Contingent Gain/losses Flashcards
Treatment of contingent losses and gain
Contingency gain is not recorded untill it is actually received. ASC 450 30 25 1 states that a gain from contingecy is not recorded on the Financial statement because to do so might be to recognise revenue before it is realised.
Contingent losses
1. Probable and Reasonably estimable - Accrue
2. Reasonably possible and non estimable - disclose but not accrue
3. Remote - no accrual or disclosure.
HOW R&D Cost is accounted
R&D cost is ammortized in the year in which it is incurred..under US GAAP all R&D costs are expensed in the period incurred.
Treatment for cost of equipment used in R&D Project which have alternative use.
Equipment which have alternate use would be Capitalised and depreciated over the estimated useful life just like the regular business assets.
Cost assigned to acquire a fixed asset is purchase cost and cost incurred to bring the asset to the location and conditions needed for it to operate in the manner intented by the mgt. Expense should be classified as R&D expense instead of dep exp.
JE
Debit R&D exp
Credit Accumulated dep.
A company has significant influence. 22%. Which disclosure is going to be made in the financials.
Disclosure regarding companies accounting policy for the investment. Is it using Fair value method or equity method. This could impact how users make decision with the information.
