Accounting policy – Noohra Business Consult

BL – Nov 2019 – L1 – SA – Q4 – Sources of Nigerian Law

Identifying changes in accounting methods that do not give rise to changes in accounting policy

Question

In accordance with the requirements of IAS-8 – Accounting Policies, Estimates and Errors, which of the following changes in method does not give rise to changes in accounting policy?
A. Measurement of PPE from cost to revaluation model
B. Presentation of depreciation from cost of sale to administrative expense
C. Calculation of depreciation from straight line to sum of digit method
D. Recognition of an expense from capitalisation to expensing
E. Reclassification of non-current asset to current asset

Answer

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Tags: Accounting policy, Financial Statements, IAS 8
Level: Level 1

Topic: Sources of Nigerian Law
Series: NOV 2019

BL – Nov 2019 – L1 – SA – Q4 – Sources of Nigerian Law

Identifying changes in accounting methods that do not give rise to changes in accounting policy

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting policy, Financial Statements, IAS 8
Level: Level 1

Topic: Sources of Nigerian Law
Series: NOV 2019

FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

Question

LB Ltd is a construction contract company involved in building commercial properties. Its current policy for determining the percentage of completion of its contracts is based on the proportion of cost incurred to date compared to the total expected cost of the contract.

One of LB Ltd’s contracts has an agreed price of GHS 500 million and estimated total costs of GHS 400 million. The cumulative progress of this contract is:

Year ended	30 September 2011	30 September 2012
Costs incurred	160	290
Work certified and billed	150	320
Billing received	140	300

Based on the above, LB Ltd prepared and published its financial statements for the year ended 30 September 2011. Relevant extracts are:

STATEMENT OF PROFIT OR LOSS

Description	GHSm
Revenue	200
Cost of sales	(160)
Profit ((100 x 160/400))	40

STATEMENT OF FINANCIAL POSITION

Description	GHSm
Current assets: Amounts due from customers
Contract costs to date	160
Profit recognised	40
Total assets	200
Progress billings	(150)
Net assets	50
Contract receivables (150-140)	10

LB Ltd has received some adverse publicity in the financial press for taking its profit too early in the contract process, leading to disappointing profits in the later stages of contracts. Most of LB Ltd’s competitors take profit based on the percentage of completion as determined by the work certified compared to the contract price.

Required:

(i) Assuming LB Ltd changes its method of determining the percentage of completion of contracts to that used by its competitors, and that this would represent a change in an accounting estimate, calculate equivalent extracts of profit or loss and statement of financial position for the year ended 30 September 2012. (7 marks)

(ii) Explain why the above represents a change in accounting estimate rather than a change in accounting policy. (2 marks)

LB Ltd also sells building materials to other contractors from its warehouse and is considering setting up another retail branch in a different part of the country.

The directors have been told that the branch can be run directly through the head office or set up as a separate entity, but are not sure how the accounting will work.

Required:
Explain to the directors how this transaction should be treated in the books of LB Ltd.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting estimates, Accounting policy, Construction Contracts, Contract Completion, Financial Reporting, IAS 11, Percentage of completion, Profit Calculation, Work certified
Level: Level 3

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2015

FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

Question

One of LB Ltd’s contracts has an agreed price of GHS 500 million and estimated total costs of GHS 400 million. The cumulative progress of this contract is:

Year ended	30 September 2011	30 September 2012
Costs incurred	160	290
Work certified and billed	150	320
Billing received	140	300

Based on the above, LB Ltd prepared and published its financial statements for the year ended 30 September 2011. Relevant extracts are:

STATEMENT OF PROFIT OR LOSS

Description	GHSm
Revenue	200
Cost of sales	(160)
Profit ((100 x 160/400))	40

STATEMENT OF FINANCIAL POSITION

Description	GHSm
Current assets: Amounts due from customers
Contract costs to date	160
Profit recognised	40
Total assets	200
Progress billings	(150)
Net assets	50
Contract receivables (150-140)	10

Required:

(ii) Explain why the above represents a change in accounting estimate rather than a change in accounting policy. (2 marks)

LB Ltd also sells building materials to other contractors from its warehouse and is considering setting up another retail branch in a different part of the country.

The directors have been told that the branch can be run directly through the head office or set up as a separate entity, but are not sure how the accounting will work.

Required:
Explain to the directors how this transaction should be treated in the books of LB Ltd.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting estimates, Accounting policy, Construction Contracts, Contract Completion, Financial Reporting, IAS 11, Percentage of completion, Profit Calculation, Work certified
Level: Level 3

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2015

BL – Nov 2019 – L1 – SA – Q4 – Sources of Nigerian Law

Identifying changes in accounting methods that do not give rise to changes in accounting policy

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting policy, Financial Statements, IAS 8
Level: Level 1

Topic: Sources of Nigerian Law
Series: NOV 2019

BL – Nov 2019 – L1 – SA – Q4 – Sources of Nigerian Law

Identifying changes in accounting methods that do not give rise to changes in accounting policy

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting policy, Financial Statements, IAS 8
Level: Level 1

Topic: Sources of Nigerian Law
Series: NOV 2019

FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

Question

One of LB Ltd’s contracts has an agreed price of GHS 500 million and estimated total costs of GHS 400 million. The cumulative progress of this contract is:

Year ended	30 September 2011	30 September 2012
Costs incurred	160	290
Work certified and billed	150	320
Billing received	140	300

Based on the above, LB Ltd prepared and published its financial statements for the year ended 30 September 2011. Relevant extracts are:

STATEMENT OF PROFIT OR LOSS

Description	GHSm
Revenue	200
Cost of sales	(160)
Profit ((100 x 160/400))	40

STATEMENT OF FINANCIAL POSITION

Description	GHSm
Current assets: Amounts due from customers
Contract costs to date	160
Profit recognised	40
Total assets	200
Progress billings	(150)
Net assets	50
Contract receivables (150-140)	10

Required:

(ii) Explain why the above represents a change in accounting estimate rather than a change in accounting policy. (2 marks)

LB Ltd also sells building materials to other contractors from its warehouse and is considering setting up another retail branch in a different part of the country.

The directors have been told that the branch can be run directly through the head office or set up as a separate entity, but are not sure how the accounting will work.

Required:
Explain to the directors how this transaction should be treated in the books of LB Ltd.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting estimates, Accounting policy, Construction Contracts, Contract Completion, Financial Reporting, IAS 11, Percentage of completion, Profit Calculation, Work certified
Level: Level 3

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2015

FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

Question

One of LB Ltd’s contracts has an agreed price of GHS 500 million and estimated total costs of GHS 400 million. The cumulative progress of this contract is:

Year ended	30 September 2011	30 September 2012
Costs incurred	160	290
Work certified and billed	150	320
Billing received	140	300

Based on the above, LB Ltd prepared and published its financial statements for the year ended 30 September 2011. Relevant extracts are:

STATEMENT OF PROFIT OR LOSS

Description	GHSm
Revenue	200
Cost of sales	(160)
Profit ((100 x 160/400))	40

STATEMENT OF FINANCIAL POSITION

Description	GHSm
Current assets: Amounts due from customers
Contract costs to date	160
Profit recognised	40
Total assets	200
Progress billings	(150)
Net assets	50
Contract receivables (150-140)	10

Required:

(ii) Explain why the above represents a change in accounting estimate rather than a change in accounting policy. (2 marks)

LB Ltd also sells building materials to other contractors from its warehouse and is considering setting up another retail branch in a different part of the country.

The directors have been told that the branch can be run directly through the head office or set up as a separate entity, but are not sure how the accounting will work.

Required:
Explain to the directors how this transaction should be treated in the books of LB Ltd.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting estimates, Accounting policy, Construction Contracts, Contract Completion, Financial Reporting, IAS 11, Percentage of completion, Profit Calculation, Work certified
Level: Level 3

Topic: Financial Reporting Standards and Their Applications
Series: NOV 2015

Question Tag: Accounting policy

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BL – Nov 2019 – L1 – SA – Q4 – Sources of Nigerian Law

Identifying changes in accounting methods that do not give rise to changes in accounting policy

BL – Nov 2019 – L1 – SA – Q4 – Sources of Nigerian Law

Identifying changes in accounting methods that do not give rise to changes in accounting policy

FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

BL – Nov 2019 – L1 – SA – Q4 – Sources of Nigerian Law

Identifying changes in accounting methods that do not give rise to changes in accounting policy

BL – Nov 2019 – L1 – SA – Q4 – Sources of Nigerian Law

Identifying changes in accounting methods that do not give rise to changes in accounting policy

FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

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Identifying changes in accounting methods that do not give rise to changes in accounting policy

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Identifying changes in accounting methods that do not give rise to changes in accounting policy

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FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

You're reporting an error for "FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications"

FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

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Identifying changes in accounting methods that do not give rise to changes in accounting policy

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Identifying changes in accounting methods that do not give rise to changes in accounting policy

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FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

You're reporting an error for "FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications"

FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications

This question involves recalculating profit and financial position based on a change in the method for determining contract completion and explaining the difference between accounting estimates and policies.

You're reporting an error for "FR – Nov 2015 – L2 – Q4b and c- Financial Reporting Standards and Their Applications"

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