SOCPA Fellowship Financial Accounting Complete Review Guide 2026–2027

4. IAS 24: related parties include the parent, subsidiaries, associates, joint ventures, key management personnel and their close family members, and post-employment benefit plans. A provider of finance, a trade union, a government agency, or a major customer or supplier is not a related party merely because of normal dealings. Key management personnel compensation is disclosed. (u6.2)
5. IAS 33 paragraph 10: basic EPS = profit attributable to ordinary equity holders of the parent ÷ weighted average number of ordinary shares outstanding. Profit is reduced by cumulative preference dividends for the period whether or not declared, and by non-cumulative preference dividends if declared. (u6.2)
6. IAS 33: for diluted EPS, after-tax interest on convertible bonds is added to the numerator and conversion shares to the denominator; options use the treasury share method (only the shares deemed issued for no consideration); anti-dilutive instruments are excluded. (u6.2)
7. IFRS 2: equity-settled share-based payment is measured at grant-date fair value and spread over the vesting period with a credit to equity; market conditions are built into grant-date fair value, while non-market vesting conditions adjust the number of instruments expected to vest. Cash-settled awards create a liability remeasured at fair value until settlement. (u6.2)
8. IAS 19: short-term benefits are recognised undiscounted, and under a defined contribution plan the expense is the contribution payable. Under a defined benefit plan, service cost and net interest go to profit or loss, while remeasurements (actuarial gains and losses and the return on plan assets excluding interest) go to other comprehensive income and are never reclassified. (u6.3)
9. IAS 19: the defined benefit obligation is discounted using market yields on high-quality corporate bonds, or on government bonds where there is no deep market in such bonds. The end-of-service benefit in the Kingdom is a defined benefit plan, usually unfunded. (u6.3)
10. IAS 26: the retirement benefit plan reports on its own; a defined contribution plan presents net assets available for benefits, and a defined benefit plan also presents the actuarial present value of promised retirement benefits. (u6.3)
11. IAS 21: functional currency is the currency of the primary economic environment in which the entity operates. When translating a foreign operation into the presentation currency, assets and liabilities use the closing rate, income and expenses use transaction-date rates (or an average as an approximation), and differences go to other comprehensive income and are reclassified to profit or loss on disposal. (u6.4)
12. IAS 29: in a hyperinflationary economy the statements are restated using a general price index into the measuring unit current at the reporting date; monetary items are not restated, and the gain or loss on the net monetary position goes to profit or loss. One indicator is cumulative inflation over three years approaching or exceeding 100%. (u6.4)
13. Branch accounting: the branch current account in the head office books mirrors the head office account in the branch books; both are eliminated in the combined statements, together with unrealised profit on goods transferred to the branch above cost and still unsold. (u6.4)
14. IAS 34 and IFRS 8: interim reports use the same accounting policies as the annual statements, and interim tax expense uses the estimated annual effective rate. Under IFRS 8 a segment is reportable if its revenue, profit or loss, or assets are 10% or more of the total (paragraph 13), and the external revenue of reportable segments must cover at least 75% of entity revenue. (u6.4)
15. IAS 36: goodwill, indefinite-life intangibles and intangibles not yet available for use are tested annually; other assets when there is an indication of impairment. A cash-generating unit's loss goes first to goodwill, then to other assets pro rata to carrying amount, without reducing any asset below the highest of its fair value less costs of disposal, its value in use and zero. (u6.5)
16. IAS 23: a qualifying asset takes a substantial period to get ready for use or sale. For specific borrowings, actual costs less investment income on temporary investment of the funds are capitalised; for general borrowings, a capitalisation rate is applied to expenditure. Capitalisation starts when expenditure, borrowing costs and activities are all under way, is suspended during extended periods without active development, and ceases when substantially all activities are complete. (u6.5)
17. IFRS 13: Level 1 is quoted prices in active markets for identical assets, Level 2 is observable inputs other than Level 1 prices, and Level 3 is unobservable inputs. A non-financial asset is measured on its highest and best use from market participants' view, in the principal market or, if none, the most advantageous market. (u6.5)
18. IAS 20, IAS 41, IFRS 17, IFRS 6 and IFRS for SMEs: a government grant is recognised under the income approach once there is reasonable assurance the conditions will be met and the grant received; an asset grant is shown as deferred income or deducted from the asset. A biological asset is measured at fair value less costs to sell, with changes in profit or loss. IFRS 17 measures contracts as fulfilment cash flows plus the contractual service margin. Exploration and evaluation spending under IFRS 6 is measured at cost and tested for impairment when indicators exist. In the Kingdom, SMEs apply the endorsed IFRS for SMEs and may elect full IFRS only if they apply all of it and keep applying it. (u6.6)

Common mistakes in this chapter

• ✕ Switching from one depreciation method to another is a change in accounting estimate applied prospectively, while moving investment property from the cost model to the fair value model is a change in accounting policy.
• ✕ Dividends declared after the reporting date are not recognised as a liability in the statement of financial position; they are disclosed in the notes as a non-adjusting event.
• ✕ Bonus issues and share splits are not time-weighted: they are treated as if they had occurred at the start of the earliest period presented, and comparative EPS is restated too.
• ✕ Equity-settled share-based payment is not remeasured after grant date, whereas the liability for cash-settled share-based payment is remeasured at each reporting date until settlement.
• ✕ An impairment loss on goodwill is never reversed in a later period (IAS 36 paragraph 124); impairment of other assets may be reversed, up to the carrying amount that would have existed without the impairment.
• ✕ Transaction costs are not deducted from fair value under IFRS 13 because they are specific to the transaction, but costs of transport to the principal market are deducted when location is a characteristic of the asset.
• ✕ The end-of-service benefit is not a defined contribution plan: the obligation is measured actuarially and discounted, and recording the amount payable as if service ended at the reporting date is not enough.
• ✕ Bearer plants such as date palms are accounted for under IAS 16 as property, plant and equipment, while the produce growing on them is a biological asset under IAS 41.