Chapters 3-5 Flashcards
what is the definition of income
Increase in economic benefits during the accounting period in the form of inflows, enhancements of assets of decreases of liabilities that result in an increase of equity
what is a performance obligation
a promise in a contract with a customer to transfer the customer either :
a) a good or service
b) a series of goods or services which are substantially the same and that have the same pattern of transfer to the customer
what is the 5 step approach to revenue recognition
1) identify contract
2) identify performance obligation
3) determine transaction price
4) allocate transaction price
5) recognise revenue when performance obligation is satisfied
what is the revenue recognition iFRS
IFRS 15
what is the criteria for a contract to be recognised
the parties have approved the contract
the entity can identify each partys rights
the entity can identify payment terms
contract has commercial substance
its probable that the entity will collect the consideration
what should an entity do if consideration has been received but the contract should not have been recognised
they should only recognise revenue when all consideration has been received and it cant be refunded.
or when the contracts terminated and it cant be refunded
how should you allocate transaction price to multiple deliverables
as a percentage, not the stand alone price
one of what 3 criterias must be met to satisfy a performance obligation over time
a) when the customer simultaneously recieves and consumes the benefits as the entity performs
b) the entity creates or enhances an asset that the customer controls as it happens
c) the entity has an enforceable right to payment
what are the 5 criterias to determine the point in time a customer obtains control of an asset
a) the entity has a present right to payment
B) customer has a legal title
c) entity has transferred physical posession
d) customer has risks and rewards
e) customer has accepted the asset
when should costs to fulfill a contract be recognised as an asset
if all of the following is met
costs relate directly to a contract
costs generate or enhance resources
costs are expected to be recovered
how do you recognise sales with a right of return
recognise revenue that the entity expects to be entitled
a refund liability
an asset for right to recover products if they return
what is principal vs agent
if the entity controls the asset before the customer its a principal
if the entity arranges for goods or services to be provided by a third party, its an agent
what are the two different models an entity can choose to measure a NCA
Cost model
revaluation model
what must happen if a revaluation model is applied
revaluations must be regular depending on volatility
the asset must be valued to fair value
all assets must be revalued if one is
where does an increase in value go
OCI
What is IAS 36
Impairment of assets
how do you measure the recoverable amount of the asset
higher of:
fair value - costs of disposal
value in use
what is value in use of an asset
present value of estimated future cash flows generated by the assets
what is a cash generating unit
smallest identifiable group of assets that are different to the main group of assets
definition of fair value
the price that would be recieved to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date
how many levels to fair value hierarchy
3
what is level 1 on the fair value hierarchy
quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date
what is level 2 on the fair value hierarchy
inputs other than quoted prices such as quoted prices for similair assets in active markets or identical in non active markets
what is level 3 on the fair value hierarchy
unobservable inputs for the assets and liabilities ie discounting estimates of future cash flows
definition of active market
a market in which transactions for the asset or liability take place with sufficient frequency and volume
how do you measure an intangible asset that was separately acquired
cost
how do you measure an intangible asset that was acquired as part of of a business combination
fair value
how do you measure internally generated goodwill
you dont
how do you measure a internally generated intangible asset
Recognised when PIRATE is met
how do you measure an acquired goverment grant
asset and grant at fair value or nominal amount + expenditure
is a property held for sale in the normal course of business or in construction for the same an investment property?
no
is owner occupied property an investment property
no
is property leased to another entity under a finance lease an investment property
no
what is IAS is investment properties
IAS 40
What IAS is government grants
IAS 20
what IAS is borrowing costs
IAS 23
what IAS is agriculture
IAS 41
What does IAS 20 gov grants state
cant be recognised until reasonable assurance that grant will be recieved
grants relating to assets can be recognised as deferred income or deducting the grant from the carrying amount of the asset
grants relating to income should be shown as other income and net of expenses
What does IAS 23 Borrowing costs state
borrowing costs directly attibutable can be capitalised
when does capitalisation begin from (ias 23)
expenditure for assets are being incurred
borrowing costs are being incurred and activities that are necessary for the asset are in progress
what needs to be disclosed (ias 23)
amount of borrowing costs are capitalised
capitalisastion rate
what is agricultural produce
harvested produce of an entitys biological assets
what are biological assets
living animals or plants
what are the 2 types of pension plans
defined contribution and defined benefit
whats a defined contribution plan
percentage of annual salary
whats a defined benefit plan
fixed output plan based on salary
whats a curtailment
a significant reduction in the number of employees covered by the plan
what does IAS 19 require
Risk based disclosures must be indentified and how risks must be managed
what types of risks come with a pension
longevity risk
interest risk
salary risk
investment risk
where is a remeasurement gain or loss recorded for pensions
OCI
where are remeasurement gains for other benefits recorded ( not pensions)
P/L
What are termination benefits
redundancy payments
when should termination benefits be recorded
at the earlier of
the company cant withdraw the redundancy
when a company recognises a restructuring provision
if a redundancy agreement includes a service based payment ie 10k for an additional months work, is it a termination payment
no
what is a criticism of IAS19
Not all pensions fit into either defined plan or defined contribution
