2021 Flashcards
what is investment property?
property held to earn rentals / capital appreciation, rather than for use in prod / supply of g&s, admin, or sale in ordinary course of business
investment property examples?
- generates cash flows independently
- land held for cap app. or undetermined future use
- building leased out by the entity
- property constructed / dev for future use
portions of investment property?
if portions can be sold separately, account for separately. otherwise no.
what is an intangible asset?
an identifiable non-monetary asset without physical substance. not held for sale in ordinary business course.
what must intangible assets have?
- identifiability
- existence of future EB
- control over a resource
when is an asset identifiable?
if it is separable and arises from legal/contractual rights. no impact on bus continuity to exist.
measurement on intangible assets?
cost + import duties, non-ref taxes, etc
classifications for int-generated intangible assets?
- research phase
- development phase
(if indistinguishable, treat it as research phase only)
if intangible asset in research phase?
- not recognized
- will be P/L= an expense
- cannot demonstrate that an asset that will produce EB exists
useful life of intangible assets?
finite = amortize indefinite = not amortized, review EUL annually
pv of annuity for leases?
pmt x [1 - 1/(1 + i/m)^nm] / (i/m)
what is a financial instrument?
any contract that gives rise to a financial asset of one entity and a financial E/L in another
deciding accounting policy for financial assets?
- contractual CF = amortised costs
- realize FV changes = P/L and OCI (only OCI if we don’t trade frequently)
new conceptual framework liability definition?
a present obligation of the entity to transfer an economic resource as a result of past events. no practical ability to avoid duty. must be potentially occurring.
IAS 37 liability definition?
present obligation resulting from a past event from which future EBs are expected to flow from the entity. recognize L if possible and measurable.
probability of outflow?
if probable and certain of timing = L
if uncertain timing = provision
when do we recognize a provision?
- obligation is result of past event
- transfer of FEBs probable
- amt estimated reliably
what is a provision?
a liability with uncertain timing or uncertain amount
contingency?
not recognized as either because it is not measurable and/or not probable. possible occurrence, will only be confirmed with future event not controlled by the entity.
recognition of contingent L?
notes only
contingent A recog?
only if receipt is probable – disclose in notes
commitment?
when the comp commits to buy an asset at a future date and they will have a future obligation. we give a note disclosure.
if no current obligation at year end?
commitment, not contingent L
PPE vs non-current assets?
used in more than one period vs used in more than 12months period
restoration costs for PPE?
create a provision on initial recognition that increases annually with interest. include the initial price of restoration costs in PPE costs on initial recognition.
subsequent expenditure for PPE?
capitalize if enhancing
expense if maintenance/repair
how does revaluation work?
- gains go through OCI – “revaluation gain” and closed off to “reval surplus”
- losses reduce “surplus” and once it dips below og cost, you make an impairment expense
costs of conversion?
costs directly related to units of production
recognizing a provision for sales returns?
DR revenue (P/L) CR provision for returns (L) DR right to return of asset (A) CR COS exp (P/L)
recognizing a provision for warranty expense?
DR inventory repairs / COS (P/L)
CR provision for warranty (L)
recognizing a provision for a lawsuit settlement to be paid in future?
DR lawsuit expense (P/L) CR provision (L)
inc annually:
DR finance costs (P/L)
CR provision (L)
contingency?
not measurable
not probable
if we offer the customer a settlement discount?
DR Accs rec (A), CR Revenue (P/L) (as normal)
DR Revenue, CR Allowance for settlement discount (A)
(remove portion of rev amount that was allowed as a discount)
if the customer pays meets requirements of settlement discount?
DR Bank
DR Allowance for settlement discount
CR Accs receivable
if the customer does not meet requirements of settlement discount?
DR Bank, CR Accs rec
DR Allowance, CR Revenue
capitalization issue?
DR dividends (E) (closed off to RE) CR share election reserve (E) (close off to stated cap)
share repurchase?
DR Stated cap, DR RE, CR Bank
DR Stated cap, CR Bank
share issue costs?
DR stated capital
CR bank
disposing of financial assets? (shares)
at year end, reduce current value to value of sale for all shares. remove shares sold. return to FV at end of year.
