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Accounting Flashcards

1
Q

Inventory Criteria

A

a) held for sale in ordinary course of business
b) in the process of productions for sale
c) in the form of materials or supplies to be consumed in the production process or in the rendering of services

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2
Q

Inventory Framework

A

ASPE - 3031

IFRS - IAS 23

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3
Q

Inventory Conversion Costs

A

Costs required to turn raw material into produce

  • Direct Labour
  • Allocated Manufacturing Overhead
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4
Q

Inventory - Difference between ASPE and IFRS

A

IFRS - Requires the capitalization of borrowing costs

ASPE - Allows a choice to either capitalize borrowing costs or expense them

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5
Q

Valuation of Inventory on Balance Sheet

A

Carried at the lower of Net Realizable Value (NRV) or Cost

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6
Q

Inventory Manufacturing Overhead (POHR)

A

POHR is determined before manufacturing occurs
= (est period OH costs) / (Normal volume of CD)
variance is adjusted through COGS

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7
Q

Inventory - Journal Entry for Over/ Under Allocated MOH

A

Over-Allocated
Dr Manufacturing Overhead (temporary)
Cr COGS

Under-Allocated
Dr COGS
Cr Manufacturing overhead (temporary)

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8
Q 
Define
PP&E
Residual Value
Salvage Value
Asset life
Useful Life
A

PPE - Tangible asset with future benefit of longer than one year and held to produce goods and services or rental to others

Residual value - Proceeds sale less any disposition costs

Salvage value - Assumes end of life and value as scrap

Asset Life - estimated length of time that the asset will last

Useful life - Period of time that the asset produces economic benefit for the business

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9
Q

PP&E - Depreciation

  • Define
  • Types
A

Subsequent Measurement - Cost Model

Systematic allocation of the cost of a long-lived asset into income over its useful life

  • Straight-line
  • Declining Balance
  • Units of Production
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10
Q

PP&E Framework

A

ASPE - 3061

IRFS - IAS 16

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11
Q

PP&E - Recognition

A
  1. Recognition Criteria
    a) Probable that future economic benefits will flow to the entity
    b) Cost of the item can be measured reliably
  2. Can it be capitalized?
    - Costs incurred for asset to be available for use
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12
Q

PP&E - Subsequent Measurement

A

Cost Method - Depreciation

Revaluation Model

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13
Q

PP&E - Revaluation Model

A
  • Made for each class of assets (not individual)
  • Degree of reliability in measuring FMV estimates

Increase to FMV

  1. Gain recognized to Net Income up to previous amount of losses
  2. Remaining amount recognized to OCI

Decrease to FMW

  1. Loss is recorded to OCI up to amount of previous gains
  2. Remaining amount to net income
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14
Q

PP&E - Revaluation Model - Methods

A

Elimination Method
- Accumulated Depreciation is reduced to 0 and asset cost is adjusted accordingly

Proportional Method
- Both Cost and Accumulated Depreciation are adjusted to achieve overall carrying value of FMV

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15
Q

PP&E - Differences between ASPE and IFRS

- Borrowing Costs

A

ASPE - Can choose to capitalize borrowing costs or expense them
IFRS - Capitalize borrowing costs that are directly attributed to the construction of the asset

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16
Q

PP&E - Differences between ASPE and IFRS

- Subsequent Measurement

A

ASPE - Cost model only

IFRS - Cost or Revaluation Model

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17
Q

PP&E - Differences between ASPE and IFRS

- De-recognition

A

ASPE - Not required when replaced, as long as recoverable from future CF’s
IFRS - Required when replaced

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18
Q

PP&E - Differences between ASPE and IFRS

- Straight-line Depreciation

A

ASPE - Greater of:

  • (Cost - RV) / UL
  • (Cost - SV) / UL

IFRS - (Cost - RV)/ UL

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19
Q

Impairment Framework

A

IFRS - IAS 36

ASPE - 3063

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20
Q 
Define:
Impairment
CGU
FV
Carrying Value
A

Impairment - Unable to recover the carrying amount of the asset

CGU: Cash Generating Unit - Smallest group of assets that generate independent cash flows from other assets or groups of assets

FV = Price that would be received to dispose of asset in an active market

Carrying Value = Purchase Price - Depreciation

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21
Q

Impairment - IFRS

A
  1. Identify independent assets - if they do not generate income, use CGU
  2. Annual Testing
  3. Determine Recoverable Amount (discounted)
  4. Write Down to Recoverable Amount
  5. Can be reversed up to the lessor of its recoverable amount and carrying value that would have existed had the asset never been written down
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22
Q

Impairment - ASPE

A
  1. Identify Asset Group
  2. Monitor for indicators of impairment
  3. Determine Recoverable Amount (undiscounted)
  4. Write Down to Fair Value
  5. Cannot be reversed
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23
Q

Impairment - Calculate Recoverable Amount

A

Higher of

a) FV - Cost of Disposal
b) Value in Use

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24
Q

Impairment - Reversal of Impairment

A

Only under IFRS

  1. Determine Recoverable Value
    - Higher of (FV-Disposal) or Value in Use
  2. Lessor of Recoverable Value or ORIGINAL Carrying Value
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25
Q

Revenue from Contracts Framework

A

IFRS - IAS 15

ASPE - 3400

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26
Q

Revenue Recognition - From Contracts (IFRS)

A
  1. Identify the contract
  2. Identify Performance Obligation
  3. Determine the transaction price
  4. Allocate Transaction Price
  5. Recognize Revenue
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27
Q

Criteria to Recognize Contract

A
  1. Approved by both parties
  2. Identifies goods/ service
  3. Identifies payment terms
  4. Has commercial substance
  5. Probable that consideration will be collected
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28
Q

Criteria to identify Distinct Good

A
  1. Customer can benefit from good or service on its own

2. Promise to transfer good/ service is separable from other promises in contract

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29
Q

Revenue Recognition - From Contracts (ASPE)

A
  1. Risks and rewards of ownership have transferred
    - Goods: Seller has no continuing involvement or control
    - Services: Percentage of completion
  2. Revenue can be measured reliably
  3. Collection is reasonably assured
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30
Q

Revenue from Contracts - Transaction Price

A

Amount of consideration expected to be entitled to excluding amount collected on behalf of 3rd party

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31
Q

Revenue from Contracts - Right of Return Journal Entries

A

Date of Sale
Dr Cash
Cr Revenue
Cr Refund Liability

Dr COGS
Dr Asset - Right to Recover
Cr Inventory

to record Refund after expiry
Dr Refund Liability
Cr Revenue (amount not returned)
Cr Asset

Dr COGS
Dr Inventory
Cr Asset - Right to Recover

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32
Q

Revenue from Contracts - Criteria for Satisfied over time

A
  1. Customer simultaneously receives and consumes the benefits
  2. Vendors performance creates or enhances a customer-controlled asset
  3. Vendors performance does not create an asset with an alternative use to the vendor and the vendor has no enforceable right to payment for performance completed to date
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33
Q

Revenue from Contracts - Criteria for Satisfied at a Point in Time

A
  1. Present right to payment
  2. Legal title has transferred
  3. Physical Possession has transferred
  4. Customer has significant risks and rewards of ownership
  5. Customers Acceptance
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34
Q

Government Grant - Definition

A

Assistance by government in the form of transfers to resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity

  • Forgivable Government Loans
  • Grants related to Income
  • Grants related to Assets
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35
Q

Government Grant Framework

A

IFRS - IAS 20

ASPE - 3800

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36
Q

Government Grants - Recognition Criteria

A

Reasonable assurance exists that:

  • Entity will comply with the conditions of the grant
  • Grant will be received
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37
Q

Government Grants - Received but does not comply with conditions

A

Recorded as a liability and reduced once conditions are met

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38
Q

Government Grants - Related to Income

A 
To cover expenses when it is incurred
- Separately as "Other Income"
           Dr Expense
                      Cr Cash
           Dr Deferred Gov Grant
                      Cr Other Income - Gov Grant

- Deducted from the related expense
             Dr Expense
                       Cr Cash
             Dr Deferred Gov Grant 
                       Cr Expense
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39
Q

Government Grants - Related to Assets

A

Recognized as income on a systematic basis, in line with asset’s depreciation
- As deferred income as depreciation is incurred over life of the asset
Dr Depreciation Expense
Cr Accumulated Depreciation (actual cost)
Dr Deferred Government Grant
Cr Other Income - Dep Expense

  • Deducted from assets carrying value (proceeds against equipment)
    Dr Depreciation (Cost - Grant)
    Cr Accumulated Depreciation
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40
Q

Government Grants - Received prior to conditions being met

A

Recognize as deferred grant (liability) until the conditions are met

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41
Q

Government Grants - Conditions met but grant not yet received

A

Recognize as government grant receivable (an asset)

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42
Q

Government Grants - Non-Monetary

A

Dr Equipment
Cr Deferred Gov Grant

IFRS - Recognize grant at FV or Nominal Amount

ASPE: Recorded at FV

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43
Q

Government Grants - Favorable Interest Terms

A

Recognize benefit as government grant
Loan Proceeds - Discounted Value

Dr Cash
Cr Gov Loan Payable (discounted value)
Cr Deferred Gov Grant (proceeds - discounted value)

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44
Q

Cash and Cash Equivalents Definition

A

IFRS - IAS 7

Cash on hand or investments that are readily convertible to cash and are subject to insignificant risk of change in value

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45
Q

Cash and Cash Equivalents - Restricted Cash

A

Company is not able to utilize cash for general purposes.

  • Minimum balance requirements
  • Funds in escrow
  • Donations
  • Legally binding
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46
Q

Accounts Receivable Definition

A

Arise our of credit sale transactions from the normal course of business, and are typically short term and unsecured

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47
Q

Accounts Receivable - Classification

A

Amortized costs

  1. Held to collect contractual CF’s
  2. Payments on principle and interest

FVOCI
Fair Value - Other Comprehensive Income
1. Collect contractual CF’s
2. Purpose to sell

FVTPL
Fair Value through Profit or Loss
1. Holding to sell as part of an active portfolio

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48
Q

Accounts Receivable - Recognition - Amortized Cost

A

Initial at FV

Subsequent using the effective interest rate method less any impairment losses

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49
Q

Allowance for Doubtful Accounts - Subsequent Measurement

A

Recognized annually

  • Equal to the present value of all cash shortfalls over the life of the receivable
  • Reverse up to amount of AC that would have been if no impairment was recognized
  • Changes in loss allowance are recognized in P/L
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50
Q

When should AR be written off

A

As soon as they are known to be uncollectable

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51
Q

AFDA - Criteria

A

Expected loss reflects

  1. Unbiased and probability weighted amount
  2. Time value of money
  3. Reasonably and Supportable information is available at report date
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52
Q

Net Discounts - Journal Entry

A

Initial
Dr AR
Cr Sales Revenue

Collection within time
Dr Cash
Dr Sales Revenue
Cr AR

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53
Q

Passive Investments - FVTPL

A 
Designation is irrevocable
Initial Measurement - Fair Value (FV)
Transaction Costs - Expense Immediately
Subsequent Measurement - FV
Classification Unrealized Gain or Loss - Profit/Loss
Impairment - not separated from FV
Derecognition - G/L recognized in P/L
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54
Q

Passive Investments - Amortized Cost

A

Initial Measurement - Fair Value (FV)
Transaction Costs - Added to Carrying Value
Subsequent Measurement - AC Effective Interest Method
Classification Unrealized Gain or Loss - n/a
Impairment - DCF using original interest rate < CV, record loss if P/L
Derecognition - G/L recognized in P/L

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55
Q

Passive Investments - FVTOCI

A

Equity - only for investments that are not held for training
Debt - held for CF and to sell instrument

Initial Measurement - Fair Value (FV)

Transaction Costs - Added to Carrying Value

Subsequent Measurement -
Equity - FV
Debt - AC Effective Interest Method

Classification Unrealized Gain or Loss - OCI, net of tax

Impairment
Equity - not separated from other FV changes
Debt - Cumulative loss on P/L

Derecognition
Equity - Amounts in OCI are not recycled to NI
Debt - Current G/L plus cumulative G/L transferred from OCI to P/L

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56
Q

RPT - Difference between IFRS and ASPE

A

IFRS does not provide guidance on measurement

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57
Q

What is a considered a related party

A
  1. Any entity exercises direct or indirect control or joint control, or significant influence
  2. Any party that can exert direct or indirect control or joint control or significant influence over the entity
  3. Parties subject to common control, joint control or common significant influence
  4. Management of the entity
  5. Members of the immediate family on an individual who is a related party
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58
Q

Exchange amount

A

Consideration paid or received as agreed to by the related parties (sales price)

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59
Q

Carrying Amount

A

Book value of the transferred item recorded by the transfer

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60
Q

Substantive change in ownership

A

When a transaction results in unrelated parties having acquired or given up at least 20% of the total equity of ownership

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61
Q

Leases - Non lease costs (Repairs and Maintenance)

A

Are specifically excluded unless lessee elects not to separate

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62
Q

Leases - Initial Measurement (Lessee)

A

ROU (Right of use asset)
- Includes direct costs incurred by the leessee

Lease Liability

  • When payment is due on the 1st it is ecluded from lease liability
  • Discounted rate = implicit unless it is not determinable
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63
Q

Leases - Lessor Perspective - Fiance Lease Criteria

A
  1. Title transfer to lessee by the end of lease term
  2. BPO option exists at date least begins and it is reasonably certain the lessee will exercise it
  3. Lease term duration - lessee will receive substantially all the economic benefits expected to be derived from property over lifespan
  4. PV of minimum lease payments amount to substantially all FV
  5. Asset is specialized in nature and only the lessee can use it without major modifications
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64
Q

Leases - Lessor Perspective - Operating Lease

A

Recognize payments on a straight-line basis into income over the lease term or on some other systematic basis depending on use irrespective of the timing of CF’s

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65
Q

Leases - Lessor Perspective - Initial Recognition

A

BPO
Revenue & Receivable - PV of lease payments + PV of BPO
COGS - Cost of Inventory

Guaranteed RV
Revenue & Receivable - PV of lease payments + PV of GRV
COGS - Cost of Inventory

Unguaranteed RV
Revenue - PV of lease payemnts
Receivable - PV of lease & PV of Residual
COSG - Cost of inventory less PV of residual

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66
Q

Leases - Lessor Perspective - Derecognition

A

Title Transfers - Lease receivable is derecognized through receipt of payment

Asset is returned - Gain/ Loss is recognized

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67
Q

What is a sale and leaseback transaction?

A

Transfers an asset to another entity and then leases the asset back

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68
Q

Criteria for a leaseback - Sale occurred?

A

Seller-Lessor

  • seller derecognizes asset and gain in recognized at time of sale limited to the proportion of claims on the asset that were transferred
  • Lease is recognized as an ROU and lease liability

Buyer-Lessor

  • Buyer recognizes the asset has been purchased
  • Lease is accounted for as an operating or finance lease
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69
Q

Lease Back Transactions - Entries

A

Proportion of claim on asset retained by seller-lessee
= PV of lease payments/ FV of asset given up

Buyer-Sellers Proportionate Claim
= (FMV asset sold - PV of lease payments) / FMV of asset

ROU Asset
= (PV lease payments / FV asset given up) * BV asset given up

Gain on Sale
= Buyer-Lessors proportional claim * (FMV asset sold - BV asset sold)

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70
Q

Lease Framework

A

IFRS - IFRS 16

ASPE - 3065

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71
Q

Leases - Lessee - ASPE / IFRS Differences

A

IFRS - All leases are capitalized with limited exceptions for ST leases 1 year or less (lease expense)
ASPE - Can be capital or Operating

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72
Q

Leases - Other Costs - ASPE / IFRS Differences

A

IFRS - Non Lease Component Costs
Elections can be made for to include non lease components in cost of lease payments

ASPE - Executory Costs
Executory costs must be excluded from minimum lease payents

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73
Q

Leases - Discount Rates - ASPE / IFRS Differences

A

IRFS - Discount rate is the implied rate. Only use borrowing rate is not readily available
ASPE - Discount rate is lower of: Implicit, if known and borrowing rate

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74
Q

Leases - Revaluation - ASPE / IFRS Differences

A

IFRS - Tested for impairment at each reporting period

ASPE - Cannot be initially recognized at amount higher than FV
- Discount rate must be adjusted to show that the PV of minimum payments is equal to the FV of leased asset

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75
Q

Definition - Non Current Asset held for sale

A

Asset that will have its carrying value recovered through a sale transaction rather than through continuing use

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76
Q

Define - Discontinued Operation

A

Component of an entity that either has been disposed of or is classified as held for sale
- Operations and CF’s that can be clearly distinguished, operatioanlly and for financial reporting purposes

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77
Q

Criteria - Non-Current Asset Held for Sale

A
  1. Must be available for immediate sale in present condition
  2. Terms of sale must be usual and customary
  3. Sale must be highly probable
    - Management is committed
    - Initiated active program to locate buyer
    - Actively marketed for sale at a reasonable price
    - Sale expected to be completed in 1 year
    - Unlikely significant changes to the plan will be made
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78
Q

Measurement - Non Current Assets HFS

A

Measured at lower of CV and FV - cost to sell
- Loss recognized to income

Depreciation stops

Presented as current assets separate from other assets

Recognize gain if FV-costs increases writeup to previous impairment

79
Q

Criteria - Discontinued Operation

A

Meets one of the following:

  1. Represent a separate major lien of business or geographical area
  2. Part of a single co-ordinated plan to dispose of a separate major line or business or geographical area
  3. Is a subsidiary acquired exclusively to resell
80
Q

Measurement - Discontinued Operations

A

Measured same as HFS

Presented separately on statement of comprehensive income

  • Post-Tax profit or loss from discontinued operations
  • Post-Tax gain or loss related to re-measurement of disposal of discontinued operations
81
Q

Framework HFS and Discontinued Operations

A

IFRS - IFRS 5

ASPE - 3475

82
Q

HFS - Calculating Amount on Statement of Comprehensive Income

A

Net Income -

Is there a difference between CV and FV?
CV - (FV - Costs) = write down or write up

83
Q

Presentation - Does not count as a Discontinued Operation

A

Not reported as a discontinued operation

Net Income = Net income before taxes - (any write downs to lower of FV - costs or Carrying Value)

84
Q

Non-Monetary Transaction

Non-Monetary Item

A

Exchanges that occur between parties where both items exchanged are non-monetary in nature.

Not cash or the right to cash in the future (such as inventory, capital assets, or services)

85
Q

Non-Monetary Non-reciprocal Transaction

A

One-sided transfer of a non-monetary asset
- in-kind dividends, donations of goods or services, and liquidation of company assets to owners

Measured at the carrying amount of the non-monetary assets or liabilities transferred

Other than the recognition of any impairment, this disposal does not result in any gain or loss of the company’s financial statements.

86
Q

Non Monetary Transactions - Measurement Criteria

A

If no to any - More reliable of FV asset given up/ FV asset received

  1. Does transaction lack commercial substance
  2. Is Exchange in ordinary course of business sold in same line
  3. Are neither FV given/ received reliably measured
  4. Is the transaction non-monetary, non reciprocal?
87
Q

Intangible Asset - Criteria

A

Has to meet both the definition and the recognition criteria
- Otherwise it is expensed

Definition Criteria

  1. Identifiable as either:
    - Separable - Can be transferred/ sold to another entity
    - Arises from contractual or other legal rights
  2. Entity controls future economic benefits
  3. Asset will generate future economic benefits

Recognition criteria

  1. Probable that expected future economic benefits will flow through the entity
  2. Cost can be reliably measured
88
Q

Intangible Asset - Definition and Examples

A

An identifiable, non-monetary asset without physical substance

  • Customer Lists
  • Trademarks
  • Copyright
  • Patents
  • Franchise Rights
89
Q

Recognition of Research as Intangible Asset

A

Early stages/ preliminary work cannot demonstrate will result in future economic benefits
- Is expensed

90
Q

Recognition of Development Costs

A

Capitalize after the point in time when all criteria are met

  • Cannot retroactively defer
    1. Technical feasibility upon completion
    2. Intent to complete
    3. Ability to use or sell
    4. Probable future economic benefits
    5. Adequate technical, financial and other resources are available
    6. Able to reliably measure the expenditures
91
Q

Definition - Goodwill

A

Not considered an identifiable asset and only recognized in a business combination.
- Internally generated goodwill is never recognized

92
Q

Intangible Assets - Development Costs - Eligible for Capitalization

A
  • Costs of materials and services used to generate intangible asset
  • Cost of employee salaries, wages and benefits incurred to generate intangible assets
  • Fees to register a legal right
  • Amortization of patents and licenses used to generate the intangible asset
  • Interest Costs
93
Q

Intangible Assets - Development Costs - Not Eligible for Capitalization

A
  • Selling, Admin and other overhead unless directly attributed to preparing asset for use
  • Inefficiencies or initial operating losses incurred before planned performance
  • Cost of training staff to use the asset
94
Q

Intangible Assets - ASPE or IFRS differences

A

ASPE

  • No guidance on government grants
  • Policy choice to capitalize or expense development costs for internal projects
  • Revaluation model is not an option
  • Impairment testing is done when events indicate
  • Does not give guidance on residual value
95
Q

Intangible Assets - Subsequent Measurement

A

Assets with Finite Life

  1. Cost Method
    - Determine UL, amortize and annually test for impairment
  2. Revaluation
    - Only available if traded on an active market
    - FV less AD less Impairment

Infinite Life
- Assessed at least annually for impairment or whenever events indicate.

96
Q

Define - Foreign Currency Transaction

A

Occurs in a different currency than the companys functional currency

97
Q

Define -

Functional Currency

A

FC - Currency of the primary economic environment in which the company operates
- currency used in day to day operations

98
Q

Foreign Currency - initial measurement

A

Translate to functional currency using the exchange rate on the date of the transaction

99
Q

Foreign Currency - Subsequent measurement

A

Monetary Items - Translated at closing rate on balance sheet date
Non-Monetary Items - Measured at historical cost or rate on revaluation date

100
Q

Foreign Currency - Monetary Items

A

Units of currency or Assets/ Liabilities to be received on paid in a fixed or determinable amount, such as cash, receivables, payables or loans

101
Q

Foreign Currency - Non Monetary Items

A

Doesn’t meet the definition of a monetary item

- Inventory, prepaid expenses, PP&E, Intagibles

102
Q

Foreign Currency - Framework

A

IFRS - IAS 31

ASPE - 1651

103
Q

Foreign Currency - ASPE/ IFRS Differences

A

No significant differences

104
Q

Foreign Currency - Disclosures

A

Entities Functional Currency
Fx Gain/Loss in Income Statement
Change in functional currency

105
Q

Contingent Liability/ Asset- Definition

A

A potential liability/ asset resulting from a past event for which a future independent event will determine if an outflow of economic benefits is required/ occur

106
Q

Contingencies - Required Disclosures

A
  1. Brief description of the nature, timing and uncertainty of payments
  2. Amount of any expected reimbursements
  3. Carrying amount at the beginning and end of the period
  4. Increases, Decreases, or reversals due to the passage of time
107
Q

Contingencies - Framework

A

IFRS - IAS 37

ASPE - 3290

108
Q

Contingencies - Liabilities - Disclosure/ Record

A

Nothing required if liability is remote

Record Provision if liability is probably, likely and measureable

109
Q

Contingencies - Assets - Disclosure/ Record

A

Nothing required if gain is less than probable
Record asset if contingency is certain and measurable
- ASPE required 100% certainty

110
Q

Contingencies - Measurement IFRS

A
  • Best estimate of most likely amount
  • Multiple Likely outcomes - weighted average
  • continuous range - mid point
111
Q

Valuation - If company is not a going concern

A

Asset Based Approach - Liquidation approach

112
Q

Two types of Liquidation Scenarios

A

Orderly (voluntary) Liquidation

  • Resolution of the entity’s members
  • Not forced

Forced Liquidation

  • Asset is sold to the highest bidder
  • Generally results in lower NRV
113
Q

Steps in performing liquidation valuation

A
  1. Adjust BS to reflect NRV on valuation date
  2. Liabilities are deducted from NRV of assets
  3. Determine the proceeds available for distribution (after corporate tax)
  4. Personal income taxes are calculated on proceeds
114
Q

Valuation -
Company does not maintain active operations
or has active operations but does not have excess earnings

A

Inherent value of goodwill is nil

Asset Based Approach - Adjusted Net Assets

115
Q

Decommissioning Provision

A

Obligation for an expected future cost to decommission a tangible asset

116
Q

Calculating PF of Decommissioned Asset

A

PV = (FV) / (1 + RATE)^ UL

117
Q

Calculating Interest Expense (Accretion)

A

Current Value of Decommissioning Asset * Pre-Tax Rate

118
Q

Define Accretion

A

Systematic increase of obligation over time

119
Q

Criteria for decommissioned asset

A
  1. Present obligation arising from past event
  2. Probable outflow to settle obligation
  3. Reliable estimate can be made
120
Q

Decommissioned Assets - Framework

A

IFRS - IAS36

ASPE - 3063

121
Q

Decommissioned Assets - Difference between IFRS and ASPE

A

IFRS

  • Legal and Constructive Obligations
  • Accretion as an interest expense over passage of time

ASPE

  • Legal Obligation only
  • Accretion as an operating expense for the passage of time
  • Retirement Obligation
122
Q

Decommissioned Assets - Journal Entry - Accretion

A

Dr Interest Expense

Cr Decommissioned Asset

123
Q

Income Taxes - Permanent Differences

A

Income

  • Dividends from CAD Corps
  • 50% Capital

Expenses

  • Golf Memberships
  • 50% Meals and Entertainment
  • Political Contributions
  • Interest/ Penalties on taxes
124
Q

Income Taxes - Temporary Differences

A 
Warranty liability (-ve)
Leases (+ve)
Decommissioning Provision
Lawsuit Accruals (-ve)
PP&amp;E
Deferred Development Costs (+ve)
Investments (+ve)
125
Q

Define Temporary Differences

A

When accounting treatment and tax treatment differ over time and these differences reverse
Taxable Difference - Higher Income paid in the future
Deductible Difference - Less tax paid in the future

126
Q

Taxes Payable Method

A

Only current income taxes are recorded, deferred taxes are ignored
only under ASPE

127
Q

Income Taxes - Difference between ASPE and IFRS

A

IFRS

  • Deferred Taxes
  • Always account for current and deferred
  • Deferred are considered LT

ASPE

  • Future Income Taxes
  • Choice of Future Income Taxes method or Taxes Payable Method
  • Current = Current and Non-Current = Non-Current
128
Q

Income Taxes - Loss Carryback

A

Losses can only be carried back 3 years

Dr Income Taxes Receivable
Cr Current Income Tax Expense (recovery)

129
Q

Income Taxes - Loss Carryforward

A

Losses not applied is prior 3 years are applied if:

1) probable earn sufficient taxable income to use benefit
2) Enacted rate in future is expected
3) Re-asses at each reporting period

Dr Deferred Tax Asset
Cr Deferred Income Tax Expense (recovery)

130
Q

Income Taxes - Framework

A

IFRS - IAS12

ASPE - 3465

131
Q

Acquisition Differential

A

Difference between purchase price and book value of associate at date of purchase

Acquisition Price
- BV net assets * Ownership
= AD
\+/- FV differential (BV-FV) * Ownership
= Goodwill
132
Q

Investments in Associates - Framework

A

IFRS - IAS 28

ASPE - 3051

133
Q

Calculation - Realized Profit in Inventory

A

Opening Inventory

  • GP%
  • Ownership%
  • (1-TR)
134
Q

Calculation - Unrealized Profit in Inventory

A

Closing Inventory

  • GP%
  • Ownership%
  • (1-TR)
135
Q

Investments in Associates - ASPE/ IFRS Differences

A

ASPE

  • Significant Influence - choice to use equity or cost method
  • If shares are publicly traded with quoted price, choice is equity method or FV
136
Q

Investments in Associates - Significant Influence %

137
Q

Post Acquisition - starting point

A
  1. Combine parent and subsidy legal entity financial statements
  2. adjust combined number for FV differentials
138
Q

After Acquisition - FV differentials period and impact

  • Inventory
  • Depreciable Capital Assets
  • Land
  • LT Debt
A

Inventory

  • In first year (turnover)
  • Cost of Sales

Depreciable

  • Over remaining useful life
  • Depreciation/ AD

Land

  • In period sold
  • Gain of Loss on Sale of Asset

LT Debt

  • Remaining term to maturity
  • Interest Expense
139
Q

Define
Current Period Amortization
Unamortized FV Differential

A

Current Period Amortization
- amount of amortization of FV differential recognized in the consolidated income statement of the current period

Unamortized FV Differential
- FV differential at acquisition cost less the accumulated amortization recognized to date

140
Q

Post Acquisition - NCI Impacts to BS

A
  • NCI’s share of amortization to date of FV differential

- NCI’s share of unrealized gain/ losses on upstream transactions

141
Q

Post Acquisition - Impact on retained earnings

A
  • amortization to date on FV differentials that arose at aquisition
  • unrealized profit in closing inventory on intercompany sales
  • unrealized loss on intercompany sale of equipment
142
Q

Post Acquisition - Intercompany adjustments to BS - Inventory

A
  1. Decrease sales & cost by intercompany selling price
  2. Decrease/ Increase Sales & Cost by unrealized profits
    Sales - unrealized in previous
    Cost - unrealized in current
143
Q

Post Acquisition - Intercompany adjustments to BS - Depreciable Assets

A

Year of sale - eliminate reported gain/ loss from income statement

Subsequent - for remaining useful life - adjust depreciation expense
Gain - reduce
Loss - increase

144
Q

Post Acquisition - Intercompany adjustments to BS - Land

A

Year of sale - eliminate reported gain/ loss from income statement

Subsequent - outside entity adjust gain or loss on sale

145
Q

Net Earnings available to shareholders

A

Net Income After Tax less any dividends on preferred Shareholders

Cumulative - Dividends owed (regardless if declared)
Non-Cumulative - Only dividends declared

146
Q

WASCO

A 
Date
Activity
Shares
Shares Outstanding (cumulative)
Adjustment
Fraction of year
WASCO

Treasure shares issued but not outstanding are not included

Stock Splits and dividends increase in the adjustments as if they occurred at the beginning of the year

147
Q

Diluted EPS - Define

A

Hypothetical measure of company earnings attributed to each CS holder assuming all dilutive securities have been converted to CS

148
Q

Calculate EPS - equation and 5 steps

A

Net earnings + Income Effect
divided by
WASCO + share effect

149
Q

EPS - Define
Income Impact
Share Effect

A

Income Impact
- change in AT income if PCS are converted to CS

Share Effect
- number of additional CS that would be outstanding if PCS is converted to CS

Incremental EPS
= Income Effect/ Share Effect

150
Q

EPS - Convertible Bonds

- Calculation

A

Income Impact
= Bond CV * Effective IR * Fraction of Year * (1-TR)

Share Impact
= Bond CV/ Cost of bond * No. Shares * Fraction of Year

151
Q

Change is Accounting - Approaches

A

Prospective

  • In the future
  • Effects are limited to current and future statements only

Retrospective
- Past financial statements that are affected are adjusted

152
Q

Types of accounting changes and their approach

A
  1. Change in Accounting estimate
    - Prospective
  2. Change in Accounting Policy
    - Retrospective if voluntary
    - Prospectively if standard requires or permits
  3. Correction of error
    - Retrospective
153
Q

Changes in Estimates - Required Disclosures

A

nature and account

- If it is not possible to estimate effect on current periods

154
Q

Changes in Accounting Policy - two reasons

A

Voluntary - relevant and reliable information
- Retrospectively

Standard - required by GAAP

155
Q

Changes in Accounting Policy - Presentation and Disclosures

A

Balance Sheet - 3 years

Income statement - 2 years

156
Q

Objective of MD&A

A

Supplement and complement the information in the FS by helping readers understand what the FS show and do not show

157
Q

Purpose of MD&A

A

Provide historical and discussion of future plans to continue operations

158
Q

Subsequent Event - Define

A

Events after the reporting period

Favorable or unfavorable that occur between the end of the reporting period and the date when the financial statements are authorized for issue

159
Q

Subsequent Events - procedure

A
  1. Is it material
    - If no - no future work is required
  2. Adjusting or Non-Adjusting Event
160
Q

Subsequent Event - Types

A

Adjusting - conditions existed at the end of the reporting period

Non Adjusting - conditions that arose after the reporting period

161
Q

Subsequent Events - Disclosures

A
  • Date financial statements were authorized

- who has power to amend after they are issued

162
Q

Subsequent Events - ASPE Vs IFRS

A

ASPE
- Completion Date of FS

IFRS
- Authorization date of FS

163
Q

Acquisition at Date - Consolidated Common Shares

A

100% of parents CS only

164
Q

Acquisition at Date - Eliminated Entries in Consolidated FS

A

recorded to adjust subs A/L to FV and remove investment account and pre-aquisition equity
No journal entries are made to the GL

165
Q

Acquisition at Date - Adjustment to FV Differentials

A

FV > BV - Debit

BV > FV - Credit

166
Q

Acquisition at Date - Factors that affect power to control

A
  • Potential Voting rights
  • Right to appoint, reassign or remove key management personnel
  • Right to direct investee to enter into transactions that benefit investor
  • Appoint 50% of board members
167
Q

Acquisition at Date - ASPE = Methods for accounting Policy

A

If traded in an active market - cannot use Cost method

  • Acquisition Method
  • Equity Method
  • Cost Method
168
Q

Acquisition at Date - Disclosures

A
  • Gross proceeds paid
  • Values assigned to assets acquired
  • Details of contingent payments
169
Q

Acquisition at Date - Calculating Goodwill (100%)

A

Purchase price
- CS
- RE
= AD

FV Differentials
Assets BV - FV
Liabilities FV - BV
Goodwill 
Deferred Income Tax
DIT
Assets (opposit sign)
Liabilities (Opposit sign)
Land @ 50%
* TR
170
Q

Acquisition at Date - Calculating Goodwill (<100%)

A

Price Paid by Parent

+ Imputed Price for NCI (INA/ FVE)

171
Q

Acquisition at Date - NCI - Measurement Approaches

A

Identifiable Net Assets (ina)
= (FV Assets - FV Liabilities) * (1-% Ownership)

Fair Value Enterprise (FVE)
= No shares * (1 - % ownership) * price per share

172
Q

Joint Venture - 2 types and describe

A

Joint Operation - rights to assets and obligations for liabilities of joint arrangement

Joint Venture - Rights to only net assets of the joint arrangement

173
Q

Classifying Joint Venture or Joint Arrangement - 4 criteria

A 
1. Structure - Separate Vehicle 
No - Joint Operation
Yes -
2. Legal Form
3. Contractual terms
4. Other facts and circumstances
Obligation to liabilities
174
Q

Joint Operation

A
  • No investment account for interest
  • Recognizes portion of assets and liabilities at FV of compensation given up
  • Subsequent Measurement - share of assets/ liabilities/ revenues/ expenses
175
Q

Joint Venture

A
  • Do not have contractual right to assets/ liabilities
  • Not appropriate to show individual assets and liabilities on statements of invested parties
  • Use the equity method (unless exempt)

Exemptions - Venture capital orgs, mutual funds, trusts, investment insurance funds

176
Q

Joint Venture - Journal Entries

  1. Acquisition - Cash
  2. Acquisition - Assets
A

FV of consideration given up
Dr Investment in JV
Cr Cash

Dr Investment in JV
Cr Gain on Disposal (FV-BV) * (1-%)
Cr Unrealized Gain on disposal (FV-BV) * %
Cr Equipment Contributed BV

177
Q

Joint Venture - Subsequent Measurement

A

Profits/ Losses increase/ decrease investment account
- Corresponding gain or loss is recognized in Net Income

Monies received decrease investment account and do not affect NI

178
Q

Joint Arrangements - Framework

A

ASPE 3056

IFRS IAS 11

179
Q

Joint Arrangements ASPE - 3 categories

A

Jointly controlled operations - JO
Jointly controlled assets - JO
jointly controlled enterprises - JV

180
Q

Joint Arrangement - Describe

A

A joint arrangement is where by contractual agreement, control is shared, and decisions require unanimous consent

181
Q

Joint Venture -

Recording Sales

A

Sales for JV are not included in parent IS

- indirectly reported in investment income

182
Q

Calculate NI Associated to Parent

A

Net Income (sub)
Less: Unrealized - Upstream
* % Interest
Less: Unrealized - Downstream

Unrealized = EI * GP * (1-TR)

183
Q

Objectives of Government Financial Reporting

A
  • Describe financial position with respect to financing activities and its ability to meet its liabilities
  • Changes to financial position
  • Nature and extend of financial affairs
184
Q

Characteristics of Government Business Enterprises

A
  • Separate legal entities
  • Power to contract in own name
  • Sue or be Sued
  • Sell goods/ services outside government

ie Crown Corporations

185
Q

Characteristics of Government Not for Profit Organizations

A
  • No transferable ownership
  • Operated for social/ educational/ ect

ie Universities or health organizations

186
Q

Foreign Operation

A

Entity that is a subsidiary, associate, JV or branch of a reporting entity, who’s activities are conducted or based in a country of currency different than the reporting company

187
Q

Determining Functional Currency

A

Primary

  1. Influences sales prices
  2. Country who’s competitive forces/ regulations determine SP
  3. Influences input costs

Secondary

  1. Financing activities
  2. Funds retained from operations
188
Q

Presentation Currency

A

Currency in which entity reports its financial results

189
Q

Types of Foreign Operations

A
  1. Integrated - Functional Currency is in CAD
    = Temporal Method
  2. Self-Sustaining - Function Currency is not CAD
    = Current Rate Method
190
Q

Statement of CF’s - Difference between Indirect and Direct Method

A

The amount of net cash flow from the operations, investing, and financing sections is the same under both methods. The presentation of the operations section is different under both methods.

191
Q

NPO Financial Statement Terminology

  • Income Statement
  • Balance Sheet
  • Retained Earnings
A
  • Statement of Operations
  • Statement of Financial Position
  • Statement of Changes in Net Assets
192
Q

NPO - Fund Accounting

A

Allows organization to segment its financial statements based on nature of various projects, programs and expenditures

  • Self-balancing
  • Must be used when restricted fund method is used for contributions
  • May have one bank account that includes several funds
193
Q

NPO Contribution Policy Method

A
  • Deferral

- Restricted Fund Method

194
Q

NPO Contribution - and types

A

Non-reciprocal transfer
- Unrestricted Contribution
= can be used for any purpose

  • Restricted Contribution
    = Externally imposed stipulations
  • Endowment Contribution
    = Contributor specifies principal contribution

Financial Accounting (4 decks)

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