Chapters 7-11 Flashcards
what does tax base mean
the amount attributed to that asset or liability for tax purposes
what is deferred tax
the tax attributable to temporary differences
how do you calculate a DT Asset or a DT liab
temp diff x tax rate
how do you calculate the temp diff
carrying amount of an asset or liab - the tax base
when is DT a liability
tax you will need to pay in the future, ie accrued income
what is DT an asset
when the entity has recorded a provision but they dont have to pay the tax until they spend on the provision
what journal would need to occur for a FV Gain
Dr Goodwill
Cr DT Liability
what journal would need to occur for a FV loss
Dr DTA
Cr Goodwill
what happens if there is a gain on an asset but it is not taxable until the asset is sold
the gain is ignored for tax purposes therefore creating a DTL
what happens if there is a loss on an asset but it is not taxable until the liability is transferred
DTA is created
when can a DTA be recognised until
it can be carried forward to the extent that its probable that a future tax profit will be available
what is a financial instrument
any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity
whats a financial asset
cash
an equity instrument of another entity
a contractual right to receive cash or another asset from another entity
to exchange financial assets or liability with another entity
whats a financial liability
to deliver cash to another entity
to exchange financial assets or liabilitys
acronym for derivative
Future
Underlying
No initial investment
what makes something a liability over equity
there is a contractual obligation to deliver cash or another asset
what does classifying something as a financial liability mean from the stakeholder perspective
increased gearing
reduced profit due to finance cost
what does classifying something as equity mean from the stakeholder perspective
decrease gearing
no effect on profit
common example of an instrument being a liability and equity
convertible debt
how do you seperate the equity and liability parts of the debt
determine the carrying amount of the liability
assign residual amount to equity
what interest rate do you use in a convertible debt question
market interest rate
when do you derecognise a financial asset
when the cash flows have expired or the asset is transferred
when do you derecognise a financial liability
when the obligation is discharged
should you derecognise an asset if it will be returned
no
should you derecognise an asset if you have the right to repurchase
yes - its only an option
is a debt instrument held to collect cash flows debt or shares
debt
is a debt instrument held to collect cash flows AND SELL debt or shares
debt
are investments in equity instruments NOT held for trading debt or shares
shares
are any other financial assets that are not:
held for cash flows
held for cash flows and sale
investments in equity not held for trading,
debt or shares?
shares
initial measurement and subsequent measurement of held to collect cash flows
FV + Transaction costs
then
amortised cost
initial measurement and subsequent measurement of held to collect cash flows and to sell
FV + Transaction costs
then
FV to OCI then to P/L when derecognised
initial measurement and subsequent measurement of investments in equity not held for trading
FV + Transaction costs
FV to OCI and dividend income in P/L
initial measurement and subsequent measurement of any other financial assets that are not :
held for cash flows
held for cash flows and sale
investments in equity not held for trading,
FV only, transaction costs are expensed
FV to P/l
how do you initially measure and subsequently measure most financial liabilities
FV - transaction costs
then at amortised cost
how do you measure ( initially and subsequently ) a liability that is held for trading
FV - transaction costs expensed
FV through P/L
when can assets and liabilities be offset
when an entity has a right to offset
they intend to settle on a net basis or realise the asset and settle the liability simultaneously
what is a loss allowance
the allowance for expected credit losses on financial assets
what is stage 1 of loss allowances
initial recognition of the asset will put a 12 month expected credit loss in - unwind this and difference will go to Finance costs
when do you go to stage 2 of loss allowances
if there is an increase in risk
what does stage 2 mean
increase the allowance and therefore finance costs for lifetime losses
when do you go stage 3 loss allowance
there is objective evidence of impairment
what does stage 3 mean
increase the allowance to lifetime losses and only calculate interest on net amount ( asset - allowance )
what IAS is Leases
16
definition of a lease
a contract, or part of a contract that conveys the right to use an asset for a period of time in exchange for consideration
how to tell if the entity has control over the asset
if they can direct the use of the asset and if they can obtain substantially all of the economic benefits
if the supplier has the right to substitute the asset, is it a lease?
no
definition of a lease term
the non cancellable period for which a lessee has the right to use an underlying asset
what does the lessee recognise at the commencement of a lease
a lease liability and a right of use asset
how do you usually measure a right of use asset
cost less depreciation and impairment losses
how do you depreciate a right of use asset
use the earlier of useful life or end of lease term
what does the initial measurement of a right of use asset include
initial measurement of liability
direct costs
dismantling or restoration costs
payments made at or before the lease commencement date
reasons to use exemption to include lease payments as an expense
short term or low value
when is a lease liability remeasured
when lease payments have been revised
for DT purposes, what is the carrying amount of the lease
the net of right of use asset - lease liability
what is the tax base of the lease
0
what is a finance lease
a lease that transfers substantially all of the risks and rewards to the lessee
what is a operating lease
a lease that does not transfer substantially all of the risks and rewards to the lessee
5 examples of what makes a lease a finance lease
transfer of ownership at the end of lease
option to purchase at end of lease for a cheaper price
lease term is a major part of the economic life
value of lease payments amounts to substantially all of the fair value
its specialised
how does a lessor account for a finance lease
derecognise asset
recognise a receivable for the net investment in lease
what is net investment for finance lease
present value of lease payments + unguaranteed residual value
what is the grant date of a share based payment
the date the entity and another party agree to the share based payment arrangement
2 types of share based payment
equity settled share based payment
cash settled share based payment
what is an example of equity settled share based payments
share options
what is an example of cash settled share based payments
share appreciation rights (SARS)
how to recognise an equity settled SBP
Dr exp
Cr equity
how to recognise a cash settled SBP
Dr Expense
Cr Liability
whats a vesting condition
a condition that must be met before the SBP can be made
if there is no vesting period how would we account for the SBP
full expense at grant date
how to measure an equity settled SBP
use FV at grant date and do not update
how to measure a cash settled SBP
Update FV at each YE with changes going to P/L
how to calculate share based payment equity or liability value at YE
No of employees x no of instruments per employee x FV per instrument x proportion of vesting period elapsed at YE
if the entity has the choice of SBP do you need to account differently?
no
if the counter party has the choice of SBP do you need to account differently?
yes - measure debt as you would a cash settled scheme, then equity as a balancing figure
what are the exemptions where a parent does not need to prepare consolidate accounts
it is itself a wholly owned sub
its debt or equity instruments arent publicly traded
how does a parent have control over a sub
power to direct relevant activities
exposure or rights to variable returns
ability to use power to affect the amount of returns
should you still consolidate if the subs activities are different to the group
yes - disclosure needs to be made under IFRS 8
should you still consolidate if the subs was only purchased for resale
yes IFRS 5 Non current assets should be applied
definition of a lease
a contract that conveys the right to use an asset for a period of time in exchange for consideration
how can you tell how to identify a lease
whether the contract allows the lessee the right to control the asset
how to tell when an entity has the right to control the asset
it can direct use of asset
the right to obtain substantially all of the economic benefits
what do you recognise on commencement as a lessee
a lease liability
a right of use asset
