CFE - From Cases Flashcards
IFRS Issue: Lawsuit not accrued.
- What to look up in handbook?
- Criteria on marking guide?
- IAS 37 on ‘provisions, contingent liabilities, and contingent assets’
- Provision definition criteria, recognition criteria
IFRS Issue: How to appropriately account for a commercial property that is currently vacant but intended to be rented out soon
- What to look up in the handbook?
- Criteria on marking guide?
IAS 40 on ‘Investment property’
Marking guide:
- Definition of an investment property
- Recognition criteria
- Initial measurement, can choose to measure at FV or cost model, subsequent reporting options under FV model and cost model (PP&E, depreciation, impairment)
- Analyzes FS impact between both FV and cost model, impact of policy choice to users under both models
IFRS Issue - MD&A Disclosure
- What are the 3 criteria that information in a MD&A disclosure should meet?
Information should be complete, fair and not misleading
ASPE Issue - Inventory (seed damaged)
- Criteria on marking guide?
- Lower of cost and NRV
- Recoverable costs (explaining NRV - cost of inventories may not be recoverable if damaged, become obsolete or selling prices have declined)
- Conclude with reasonable journal entry consistent with analysis
ASPE Issue- Inventory (delayed transit & additional storage costs)
- Criteria on marking guide?
- Control & Storage costs
- Conclude with reasonable journal entry, consistent with analysis
ASPE Issue - Intangible Asset (custom software developed)
- Criteria on marking guide?
- Definition criteria (identifiable, control, future benefits)
-> Identifiable if it either is separable or arises from contractual or other legal rights
-> Control is the power to obtain future economic benefits
-> Recognition criteria (future benefits, reliable measurement) - Development cost criteria: (6) - Tech feasibility etc.
- Analyzes which costs are eligible to be capitalized
- Provide journal entry consistent with analysis
ASPE Issue - Acct tx for government loan repayment
- Criteria on marking guide?
Densmore Marking guide
ASPE 3800
Reasonable = 2 valid issues and attempts to conclude on appropriate acct tx
Valid issues:
- Repayment of gov loans treated same way as repayment of government grant based off ‘forgivable loan’ definition in HB 3800
- discuss case facts and why the loan is repayable now (didn’t meet conditions)
- Required to adjust the amount as a deferred credit to a repayable loan and a loss of the amount that was already amortized and brought into income
IFRS Issue: FG inventory - returns in transit & damaged/ obsolete goods
- Criteria on marking guide?
- Inventory measured at lower of cost and NRV
- Definition of NRV ( cost of inventories may not be recoverable if damaged, become obsolete or selling prices have decline)
- Apply definition of NRV to the damaged/ obsolete goods/ estimated sale price
- Provide reasonable journal entry
IFRS Issue: Revenue recognition
- Criteria on marking guide?
- 5 steps of rev - emphasis on steps 2, 4 and 5 being done correctly (identify separate performance obligations, allocate transaction price to separate performance obligations and determine when obligation is complete and rev can be rec)
- 2 criteria to be met in determining whether the good/ service that is promised to a customer is distinct (step 2). A) the customer can benefit from the goods/ services on their own. B) Sellers promise to transfer goods/ services is separately identified. Both must be met to have separate performance obligations. If NOT MET to one or both, it’s a single performance obligation.
- Ensure to tie case facts into every step*
- If only one performance obligation but 2 or more payments - combine and average price
- Provide reasonable journal entry
IFRS issue: Revenue recognition on incremental costs incurred to obtain the contract
- Criteria on marking guide?
- discusses each topic separately
- Relevant costs are incurred as an asset if expect to recover costs (sales commissions) and amortized over period of the performance obligation but exclude fixed costs that would have been incurred regardless of the sales contract.
- “Asset” means contract liability
- Provide reasonable journal entry
IFRS Issue: Intangible assets (recipes and brand name)
-Criteria on marking guide?
IAS 38
- Definition criteria (identifiable, control, future benefits)
-> Identifiable if it either is separable or arises from contractual or other legal rights
-> Control is the power to obtain future economic benefits
-> Recognition criteria (future benefits, reliable measurement)
- Analyzes which costs are eligible to be capitalized
- Measurement after recognition - cost or revaluation as well as monitor for impairment annually
- Provide journal entry consistent with analysis
IFRS Issue: Identify whether costs should be recognized as an asset or expensed (PP&E)
- Criteria on marking guide?
- The cost of an item is recognized as an asset if:
a) it is probable there will be future economic benefits
b) the cost is reliably measured - Apply the above to EACH cost
- Conclude with reasonable journal entry
IFRS Issue: Lease for lessee
- Criteria on marking guide?
Recall all leases are capitalized from the Lessee’s perspective
IFRS 16
Lease recognition:
- Identify if there is a lease
- Identify the separate lease components from non lease components (if applicable)
- Determine commencement date (when avail for use)
- Determine lease term (includes the non-cancellable period of lease, including option to extend if reasonably certain to exercise that)
- Determine the discount rate (use implicit rate or borrowing rate)
Initial measurement
- Present value ROU asset / lease liability - should include all the below factors
- Monthly discount rate
- Monthly lease term
- Monthly fixed payments
- Payments at end of month/ beg of month
Subsequent measurement
- ROU asset - cost model (shall use cost model unless it already applies the revaluation model to the same class of assets)
- ROU asset - carrying amount
- Lease liability - carrying amount
IFRS Issue: Government loan - interest free
- Marking guide criteria?
IAS 20
Discuss loan component of the agreement
- Measured at amortized cost (financial liabilities that are not held for trading are measured at amortized cost unless the FV option is applied)
- Discount rate
- PV - commencement of agreement
Discuss grant component
- Are the conditions met? Discuss each condition / compliance separately if met or not
- Is the amount reasonably certain to be received?
- Either deferred liability or net against asset
- Calculation (PV of loan using implicit interest rate - difference is the interest portion or the grant portion) *variance between the pv of the loan already calculated and the cash received
- Grant repayment
Return on assets formula?
Total operating income / total assets
Using net income is also acceptable
