(5) Liabilities Flashcards
How should a liability that requires periodic payment of interest be classified?
Accrued liability or debt
How should a liability secured by collateral be classified?
Loan payable
SFAS No6, classification of short-term obligations expected to be refinanced, states the following:
:if equity securites have beenissued [after the BS date but before issuance date], the short term obligation, alsthough excluded for CL, shall not be included in owners equity.
When can a short term obligation be excluded from current liabilitiesand inclueded in non-current debt?
If a company has both the intent and the ability to refinance the debt on a long-term basis, as evidenced by an actual refinancing before the issuance of the FS.
How should asset retirement obligations be recorded when purchasing an asset?
In the case of an asset that there is a legal obligation to retire at end of useful life,, the amount should be classified as a liability and expensed thorughout the useful life.
Generally accrued compensated absences generally includes vacation pay, but doesnt include the follwing:
Sick pay (usually not vest)
What amount should be used when there are various options within contingent liabilities, and they are all as likely probable?
The lowest amount from the estimated amounts should be recorded.
When should estimated losses be disclosed?
When probable and measurable. Reasonably possible losses are disclosed in the notes of the FS’s.
When should contingent gains be recorded and how?
When probable and measurable, and should be recorded in the notes of the FS’s.
Under IFRS, bond issuance costs reduce the cash received from the bond issuance and are deducted by the carrying value of the liability. How should a bond premium be treated when there are issuance citar related to the same bond premium?
The premium should be treated net of issuance costs.
Converting cash basis to accrual basis
cash base rev \+ end AR - beg AR - end unearned rev \+ beg unearned rev = accrual basis rev
How to calculate Amortization on bonds
Par value of bonds X effective interest rate = Interest expense
Interest expense - Interst paid
=Discount or premium on bonds
What comprises Special Purpose Local Governments (example: hospital authority or a school district) primary gov.
State government, General purpose local governments Separately elected gov body Legally separate Fiscally independent or other statement and local gov
What comprises R&D costs:
New knowledge or new data
Model or prototype
App of new research findings
Financing lease criteria
(1) PV of the sum of the lease payments and any gurantee is not reflected in the lease payments
(2) It is probable that the lessor will collect the lease payments plus any amount necessary to satisfy a residual value gurantee
