MSA 01 Summer 2022: Iq School of Finance Msa 1 by Sir Ibrahim Iqsf - PK

IQ SCHOOL OF FINANCE MSA 1 BY SIR IBRAHIM IQSF.
PK
MSA 01 Summer 2022
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IQ SCHOOL OF FINANCE MSA 1 BY SIR IBRAHIM IQSF.PK
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MSA 01 Winter 2021
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MSA 01 summer 2021
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IFRS 09 – Financial Instruments
Heading Risk Procedures

Subsequent There is a risk • Inspect the agreement to evaluate the cash flow i.e. whether cash flow terms
Classification and that are solely payment of principal and interest on the principal amount
measurement management outstanding
may not have • Inquire with the management the reason for investment to evaluate the
classified the business model
financial asset • Inspect the minutes of the meeting of investment committee to evaluate the
as the intention for investment
requirement of • Reassess the investment that was made in previous year to corroborate
IFRS 09 i.e. management intention and business model
considering the • Perform subsequent event procedures to corroborate management intention
business model and business model
and • Ensure that accounting of transaction cost, effective interest rate and fair value
charateristics of gains and losses has been appropriately account for in accordance with the
contractual requirement of IFRS 09
cashflows. • Obtain Written representation from management
Impairment • -Understand and evaluate the management process to identify long
outstanding receivable and to estimate the allowance for doubtful debt to
determine whether it is appropriate in the circumstances and in accordance
with the applicable financial reporting framework.i.e. IFRS 09
• Perform test of controls over the recording of impairment
• -Obtain management working on allowance for doubtful debt and check

whether assumption such as model used, data input, PD and LGD used by
the management is reasonable
• Inspect the internal rating (if any) assigned by the company
• Inspect the external credit rating of the counter party to evaluate the LGD
and PD
• -Obtain debtors aging analysis and change in debtor days to identify long
outstanding receivable.
• -Check subsequent receipts to obtain evidence regarding the recoverability
• Inspect the management expert report for the fair value of the security
• Evaluate the adequacy of the expert work :

o Relevance and reasonableness of the expert finding
o Relevance and reasonableness of the assumption and methodology
used
o The relevance, completeness and accuracy of source data
• May consider to use the auditor expert
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Summer 2018
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LONG TERM CONTRACT
STUDENT BOX
Revenue Recognition
Revenue is recognised as control is passed, either over time or at a point in time. [IFRS 15:32]
Control of an asset is defined as the ability to direct the use of and obtain substantially all of the
remaining benefits from the asset. This includes the ability to prevent others from directing the use of
and obtaining the benefits from the asset. The benefits related to the asset are the potential cash flows
that may be obtained directly or indirectly. These include, but are not limited to: [IFRS 15:31-33]
using the asset to produce goods or provide services;
using the asset to enhance the value of other assets;
using the asset to settle liabilities or to reduce expenses;
selling or exchanging the asset;
pledging the asset to secure a loan; and
holding the asset.
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EVALUATION AUDIT RISK AUDIT PROCEDURES

As per IFRS 15 Revenue is There is a risk that management• Inspect the sales agreement
recognised as control is passed, may have recognised revenue to identify performance
either over time or at a point in and no performance obligation obligation and transaction
time. has been satisfied as per the price
requirement of IFRS 15 • Evaluate when then control
Control of an asset is defined as will be transferred or
the ability to direct the use of performance obligation will
and obtain substantially all of be satisfied by inspecting
the remaining benefits from the GDN and customer
asset. acceptance
The management has • Inquire with the
recognized revenue for those management the reason to
units which has not been recognised revenue
delivered • Evaluate the accounting
policy and ensure that it is
consitent with the
requirement of IFRS 15
As the management has billed There is a risk that management • Inspect the bill and hold
for December 2017 units but may recognised revenue at agreement to:
retain the physical possession of point of time or management o identify
the product until tranferred in may not allocate the transaction performance
future agaisnt the storage fee of price to performance obligation obligation and
Rs. 50,000. transaction price
The above arrangement is Bill o Evaluate whether
and hold arrangement and it control had been
needs to assess passed
• Whether control is o Evaluate customer
passed considering the has an ability to
fact that physical direct the use of an
posession of the goods assest and obtain
is with management substantially all the
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• The arrangement remaining benefits

includes 2 performance from the product
obligation and • Inspect the correspondence
recognition of revenue file with the customer to
shall be evaluated substantiate the reason for
separately because it is bill and hold arrangement
a distinct service • Inspect the warehouse to
ensure that:
o Product are
separately
idenfiable
o Ready for physical
transfer to
customer
5 Classification and measurement of financial assets
Subsequent to initial recognition, IFRS 9 requires all assets within its scope to be measured at: [IFRS
9:5.2.1]
• amortised cost (see 5.3);

• fair value through other comprehensive income (FVTOCI) (see 5.4); or
• fair value through profit or loss (FVTPL) (see 5.5).
Except for financial assets that are designated at initial recognition as at FVTPL, a financial asset is
classified on the basis of both: [IFRS 9:4.1.1]
• the entity’s business model for managing the financial assets (see 5.1); and
• the contractual cash flow characteristics of the financial asset (see 5.2).
The gain or loss on equity There is a risk that • Inquire with the
instruments can only be management may not have management the reason for
recognized in FVTOCI if at classified such investment
initial recognition the correctly and therefore any investment and whether
management makes an resulting gain or loss is the same has been
irrecoverable election to classified in correctly. classified as FVTOCI at the
designate equity instrument as date of recognition
FVTOCI
• Inspect the minutes of the
meeting of investment
committee to evaluate the
intention for investment i.e.
whether it s is held for
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tradingand classification of
investment
• Reassess the investment
that was made in previous
year to corroborate
management intention
• Perform subsequent event
procedures to corroborate
management intention and
business model such as the
same has not been disposed
off
SIC-32 Intangible Assets – Web Site Costs addresses the appropriate accounting treatment for
internal expenditure to develop, enhance and maintain a web site incurred by an entity (whether for
internal or external access). Specifically, the Interpretation addresses the application of IAS 38 to web
site development costs.
SIC-32 identifies the following stages of web site development: [SIC-32:2 & 3]
• Planning (including undertaking feasibility studies, defining objectives and

specifications, evaluating alternatives and selecting preferences);
• Application and Infrastructure Development (including obtaining a domain name,
purchasing and developing hardware and operating software, installing developed
applications and stress testing);
• Graphical Design (including designing the appearance of web pages);
• Content Development (including creating, purchasing, preparing and uploading
information, either textual or graphical in nature, on the web site before the completion
of the web site’s development. This information may either be stored in separate
databases that are integrated into, or accessed from, the web site or coded directly into
the web pages); and
• Operating (including maintaining and enhancing the applications, infrastructure,
graphical design and content of the web site).
The Interpretation states that: [SIC-32:7 & 8]
• a web site developed by an entity for its own use (whether for internal or external
access) is an internally generated intangible asset that is subject to the requirements of
IAS 38;
• future economic benefits, as envisaged by IAS 38’s criteria for recognition of internally
generated intangible assets, will be generated from a web site only when the web site is
capable of generating revenue. For example, the requirement may be satisfied when
the web site is capable of generating direct revenues from enabling orders to be placed;
and
• if the web site has been developed solely or primarily for promoting or advertising the
entity’s products and services, the entity will be unable to demonstrate that such a web
site will generate future economic benefits, and costs incurred on the development of
the web site should be expensed as incurred.
SIC-32 concludes as follows: [SIC-32:9]
• the nature of each activity for which expenditure is incurred (e.g. training employees
and maintaining the web site) and the web site’s stage of development or post-
development are evaluated to determine the appropriate accounting treatment
(additional guidance is provided in the appendix to SIC-32);
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• the Planning stage of a web site development is similar to the research phase and,
therefore, any expenditure incurred in this stage is recognised as an expense when it is
incurred;
• the Application and Infrastructure Development stage, the Graphical Design stage and
the Content Development stage are similar in nature to the development phase.
Therefore, expenditure incurred in these stages is recognised as an intangible asset if
the expenditure can be directly attributed and is necessary to creating, producing or
preparing the web site for it to be capable of operating in the manner intended by
management. For example, expenditure on purchasing or creating content (other than
content that advertises and promotes an entity’s own products and services) specifically
for a web site, or to enable use of the content (e.g. a fee for acquiring a licence to
reproduce) on the web site, is included in the cost of development when this condition
is met; and
• expenditure incurred in the Content Development stage, to the extent that content is
developed to advertise and promote an entity’s own products and services (e.g. digital
photographs of products), is recognised as an expense when incurred. For example,
when accounting for expenditure on professional services for taking digital photographs
of an entity’s own products and for enhancing their display, expenditure is recognised
as an expense as the professional services are received during the process, not when
the digital photographs are displayed on the web site.
In accordance with IAS 38:71 (expenditure on web site development that has previously been
recognised as an expense should not be recognised as part of the cost of the web site intangible asset
at a later date.
The Operating stage commences once the web site is available for use and, therefore, expenditure to
maintain or enhance the web site after development has been completed should be recognised as an
expense when it is incurred, unless it meets the criteria discussed at 4.3.1 (criteria for recognising
subsequent expenditure as an asset).SIC-32 indicates that the best estimate of a web site’s useful life,
for the purpose of amortisation, is short. [SIC-32:10]
Evaluation Audit risk Procedures

As the prioject is abandoned There is a risk that management • Inspect technical and
therefore it is an impairment may have wrongly capitalised feasibility report to
indication and impairment shall the expenditure incurred that ensure that website will
be recognised based on IAS 32 pertains to research phase generate futiure
Company further spent Rs. Or website may not meet the economic benefit
205,000 therefore expenditure recognition criteria • Obtain the breakup of
may not meet the recognition expenditure and
criteria or expenditure incurred evaluate the various
on various stages which stages such as:
determine the recognition o Planning
critera for expense and o Application and
capitalisation Infrastructure
Development
o Graphical
Design
o Content
Development
o Operating
o Select samples
from break up
and inspect
supporting
document to
ensure that
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expenditure
pertaining to
application and
infrastructure
development,
Graphical
Design
o Content
Development
is recognised
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LEASES
4.2.1 Requirement to assess whether a contract is, or contains, a lease
At inception of a contract, an entity is required to assess whether the contract is, or contains, a lease.
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration. [IFRS 16:9]Key aspects of this definition are
that:
• the asset that is the subject of a lease must be specifically identified; and
• the contract must convey the right to control the use of that identified asset for a period
of time.
For the purposes of IFRS 16:9, a 'period of time' may be described in terms of the amount of use of
an identified asset (e.g. the number of production units that an item of equipment will be used to
produce). [IFRS 16:10]An entity is required to assess whether a contract contains a lease at inception
of the contract, rather than at commencement of the lease term for an explanation of these terms).
8.4.1 Initial measurement of the right-of-use asset
8.4.1.1 Right-of-use asset to be measured initially at cost

At the commencement date, the right-of-use asset should be measured at cost. [IFRS 16:23]
For this purpose, cost comprises: [IFRS 16:24]
a. the amount of the initial measurement of the lease liability, as described in IFRS 16:26 (
b. any lease payments made at or before the commencement date), less any lease
incentives received for a definition of lease incentives);
c. any initial direct costs incurred by the lessee and
d. an estimate of costs to be incurred by the lessee in dismantling and removing the
underlying asset, restoring the site on which it is located or restoring the underlying asset
to the condition required by the terms and conditions of the lease, unless those costs are
incurred to produce inventories. The lessee incurs the obligation for those costs either at
the commencement date or as a consequence of having used the asset during a particular
period (
Note that security deposits are not included in the initial measurement of a right-of-use asset because
they do not meet the definition of a lease payment
for an illustration of the initial and subsequent measurement of a lessee's right-of-use asset and lease
liability.
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Winter 2017
In advance of my meeting with the client next week, I would like you to review all of
the above information and prepare a briefing note on any financial reporting and
auditing issues. For each issue identified you should:
(i) Explain the financial reporting issues and, where relevant, prepare calculations
for any additional adjustments that you identify from your review. (16 marks)
(ii) Evaluate the testing performed by Shahid Chowdry and explain any outstanding
audit issues. (08 marks)
(iii) List additional key audit procedures that should be performed before the audit
report is signed.
(11 marks)
Rental
In January 2017, the board discussed a proposal that two floors of one of BFC's owned office
buildings should be leased out, as these floors are only occasionally used for meetings.
Discussions focused on whether this would impact on the company's ongoing activities and,
in particular, whether the tenants would be able to gain access to BFC's offices. Omar Rumi
explained that he had discussed this with BFC's property teams and they had told him that the two
floors have their own separate access so this will not be an issue.
The board approved the rental and Omar was instructed to inform the relevant teams to
proceed further.
Two floors of the building were rented out to a third party for an annual rental of
Rs. 8 million. The lease commenced on 1 May 2017 and was for a period of 2 years.
Rental income has been included within other income at Rs. 4 million. This figure has been
calculated based on an annual rental of Rs. 8 million. I recalculated the figures to confirm they
are correct and have agreed the annual amount to the lease agreement.
Student Corner – IFRS BOX
Investment property is property (land or a building–orpart of a building–or both) held (by the owner
or by the lessee as aright-of-use asset) to earn rentals or for capital appreciation or both,rather
than for:
a. a.use in the production or supplyof goods or services or for administrative purposes;

or
b. b.sale in the ordinary course ofbusiness.
2.3.2 Property held for more than one purpose

In circumstances when property is held partly for capital appreciation and/or rentals, and partly for
the production of goods or services or administrative purposes, the two parts are accounted for
separately if they could be sold, or leased out under a finance lease, separately. If they could not be
sold (or leased out under a finance lease) separately, the property is accounted for as an
investment property only if an insignificant portion is held for use in the production or supply of
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goods or services or for administrative purposes. [IAS 40:10]IAS 40 does not include any guidance
as to what constitutes an 'insignificant' portion for this purpose. This is a deliberate omission – the
Basis for Conclusions on IAS 40 explains that quantitative guidance has not been provided because
the Board concluded that such guidance could lead to arbitrary distinctions.
Financial reporting issue Risk Procedures

Property held for more There is a risk that • Inspect the lease agreement to assess
than purposes therefore management may whether it’s an operating lease or finance
It needs to be assessed not have accounted lease
whether it can be it separately • Inquire with the property team to assess
account for separately. whether it can be sold separately
The two parts are • Inspect the correspondence file with the
accounted for separately Property broker (management expert) if
if they could be sold, or any to assess whether such property
leased out under a could be sold or finance leased separately
finance lease, separately • Evaluate the accounting policy and ensure
For property used for that it is consistent with the requirement
own purpose is of IAS 40
accounted for as per IAS
16 and property that has • Evaluate the competency, capability and
been rented out is objectivity/independence of the
accounted for as per IAS Management expert
40 • Evaluate the adequacy of the expert work:
o Relevance and reasonableness of the
expert finding
o Relevance and reasonableness of the
assumption and methodology used
o The relevance, completeness
and accuracy of source data
• May consider to use the auditor
expert
FINE DINNING
The board is currently focused on a strategy of continued growth and a stock market listing is
planned within two years.
Board Structure
CEO/Chairman: Najeeb Saeed
CFO and executive director: Sadia Khan
Executive director: Omar Rumi
Executive director: Amna Malik
Non-executive director: Abid Javed
Financial statements are currently only presented to the Board on an annual basis by Sadia
Khan.
In November 2016 BFC acquired a chain of high-end restaurants, Fine Dining. This
represented a new direction for BFC as it has traditionally operated restaurants which are
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aimed at the mass market. Najeeb Saeed was the key driver of this acquisition as he believes
that high end restaurants is a growing market and feels BFC can utilise the existing brand
loyalty within this chain. His wife, Sarah, was hired by him as a consultant on this
acquisition. Her report was presented to the board and it was relied upon by them in deciding
to approve the acquisition.
The board reviewed up to date management information for the chain of restaurants which
was acquired earlier in the year. The key issue is that the performance of the chain is
significantly below the forecasts presented at the time of acquisition. Najeeb strongly defended the
performance and explained that the current performance was as a result of temporary issues with a
management change. He stated that he is confident that the future performance will be in line with
expectations and that BFC did not overpay for this chain.
Fine Dining
I discussed the performance of the restaurant chain with the financial controller and he
provided me with the following information:
As part of my year-end review I performed impairment testing on this recent
acquisition and prepared calculations as at 31 October 2017. The Fine Dining chain
is made up of two cash-generating units and I have not been able to allocate the
goodwill on a non-arbitrary basis.
The carrying value of the CGU at the 31 October 2017 is:
To
To calculate the value in use of the CGUs I used updated budgets for two years but
beyond that I only had forecasts prepared at the acquisition date. I calculated the
recoverable amounts as follows:
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Summary of audit testing on impairment

Having received the information from the financial controller, I discussed with him why he
had performed no additional calculations to calculate any impairment loss. The financial
controller explained that after preparing the calculations he discussed them with Sadia Khan.
Sadia told him that the performance of Fine Dining was discussed by the board and that
Najeeb Saeed was confident about the future performance of the this chain.
I have agreed this explanation to the board minutes and therefore concluded that the
treatment was correct and performed no additional testing in this area.
Cash flow projections should be based on the most recent financial budgets/forecasts that have
been approved by management.
9.3 Two-step approach for goodwill allocated to a group of cash-
generating units
When goodwill is allocated to a group of CGUs for the purpose of impairment testing but cannot be
allocated on a non-arbitrary basis to individual CGUs, the individual CGUs must be tested for
impairment before the group of CGUs containing the associated goodwill. [IAS 36:81, 88 & 97 - 98.
• The value in use must be determined using the latest budget and forecast
• Projection of cash flow should be based on reasonable and supportable assumptions that
represents management best estimates of the range of economic conditions that will exist
over the remaining useful life of the asset
• Greater weight should be given to external evidence
• The reasonableness of the asumptions on which current cash flow projections are based
should be assessed by examining the cause of differences between past cash flow
projections and actual cash flows.
• There is an indication of impairment of the fine dining business therefore
impairment test for each CGU shall be carried out.
• Within CGU 01 the CV is higher than recoverable amount therefore
impairment shall be recorded by Rs. 20 million and allocated to intangible
and PPE based on their respective carrying value
• In CGU 02 the recoverable amount is higher than the carrying amount
therefore no impairment arises.
• The updated carrying amount is now compared to whole fine dining business
and further impairment of Rs. 10 million is recorded against goodwill
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• Using management working there is an impairment of Rs. 30 million
Audit issue
• No procedure has been performed to obtain SAAE on the reasonableness of the assumption of
impairment working. For that purpose auditor needs to perform following procedures:
o Obtain an understanding of the management process to record impairment
o Test controls over the recording of impairment
o Ensure that assumptions such as future cashflows and discount rates are reasonable
o Perform subsequent events such as inspection of subsequent interim FS to compare the
projected result with the actual result.
o Further as the business has been acquired recently and had not performed well
therefore there is a fraud risk factor that management may have an incentive/pressure
to commit FFR. Therefore auditor needs to maintain PS and make appropriate response
to such fraud risk
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Closure of storage facility at Peshawar

In September 2017, the board discussed a proposal to close the storage facility at Peshawar as part of
a cost savings plan. A proposal was presented by Sadia Khan that showed that, over the next two
years, considerable savings could be made by closing this facility, as a nearby facility has spare
capacity. Sadia also explained that, whilst BFC would still be committed to pay for the lease of this
facility, she was confident that the storage facility could be sublet as demand is high for this type of
facility.
The board approved this proposal.
I agreed the closure date to documentation that showed that on 1 November 2017 the
equipment was moved from the Peshawar facility. I also agreed the redundancy details to
human resources records that confirmed that the employees were made redundant on
1 November 2017.
All evidence therefore confirmed that the closure occurred after the year-end and thus
supports the fact that no provision was required in the financial statements as at
31 October 2017.
STUDENT BOX – IFRS
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Financial Reporting Issue Audit risk Audit Procedures

The closure clearly took place There is a risk that
after the year-end (1 November restructuring provisin may not 1. Obtain and understand the
2017), however the important be recorded as per IAS 37 management process regarding
date is when BFC became the recording of restructuring
committed to the decision. A provision
provision should be created
when a constructive obligation 2. Inspect the correspondence
arises, which is on the date that with the labour union /
the decision is communicated to agreement to evaluate the date
employees. Given that these of communication and to
employees ceased employment ensure that amount of provision
on 1 November and the is correct
equipment was moved on that 3. Perform subsequent event
date it is likely that they were procedures such as subsequent
informed of these plans before agreement / payment if any
the year-end. This would create 4. Inspect the Board minutes to
a constructive obligation and ensure that formal detailed plan
BFC needs to make an has been presented before the
adjustment based on the year end
following calculations:
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SALE AND LEASE BACK

Shamala,
I would appreciate your advice on the following issue that would potentially impact on our
financial statements next year.
We are considering selling one of our properties and then leasing it back. We have been
offered a price of Rs. 838 million which is the same as the market value of the property. The
property has a carrying value at the date of sale will be Rs. 503 million and has a remaining
useful life of 25 years.
The terms of the lease are that we would pay Rs. 62 million annually in arrears for 20 years
and the present value of the lease payments is Rs. 657 million and the interest rate implicit in
the lease is 7%.
Thanks in advance for your assistance.
Kind regards,
Sadia
6.4.4 Substantive rights

6.4.4.1 Determining whether rights are substantive
In assessing whether it has power, an investor considers only substantive rights relating to an
investee; the substantive rights to be considered are those held by the investor and those held by
others. For a right to be substantive, the holder must have the practical ability to exercise that
right. [IFRS 10:B9 & B22]
Determining whether or not rights are substantive requires the exercise of judgement, taking into
account all facts and circumstances. IFRS 10 sets out a number of factors that an investor should
consider in assessing whether rights are substantive (the list is not exhaustive): [IFRS 10:B23]
• whether there are any barriers (economic or otherwise) that prevent the holder (or
holders) from exercising the rights (see 6.4.4.2);
• when the exercise of rights requires the agreement of more than one party, or when
the rights are held by more than one party, whether a mechanism is in place that
provides those parties with the practical ability to exercise their rights collectively if
they choose to do so (see 6.4.4.3); and
• whether the party or parties that hold the rights would benefit from the exercise of
those rights (see 6.4.4.4).
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WINTER 2018
Lahore Medical and Chiniot Healthcare
Lahore Medical and Chiniot Healthcare are wholly-owned subsidiaries which were acquired
many years ago. The subsidiaries have been audited by Habib and Company for many years.
Lahore Medical has expanded during the year by beginning to supply larger medical
equipment to hospitals.
During the year, TAH sold 5% of its shareholdings in Lahore Medical.
Equipment sale
On 1 October 2018, Lahore Medical signed a contract to supply medical equipment to a
customer for Rs. 900 million. The contract included a clause that allows the customer to
purchase 80,000 units of consumables for the equipment for a period of 12 months for a price
of Rs. 1,500 per unit. Once they have purchased 80,000 units or after 12 months the customer will
have to pay the normal market price of Rs. 3,000 per unit.
Lahore Medical normally sells such equipment for Rs. 1,000 million and the expectation is
that the customer will buy around 170,000 units of the consumables within one year.
Lahore Medical has recognised revenue of Rs. 900 million upon delivery on 1 November 2018.
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12.3.4-1
Disposal of part of an investment in a subsidiary — subsequent accounting for retained interest
IFRS 10:20
When part of an investment in a subsidiary is sold during the reporting period, the status of the investment
immediately after the disposal should determine the accounting. For example:
if a parent sells a portion of its investment in a subsidiary, but does not lose control, the consolidated
financial statements at the end of the period should include the assets, liabilities, and operations of the
subsidiary, and reflect the new non-controlling interest from the date of the transaction. No gain or loss
should be reported in comprehensive income because this is an equity transaction
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6.3.5 Customer options for additional goods or services

6.3.5.1 Customer options for additional goods or services — general
Customer options to acquire additional goods or services for free or at a discount come in many forms,
including sales incentives, customer award credits (or points), contract renewal options or other
discounts on future goods or services.
When a contract grants the customer an option to acquire additional goods or services, that option
gives rise to a performance obligation in the contract only when it provides a material right to the
customer that the customer would not have received without entering into that contract (e.g. a
discount is incremental to the range of discounts typically given for those goods or services to that
class of customer in that geographical area or market). If the option provides a material right to the
customer, the customer is, in effect, paying the entity in advance for future goods or services.
Therefore the entity should defer the recognition of revenue allocated to that option until those future
goods or services are transferred, or when the option expires.
If the amount that the customer would pay for the additional good or service reflects the stand-alone
selling price for that good or service, the option does not provide the customer with a material right
even if the option can be exercised only by entering into a previous contract. In these circumstances,
the entity has merely made a marketing offer, and it will account in accordance with IFRS 15 only
when the customer exercises the option to purchase the additional goods or services.
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Cosmetic Care
Cosmetic Care is a newly acquired subsidiary that was purchased as TAH wanted to diversify
into the cosmetics market. Cosmetic Care is a market leader in this area and TAH acquired it
with the intention of replacing the existing management. TAH expected to make significant
cost savings by combining management teams, and on acquisition, Cosmetic Care's predicted
profit was Rs. 1,700 million for the year ended 30 November 2018 and Rs. 2,500 million for
the year after.
TAH acquired 100% shareholdings in Cosmetic Care and gained control from 1 December
2017. Habib and Company was appointed as auditor of Cosmetic Care during the year.
The post-acquisition performance of Cosmetic Care has been disappointing. The main reason
is that TAH have struggled to make the expected cost savings and a range of Cosmetic Care's
products have seen decline in sales as a result of negative publicity.
TAH is highly confident that all of the issues will be resolved and that Cosmetic Care will
meet its predicted profit for the year ended 30 November 2019. TAH also expects new
publicity to reverse the trend.
The acquisition of Cosmetic Care was made through a share exchange. TAH also agreed to
pay Rs. 1,000 million in cash on 30 November 2019 if the profit exceeds Rs. 2,000 million for
the year ending 30 November 2019.
At acquisition the management estimated that the amount would be payable and the full
amount has been included as contingent consideration.
STUDENT CORNER – IFRS BOX
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Sukkur Pharmaceuticals
Sukkur Pharmaceuticals is a 100% owned subsidiary and control was obtained on
1 December 2017. The key reasons for the acquisition were to gain access to Sukkur
Pharmaceuticals’ on-going research & development and to save costs by sourcing
pharmaceutical products that are used by TAH for a cheaper price.
Sukkur Pharmaceuticals is audited by another firm of auditors as Sukkur Pharmaceuticals is
based in an area where we have no offices.
Sukkur Pharmaceuticals was acquired as TAH was keen to utilise the promising research that
Sukkur Pharmaceuticals had been undertaking and as a result the goodwill arising on the
acquisition was high. The due diligence undertaken by TAH on the acquisition identified that
Sukkur Pharmaceuticals had previously received offers to buy the research.
Research is still on-going and all costs have been expensed to profit or loss.
34
Winter 2018
35
36
Summer 2019
37
38
39
40
41
42
Winter 2019
43
44
45
46
47
Winter 2020
48
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MSA 01 Summer 2022: Iq School of Finance Msa 1 by Sir Ibrahim Iqsf - PK

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MSA 01 Summer 2022: Iq School of Finance Msa 1 by Sir Ibrahim Iqsf - PK

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IQ SCHOOL OF FINANCE MSA 1 BY SIR IBRAHIM IQSF.

MSA 01 Summer 2022

MSA 01 Winter 2021

MSA 01 summer 2021

IFRS 09 – Financial Instruments

Heading Risk Procedures

• -Obtain management working on allowance for doubtful debt and check

• Inspect the internal rating (if any) assigned by the company

• -Check subsequent receipts to obtain evidence regarding the recoverability

• Evaluate the adequacy of the expert work :

LONG TERM CONTRACT

using the asset to enhance the value of other assets;

using the asset to settle liabilities or to reduce expenses;

selling or exchanging the asset;

pledging the asset to secure a loan; and

holding the asset.

EVALUATION AUDIT RISK AUDIT PROCEDURES

• The arrangement remaining benefits

5 Classification and measurement of financial assets

• amortised cost (see 5.3);

• Planning (including undertaking feasibility studies, defining objectives and

Evaluation Audit risk Procedures

4.2.1 Requirement to assess whether a contract is, or contains, a lease

8.4.1 Initial measurement of the right-of-use asset

8.4.1.1 Right-of-use asset to be measured initially at cost

For this purpose, cost comprises: [IFRS 16:24]

Student Corner – IFRS BOX

a. a.use in the production or supplyof goods or services or for administrative purposes;

2.3.2 Property held for more than one purpose

Financial reporting issue Risk Procedures

Summary of audit testing on impairment

Student Corner – IFRS BOX

• Using management working there is an impairment of Rs. 30 million

Closure of storage facility at Peshawar

STUDENT BOX – IFRS

Financial Reporting Issue Audit risk Audit Procedures

SALE AND LEASE BACK

6.4.4 Substantive rights

Lahore Medical and Chiniot Healthcare

Student Corner – IFRS BOX

6.3.5 Customer options for additional goods or services

STUDENT CORNER – IFRS BOX

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