F2 Flashcards
Key Terms for Revenue Recognition under IFRS
- economic benefits will flow to the entity
- entity has transferred to the buyer the significant risk and rewards of ownership
- no managerial involvement
Accrual vs Deferral
accrual: income statement impact; no cash impact
deferral: no income statement impact; cash impact
Treatment of royalty revenue received in advance
*treated as unearned revenue
Franchisor Accounting - Initial Franchise Fees
- revenue when substantially performed
* usually can’t be recognized before the franchisee’s first day of operations
Franchisor Accounting - Franchise Fees
*revenue when earned (use PV for future cash flows)
Goodwill is which type of asset?
not specifically identifiable intangible asset
Costs that can be capitalized for internally created intangible assets
- legal fees related to successful defense
- registration or consulting fees
- design costs
- direct costs to secure asset
What happens if you lose a lawsuit related to a patent?
*expense cost and test the asset for impairment
2 Methods for Reporting Intangible Assets under IFRS
- cost method
2. revaluation model
Franchisee Accounting - Initial Franchise Fees
*intangible asset at PV and amortize
Franchisee Accounting - Continuing Franchise Fees
*expense as incurred
Organizational Costs are _______
expenses when incurred
2 Exceptions to Expensing R&D
- assets with other uses
(depreciation expense is a R&D EXPENSE) - research performed for others (COGS instead of R&D)
Is quality control testing R&D?
No
Basis for amortizing internally developed software
*straight line only
What if internally developed software is instead sold to outsiders?
*cost recovery method
GAAP Impairment
- compare to undiscounted cash flows
2. impairment is difference between FV and book value
GAAP Impairment - Asset with Indefinite Life
Step 2 Only (compare to FV and impair)
IFRS Impairment
One Step
Compare Book Value to Recoverable Amount
Recoverable Amount is GREATER of:
- asset’s value in use
- selling price less costs to sell
Unit Level for Goodwill Impairment: GAAP vs IFRS
reporting unit level vs. cash generating unit level
What is a reporting unit?
- a unit with separate cash flows
* management regularly reviews
Is the completed contract method allowed under IFRS?
No
When to recognize loss for construction contracts?
*in the year of the loss
Deferred GP is what type of account?
*a contra-asset
Are gains and losses realized when there is commercial substance?
Yes
Rules for Recognizing Gains/Losses for Noncommerical Exchanges
No boot received: no gain recognized
Boot RECEIVED under 25% of compensation: gain recognized in proportion to total compensation
Boot involved (either way) greater than 25%: full recognition
losses are always recognized in full
Gain/Loss Computation for Exchanges
*ONLY ON THE ASSET; not on total consideration given or received
Are Gains/Losses recognized on involuntary conversions?
Yes; all gains and losses are recognized (proceeds less the basis determines gain or loss)
Historic Cost
Current Cost
Nominal Dollars
Constant Dollars
- actual exchange rate at a prior date (appreciation)
- cost that would be incurred at the present time (appreciation)
- unadjusted for changes in purchasing power (inflation)
- dollars restated based on calculations of CPI ratios (inflation)
Monetary Assets & Liabilities
*assets lose purchasing power and liabilities gain purchasing power during periods of inflation
List of Monetary Assets
Cash Bonds - non-convertible A/R & N/R Long-term receivables A/P & N/P Accrued Expenses Bonds/notes payable
- contra accounts are assigned according to their related balance sheet account
- DOES NOT INCLUDE INVENTORY OR MARKETABLE SECURITIES
Monetary Purchasing Power =
Non-monetary =
Inflation
Appreciation
Translation Method
- Income Statement = weighted average
- Balance Sheet
* **year-end rate
* **C/S and APIC at historical
* **roll forward R/E (beginning translated R/E plus translated NI less translated dividends) - Plug to AOCI
Remeasurement Method
- Balance Sheet
* **Monetary: current/year-end
* **non-monetary: historical - Income Statement
* **non-balance sheet = weighted average
* **historical for
* ***depreciation, COGS, amortization of bonds/intangibles - G/L plugged to get NI to equal required R/E
Is a statement of cash flow required for OCBOA presentation?
No
Cash Basis Financial Statements
- Statement of Cash and Equity
2. Statement of Cash Receipts and Disbursements
Personal Financial Statements Issues
- statement of financial condition
- assets are reported at estimated current FV
- life insurance loans payable are netted against the cash surrender value of life insurance
- vested pension plan benefits are reported at FV
- liabilities are reported at estimated current amount
- made in order of liquidity; no current or noncurrent classifications
