CFAS Flashcards
3 process in the definition given by (AAA) American Accounting Association
Identifyng - analytical
Measuring - technical
Communicating - formal
Accounting is a service activity. The accounting function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision.
Accounting Standards Council
CAT
Accounting is the art of ______________________ in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and _____ the results thereof.
recording, classifying and summarizing, interpreting
The 3 important points made in the definition of accounting:
It is a quantitative information
Financial in nature
Useful in decision making
This accounting process is the recognition or nonrecognition of business activities as “accountable” events.
Identifying
Are all business activities accountable?
No
An event is ______________ when it has an effect on assets, liabilities and equity.
accountable or quantifiable
Only ___________ are emphasized and recognized in accounting.
economic activities
______________ or exchange transactions are those economic events involving one entity and another entity.
External transactions
any sudden and unanticipated loss from fire, flood, earthquake and other event ordinarily termed as an act of God
Casualty
examples of internal transactions.
Production and Casualty
the accounting process of assigning of peso amounts to the accountable economic transactions and
Measuring
The measurement bases are
historical costa and current value
the original acquisition cost and the most common measure of financial transactions.
Historical Cost
the process of preparing and distributing accounting reports to potential users of accounting information
Communicating
the sorting or grouping of similar and interrelated economic transactions into their respective classes.
Classifying
the process of systematically maintaining a record of all economic business transactions after they have been identified and measured.
Recording
the preparation of financial statements which include the statement of financial position, income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows.
Summarizing
Implicit in the communication process
Recording, classifying, and summarizing
is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.
Board of Accountancy
This law is known as the Philippine Accountancy Act of 2004.
Republic Act No. 9298
Certified Public Accountants generally practice their profession in three main areas,
Public Accounting
Private Accounting
Government Accounting
Public accountants usually offer three kinds of services, namely
Auditing, Taxation and management advisory services
the examination of financial statements by independent certified public accountant for the purpose of expressing an opinion as to the fairness with which the financial statements are prepared.
Auditing
includes the preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors.
Taxation or Taxation Services
have become increasingly important in recent years although audit and tax services are undoubtedly the mainstay of public accountants.
Management advisory services
The highest accounting officer in an entity is known as the
CFO or Controller
encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property and interpreting the results thereof.
Government Accounting
The focus of government accounting is the
custody and administration of public funds.
CPD meaning
Continuing Professional Development
required for thebrenewal of CPA license and accreditation of CPA to practice the accountancy profession.
CPD
How many CPD are required for accreditation of a CPA to practice the accountancy profession?
120 CPD credited units
How many CPD Units are needed for renewal of license
15 CPD credited units
A CPA shall be permanently exempted from CPDvrequirements upon reaching the age of __ years.
65
refers to the profession of accounting practice.
Accountancy
used in reference only to a particular field of accountancy such as public accounting, private accounting and government accounting.
Accounting
is procedural and largely concerned with development and maintenance of accounting records.
Bookkeeping
primarily concerned with the recording of business transactions and the eventual preparation of financial statements.
Financial Accounting
focuses on general purpose reports
known as financial statements intended for internal and external users.
Financial Accounting
is the accumulation and preparation of financial reports for internal users only.
Managerial Accounting
represent the rules, procedures, practice and standards followed in the preparation and presentation of financial statements.
Generally accepted accounting principles
Replacement of Accounting Standards Council
Financial Reporting Standards Council or FRSC
The main function is to establish and improve accounting standards that will be generally accepted in the Philippines.
FRSC
The approved statements of the FRSC are known as
Philippine Accounting Standards or PAS and Philippine Financial Reporting Standards or PFRS.
The Financial Reporting Standards Council issues standards in a series of pronouncements called
Philippine Financial Reporting Standards or PFRS.
CPA’s are licensed by
PICPA
Accounting standard-setting has been characterized as
A political process
What is the standard-setting body in the Philippines at the present time?
Financial Reporting Standards Council
Accountants employed in entities in various capacity as accounting staff, chief accountant or controller are said to be engaged in
Private Accounting
The primary responsibility for properly applying GAAP lies with
Internal Auditor
The Conceptual Framework provides the foundation for Standards that: 3
Contribute to transparency
Contribute to economic efficiency
Strengthen accountability
In the absence of a standard or an interpretation that specifically applies to a transaction, management shall consider the applicability of the
Conceptual Framework
include the existing and potential investors, lenders and other creditors.
Primary users
include the employees, customers, governments and their agencies, and the public.
Other users
Users of Financial information
Primary users
Other users
financial information are the parties to whom general purpose financial reports are primarily directed
Primary users
users of financial information other than the existing and potential investors, lenders and other creditors
other users
information about the entity’s economic resources and the claims against the reporting entity.
Financial position
the assets and the claims are the liabilities and equity of the entity
Economic resources
is the availability of cash in the near future to cover currently maturing obligations.
Liquidity
is the availability of cash over a long term to meet financial commitments when they fall due.
Solvency
means that income is recognized when earned regardless of when received and expense is recognized when incurred regardless of when paid.
Accrual Accounting
The underlying theme of the Conceptual Framework is
Decision Usefulness
These users require information on risk and return provided by their investment.
Investors
These users are interested in information about the continuance of an entity, especially when they have a long-term involvement with or are dependent on the entity.
Customers
These users are interested in information about the profitability and stability of the entity in order to assess the ability of entity to provide remuneration, retirement benefits and employment opportunities.
Employees
These users are interested in information that enables them to assess whether their loans,the related interest thereon, and other amounts owing to them will be paid when due.
Lenders or Creditors
These users are interested in information in order to regulate the activities of an entity, determine taxation policies and provide a basis for national statistics.
Government and its agencies
These users need information on trends and recent developments where an entity makes a substantial contribution to the local economy providing employment and using local suppliers.
The public
The overall objective of financial reporting is to provide information
that is useful in decision making
The primary objective of financial reporting is to provide useful information to
Capital Providers
are the qualities or attributes that make financial accounting information useful to the users.
Qualitative Characteristics
The fundamental qualitative characteristics are
Relevance and Faithful representation
relate to the content or substance of financial information.
The fundamental qualitative characteristics
the capacity of the information to influence a decision.
Relevance
Financial information has _______ if it can be used as an input to processes employed by users to predict future outcome.
Predictive Value
financial information has predictive value when it can help users increase the likelihood of correctly or accurately predicting or
forecasting outcome of events.
Financial information is capable of making a difference in a decision if it has
Predictive Value and Confirmatory Value
means that the information provides feedback on previous evaluations
Confirmatory Value
is a practical rule in accounting which dictates that strict adherence to GAAP is not required when the items are not significant enough to affect the evaluation, decision and fairness of the financial statements.
Materiality
The materiality concept is also known as the
doctrine of convenience
The relevance of information is affected by its
nature and materiality
Materiality of an item depends on ______ rather than absolute size.
Relative size
an item is ______ if knowledge of it could reasonably affect or influence the economic decision of the primary users of the financial statements.
material
means the presentation of financial information not readily understood or not clearly expressed.
Obscuring Information
may be characterized by deliberate vagueness, ambiguity and abstruseness.
Obscuring Information
3 Ingredients of faithful representation
a Completeness
b. Neutrality
c. Free from error
means that financial reports represent economic phenomena or transactions in words and numbers.
Faithful Representation
means that the actual effects of the transactions shall be properly accounted for and reported in the financial statements.
Faithful Representation
requires that relevant information should be presented in a way that facilitates understanding and avoids erroneous implication.
Completeness
Actually, to be complete, the financial statements shall be accompanied by
notes to financial statements
depiction is without bias in the preparation or presentation of financial information.
Neutral
means that all significant and relevant information leading to the preparation of financial statements shall be clearly reported.
Adequate disclosure
Neutrality is synonymous with the all-encompassing
Principle of Fairness
is the exercise of care and caution when dealing with the uncertainties in the measurement process such that assets or income are not overstated and liabilities or expenses are not understated.
Prudence
Neutrality is supported by the exercise of
prudence
synonymous with prudence.
Prudence
means “in case of doubt, record any loss and do not record any gain.”
Conservatism
arises when monetary amounts in financial reports cannot be observed directly and must instead be estimated.
Measurement Uncertainty
can affect faithful representation if the level of uncertainty in providing an estimate is high.
Measurement Uncertainty
means there are no errors or omissions in the description of the phenomenon or transaction.
Free from error
If information is to represent faithfully the transactions and other events it purports to represent, it is necessary that the transactions and events are accounted in accordance with their substance and not merely their legal form.
Substance over form
The enhancing qualitative characteristics are: 4
comparability, understandability, verifiability and timeliness.
means the ability to bring together for the purpose of noting points of likeness and difference.
Comparability
may be made within an entity or between and across entities.
Comparability
Comparability within an entity is also known as
horizontal comparability or intracomparability.
Comparability across entities is also known as
intercomparability or dimensional comparability.
is the uniform application of accounting method from period to period within an entity.
Consistency
is the uniform application of accounting method between and across entities in the same industry.
Comparability
requires that financial information must be comprehensible or intelligible if it is to be most useful.
Understandability
means verifying an amount or other representation through direct observation, for example, by counting cash.
Direct Verification
means checking the inputs to a model, formula or other technique and recalculating the inputs using the same methodology.
Indirect Verification
means that different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation.
Verifiability
Verifiability implies
Consensus
means that financial information must be available or communicated early enough when a decision is to be made.
Timeliness
enhances the truism that without knowledge of the past, the basis for prediction will usually be lacking and without interest in the future, knowledge of the past is sterile.
Timeliness
is a pervasive constraint on the information that can be provided by financial reporting.
Cost
The ingredients of relevant financial information are
Predictive Value and Confirmatory Value
What is the quality of information that gives assurance that it is reasonably free of error and bias?
Faithful representation
The financial accounting information is directed toward the common needs of users and is independent of presumptions about particular needs and desires of specific users
Neutrality
In the event of conflict between the economic substance of a transaction and the legal form, the economic substance shall prevail
Substance over form
Which concept of accounting holds that, to the maximum extent possible, financial statements shall be based on arm’s length transactions?
Monetary Unit
Recognizing expected losses immediately but deferring expected gains is an example of
Conservatism
Which of the following relates to both relevance and faithful representation?
Comparability
Principle of objectivity includes concept of
Verifiability
entity, claims against the entity and changes in the economic resources and claims.
Financial Statements
are the financial statements prepared when the reporting entity comprises both the parent and its subsidiaries.
Consolidated Financial Statements
are the financial statements when the reporting entity comprises two or more entities that are not linked by a parent and subsidiary relationship.
Combined Financial Statements
are the financial statements prepared when the reporting entity is the parent alone.
Unconsolidated Financial Statements
provide information about the assets, liabilities, equity, income and expenses of both the parent and its subsidiaries as a single reporting entity.
Consolidated Financial Statements
is the entity that exercises control over the subsidiaries.
The parent
are designed to provide information about the parent’s assets, liabilities, income and expenses and not about those of the subsidiaries.
Unconsolidated Financial Statements
is an entity that is required or chooses to prepare financial statements.
Reporting entity
A reporting entity is not necessarily a
legal entity
is the period when financial statements are prepared for general purpose financial reporting.
Reporting Period
means that in the absence of evidence to the contrary, the accounting entity is viewed as continuing in operation indefinitely.
Going Concern Assumption
requires that the indefinite life of an entity is subdivided into accounting periods which are usually of equal length for the purpose of preparing financial reports on financial position, performance and cash flows.
Time period principle
is a twelve-month period that ends on December 31.
Calendar year
is a twelve-month period that ends on any month when the business is at the lowest or experiencing slack season.
Natural business year
The monetary unit assumption has two aspects
quantifiability and stability of the peso
means that the assets, liabilities, equity, income and expenses should be stated in terms of a unit of measure which is the peso in the Philippines.
Quantifiability
assumption means that the purchasing power of the peso is stable or constant and that its instability is insignificant and therefore may be ignored.
Stability of peso
the residual interest in the assets of the entity after deducting all of the habilities.
Equity
Obligations can either be
legal or constructive
arise from normal business practice, custom and a desire to maintain good business relations or act in an equitable manner.
Constructive Obligations
arises in the course of the ordinary regular activities and is referred to by variety of different names including sales, fees, interest, dividends, royalties and rent.
Revenue
represent other items that meet the definition of income and do not arise in the course of the ordinary regular activities.
Gains
The essence of revenue is
regularity
is defined as decreases in assets or increases in liabilities that result in decreases in equity, other than those relating to distributions to equity holders.
Expense
encompass losses as well as those expenses that arise in the course of the ordinary regular activities.
Expense
do not arise in the course of the ordinary regular activities and include losses resulting from disasters.
Loses
gain resulting from the sale of an asset in an arm’s length transaction.
Income
can be an effective communication tool about the information in financial statements.
presentation and disclosure
is the adding together of assets, liabilities, equity, income and expenses that have similar or shared characteristics and are included in the same classification.
Aggregation
primary source of information about an entity’s financial performance for the reporting period.
Income Statement
is the monetary amount of the net assets contributed by shareholders and the amount of the increase in net assets resulting from earnings retained by the entity.
Financial Capital
is the traditional concept based on historical cost and adopted by most entities.
Financial Capital
is an erosion of the capital invested in the entity.
Return of Capital
means that net income occurs only after the capital used from the beginning of the period is maintained.
Capital Maintenance Approach
is the quantitative measure of the physical productive capacity to produce goods and services.
Physical Capital
Accordingly, physical capital is equal to the net assets of the entity expressed in terms of
current cost
_____ assets include inventories and property, plant and equipment.
Productive
In physical capital productive assets are measured in _____
current cost
What is the accounting concept that justifies the usage of accruals and deferrals?
Going Concern
When a parent and subsidiary relationship exists, consolidated financial statements are prepared in recognition of
Economic Entity
The valuation of a promise to receive cash in the future at present value is valid because of what accounting concept?
Going Concern
Accounting for government grant and disclosure of government assistance
PAS 20
Employee benefits
PAS 19
Property, plant and equipment
PAS 16
Income taxes
PAS 12
Events after the reporting period
PAS 10
Accounting policies, changes in accounting estimate and errors
PAS 8
Statement of cash flows
PAS 7
Inventories
PAS 2
Presentation of financial statements
PAS 1
The elements directly related to the measurement of financial position are:
a. Asset
b. Liability
c. Equity
The elements directly related to the measurement of financial performance are:
Income
Expense
Which is not within the new definition of an asset?
a. An asset is a present economic resource.
b. The economic resource is a right that has potential to produce economic benefit.
c. The economic resource is controlled by the entity as a result of past event.
d. Future economic benefit is expected to flow to the entity.
D
Which of the following criteria need not be satisfied for a liability to exist?
a. The entity has an obligation.
b. The obligation is to transfer an economic resource.
c. The obligation is a present obligation that exists as a result of a past event.
d. The settlement is expected to result in an outflow of economic benefit.
D
Rights that have the potential to produce economic benefits and correspond to an obligation of another entity include all, except
a. Right to receive cash
b. Right to receive goods
c. Right to exchange economic resources with another entity on favorable terms
d. Right over property, plant and equipment
D
An economic resource could produce economic benefit if an entity is entitled to all, except
a. To receive contractual cash flows b. To exchange economic resources with another entity on unfavorable terms
c. To receive cash by selling the economic resource
d. To extinguish a liability by transferring an economic resource
B
Obligations to transfer an economic resource include all, except
a. Obligation to pay cash
b. Obligation to deliver goods
c. Obligation to provide services
d. Obligation to transfer an economic resource even specified future event does not occur
D
It is the present ability to direct the use of an economic resource and obtain the benefit that may flow from it.
a. Control
b. Legal right
c. Obligation
d. Ownership
A
A decrease in an asset arising from peripheral or incidental transaction is called
Loss
An outflow of asset based on an activity that represents the major operations is called
Expense
What is the primary distinction between revenue and gain?
a. The materiality of the amount
b. The likelihood that the transaction will recur
c. The nature of the activity that gives rise to the transaction
d. The method of disclosing the transaction
C
Only items that meet the definition of an asset, a liability or equity are recognized in the statement of financial position.
Recognition
A principle means that expenses are
recognized when incurred.
Expense Recognition
The basic principle of _______ is that income shall
be recognized when earned
income recognition
or point of sale recognition
The _________ requires that those costs and expenses incurred in earning a revenue shall be reported in the same period.
matching principle
The matching principle has three applications, namely:
a. Cause and effect association
b. Systematic and rational allocation c. Immediate recognition
Under the _________, the expense is recognized when the revenue is already recognized.
cause and effect association
The cause and effect association principle is actually the ________
strict matching concept.
Under ___________ some costs are expensed by simply allocating them over the periods benefited
systematic and rational allocation,
is defined as the removal of all or part of a recognized asset or liability from the statement of financial position.
Derecognition
is defined as quantifying in monetary terms the elements in the financial statements.
Measurement
Measurement
The Revised Conceptual Framework mentions twoeasurement
Historical Cost
Current Value
Current value includes:
a. Fair value
b. Value in use for asset
c. Fulfillment value for liability
d. Current cost
the price that would be received to sell an asset in an orderly transaction between market participants at measurement date.
Fair Value
is the present value of the cash flows that an entity expects to derive from the use of an asset and from the ultimate disposal.
Value in Use
is the present value of cash that an entity expects to transfer in paying or settling a liability.
Fulfillment Value
is the cost of an equivalent asset at the measurement date comprising the consideration paid and transaction cost.
Current cost of an asset
is the consideration that would be received less any transaction cost at measurement date.
Current cost of a liability
is the measurement basis most commonly adopted in preparing financial statements..
Historical Cost
A cause and effect relationship is implicit in the
Matching Principle
are the means by which the information accumulated and processed in financial accounting is periodically communicated to the users.
Financial Statements
is the time between the acquisition of assets and their realization in cash.
Operating Cycle
an entity shall classify all other assets not classified as current as noncurrent.
PAS 1, paragraph 66,
is simply defined as an identifiable nonmonetary asset without physical substance.
Intangible assets
The common examples of identifiable intangible assets include
patent, franchise, copyright, lease right, trademark and computer software.
An example of an unidentifiable intangible asset is
goodwill
are actually restrictions on the borrower as to undertaking further borrowings, paying dividends. maintaining specified level of working capital and so forth.
Covenants
is the residual interest of owners in the net assets of a corporation measured by the excess of assets over liabilities.
Shareholders’ equity
provide narrative description or disaggregation of items presented in the financial statements and information about items that do not qualify for recognition.
Notes to financial statements
are used to report information that does not fit into the body of the financial statements in order to enhance the understandability of the financial statements.
Notes to financial statements
is to provide the necessary disclosures required by Philippine Financial Reporting Standards.
Notes to financial statements
Forms of Financial Statements
Report Form
Account Form
The financial performance is also known as the
Results of Operations
constitute costs which are directly related to selling, advertising and delivery of goods to customers.
Distribution Cost
constitute cost of administering the business.
Administrative expenses
No More extraordinary items
PAS paragraph 87
Non-current asset is a ___ definition
residual
Current liabilities
PAS 1 paragraph 69
The ________ classifies expenses according to their function as part of cost of goods sold, distribution costs, administrative expenses and other expenses
functional presentation
is also known as the cost of goods sold method
functional presentation
Forms of IS
Functional Presentation
Natural Presentation
is referred to as the nature of expense method
Natural Presentation
the change in equity during a period resulting from transactions and other events, other than changes resulting from transactions with owners in their capacity as owners.
Comprehensive Income
are the cash flows derived primarily from the principal revenue producing activities of the entity.
Operating Activities
are the cash flows derived from the acquisition and disposal of long-term assets and other investments not included in cash equivalent.
Investing Activities
are the cash flows derived from the equity capital and borrowings of the entity.
Financing Activities
Statement of Cash flow is strictly a ____ concept
Cash
may be classified as financing cash flow because it is a cost of obtaining financial resources.
Interest Paid
may be classified as investing cash flow because it is a return on investment.
Interested Received
shall be classified as operating cash flow because it enters into the determination of net income.
Dividend Received
be classified as financing cash flow because it is a cost of obtaining financial resources.
Dividend Paid
are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.
Accounting Policies
means that any resulting adjustment from the change in accounting policy shall be reported as an adjustment to the opening balance of retained earnings.
Retrospective Application
are omissions and misstatements in the financial statements for one or more periods arising from a failure to use or misuse of reliable information.
Prior Period Errors
as those events, whether favorable or unfavorable, that occur between the end of reporting period and the date on which the financial statements are authorized for issue.
events after the reporting period
Types of events after the reporting period
Adjusting Events
Nonadjusting events
Types of events after the reporting period
after the reporting period are those that provide evidence of conditions that exist at the end of reporting period.
Adjusting Events
Types of events after the reporting period
after reporting period are those that are indicative of conditions that arise after the end of reporting period.
Nonadjusting Events
when the board of directors reviews the financial statements and authorizes them issue.
Financial statements are authorized for issue
is ownership directly or indirectly through subsidiaries of more than half of the voting power of an entity
Control
is the contractually agreed sharing of control over an economic activity.
Joint Control
Examples of Related Parties
Affiliates
Associates
Venturers
meaning the parent, the subsidiary and fellow subsidiaries.
Affiliates
If an investor owns more than 50% of an investee, the investor is known as
Parent
If an investor owns more than 50% of an investee, the imvestee is known as
Subsidiary
meaning the entities over which one party exercises significant influence.
Associates
If an investor owns at least 20% of the investee, the investee is known as
Associates
The term “____” includes the subsidiary or subsidiaries of the associate.
Associate
are the persons with managerial positions, like the president, vice-president, chief executive officer and other officers with responsibility of controlling the activities of entity.
The key management personnel
a. The individual’s spouse and children
b. Children of the individual’s spouse
c. Dependents of the individual or the individual’s spouse
Close family members of key management personnel
owning at least 20% of the reporting entity.
Individuals oe shareholders
is a transfer of resources or obligations between related parties, regardless of whether a price is charged.
Related party transaction
PAS 24, paragraph 12, requires ______________ relationships where control exists irrespective of whether there have been transactions between the related parties.
disclosure of related party
shall comprise cost of purchase, cost of conversion and other cost incurred in bringing the inventories to their present location and condition.
Cost of inventories
are assets held for sale in the ordinary course of business, in the process of production for such sale or in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Inventories
The _____ of inventories includes cost directly related to the units of production such as direct labor.
Cost of conversion
means that specific costs are attributed to identified items of inventory.
Specific Identification
PAS 2, paragraph 9, provides that inventories shall be measured at the lower of
cost and nrv
The cost of inventory is determined using either
FIFO cost
Average cost
the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost of disposal.
Net realizable value or NRV
The write down of inventory to net realizable value is accounted for using the
Allowance Method
PPE initial measurement
Cost
Major characteristic of PPE
Tangible Asset
Used in business
More than one year
means that property, plant and equipment are carried at cost less any accumulated depreciation and any accumulated impairment loss.
Cost model
means that property, plant and equipment are carried at revalued carrying amount.
Revaluation model
the fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment loss.
revalued carrying amount
as assistance by government in the form of transfer of resources to an entity in return for part or future compliance with certain conditions relating to the operating activities of the entity.
Government Grant
is action by government designed to provide an economic benefit specific to an entity or range of entities qualifying under certain criteria
Government Assistance
Intangible Assets
PAS 38
Impairment of Assets
PAS 36
Investment in Associates
PAS 28
Borrowing Cost
PAS 23
Related Party Disclosure
PAS 24
is an asset that necessarily takes a substantial period of time to get ready for the intended use or sale.
Qualifying Asset
defined as interest and other costs that an entity incurs in connection with borrowing of funds.
Borrowing Cost
PAS 23 requires that borrowing costs incurred in connection with acquisition of a qualifying asset should be
capitalized as cost of the qualifying asset.
Capitalization of borrowing costs shall cease when substantially all the activities necessary to prepare the qualifying asset for the intended use or sale are
Complete
is simply defined as an entity over which the investor has significant influence.
Associate
is the power to participate in the financial and operating policy decisions of the associate but not control or joint control over those policies.
Significance influence
The investment in associate is measured using the
equity method of accounting
If the carrying amount of an asset is higher than the recoverable amount, the asset is judged to have suffered an
impairment loss
is an incremental cost directly attributable to the disposal of an asset, excluding finance cost and income tax expense.
Cost of disposal
is the smallest identifiable group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows from other assets or group of assets
Cash generating unit
Future economic benefits may include
Revenue
Cost Savings
is the systematic allocation of the amortizable amount of an intangible asset over the useful life.
Amortization
cost of the intangible asset less residual value.
Amortizable Amount
The useful life of an intangible asset must be assessed as either
indefinite and definite
The useful life of an intangible asset is ______ when there is no foreseeable limit to the period over which the asset is expected to generate net cash flows.
indefinite
is the application of research findings or other knowledge to a plan or design for the production of new or substantially improved material, device, product, process, system or service, prior to the commencement of commercial production.
Development
is original and planned investigation undertaken with the prospect of gaining scientific or technical knowledge and understanding.
Research
expenditure on research or on the research phase of an internal project shall be recognized as expense when
incurred
