Question 1 Read the below statements carefully and determine whether the statements is True or False. No. Statements True False Material prior period errors must be corrected retrospectively. But if it is impracticalble to determine the cumulative effect of an error on prior periods an entity can correctan error prospectively only. Estimates arise in relation to business activities because of the uncertainties inherent within them. Changes in accounting estimate are applied retrospectively. (C) Change in Accounting policies involves adjustment of the carrying amount of an asset or a liability or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. The four fundamental qualitative characteristics are: comparability, verifiability, timeliness and understandability. Liability is a present obligation of the entity arising from future events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Income represents increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. The preference shares are a non-current liability and should not be presented as part of equity in the statement of financial position. They have the characteristics of a loan, rather than an owners" interest. (h) Fair value of tangible assets is 'the price that would be received to sell an asset or paid totransfer a liability in an orderly transaction between market participants at the measurement date . Other comprehensive income in Statement of comprehensive income comprises items of income and expense which the Standards do not allow or permit to be recognised in profit or loss. Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners. 10 marksQuestion 2 (E) MFRS 136 Impairment of Assets seeks to ensure that an entity's assets are not carried at more than their recoverable amount (i.e. the higher of fair value less costs of disposal and value in use). Impairment test is important especially in the context of financial reporting quality in that it requires the exercise of considerable management judgement, and reporting discretion. There are many factors which can affect the quality of impairment accounting and one of it is valuation issue. Discuss the importance and significance of the valuation issue when conducting an impairment testunder MFRS136 Impairment of Assets. [15 marks]Question 3 YGL Berhad specialises in the communications sector with three main Cash Generating Units (CGUs). Goodwill was a significant component of total assets. In the year ended 31 December 2020, YGL has performed an impairment test of the CGUs. The cash flow projections were based on the most recent financial budgets approved by management. The realised cash flows for the CGUs were negative in 2020 and far below budgeted cash flows for that period. The directors had significantly raised cash flow forecasts for 2021 with little justification. The projected cash flows were calculated by adding back depreciation charges to the budgeted result for the period with expected changes in working capital and capital expenditure not taken into account. Discuss whether the action taken by the directors is appropriate. [15 marks]