Cheat sheets

One-page sheets for the exam: the lecture diagrams first, then the rules, proformas and exam traps for every topic in your module. Print them or save them as a PDF.

IAS 16 & IAS 38: cost model vs revaluation model (from lecture notes)

An asset bought at cost, then its value goes up, falls, and recovers. What goes in the accounts?

Cost model (IAS 16 / IAS 38)Asset stays at cost less depreciation and impairment. Rises in value are ignored. Falls below cost are impairment losses in P/L.

Revaluation modelAsset goes to fair value. Rise above cost → OCI (revaluation surplus). Fall: use up the surplus first, then the rest to P/L. IAS 38 only if there is an active market.

Impairment isn't reversible: US + GWUnder US GAAP an impairment is never reversed. For goodwill it is never reversed under IFRS either.

Read it step by step (cost model)

You buy land for £100. It goes in the accounts at £100. That's the dashed "Cost" line.
The land becomes worth £150. Under the cost model you do nothing. You haven't sold it, so the £50 isn't real money yet. That's why the bump is crossed out.
The land drops to £80. Now it's worth less than you paid. You must write it down to £80 and record a £20 loss in P/L ("P/L (20)" in the box). Rule of thumb: bad news now, good news only when it's real.
The land recovers. Under IFRS you can undo the £20 loss, but only back up to the original £100, never higher.
Crossed out "P/L 20": under US rules, or for goodwill, you are not allowed to undo it. The loss stays forever.
Crossed out "80": under IFRS the land doesn't stay at 80, because the loss gets reversed when the value comes back.

Words in plain English

Cost: What you paid for the asset. The dashed line.
Carrying amount: The number the asset is shown at in the accounts.
Fair value: What it would sell for today.
Unrealised gain: It's worth more, but you haven't sold it, so you haven't actually got the money.
P/L (profit or loss): The income statement. Anything here changes this year's profit.
OCI (other comprehensive income): A separate section under profit. Gains here do NOT count as profit.
Revaluation surplus: A "savings jar" in equity (a reserve) where OCI gains on assets are kept.
Equity: What belongs to the owners: share capital + reserves.
Impairment: The asset is worth less than the books say, so you write it down. That's a loss.
Reversal: The value comes back up, so you undo some of the old write-down.
US GAAP: The American accounting rules (IFRS is the international one you study).
GW (goodwill): The extra paid when buying a whole company, for its name, customers etc.

One-line summary: Cost model = stay at what you paid. Ignore rises. Record falls as a loss. Under IFRS you can undo the fall (up to cost), but not under US rules or for goodwill.

Revaluation model: where do gains and losses go? (IAS 16 / IAS 38, from lecture notes)

Example: a building (cost £100). The curve shows value only; depreciation is explained below. The flat line is cost. Above it is the revaluation surplus (equity). Below it is profit or loss.

Going upAbove cost: credit the revaluation surplus (a reserve in equity), shown in OCI. If it reverses an earlier P/L loss, that part goes to P/L first.

Going downDebit the revaluation surplus for that asset first (OCI). Only the part below cost goes to P/L as an impairment loss.

Depreciation: yes!Depreciate the revalued amount over the remaining life (£150 ÷ 10 = £15 a year). Land is never depreciated.

ClassesRevalue the whole class of assets (all land, all buildings), not just one, so you can't cherry-pick. Keep it up to date.

Read it step by step (revaluation model)

You buy a building for £100 (10-year life). That's the dashed "Cost" line. Above the line = gains go to the savings jar (revaluation surplus). Below the line = losses hit profit (P/L).
① Worth £150: this time you DO update the accounts to £150. The £50 gain goes into the revaluation surplus via OCI, not into profit, because you haven't sold it.
② Falls back to £100: take the £50 back out of the savings jar first. The jar is now empty. Profit isn't touched.
③ Falls to £80: the jar is empty, so this £20 is a real loss. It's an impairment of £20 in P/L.
④ Rises back to £100: first undo the old £20 loss, so +£20 to P/L (it went through profit, so it comes back through profit).
⑤ Rises to £110: anything above cost goes back into the savings jar: +£10 to the revaluation surplus.
Yes, there is still depreciation. After revaluing, you depreciate the new value. Building revalued to £150 with 10 years left: £150 ÷ 10 = £15 a year to P/L (instead of £10 on the old cost). The extra £5 a year can be moved from the savings jar to retained earnings (Dr revaluation surplus £5, Cr retained earnings £5). That move does not touch profit. Land is the exception: land is never depreciated.
"Classes": if you revalue one building you must revalue all your buildings, so you can't just pick the ones that went up.

Words in plain English

Cost: What you paid for the asset. The dashed line.
Carrying amount: The number the asset is shown at in the accounts.
Fair value: What it would sell for today.
Unrealised gain: It's worth more, but you haven't sold it, so you haven't actually got the money.
P/L (profit or loss): The income statement. Anything here changes this year's profit.
OCI (other comprehensive income): A separate section under profit. Gains here do NOT count as profit.
Revaluation surplus: A "savings jar" in equity (a reserve) where OCI gains on assets are kept.
Depreciation: Spreading the asset's value as an expense over the years you use it.
Retained earnings: Profits kept in the business over the years (part of equity).
Equity: What belongs to the owners: share capital + reserves.
Impairment: The asset is worth less than the books say, so you write it down. That's a loss.
Reversal: The value comes back up, so you undo some of the old write-down.
US GAAP: The American accounting rules (IFRS is the international one you study).
GW (goodwill): The extra paid when buying a whole company, for its name, customers etc.

One-line summary: Above cost → savings jar (revaluation surplus, OCI). Below cost → P/L. Going down, empty the jar first. Coming back up, refill P/L first, then the jar. And keep depreciating the new value.

Lecture: exam questions and IFRS vs US GAAP (measurement models lecture)

What the lecturer said she likes to ask, in plain English.

Her favourite exam questions

How do you account for impairment under the revaluation model? First against the revaluation surplus for that asset (it can never go negative), then any remainder to profit or loss.
Must the revaluation model be used for all PPE? No, for a whole class (all land, all buildings, all machinery, all cars). Remember the word classes.
Is there depreciation under the revaluation model? Yes, on the revalued amount. Land is the exception: it is never depreciated.
Can intangibles be revalued? Only if there is an active market: very rare (taxi licences, fishing quotas, production quotas).
IAS 40 fair value model? All changes to profit or loss, no depreciation even for buildings, one model for all investment property.
IAS 41? No choice: fair value less costs to sell, all changes to profit or loss.

IFRS vs US GAAP: reversing impairment

IFRS: An impairment can be reversed when value recovers, but only back up to what the carrying amount would have been (never above cost under the cost model). Goodwill impairment is never reversed.
US GAAP: An impairment of assets held for use is never reversed.
Why the US bans it: Manipulation (creative accounting). A company could impair heavily now and reverse it just before asking a bank for a loan, to make profit look better when it matters.
Why the US approach is also flawed: Later depreciation is charged on the lower impaired amount, so later profits can look too high.
Her view: Both have problems. In an essay, give both sides.

Why companies avoid the revaluation model: depreciation on a higher value means lower profit. In her research only 8 of 600 companies used it, mostly for land. It’s more common in the UK, and ACCA tests it a lot.

Groups

Consolidated SoFP: the five workings (IFRS 3 and IFRS 10)

The proforma to learn by heart. Add the parent and subsidiary 100% line by line, then use these workings.

The workings

W1 Group structure: parent % and NCI %. Note the acquisition date.
W2 Net assets of S (at acquisition | at reporting date): share capital + share premium + retained earnings + fair value adjustments − extra depreciation on FV adjustments − PURP (if S sold). Difference = post-acquisition profit.
W3 Goodwill: consideration + NCI at acquisition − net assets at acquisition (W2) − impairment to date.
W4 NCI: NCI at acquisition + NCI % × post-acquisition profit − NCI % × goodwill impairment (fair value method only).
W5 Group retained earnings: P’s RE (100%) + P % × S’s post-acquisition profit − PURP (if P sold) − goodwill impairment (P % under fair value method, 100% under proportionate method) + share of associate’s post-acquisition profit.

Adjustments that come up every time

Consideration: Cash now; deferred cash at present value (unwinds to finance cost); shares at the parent’s market price on acquisition day; contingent consideration at fair value. Legal and advisory costs are expensed.
Fair value adjustments: Add to S’s net assets in W2 and to the asset line. Extra depreciation reduces post-acquisition profit.
Intragroup balances: Cancel receivable against payable. Cash in transit: add to cash first. Goods in transit: add to inventory first.
PURP in inventory: Mark-up 25% on cost: profit = selling price × 25/125. Margin 20%: profit = selling price × 20%. Reduce inventory. Seller decides W2 or W5.
Equity on the face: Parent’s share capital and share premium only; group RE; NCI.

Exam trap: Never add the subsidiary’s share capital or pre-acquisition reserves to the group. They are cancelled in goodwill.

Full topic: IFRS 3 and IFRS 10 · Group accounts

Consolidated statement of profit or loss (IFRS 10)

Add P and S line by line for the period of control, then strip out everything done inside the group.

Step by step

Add 100% of P and S, but only S’s results since acquisition (time-apportion if bought mid-year).
Intragroup sales: deduct the full amount from both revenue and cost of sales.
PURP: add the unrealised profit to cost of sales.
Extra depreciation on fair value adjustments: add to expenses.
Goodwill impairment for the year: add to operating expenses.
Remove intragroup dividends and interest (P’s investment income from S).
Split profit for the year: NCI = NCI % × S’s profit after the adjustments that belong to S; the rest is owners of the parent.

NCI share of profit: which adjustments?

Belongs to S (affects NCI): PURP when S is the seller; extra depreciation on S’s fair value adjustments; goodwill impairment under the fair value method (NCI %).
Belongs to P only: PURP when P is the seller; goodwill impairment under the proportionate method.
Associate: One line: “share of profit of associate” = A’s profit × group % − impairment − group % of PURP. Under IFRS 18 it sits in the investing category.

Exam trap: Time-apportioning: if S was bought 1 October and the year ends 31 December, include 3/12 of S’s revenue and expenses, and only 3/12 goes into NCI.

Full topic: Consolidated profit or loss

Associates: the equity method (IAS 28)

Significant influence (usually 20–50%) = one line in the SoFP and one line in profit or loss. Never add its assets line by line.

The two workings

Investment in associate = cost + group % × post-acquisition retained earnings − impairment − group % of PURP (if the associate holds the goods).
Group retained earnings also include group % × the associate’s post-acquisition profit − impairment.
Profit or loss: share of associate’s profit for the year (group % × profit after tax) − impairment for the year.
Dividends received from the associate: Dr Cash, Cr Investment. Not income in the group accounts.

Know these

Significant influence: Presumed at 20%+. Evidence: board seat, policy-making, material transactions, swapping managers, essential technical information.
Goodwill: Not shown separately: it is inside the cost of the investment.
Trading with the associate: Do not cancel the sales or balances. Only eliminate the group % of any unrealised profit.
Joint venture: Same equity method (IFRS 11).

Exam trap: Students often add the associate’s assets into the group SoFP. Only the single investment line appears.

Full topic: IAS 28

Assets

PPE: cost, depreciation and disposal (IAS 16)

What goes into cost, how to depreciate it and how to get it off the books.

Rules

Include in cost: purchase price + import duties − trade discounts + directly attributable costs (delivery, site preparation, installation, testing, professional fees) + PV of dismantling costs.
Exclude: admin and general overheads, staff training, opening ceremonies and advertising, abnormal waste, costs after the asset is ready to use.
Depreciate from when the asset is available for use, over its useful life, down to residual value. Land isn’t depreciated.
Review useful life, residual value and method each year. A change is a change in estimate: apply it prospectively.
Significant parts (e.g. an aircraft’s engines) are depreciated separately.
Disposal: profit or loss = proceeds − carrying amount, to profit or loss. Any revaluation surplus goes to retained earnings, not profit or loss.

Formulas

Straight line: (Cost − residual value) ÷ useful life
Reducing balance: Carrying amount × rate
Change in estimate: New charge = carrying amount now ÷ remaining life (less residual value)
Revaluation model: Whole class; keep up to date; depreciate the revalued amount over the remaining life. See the two lecture diagrams above.

Exam trap: Major inspections and overhauls can be capitalised as a component. Day-to-day repairs are expensed.

Full topic: IAS 16 · Depreciation

Impairment of assets (IAS 36)

An asset can’t be carried at more than you can get out of it.

Steps

Look for indicators at each reporting date. Test every year anyway for goodwill, intangibles with an indefinite life and intangibles not yet in use.
Recoverable amount = the higher of fair value less costs of disposal and value in use.
If carrying amount > recoverable amount, write down. Loss to profit or loss (or against revaluation surplus first for revalued assets).
For a cash-generating unit (CGU), allocate the loss: first to goodwill, then to the other assets pro rata to carrying amount.
No asset goes below the highest of its own fair value less costs of disposal, value in use and zero. Share any excess among the other assets.
Reversals: allowed (not for goodwill), up to what the carrying amount would have been with no impairment.

Indicators

External: Market value falls a lot; adverse changes in technology, market, economy or law; interest rates rise; net assets > market capitalisation.
Internal: Obsolescence or physical damage; plans to restructure or dispose; performance worse than expected.
Value in use: PV of future cash flows from the asset in its current condition (no future improvements or restructurings not yet committed), pre-tax discount rate.

Exam trap: Specifically damaged assets in a CGU are written down first, before the rest of the CGU loss is allocated.

Full topic: IAS 36

Intangible assets (IAS 38)

Identifiable, controlled, no physical substance, future economic benefits.

Rules

Research is always expensed.
Development is capitalised only when all six PIRATE criteria are met (from that date onward, never backdated).
Never recognise internally generated goodwill, brands, mastheads, publishing titles or customer lists.
Intangibles bought in a business combination are recognised separately at fair value, even if the seller had them off-balance sheet.
Finite life: amortise over useful life. Indefinite life: don’t amortise, test for impairment every year.
Revaluation only if there is an active market (rare).

PIRATE

P: Probable future economic benefits
I: Intention to complete and use or sell
R: Resources (technical, financial) to complete
A: Ability to use or sell
T: Technical feasibility
E: Expenditure can be measured reliably

Exam trap: Costs expensed before the criteria were met can’t be reinstated later.

Full topic: IAS 38

Borrowing costs (IAS 23)

Interest on money borrowed to build a qualifying asset is added to its cost.

Rules

Qualifying asset: takes a substantial period to get ready (a factory, a ship, a long-build property).
Start capitalising when all three happen: spending on the asset, borrowing costs incurred, and work in progress.
Suspend during long periods when active development stops.
Stop when substantially all the activities are complete.

Calculations

Specific loan: Actual interest for the capitalisation period − investment income earned on temporarily invested funds.
General borrowings: Expenditure × weighted average capitalisation rate (total general interest ÷ average general borrowings), for the months of capitalisation.
Example: £10m loan at 6%; work from 1 April to 31 December; £0.1m earned on surplus funds: 10m × 6% × 9/12 − 0.1m = £0.35m capitalised.

Exam trap: Interest during a planned delay that is a normal part of the process (e.g. letting concrete set) is not a suspension.

Full topic: IAS 23

Investment property (IAS 40)

Held to earn rent or for capital growth, not used by the company or sold in the ordinary course of business.

Rules

Initially at cost (including transaction costs).
Then choose for all investment property: fair value model (changes to profit or loss, no depreciation) or cost model (as IAS 16, disclose fair value).
Property leased to a subsidiary is investment property in the lessor’s own accounts but owner-occupied in the group accounts.
If part is let and part owner-occupied: split if the parts could be sold separately; if not, investment property only if the owner-occupied part is insignificant.

Transfers (fair value model)

Owner-occupied → investment property: Apply IAS 16 up to the date of change. Fair value difference is treated as a revaluation: gain to OCI (revaluation surplus).
Inventory → investment property: Difference between carrying amount and fair value to profit or loss.
Investment property → owner-occupied or inventory: Fair value at the change date becomes deemed cost.

Exam trap: Don’t depreciate investment property under the fair value model, even buildings.

Full topic: IAS 40

Agriculture (IAS 41)

Living animals and plants, measured at fair value.

Rules

Biological assets: fair value less costs to sell at initial recognition and every reporting date. All gains and losses (including on day one) to profit or loss.
Agricultural produce (milk, wool, harvested grapes): fair value less costs to sell at the point of harvest, then it becomes inventory under IAS 2.
Bearer plants (tea bushes, vines, fruit trees): IAS 16. The produce growing on them is IAS 41.
The land is IAS 16 or IAS 40, never IAS 41.
An unconditional government grant for a biological asset at fair value less costs to sell: income when receivable.

Splitting the gain

Price change: Change in fair value per unit × opening number of animals
Physical change: Growth, births, ageing at the new price
Example: Dairy herd gain from the IAS 41 page: 6,400. Look at the worked example there.

Full topic: IAS 41

Government grants (IAS 20)

Recognise a grant only when there is reasonable assurance the conditions will be met and it will be received.

Rules

Use the income approach: match the grant to the costs it pays for, in profit or loss.
Grant for an asset: either deferred income released over the asset’s life, or deduct it from the asset’s cost (lower depreciation).
Grant for expenses: credit to profit or loss (as other income or as a deduction from the expense) when the costs are recognised.
Grant to repay: a change in estimate. Use any unamortised deferred income first, the rest to profit or loss.

Example

Facts: Machine £100,000, 5-year life, grant £20,000.
Deferred income method: Depreciation 20,000; grant income 4,000; deferred income 16,000 after year 1 (split current 4,000 / non-current 12,000).
Netting method: Cost 80,000; depreciation 16,000. Same profit effect.

Full topic: IAS 20

Liabilities, tax and financial instruments

Provisions and contingencies (IAS 37)

Three tests for a provision, then decide between provision, disclosure or nothing.

Is it a provision?

A present obligation (legal or constructive) from a past event.
An outflow of resources is probable (more likely than not).
A reliable estimate can be made.
All three → provision: Dr Expense (or asset, for dismantling), Cr Provision.
Measure at the best estimate: most likely outcome for one obligation, expected value for a large population. Discount if material; the unwinding goes to finance cost.

Decision table

Probable and reliable: Provide
Possible, or not reliable: Contingent liability: disclose
Remote: Nothing
Contingent asset: Virtually certain: recognise. Probable: disclose. Otherwise nothing.
Special cases: Onerous contract: provide for the lower of cost to fulfil and penalty to exit. Restructuring: only once there is a detailed formal plan and it has been announced or started; only direct costs (not retraining, relocation, marketing). Future operating losses: never.

Exam trap: A board decision alone isn’t an obligation. Nothing has been communicated, so there’s no valid expectation yet.

Full topic: IAS 37

Deferred tax (IAS 12)

Deferred tax smooths the tax charge when accounting and tax rules recognise things at different times.

Steps

Temporary difference = carrying amount − tax base.
Asset with carrying amount > tax base (e.g. accelerated capital allowances, revaluation) → taxable difference → deferred tax liability.
Carrying amount < tax base, or liability not yet deductible (e.g. a provision, tax losses) → deductible difference → deferred tax asset, only if future taxable profits are probable.
Deferred tax = temporary difference × the rate expected when it reverses (enacted or substantively enacted).
Book the movement in the balance: to profit or loss, unless the item went to OCI (e.g. a revaluation), then to OCI.

Know these

Not discounted: Deferred tax is never discounted.
Exception: No deferred tax on the initial recognition of goodwill.
Groups: Fair value adjustments and PURP in consolidation create temporary differences too.
Example: Machine: carrying amount 80,000, tax base 50,000, rate 25% → deferred tax liability 7,500. Last year 6,000 → charge to P/L 1,500.

Exam trap: Current tax over- or under-provided last year is adjusted in this year’s tax charge, not restated.

Full topic: IAS 12

Leases (lessee) (IFRS 16)

Almost every lease goes on the balance sheet: a right-of-use asset and a lease liability.

Steps

Lease liability = PV of lease payments not yet paid, at the rate implicit in the lease (or incremental borrowing rate). Include payments in reasonably certain extension periods.
Right-of-use asset = lease liability + payments made at or before the start + initial direct costs + estimated dismantling costs − lease incentives received.
Depreciate the asset over the shorter of the lease term and useful life (useful life if ownership transfers).
Liability table, payments in arrears: opening + interest − payment = closing. Payments in advance: opening − payment, then + interest.
Split the closing liability into current (next year’s reduction in capital) and non-current.

Know these

Exemptions: Short-term (12 months or less, no purchase option) and low-value assets: expense on a straight-line basis.
Sale and leaseback: If it’s a sale under IFRS 15: derecognise the asset; the right-of-use asset is the proportion of the old carrying amount kept; recognise only the gain on the rights transferred. If not a sale: keep the asset and treat the cash as a loan (IFRS 9).
Lessors: Finance lease (risks and rewards transferred): receivable. Operating lease: keep the asset, rent is income.

Exam trap: Advance payments mean the first payment reduces the liability before any interest is charged.

Full topic: IFRS 16 · New lease job task

Financial instruments (IFRS 9 and IAS 32)

Classify, measure, and impair.

Classification

Debt asset: amortised cost if held to collect and the cash flows are solely payments of principal and interest (SPPI). FVOCI if held to collect and sell, plus SPPI (gains recycled on disposal). Otherwise FVTPL.
Equity investment: FVTPL by default. Irrevocable election for FVOCI if not held for trading: no recycling, dividends to P/L.
Financial liabilities: mostly amortised cost.
Transaction costs: added to (or deducted from) the initial amount, except for FVTPL items, where they’re expensed.
Amortised cost table: opening + interest at the effective rate − cash at the coupon rate = closing.

Impairment: expected credit losses

Stage 1: No significant increase in credit risk: 12-month expected losses.
Stage 2: Significant increase in credit risk: lifetime expected losses.
Stage 3: Credit-impaired: lifetime losses, interest on the net amount.
Trade receivables: Simplified approach: lifetime losses from day one (often a provision matrix).
Liability or equity? (IAS 32): Can’t avoid paying cash → liability. Convertible bond: liability = PV at the rate for similar debt without conversion; equity = the rest.

Exam trap: FVOCI equity gains never go to profit or loss, not even on sale.

Full topic: IFRS 9 · IAS 32 and IFRS 7

Revenue, presentation and reporting

Revenue: the five steps (IFRS 15)

Recognise revenue when control of goods or services passes to the customer.

The five steps

Identify the contract (approved, rights and payment terms clear, commercial substance, collection probable).
Identify the performance obligations: each distinct good or service.
Determine the transaction price: include variable consideration only if a significant reversal is highly unlikely; adjust for a significant financing component.
Allocate the price to each obligation using standalone selling prices.
Recognise revenue when (or as) each obligation is satisfied.

Over time or at a point in time?

Over time if any one: Customer receives and uses the benefit as you perform; customer controls the asset as it’s built; no alternative use and you have an enforceable right to payment for work done.
Otherwise: At a point in time: look at legal title, physical possession, risks and rewards, acceptance and the right to payment.
Principal or agent: Agent: revenue is just the commission.
Contract costs: Incremental costs of winning a contract (e.g. sales commission) are capitalised if expected to be recovered.

Exam trap: A free service bundled with a product is a separate performance obligation and gets part of the price.

Full topic: IFRS 15

Statement of cash flows (IAS 7)

Indirect method proforma and the workings examiners love.

Cash from operating activities (indirect)

Profit before tax (from 2027, under IFRS 18: operating profit).
Add back depreciation, amortisation, impairment and losses on disposal; deduct gains on disposal.
Add back finance costs; deduct investment income (they’re shown elsewhere).
Working capital: increase in inventory or receivables → deduct; increase in payables → add.
= cash generated from operations; then deduct interest paid and tax paid where classified here.

Investing, financing and the usual workings

Investing: Buying PPE and intangibles, proceeds from disposals, interest and dividends received.
Financing: Shares issued, loans raised and repaid, lease payments (capital), dividends paid.
PPE working: Opening + additions + revaluation − depreciation − disposals (carrying amount) = closing. Find the missing figure.
Tax paid working: Opening tax liabilities (current + deferred) + P/L charge − closing = tax paid.
From 2027 (IFRS 18 changes to IAS 7): For most companies the choices go: interest paid → financing, interest and dividends received → investing, dividends paid → financing.

Exam trap: New leases are non-cash: leave them out of investing, and only the payments appear (in financing).

Full topic: Statement of cash flows · Cash flow statement explained

Presentation: IAS 1 and IFRS 18 (IFRS 18 from 1 January 2027)

IFRS 18 replaces IAS 1 for profit or loss presentation from 2027. The balance sheet rules carry over.

IFRS 18 profit or loss

Every income and expense goes in a category: operating, investing, financing, income taxes or discontinued operations.
Two new required subtotals: operating profit and profit before financing and income taxes.
Management-defined performance measures (e.g. “adjusted operating profit”) are disclosed in one note, reconciled to the nearest IFRS subtotal.
Better aggregation and disaggregation: no big “other” lines without explanation. If expenses are shown by function, disclose depreciation, amortisation, staff costs and impairments by nature.

Still true (IAS 1 rules carried into IFRS 18)

Current: Expected to be settled within 12 months or the normal operating cycle, held for trading, or no right to defer settlement for 12 months after the reporting date.
Going concern: Assess at least 12 months ahead. Material uncertainties are disclosed.
Offsetting: Not allowed unless a standard requires or permits it.
Example: The IFRS 18 worked example: operating profit 190, profit before financing and income taxes 215.

Full topic: IAS 1 and IFRS 18

Policies, estimates, errors and events after the year end (IAS 8 and IAS 10)

Two standards examiners often combine in one scenario.

IAS 8

Change in accounting policy (only if a standard requires it, or it gives more relevant and reliable information): apply retrospectively, restate comparatives and opening retained earnings.
Change in estimate (useful life, residual value, depreciation method, allowance for receivables): prospectively, this year and future years.
Prior period error: correct retrospectively, restate the comparatives, adjust opening retained earnings of the earliest period shown.
No standard? Use judgement: similar standards, then the Conceptual Framework.

IAS 10: adjusting or not?

Adjusting: More evidence about conditions at the year end: court case settled; a customer at the year end goes bankrupt; inventory sold below cost after the year end; fraud or errors discovered; final price of assets bought before the year end.
Non-adjusting (disclose if material): Conditions arising after the year end: fire or flood; big acquisition; market value fall in investments; restructuring announced; share issue; dividends declared after the year end.
Going concern: If it’s no longer appropriate after the year end, the whole basis changes: never just a disclosure.

Exam trap: A change from straight-line to reducing balance depreciation is a change in estimate, not policy.

Full topic: IAS 8 · IAS 10

Earnings per share (IAS 33)

Basic EPS, the share issues that change it, and diluted EPS.

Basic EPS

Earnings = profit attributable to the parent’s ordinary shareholders (after NCI and after preference dividends on equity preference shares).
Shares = weighted average number in issue during the year.
Full-price issue: time-weight from the issue date.
Bonus issue: treat as if it happened at the start of the earliest period; restate the comparative.
Rights issue: bonus fraction = fair value before the issue ÷ TERP. Apply it to shares before the issue; comparative EPS × TERP ÷ fair value.

Formulas

TERP: (Shares before × market price + new shares × issue price) ÷ total shares after
Diluted: convertibles: Add back interest saved (net of tax) to earnings; add the shares on conversion.
Diluted: options: Free shares = options × (average market price − exercise price) ÷ average market price. Earnings unchanged.
Anti-dilutive: Ignore anything that would increase EPS.

Full topic: IAS 33

Foreign currency (IAS 21)

Individual transactions, then translating a foreign subsidiary.

Transactions in your own accounts

Record at the spot rate on the transaction date (an average rate is fine if rates don’t move much).
At the year end, retranslate monetary items (cash, receivables, payables, loans) at the closing rate.
Non-monetary items (PPE, inventory) stay at the historical rate (or the rate when fair value was measured).
Exchange differences on settlement and retranslation → profit or loss.

Translating a foreign subsidiary

Assets and liabilities: Closing rate (goodwill too).
Income and expenses: Actual rate or average rate for the year.
Equity at acquisition: Historical rate.
Exchange differences: To OCI (translation reserve), split between group and NCI; reclassified to profit or loss when the subsidiary is sold.

Exam trap: Functional currency is decided by the primary economic environment (where it sells, its costs, its financing), not by where it is located.

Full topic: IAS 21

Conceptual Framework (2018 Conceptual Framework)

The definitions every essay question leans on.

Elements

Asset: a present economic resource controlled by the entity as a result of past events. (Economic resource = a right that has the potential to produce economic benefits.)
Liability: a present obligation of the entity to transfer an economic resource as a result of past events.
Equity: the residual interest after deducting all liabilities.
Income and expenses: increases or decreases in assets or liabilities that change equity, other than contributions from or distributions to owners.

Qualitative characteristics and measurement

Fundamental: Relevance (predictive and confirmatory value, materiality) and faithful representation (complete, neutral, free from error). Prudence supports neutrality.
Enhancing: Comparability, verifiability, timeliness, understandability.
Measurement bases: Historical cost, or current value: fair value, value in use (fulfilment value for liabilities), current cost.
Example: Machine: historical cost 96,000; current cost 112,000; value in use 104,132.
Status: Not a standard. It doesn’t override any IFRS.

Full topic: Conceptual Framework

Everything else

One line on every other standard (quick reference)

The less-examined standards in your module list, in one line each. Click a standard for the full page.

Standard	The one thing to remember
IAS 2	Lower of cost and NRV, item by item. FIFO or weighted average; no LIFO.
IFRS 5	Held for sale: lower of carrying amount and FV less costs to sell; stop depreciating. Discontinued operation: one post-tax line.
IAS 19	DB plan: service cost + net interest to P/L; remeasurements to OCI. DC plan: expense contributions.
IFRS 2	Equity-settled: grant-date fair value, spread over vesting, Cr equity. Cash-settled: liability remeasured each year.
IAS 24	Disclosure only. Parent–subsidiary always; KMP pay in 5 categories; a shared director alone isn’t related.
IFRS 11	Joint operation: your share of assets and liabilities. Joint venture: equity method. Replaced IAS 31.
IAS 27	Parent’s own accounts: investments at cost, IFRS 9 or equity method.
IAS 32 / IFRS 7	Can’t avoid paying cash = liability. Split convertibles. IFRS 7: credit, liquidity and market risk disclosures.
IFRS 8	Management approach; 10% tests (revenue, profit, assets); reportable segments ≥ 75% of external revenue. Replaced IAS 14.
IFRS 12	Disclose judgements on control, material NCI, restrictions, and risks from unconsolidated structured entities.
IAS 34	Year-to-date approach; no smoothing of seasonal revenue; tax at the expected annual effective rate.
IFRS 1	Opening IFRS SoFP at the date of transition; adjustments to retained earnings; deemed cost exemption.
IAS 29	Restate non-monetary items with a general price index; gain or loss on net monetary position to P/L.
IAS 26	The pension plan’s own accounts: net assets available for benefits vs actuarial PV of promised benefits.
IFRS 6	Capitalise exploration and evaluation costs after getting the licence and before feasibility is proven.
IFRS 17	Fulfilment cash flows + contractual service margin (unearned profit). Onerous groups: loss at once.
IFRS 19	From 2027: eligible subsidiaries use full IFRS measurement with fewer disclosures.
IFRS 14 / IFRS 20	IFRS 20 (from 2029) replaces IFRS 14: regulatory assets and liabilities, shown separately, no offsetting.

Exam tip: in a discussion question, name the standard, state the rule, apply it to the facts, then conclude. Even one line from this table can earn the “identify the standard” mark.