PAS 23 - Borrowing Costs

1. According to PAS 23, borrowing costs that do not directly relate to acquisition, construction or
production of a qualifying asset are expensed

2. What is qualifying asset?

3. Which of the following is a qualifying asset?

a. Investment property measured at fair value

b. Building that is ready for its intended use upon purchase

c. Inventories that are routinely produced in large quantities on a continuous basis

d. An application software (intangible asset) that takes 3 years to develop

4. In which of the following instances is the capitalization of borrowing costs under PAS 23 would most
likely be suspended?

a. Construction is temporarily stopped for the curing of the concrete

b. Active development is stopped to give time for the engineers to reevaluate a design flaw

c. The construction of a bridge is disrupted by troubled waters

d. The construction of a building is discontinued because it is condemned by the government. The

5. Capitalization is suspended during extended periods in which active development is interrupted

6-7. On Jan 1, 20x1, Concepti had the following general borrowings. A part of the proceeds was used to
finance the construction of a qualifying asset:

12% bank loan (1.5 year) - P1,000,000

10% bank loan (3-year) - P8,000,000

Expenditures made on the qualifying asset were as follows:

Jan 1 - P5,000,000

March 1 - P4,000,000
August 31 - P3,000,000

December 1 - P2,000,000

Construction was completed on December 31, 20x1

6. How much borrowings costs are capitalized to the cost of the constructed qualifying asset?

a. 1,045,000

b. 920,000 (12%x1M)+(10%x8M)

c. 1,026,667

d. 970,900

7. How much is the cost of the qualifying asset on the initial recognition?

a. 15,045,000

b. 14,970,900

c. 14,920,000 (5M+4M+3M+2M+920)

d. 13,010,000
PAS 24-Related Party Disclosures

1. It is a person or an entity that is related to the reporting entity. Related party

2. It is a transfer of resources, services or obligations between a reporting entity and a related

3. It refers to persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including any director of that entity. Key management
personnel

4. Control, having more than 50% ownership of the company, has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities. The best example
of it is the parent-associate relationship. Is it true or not? False

5. Ms. Maria and Mr. Nathan share joint control over TGWEB, Inc. Which of the following are
related parties?

A. Ms. Maria and Mr. Nathan

B. TGWEB, Inc and Mr. Nathan

C. Both A and B

D. None of the above

1.) What is presumed to exist of investor holds, directly or indirectly 20% or more of voting power?

Significant influence

2.) Under equity method, what is initially recognized?

Equity investment at cost

3.) Give 2 indicator of significant influence out of five

Interchange of managerial personnel

Provision of essential technical information

4.) Is less than 20% ownership interest has control over the investee? True or False.

5.) Some cases, an investor didn't even reach the 20% above requirement in ownership interest,
therefore, is it automatic that the significant influence is not present at all?

Yes or no and why? No, it is presumed that the investor does not have significant influence, unless such
influence can be clearly demonstrated. The presence of one or more of the indicators set out in the
earlier paragraph may indicate that an investor exercises significant influence over a less than 20 per
cent-owned corporate investee. Decisions regarding the appropriateness of applying the equity method
for a less than 20 per cent-owned corporate investee require careful evaluation of voting rights and their
impact on the investor's ability to exercise significant influence.

6-7) On August 12, 2022, Family Mart Company acquires 30% interest in Molly Ventures Corp. for
P550,000. Molly Ventures Corp. reports profit of P150,000 and declares dividends of 65,000.

Compute for the investment in associate on December 31,2022.

150k x 30% = 45k – (65kx30%) = 25.5k + 550k = 575,500

150kx10% = 15k – (6500x10%) = 8.5k + 550k = 558,500

1. PAS 26 complements PAS 19. (TRUE OR FALSE)

2. Such Hybrid plans are considered defined benefit plans for the purposes of this this standard the PAS
26.

3. Funding refers to transfer of assets to an entity separate from the employer’s entity to meet

Present obligations for the payment of retirement benefits. (TRUE OR FALSE)

4. Hybrid plans have characteristics of both defined contribution plan and defined benefit plan

5. Financial statements of the defined contribution plan shall contain: (3)

A statement of net assets available for benefits and a description of the funding policy.

6. Retirement benefit plans are arrangements whereby an entity provides benefits for employees on or
after termination of service.

7. Plan assets are measured at fair value or market value. (TRUE OR FALSE)
PAS 27

1. PAS 27 does not mandate which entities should produce consolidated financial statement. True or
False

2. When is PAS 27 applied?

Accounting for investments in subsidiaries, jointly ventures, and associates when an entity elects, or is
required by local regulations, to present separate (non-consolidated) financial statements.

3. PAS 27 the accounting and disclosure requirements for which entities?

Subsidiaries, joint ventures and associates

4. In preparation of Separate Financial statements in accordance with all applicable PFRS, investment in
subsidiaries, associates or joint venture are accounted for either, what?

At cost or in accordance with PAS 39 Financial Instruments: Recognition and Measurement or PFRS 9
Financial Instruments.

5. It is a business arrangement in which two or more parties agree to pool their resources for the
purpose of accomplishing a specific task.

Joint Venture

6. PAS 27 is applied by investor entities if they are exempted from consolidation requirements provided
by which PFRS? PFRS 10

7. Separate Financial statements are presented in addition to?

Consolidated financial statements or in addition to the financial statements of an investor that does not
have controlled entities but has investments in associates or joint ventures in which the investments in
associates or joint ventures are required by IPSAS 36 to be accounted for using the equity method
1. Interest expense, lease liabilities and exchange differences are examples of ____?

- borrowing costs

2. The core principles of PAS 23 contains that?

- Borrowing costs that are attributable to the acquisition, construction or production of qualifying asset
from part of the cost of that asset. Other borrowing costs are expensed when incurred.

3. What formula will be used when computing for the qualifying asset financed through specific
borrowings?

- Interest expense on specific borrowing less investment income earned on specific borrowing =
borrowing cost eligible for capitalization.

4. In preparation of financial statements, qualifying assets are being segregated from the other assets.
True or false?

- False

5. Commencement of capitalization happens when all of the conditions are being met. The following
conditions states that;

a. the entity incurs expenditures for the asset

b. The entity incurs borrowing costs

c. It undertakes activities that are necessary to prepare the asset for its intended use or sale.
PAS 24 Related Party Disclosure

1. Trulaloo or Eclavoo- RPD 24 is required for the Financial Statements to make sure that it complies
with the standard and reasonable assurance of compliance to protect the public.

Answer: Truelaloo

2. Truelaloo or Eclavoo- Necessary disclosure of PAS 24 does not prescribe a form of paragraph, it only
prescribes the necessary amounts.

Answer: Eclavoo, due because that even a paragraph form is prescribe by PAS 24 to be disclosed, the
nature and form of it should be.

3. Scenario: What if you only have 19% and below investment, is it possible for you to have a significant
influence? Yes or No, justify your answer.

Yes, because there are indications to be considered in this significant influence like; representations in
the board of directors, Participation in policy making, Materials transactions between investor and
investee, Interchange of managerial personnel, and Provision of essential technical information.

4. which of the following are not related parties?

a. A parent and its subsidiaries.

b. Two or more subsidiaries with the same parent.

c. A company and its Chief Executive Officer.

d. Two co-venturer of a common joint venture business.

5. Which of the following best indicates that two parties are related for purposes of PAS24?

a. One party is larger than the other.

b. The parties are a parent and a subsidiary.

c. One party has the ability to affect the financial and operating decisions of the other party through
control, significant influence or joint control.

d. One party is in the private sector and the other is a government regulatory body.

6. Which of the following is not a required disclosure under PAS 24?

a. Relationship between parent and subsidiaries

b. Key management personnel compensation

c. Related party transactions (in the separate financial statements

d. Related party transactions (in the consolidated financial statements)

1. It is the assets of a pension plan or long-term employee benefit funds for the purpose of paying
benefits to employees.

- Plan Assets

2. The financial statement of a retirement benefit plan, whether defined contribution plan or defined
benefit plan, does not include which of the following?

a. Statement of cash flows

b. Net assets available for benefits

c. Statement of changes in net assets available for benefits

d. Accompanying notes to financial statement

3. What Philippine Accounting Standard complements PAS 26?

- PAS 19

4. What is the main difference between the financial statements of a defined contribution plan and a
defined benefit plan?

a. The financial statement of a defined contribution plan include a statement of net asset available for
benefits

b. The financial statement of defined benefit plan shows information on the actuarial present value of
promised retirement benefit

c. The financial statement of defined contribution plan include a statement of changes in net assets
available for benefits

5. The actuarial present value of retirement benefits is the present value of expected payments by a
retirement benefit plan existing to past employees, attributable to service already rendered.

(True or False) – True

6. Retirement benefit plan is also called

- Pension schemes, superannuation schemes or retirement benefit schemes.

1. Pas 27 prescribes the accounting and disclosure requirements for investments in ____, _____, and
_____ when an entity prepares separate financial statements.

2. True or False. PAS 27 mandates which entities should produce separate financial statements.

3. What are the two instances when will the entity shall apply PAS 27?

4. According to PAS 27, investments in subsidiaries, associates or joint venture are accounted for in the
separate financial statements

a. at cost

b. in accordance with PFRS 9 Financial Instruments.

c. using the equity method under PAS 28 Investments in Associates and Joint Ventures.

d. any of these, as a matter of accounting policy choice.

4. Dividends from a subsidiary, associate or joint venture are recognized in ________ when the entity’s
right to receive the dividends is established.

Answer:

1. subsidiaries, associates, joint venture

2. False, does not mandate

3. when it elects or when it is required by local regulations

4. d. any of these as a matter of accounting policy choice.

5. profit or loss
PAS 28 Questions and Answers.

1. If cost is greater than fair value of the interest acquired, excess is _______________.
 Goodwill

2. Give at least three proofs that an investor has significant influence over the investee.
• Any of the following may provide evidence of the existence of significant
influence:
a. Representation on the board of directors or equivalent governing body of the
investee;
b. participation in policy-making processes, including participation in decisions
about dividends or other distributions;
c. Material transactions between the entity and its investee;
d. Interchange of managerial personnel; or
e. Provision of essential technical information

3. What is the effect of the distribution received from an investee on investment in an

4. How much is the ownership interest of an investor in a joint venture?

5. Does preference shareholders have significant influence over the investee? Explain.
 No, because only ordinary shareholders have voting rights. If the investor
doesn’t have voting power, it doesn’t have significant influence.

6. If an investor has more than 50% ownership interest, what accounting treatment shall
the investor use?
 Acquisition Method

7. If the investee has an outstanding cumulative preference share, the investor computes
its share of profits or losses after ______________________________________.
 Deducting one-year dividends on those shares.