Reference no: EM132616260

Point 1: On 1 January 2019 Nacho plc had in place $500,000 of 6.0% pa loan finance and $800,000 of 4.7% pa loan finance. Neither loan was taken out for a specific purpose. On 1 February 2019 the company began to construct a new office building, which was funded by this existing loan finance. The building was correctly assessed as a qualifying asset, was completed and available for use on 31 October 2019, and has an estimated total useful life of 50 years. The company moved its administrative function into this building on 31 December 2019. The accountant included the interest payable for the whole year on the total loan finance as part of the cost of the office building of $650,000 within property, plant and equipment. He did not recognise any depreciation on this building in the year ended 31 December 2019 because the staff did not move to the new building until the last day of the year.

Point 2: The draft financial statements of Tacos plc include research and development expenditure of $390,500 within intangible assets. The accountant's working papers show that this all related to the development of a new waterproof fabric, which was assessed as being commercially viable on 31 March 2019. The development of the fabric was completed on 31 August 2019, and the first fabric was delivered to customers on 1 September 2019. The amount capitalised is made up as follows:

Research costs                                                                       100,000

Development costs incurred prior to 31 March 2015                        55,500

Development costs incurred from 1 April 2015 to 31 August 2015    225,000

Marketing costs                                                                       10,000

                                                                                            390,500

No amortisation has been charged on this amount. The fabric technology is estimated to have a three-year life before it is superseded by superior products.

Point 3: During the year ended 31 December 2019 the directors of Nami plc decided to change the company's accounting policy in respect of consumable stores, such as dyes and threads used in the manufacturing process. In the year ended 31 December 2018, and all years prior to that, Nami plc's stated accounting policy was to write off the costs of such consumable stores as incurred. The directors now wish to recognise consumable stores as inventory, on the grounds that this better matches purchases made to sales generated. As a result, the accountant included closing inventory of consumable stores of $22,600 in the draft financial statements for the year ended 31 December 2019, but made no other adjustments. It has been established that the equivalent figure at 31 December 2018 was $31,200, but it has not been possible to arrive at figures prior to that date.

Problem 1: Explain the required IFRS financial reporting treatment of Issue above in the financial statements of each company. Show all relevant calculations and set out the required adjustments in the form of journal entries.