Chapter 8 Fair Value measurement And Revenue Flashcards

1
Q

Whats is IFRS 13 FOR

A

Fair value measurement

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2
Q

What is the principal market

A

it is the market with the greatest volume and level of activity.

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3
Q

what to consider if there is no principal market

A

We have to consider the market that is the most advantageous for us, based on the net selling pirce

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3
Q

What is fair value formula

A

Selling price - transportation cost (not transaction cost)

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4
Q

What is net selling pirce

A

selling price - all costs both transportation and transaction

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5
Q

What is IFRS 15

A

Revenue

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6
Q

Why are transaction cost not considered when measuring the fair vlaue under IFRS 13

A

focuses on determining a price that reflects the market conditions and not the costs that an individual entity may incur when selling or buying. Transaction costs are seen as incidental, while transportation costs are necessary to realize the asset’s market value
(basically it deoends in individual buyer ansd seller, some seelers may charge commission and some wont, this does not effect the intrinsic value of the asset) where as transportation cost will be incurred for all the units fo the asset in order for them to be transported into the market place wheree they can be sold and there for effects the intrinsic valuer of the asset.

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7
Q

Indicators of the transfer of control
So that revenue is recorded at a point of time

A

1)The entity has a present right to payment for the asset
2)The customer has the the legal title to the asset
3)the entity has transferred the physical possession of the asset to the customer
4)The customer has the significant risk and rewards that are associated with the product
5)The customer has accepted the asset.

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8
Q

Indicators of a service

A

page 123 3 points

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9
Q

What are the costs that can be capitalised and later ammortized

A

1) Costs related to obtaining a contract (this excludes costs that would have been incurred regardless if a contract was found or not)
2) Cost related to fulilling a contract and enhancing a machine or asset which will help in fullifillin the conctract that do not fall with the scope of any other standard.The firm should also expect these costs to be recovered.

Any costs do not fit these 2 criteria of capitalization will be immediately expensed in the income statement.

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10
Q

What is a contract modification

A

Change in the scope or price of the contract that is agrred to by both the parties. Also called change order, modification and ammendment.

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11
Q

A contract modification is only accounted for as a seperate or additional contract only if.

A

1)The scope of contract chnages due to the addition of promised good or services that are distinct and the
2)price of the contract increases

There is one more caveat 119 page

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