Chapter 4

Question 1

Asset

Answer 1

resources controlled by the company as a result of past events and from which future economic benefits are expected to flow to the entity

Question 2

Liability

Answer 2

obligation of a company arising from past events, the settlement of which is expected to result in an outflow of economic benefits from the entity

Question 3

equity

Answer 3

represent the owners’ residual interest in the company’s assets after deducting its liabilities

Question 4

Equity in the B.s

Answer 4

BS is mixed measured (historical cost, fair value)
- BS is a static document

Question 5

IFRS BALANCE sheet

Answer 5

from the least liquid to the higher liquid

Question 6

GAAP B.S

Answer 6

from the higher liquid to the last liquid

Question 7

classified balance sheet

Answer 7

balance sheet with separately classified current and non-current asset and liabilities

Question 8

Current asset

Answer 8

asset expected to be sold, used up, or otherwise realised in cash within one year or one operating cycle of the business, whichever is greater, after the reporting period

Question 9

Non current asset

Answer 9

asset not classified as current. also know as long-term or long-lived asset

Question 10

current liabilities

Answer 10

liabilities expected to be settled within one year or within one operating cycle of the business

Question 11

non current liabilities

Answer 11

all liabilities not classified as current

Question 12

working capital

Answer 12

the excess of current assets over current liabilities

Question 13

cash equivalent

Answer 13

highly liquid, short term investments that are so close to maturity that the risk of significant change in value from changes in int.rates is minimal

Question 14

trade receivable

Answer 14

amounts owed to a company by its customer for products and services already delivered. also referred to A/R. typically reported at net realisable value

Question 15

measurement base of current asset
GAAP

Answer 15

lower of cost or market
Market defined as replacement cost with a floor (NRV- profit margin) and a ceiling
NRV defined as estimated selling price less estimated cost of completion and sale
REVERSAL OR PRIOR WRITE-DOWNS are not allowed
yes LIFO

Question 16

Measurement base of current asset under IFRS

Answer 16

lower cost or NRV
NRV defined as estimated selling-price estimated cost of completion and sale
reversal of prior write-downs can be made and recognise in Income
No LIFO

Question 17

PP&E

Answer 17

Tangible asset that are mused in company operations over make than one fiscal period

Question 18

PP&E under cost model

Answer 18

is reported at historical cost - any accumulated depreciation and less impairment losses

Question 19

PP&E under the revaluation model

Answer 19

is reported at FAIR value at the date of te revaluation - ACC.deprecation

Question 20

PP&E GAAP

Answer 20

permit only the cost model for reporting pp&e
reversal of prior impairment losses are not allowed

Question 21

PP&E IFRS

Answer 21

permit either cost model or revaluation model
reversal of impairment losses are permitted

Question 22

impairment

Answer 22

occur when a business asset suffers a deprecation in fair mkt value in excess of the book value of the asset on a company’s financial statement

Question 23

book value formula

Answer 23

cost - depreciation

Question 24

fair value is equal to

Answer 24

mkt value

Question 25

intangible asset

Answer 25

non monetary asset without physical substance (trademarks, licenses..)

Question 26

intangible asset IFRS

Answer 26

allow either cost model or revaluation model

Question 27

intangible asset GAAP

Answer 27

allows only the cost model

Question 28

intangible asset with indefinite useful life

Answer 28

do not amortise but asses for impairment (annually ifs; only after qualitative assessment us GAAP)

Question 29

int asset with limit useful life

Answer 29

Amortize over useful life and asses for impairment when indicated

Question 30

goodwill

Answer 30

arise when a company acquires another company for a price in excess of fair market value of net identifiable asset acquired

Question 31

goodwill is equal

Answer 31

purchase price of business less mkt value of net asset acquired

Question 32

goodwill is recorde

Answer 32

only when there is an exchange transaction that involves the purchase of an entire business

Question 33

goodwill is amortised?

Answer 33

no, but assessed for impairment 2

Question 34

accounting goodwill

Answer 34

represent the positive difference between the amount that was actually paid for asset and the book value of those assets when purchased in a business acquisition

Question 35

economic goodwill

Answer 35

more than subjective value of the intangible advantages a company has over its competitors such as excellent reputation, strategic location, business connections and would represented in its higher mkt value if the company asset were sold

Question 36

common type of current liabilities

Answer 36

trade payables notes payable accrued expenses deferred income

Question 37

trade payables

Answer 37

also know as account payable amounts that a company owes its vendors for purchases of goods and services

Question 38

notes payable

Answer 38

financial liabilities owed by a company to creditors, including trade creditors

Question 39

accrued expenses

Answer 39

expenses that have been recognized on a company income statement but have not yet been paid as of the B.S date

Question 40

Deferred income

Answer 40

arise when a company receives payment in advance of delivery of the goods and services associated with the payment

Question 41

common type of non current liabilities

Answer 41

long-term financial liabilities deferred tax lablites

Question 42

long term financial liabilities

Answer 42

loans and notes or bond payable usually reported at amortises cost on the BS in some cases, liabilities such as bonds, ar reported at fair value

Question 43

deferred tax liabilities

Answer 43

amount of income taxes payable in future periods with respect of taxable temporary differnces result from temporary riming differences btw a company's income as reported for tax purpose and income as reported for financial statement purpose

Question 44

component of shareholder equity

Answer 44

capital contributed by owners preferred shared treasury shares retained earnings ACC.OCI non controlling interest

Question 45

liquidity analysis on the B:S

Answer 45

company's ability to meet its short term financial commitments the ability to convert assets to cash and pay fo operating needs

Question 46

solvency analysis on the B:S

Answer 46

ability to meet it's financial obligations over the long term ability to pay long-term financing obligations

Question 47

current ratio

Answer 47

current asset/current liability

Question 48

quick ratio

Answer 48

cash + mkt securities + receivables/ current liability

Question 49

cash

Answer 49

cash + mkt securities/curr.liabilites

Question 50

long term deb to equity

Answer 50

tot long term debt/to equity

Question 51

debt to equity

Answer 51

tot debt/tot equity

Question 52

debt to asset

Answer 52

total debt/tot asset

Question 53

debt to capital

Answer 53

total debt/(total debt + total equity )

Question 54

financial leverage

Answer 54

tot asset/tot equity