Part (a)

Cost incurred to develop 25 000 000

Interest incurred (25 mil * 9%) 2 250 000
Less interest earned - 300 000
26 950 000

Part a)

Part (b) (i) - measurement of factory and plant

Management has made a decision to sell the plant and factory as at 31 Dec 2023, therefore
consideration should be made whether the asset should be transferred from IAS 16 to IFRS 5

An asset is accounted for as held for sale under IFRS 5 if it will be recovered through sale
rather than continuing use and where such sale is highly probable.

The sale of the plant and factory doesn't qualify for this classification because it is not available
for immediate sale, as FusionHome is still using it.

Therefore the plant and factory will continue to be accounted for in terms of IAS 16 and will not be
transferred to held for sale.

Further consideration should made regarding whether the plant and machinery is showing indicators
of impairment. On the information given the only reason for the pending change is the vision of the
company, and not the operating effectiveness of the factory and plant. .

Therefore, it will be fair to argue that the factory and plant is not impaired at 31 Dec 2023, and should
thererefore continue to be recognized at historical carrying amount.

The same applies in the year ended 31 December 2024 as the facts around the use of the asset
have not changed.

Even though the asset is operating effectively, IAS36.12(f) identifies plans to restructure operations
as a possible indication of impairment. Therefore, under this interpretation, the factory and plant
must be tested for impairment in both 2023 and 2024 by comparing its carrying amount to its
recoverable amount.

FY2024 FY2023
Value in Use 5 000 000 13 400 000
Fair value less cost to sell 9 665 000 10 777 000
Therefore Recoverable amount 9 665 000 13 400 000

Historical carrying amount - given 9 500 000 11 400 000

Therefore no impairment in both years

Available
Max

Part (b) (ii) - measurement of restructuring provision

Restructing provision are measured in relation to expenditures entailed by the restructuring, excluding
continuing operations.

Therefore the training and relocation costs are part of ongoing activities, and no provision is raised
for those amounts.

Therefore, the provision is measured at R2 000 000 relating to retrenchment costs

Max
Part (c)
A contract contains a lease if it conveys the right to control the use an identified asset in exchange for
consideration

For an entity to control the use of an asset, it must be able to obtain substantially all the economic
benefits during the period of the lease. FH will not obtain substantially all the economic benefits from
the use of the farm as there other customers that will benefit

Therefore the arrangement does not contain a lease as defined.

Available
Max
Part (d)
Error/Omision Reason/explanation/Guidance

1 Statement of profit or loss is given as at year end Statement should be presented for the year ended, as it shows flows for a period and not balances
The revenue appears to be recognised equally between the two
financial years with no regards to stage of completion, therefore Revenue should be recognised to depict the transfer of good/services to the customer. Therefore a stage of
2 overstated completion should have been used.

All income statement amounts appear to be presented on a cash The stage of completion could not be calculated in 2023, therefore the revenue recognised should have been
3 basis limited costs incurred

The significant financing component or time value of money has The project was scheduled to be completed in February 2024, with the last payment to be received more than a
4 been ignored. year later. Therefore it is likely that a significant financing components exists and should be accounted for.

The contract asset at the end of FY2023 has been incorrectly The amount recorded as a receivable is conditional upon performance of FusionHomes. It doesn't meet the
5 recorded as a receivable definition of a receivable

The inventory at the end of FY2023 has been inappropriately To the extent that the control of the goods haven't been tranfered to the customer, they should be recorgnised
6 expensed as an asset using an appropriate accounting standard.

The contingent consideration due after the end of the contract

7 appears to have been ignored. While it may have been incorrect to exclude the contingent consideration

The provision for fulfilling the assurance waranty has not been raised There appears to be an assurance type warranty included in the contract. A provision should be raised for the
8 and included in the summary. costs of fulfilling the requirements of the waranty

9 The expense that goes with the provision has also not been raised

10 To the extent that the errors occurred in 2023, the requirements of IAS8 will need to be applied to correct the prior period errors.
Part (e)

It is fair to consider that AI advertising based on life events would be considered intrusive
as the customer doesn't know if it their phone, or another person making the decision.

Fusion must take steps to assure customer that their products are safe for use, and respect privacy

FusionHomes could create educational alerts on their APPs explaining to customers how the AI works,
and the steps taken to make it safe.

FusionHomes must train their AI on human behaviour and have a system for identifying sensitive topics