FAC3701 May June 2025 PORTFOLIO

FAC3701 May June 2025; 100 % TRUSTED workings, Expert Solved, Explanations and Solutions. For assistance call or W.h.a.t.s.a.p.p us on ...(.+.2.5.4.7.7.9.5.4.0.1.3.2)........... General Financial Reporting - FAC3701 QUESTION 1 (50 marks) (90 minutes) THIS QUESTION CONSISTS OF TWO (2) INDEPENDENT PARTS QUESTION 1 PART A (4 marks)(7 minutes) This question must be answered in your examination answer book. Each question has only one correct answer. The marks per question are indicated in brackets after each question. QUESTION 1 Which one of the following definitions is correct according to IFRS 13, Fair value measurement? 1. Highest and best use is the use of a non-financial asset by market participants that would maximise the value of the asset or the group of assets and liabilities (e.g. a business) within which the asset would be used. 2. Fair value is the price that would be paid to buy an asset or paid to transfer a liability in a transaction under force between market participants at the reporting date. 3. Income approach is a valuation technique that reflects the amount that would be required currently to replace the service capacity of an asset. 4. Cost approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (i.e. similar) assets, liabilities or a group of assets. 5. Entry price is the price that would be received to sell an asset or paid to transfer a liability. (1) QUESTION 2 Market participants are defined as buyers and sellers in the principal market or most advantageous market for an asset or liability. Which one of the following is a characteristic that a market participant will have in terms of IFRS 13, Fair value measurement? 1. Market participants are dependent on each other. 2. Market participants do not have an adequate understanding about the asset or liability and the transaction. 3. Market participants have the ability to enter into a transaction for the asset or liability. 4. Market participants are registered with a professional board of valuers. 5. Market participants are compelled to enter into a transaction for the asset or liability, in other words they are forced to do so. (1) QUESTION 3 Different inputs may be used when valuation techniques are used to measure fair value. These inputs may be observable or unobservable. Which one of the following statements relating to inputs in terms of IFRS 13, Fair value measurement is incorrect? 1. Inputs are the assumptions that market participants would use when pricing an asset or liability, including assumptions about risk. 2. Level three inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that an entity can access at the measurement date. 3. Market-corroborated inputs are inputs that are derived principally from or corroborated by observable market data by correlation or other means. 4. Observable inputs are inputs that are developed using market data, such as publicly available information about actual events or transactions, and that reflect the assumptions that market participants would use when pricing the asset or liability. 5. Level two inputs are inputs other than quoted prices included within level I inputs. (1) 4 FAC3701 05/06 2025 [TURN OVER] QUESTION 1 (PART A) (continued) QUESTION 4 Which one of the following statements, relating to fair value measurement, according to IFRS 13, Fair value measurement is incorrect? 1. Condition, location and restrictions are three characteristics that should be considered when the fair value of an item is determined. 2. The exit price is the price that would be received to sell an asset or paid to transfer a liability. 3. Fair value is an entity-specific value and not a market-based value, which means that it is the value that market participants of the entity would agree upon under market conditions existing on the measurement date. 4. When calculating the fair value of an asset the transaction costs, for example commissions, should be ignored in the calculation of the fair value of the asset as they do not form part of the characteristics of an asset. 5. A transaction can take place either in the principal market or in the most advantageous market for an asset or liability. The fair value of an asset should represent the price in the most advantageous market if no principal market exists for an asset. (1) Subtotal [4] QUESTION 1 PART B (46 marks) (83 minutes) The annual financial statements of Ultra Ltd, a manufacturer and retailer of inverters, for the year ended 31 August 2024, were presented to the board of directors for authorisation for issue on 15 November 2024. Additional information The following transactions have not yet been recorded in the accounting reco