IAS 10, IAS 37, IFRS 15_07.07.2025

IFRS Knowledge Test

This set of questions is designed to assess the ability to correctly apply International Financial Reporting Standards (IFRS) in practical situations.

The tasks focus on understanding accounting principles and accurately reflecting transactions and events in financial statements.

Multiple-choice answers allow selecting the correct option in accordance with the requirements of the relevant standards.

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1. 🔎 Events After the Reporting Period (IAS 10)

Company "Geden" prepares financial statements for the 12 months ended December 31, 2024.

📅 On January 10, 2025, a flood occurred at the company’s warehouse. According to a technical expert’s report, the flooding was caused by ground subsidence that had been occurring over the last months of 2024 at the site where the warehouse is located.

📦 Inventory stored in the warehouse at the time of the flooding was sold in late January 2025 at a price equal to 50% of its cost.

📘 Question: How should these events be classified in accordance with IAS 10 Events After the Reporting Period?

a) Sale of inventory below cost — adjusting event, identification of ground subsidence — non-adjusting event;

b) Sale of inventory below cost — non-adjusting event, identification of ground subsidence — adjusting event;

c) Sale of inventory below cost and identification of ground subsidence — adjusting events;

d) Sale of inventory below cost and identification of ground subsidence — non-adjusting events.

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2. 🔎 Revenue Recognition (IFRS 15)

Company "Alpha" specializes in manufacturing aligners for orthodontists.

Based on a treatment plan provided by the doctor, the company produces an initial set of 20 aligners and delivers it to the doctor along with a transfer-acceptance document.

📄 Under the contract terms, the doctor is entitled to request additional corrective aligners free of charge for treatment adjustments, which typically last about 12 months.

📦 Alpha also manufactures and sells corrective aligners to doctors who previously ordered initial sets from other suppliers.

💰 Payment for the products is made within five working days from the signing of the transfer-acceptance document.

📘 Question: How should Company "Alpha" account for the obligation to provide free corrective aligners under IFRS 15?

a) Recognize a provision for the estimated cost of producing corrective aligners;

b) Develop a separate accounting policy and apply it consistently;

c) Allocate the transaction price between the obligation to produce the initial set and the obligation to provide corrective aligners;

d) Recognize all revenue upon signing the transfer-acceptance document, and upon delivery of corrective aligners, reduce revenue by the direct cost of their production.

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3. 🔎 Provisions (IAS 37)

Company "Alpha" has faced significant financial difficulties in recent years, necessitating a revision of its strategic course.

On December 31, 2024, the new management approved and communicated to all employees a recovery plan that includes the following measures:

📉 Staff optimization starting in 2026, with expected severance payments of 25 million CU.

⚠️ The plan does not specify the employees or departments subject to reduction.

🎓 Retraining of certain employees, planned for early 2025, with an estimated cost of 10 million CU.

✔️ The list of these employees is included in an appendix to the approved plan.

📘 Question: What is the amount of the provision Company "Alpha" should recognize as of December 31, 2024, in accordance with IAS 37 Provisions, Contingent Liabilities, and Contingent Assets?

a) 25 million CU;

b) 35 million CU;

c) 10 million CU;

d) 0 million CU.

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4. 🔎 Investments in Associates and Elimination of Unrealized Profit – IAS 28

Entity A holds 60% of the share capital of its subsidiary B. In turn, company B holds 30% of the share capital of entity G.

📌 Company B exercises significant influence over G, and therefore G is treated as an associate in the consolidated financial statements of A.

📈 Relevant financial data:

The net profit of G for the year ended December 31, 2024, is 100 million currency units.

As of December 31, 2024, G sold goods to company A with a profit of 20 million currency units, and these goods were still in A’s inventory at the reporting date.

📘 Question: What is the amount of the associate’s profit that should be recognized in the consolidated financial statements of entity A for the year ended December 31, 2024, in accordance with IAS 28?

a) 6 million CU;

b) 14.4 million CU

c) 18 million CU

d) 26.4 million CU

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