QUESTION Abebio Limited is a listed company with a year end of 31 December 2019. A director of the company has a number of questions relating to the application of Intematonal Financial Reporting Standards (IFRS Standards) in its financial statements for the year ended 31 December 2009. The questions appear in notes 1-3. Note 1 - Pending legal cases At a recent board meeting, we discussed legal cases which customers A and Bare bringing against Abebio in respect of the supply of products which were allegedly faulty. We supplied the goods in the last three months of the financial year We have reliably estimated that if the actions succeed, we are likely to have to pay out GHSTO million in damages to customer A and GHS million in damages to customer B. Also, Abchio's legal advisers have reliably estimated that there is a 60% chance that customer A's claims will be successful and a 25% chance that customer B's claim will be successful I know we have insurance in place to cover us against claims like this. It is highly probable that any claims which were successful would be covered under our policy. Therefore. I would have expected to see a provision for legal claims based on the likelihood of the claims succeeding However, I would also have expected to see an equivalent asset in respect of mounts recoverable from the insurance company. The financial statements de contain a provision for GHSIO million but no equivalent asset. Disclosure of the information e relating to both of the claims and the associated insurance is made in the notes to the financial statements Required: Given the above facts, discuss the correct accounting treatment of the pending legal cases Note te 2 - Non-current assets When I look at the statement of financial position, one of the categories of non-current assis investment properties and another category is property, plant and equipment in which all other properties are included. Surely, we invest in all our properties, so why do we have two Categories for them in the statement of financial position? How do we decide what goes into property, plant and equipment and investment properties"? In addition, a note to the financial statements states that investment properties are measured at their fair values and not depreciated. Don't all non-current assets have to be depreciated over their estimated useful lives? Another note states that property included in property, plant and equipment is measured at cost less accumulated depreciation rather than a fair value. Shouldn't all properties be measured in the financial statements on a consistent basis? Don't you think this is a clear violation of consistency concept? Finally, I can't immediately see from the financial statements where the gains or losses relating to the measurement of investment properties are included. The profit statement soems to include main components-profit or loss and other comprehensive income. Where would the gains losses go? Presumably, is the treatment of gains and losses the same for any ocument assets which are measured at fair value? Required: Given the above facts, discuss clearly what constitute property, plant and equipment and investment property. You are also required to explain the correct accounting treatment of revaluation gain and loss, and fair value gain and loss Note 3 - Inventory Abebio Limited is a retailer of Italian furniture and has five major product lines sofasining tables, beds, closets, and lounge chairs. At December 31, 2019. quantity on hand cost permit and net realizable value (NRV) per unit of the product lines are as follows: Cost NRV Product line on hand per unit per un GHS GHS Sofas 100 1.000 1.030 Dining tables 200 500 Bed 300 1.500 Closets 400 750 770 Lounge chairs 250 Required: Compute the valuation of the inventory of Abebio Limited at December 31, 2019. under LAS 2 using the lower of cost and NRV" principle. (4 marks) 500 QUESTION Abebio Limited is a listed company with a year end of 31 December 2019. A director of the company has a number of questions relating to the application of Intematonal Financial Reporting Standards (IFRS Standards) in its financial statements for the year ended 31 December 2009. The questions appear in notes 1-3. Note 1 - Pending legal cases At a recent board meeting, we discussed legal cases which customers A and Bare bringing against Abebio in respect of the supply of products which were allegedly faulty. We supplied the goods in the last three months of the financial year We have reliably estimated that if the actions succeed, we are likely to have to pay out GHSTO million in damages to customer A and GHS million in damages to customer B. Also, Abchio's legal advisers have reliably estimated that there is a 60% chance that customer A's claims will be successful and a 25% chance that customer B's claim will be successful I know we have insurance in place to cover us against claims like this. It is highly probable that any claims which were successful would be covered under our policy. Therefore. I would have expected to see a provision for legal claims based on the likelihood of the claims succeeding However, I would also have expected to see an equivalent asset in respect of mounts recoverable from the insurance company. The financial statements de contain a provision for GHSIO million but no equivalent asset. Disclosure of the information e relating to both of the claims and the associated insurance is made in the notes to the financial statements Required: Given the above facts, discuss the correct accounting treatment of the pending legal cases Note te 2 - Non-current assets When I look at the statement of financial position, one of the categories of non-current assis investment properties and another category is property, plant and equipment in which all other properties are included. Surely, we invest in all our properties, so why do we have two Categories for them in the statement of financial position? How do we decide what goes into property, plant and equipment and investment properties"? In addition, a note to the financial statements states that investment properties are measured at their fair values and not depreciated. Don't all non-current assets have to be depreciated over their estimated useful lives? Another note states that property included in property, plant and equipment is measured at cost less accumulated depreciation rather than a fair value. Shouldn't all properties be measured in the financial statements on a consistent basis? Don't you think this is a clear violation of consistency concept? Finally, I can't immediately see from the financial statements where the gains or losses relating to the measurement of investment properties are included. The profit statement soems to include main components-profit or loss and other comprehensive income. Where would the gains losses go? Presumably, is the treatment of gains and losses the same for any ocument assets which are measured at fair value? Required: Given the above facts, discuss clearly what constitute property, plant and equipment and investment property. You are also required to explain the correct accounting treatment of revaluation gain and loss, and fair value gain and loss Note 3 - Inventory Abebio Limited is a retailer of Italian furniture and has five major product lines sofasining tables, beds, closets, and lounge chairs. At December 31, 2019. quantity on hand cost permit and net realizable value (NRV) per unit of the product lines are as follows: Cost NRV Product line on hand per unit per un GHS GHS Sofas 100 1.000 1.030 Dining tables 200 500 Bed 300 1.500 Closets 400 750 770 Lounge chairs 250 Required: Compute the valuation of the inventory of Abebio Limited at December 31, 2019. under LAS 2 using the lower of cost and NRV" principle. (4 marks) 500