Answers to Quiz1

1a) ABC Company can give a statement of compliance with IFRS. IAS 1 allows for the departure of the requirements of a standard, if its considered misleading by the management. However, the departure must be disclosed in the notes as well as the reason(s) for the departure.

1b) ABC Company cannot give a statement of compliance with IFRS because IAS 1 does not allow for departure due to local or national governing laws.

Tip: To avoid the conflict of national standards with the IFRS's, local standard setters are advised to fashion their standards in line with the IAS's and IFRS's.

2) This question is simply testing the IAS 2 principle of measuring inventory at the lower of cost and Net Realizable Value.

Cost = N350,000
Net Realizable Value (NRV) = N300,000*

Hence,
Closing inventory = N300,000 (Lower of cost & NRV)

*Working:
Fair Value less cost to sell. Hence, N420,000 - N120,000 = N300,000

Then, this figure is used to prepare the statements of financial position and profit or loss. It is used as the closing inventory for the profit or loss statement and as a current asset in the statement of financial position.

Hope you got it right?

Regards.