The accountant of Lisbon is considering a number of transactions and events and how they should be treated in accordance with the concepts and qualitative characteristics of financial information as set out in the Conceptual Framework.
During the year ended 31 March 20X6, Lisbon experienced the following transactions or events:
(1) Lisbon sold an asset to a finance company and immediately leased it back for the remainder of its useful life. The transaction met the criteria to be recognised as a sale under IFRS 15 Revenue from Contracts with Customers. The accountant determined that the transaction should be treated as a sale and leaseback in accordance with IFRS 16 Leases and has accounted for it accordingly.
(2) The company’s statement of profit or loss, prepared using historical costs, showed a loss from operating its shops. Lisbon is aware that the increase in the value of its properties during the period far outweighs the operating loss.
(3) Inventory has historically been valued using the first in first out (FIFO) method but the accountant is considering changing to the weighted average (AVCO) method for the year to 31 March 20Χ6.
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