentofprincipal.
Interestrate(couponrate):10%(interestispayableannuallyinarrears).
Effectiveinterestrate:13%.
Rubymeasuresthebondsatamortisedcostusingtheeffectiveinterestmethod(EIM).
WhatamountwillRubyrecogniseasthebondliabilityat30June20X6?
A. $392,640.
B. $371,666.
C. $400,000.
D. $379,983.

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Q U EST I O N 9

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AgnesLimitedhasadesignatedcashflowhedgerelationshipduringthecurrentfinancialyear.Therelationshipwasdesignatedat
inceptionwhenthehedginginstrumenthadafairvalueofnil.
At31December20X6,thefairvalueofthehedginginstrumentis$1.4millionliability,andthepresentvalueofthecumulativechangein
expectedcashflowsofthehedgeditemsincetheinceptionofthehedgingrelationshipis$1.6millionasset.
Whatisthebalanceofthecashflowhedgereserve(CFHR)attributabletothishedgingrelationshipat31December20X6,ignoringany
taximplications?
A. $1,400,000credit.
B. $1,600,000credit.
C. $1,400,000debit.
D. $1,600,000debit.

Q U EST I O N 1 0

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BorderLimited(Border)isanAustralianminingcompanywithafunctionalcurrencyofAustraliandollars.
ThefollowinginformationrelatestoBordersrecentactivitiesthathavebeendesignatedinhedgingrelationships:
I.Borderhasanorderwithasuppliertobuyasignificantamountofironoreinthreemonthstimeatthemarketpriceondelivery
date.Ithasenteredintoafuturescontracttoselltheironoreattheprevailingmarketpriceinthreemonthstime.
II.BorderhasanoncancellablecontracttopurchasemachineryfromanAmericancompany.ThecontractcontainsasetpriceinUS
dollarsandanagreeddeliveryandpaymentdate.BorderhasenteredintoaforwardexchangecontracttobuyUSdollarsinthree
monthstime.
III.BorderisinthefinalstagesofnegotiatingtheacquisitionofasignificantminingtenementinSouthAfrica.Theboardofdirectors
hasapprovedtheacquisitionandthecontractisduetobesignedwithinthenexttwoweeks.Borderhasenteredintoaforward
exchangecontracttobuySouthAfricanrandinonemonthstime.
Assumingdocumentationandeffectivenessrequirementscanbemet,whichoftheabovehedgingrelationshipscouldbeaccountedfor
asafairvaluehedgeinaccordancewithIAS39FinancialInstruments:RecognitionandMeasurement?
A. I,IIandIII.
B. Ionly.
C. IandIIonly.
D. IIandIIIonly.

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