ACCA FR Past papers - Section B: Q3

June 2019 sample exam

Q3 Section B

During the year ended 31 December 20X8, Linetti Co built an extension to its head office. The costs associated with the construction of the head office extension are as follows:

	$m
Land acquisition	10·0
Fees for environmental certifications and building permits	0·5
Architect and engineer fees	1·0
Construction material and labour costs (including unused materials)	6·6

At 30 September 20X8, the date when the head office extension became available for use, the cost of unused materials on site amounted to $0·5m. At that date, the total borrowing costs incurred on a loan which was used to specifically finance the head office extension amounted to $0·8m.

Linetti Co also acquired 100% of a subsidiary, Scully Co, on 1 January 20X8. The carrying amount of the assets of Scully Co in the consolidated financial statements of the Linetti group at 31 December 20X8, immediately before an impairment review, were as follows:

	$m
Goodwill	1·4
Brand name	2·0
Property, plant and equipment	6·0
Current assets (at recoverable amount)	2·4
	–––––
	11·8
	–––––

The recoverable amount of Scully Co was estimated at $9·6m at 31 December 20X8 and the impairment of the investment in Scully Co was deemed to be $2·2m.

At 31 December 20X9, the directors of Linetti Co decide to adopt the revaluation model of IAS 16 Property, Plant and Equipment for Linetti Co's property.

In accordance with IAS 16 Property, Plant and Equipment, which of the following statements is FALSE?

Pick 1 option

Each component part of the head office building is revalued separatelyIn subsequent years, the depreciation will be based on the revalued amount of the head office building as opposed to its costAny revaluation gain on the head office building is recognised in other comprehensive income and any revaluation loss is recognised in profit or lossThe residual value and the useful life of the head office building must be reviewed each year