Chapter 11 - terms Flashcards
a. A short, usually descriptive literary sketch. b. A short scene or incident, as from a movie.
vignette
ordinary annuity
A series of equal payments made at the end of each period over a fixed amount of time.
The opposite of an ordinary annuity is ….
an annuity due, where payments are made at the beginning of each period. Most testing questions will be based on an ordinary, so you need to be careful that your calculator is not in annuity due mode, usually denoted with “BEG” (representing beginning).
Depreciation begins…
…when the asset is available for use, not when the asset is put into use.
Ex: depreciation starts for a building that was completed (constrcted) from the moment it’s finished, NOT from the moment the company starts to use it.
Depreciation - activity method
variable charge approach
units of production method
(a limitation of this method is that often is difficult to arrive at a reliable measure of total units of output)
When you change the estimates (for useful, residual life etc)
IFRS - has to do it annually
- changes in estimates are accounted for prospectively, meaning remaining book value of the asset is depreciated using the revised estimates in the CURRENT YEAR and going forward
Under the cost model, impairment calculation is different under ASPE and IFRS
A. Cost Recovery Impairment model
- Compare carrying amount with the UNDISCOUNTED (not disocunted!) future cash flows
- Carrying amount - FAIR VALUE
B. RATIONAL ENTITY MODEL
- Compare carrying amount with recoverable amount [the higher of the discounted future cash flow (the value in use) or current FV less costs to sell
ASPE
Cost recovery impairment Model
recovery of impairment losses is NOT permitted
IFRS - Rational Entity impairment
Under IAS 36, an impairment loss may be reversed, however the specific asset cannot be increased in value to more than what its carrying amount would have been, net of depreciation, if the original impairment loss had never been recognized.
