F7-ACCA Flashcards
Revaluation of Asset (IAS 16)
Dr PPE
Dr Acc. Depreciation
Cr RR
Date of revaluation
1.Begining of the year:revaluation first and depreciation at the end of the year.
2.During the year:
1st half: use old value to depreciate.
2nd half:depreciate using new value
3.End of the year:Depreciate first, then revalue
Research and Development
- Research: Expenses immediately -> Prudence concept.
- Development: Capitalise only if 6 criterias:
- Technically feasible.
- Intention to complete the development.
- Ability to use or sell the product developed and potential revenvue > cost.
- Generate future economic benefits.
- Available financial resources to complete the development.
- Reliable estimate.
IAS 38: Intangible Asset
- Others: Brand, patent,trademarks, licences, websites, mobile apps
- R&D Cost
- Good will
Intangible Asset: Recognitiion criteria (4 criterias)
Criteria:
- Control over the asset
- Generate future economic benefit
- Separate identifiability from business.
- Reliable estimate
*Initial recognition ->cost
*Subsequent recognition:
-If active market exist ->F/V model (revaluation)
-If no active market exist ->use cost model.
-If indefinite life: No need to amortise but must do impairment test.
-If definite life: Must amortise, eg: licence with fixed life
Amortise and do impairment test if there is indication of impairment.
On 31 Oct 2011, brand Z was independently valued at $250000, previously value $200 000
-> How to treat brand Z in SOFP?
Can not use F/V model as valuation given is not an active market.
Value cost model must be maintained at $200 000
IMPAIRMENT LOSS: IAS 36
1.Impairment loss: When permanent down in asset value cause: Obsolete, technological progress, damaged or under usage of asset.
2. When carrying value > Recoverable Amount RA
= Higher of
1.Value in use (VIU):PV of future cash flow generated by asset (including any scrap) over it’s remaining life
2.Fair value (selling cost) less cost to sell (NRV)
Impairment of Assets in a group
C/V of business div > R/A of business div
- > Impairment loss allocated.
1. Specific asset
2. Good will
3. Other non C.A prorated.
Reversal of Impairment Loss
if carrying value < recoverable amount -> No impairment.
However, if this asset had been impaired previously using VIU (FROM FORECAST CASH FLOW) and currently company realise the cash flow are much higher than forecast in the business -> R/A increases and C/V reversal is necessary and maximum reversal is equal to amount impaired previously.
Dr. Non C.A
Cr. P/L
How does impairment of Asset in a group allocate?
- Specific Asset
- Goodwill (xem như impaired toàn bộ)
- Current asset (xem như ko bị ảnh hưởng)
- Other non current asset prorated
What two of following would be external indicator that one or more of an entity’s asset may be impaired?
a. An unusually significant fall in the market value of one or more assets.
b. Evidence of obsolescence of one or more assets.
c. A decline in the economic performance of one or more assets.
d. An increase in market interest rates used to calculate value in use of the assets.
Answer: A, D
IAS 40: Investment property
Investment property: Held for rental income or held for capital gain.
-Cost model: Do depreciation.
-Fair value model: recommended treatment.
+No need to depreciate
+ Compulsory to fair value every year, F/V gain/loss must be taken to P/L
A sub-let to a subsidiary an asset.
How it treated in consolidated statement of financial position?
At group level, on consolidation property rented to subsidiary will be treated as owner occupied due to the single entity concept. Rental will be eliminated and property B will be depreciated using IAS 16
Dễ nhầm:
- How many years for depriciation from 1/1/2000 -> 30/6/2008
- Purchase a building for capital appreciation purpose -> This is IAS 40 or IAS 16?
- IAS 40 refers to operating lease or finance lease?
- Answers: 8.5 years
- IAS 40
- IAS 40 refers to operating lease.
Operating lease and finance lease
Finance lease Operating lease
-Contract for long term - Short term
-Contract =loan agreement contract - Rental agreement
contract
-Risk of obsolescence: Leasee/tenant -Leasor /landlord
-Under IAS 40
Government grant
- When received: Dr bank :5
Cr Deferred govt grant :5
2. Dr Deferred govt grant :1
Cr income (P/L) : 1
- SOFP
- Non current liability (Deferred govt grant): 3
- Current liability (Deferred govt grant) : 1
How to name these IAS: IAS 16 IAS 23 IAS 38 IAS 36 IAS 40 IAS 20 IAS 2 IAS 41
IAS 16 : PPE IAS 23 : Borrowing IAS 38 : Intangible IAS 36 :Impairment IAS 40 : Investment property IAS 20 :Government grant IAS 2 :Inventory IAS 41 : Agriculture
IAS2: Inventory:
-How to value
Value at cost or NRV whichever is lower.
-Overhead absorption overhead
-Marginal costing not allowed to IAS 2
*Overhead absorption: Material, Labour, fix overhead aborption
Not include: Admin OVH, selling OVHWhich of the following statement abount IAS 2 inventories are correct?
- Production overhead should be included in cost on the basis of a compay’s actual level of activity in the period
- In arriving at the net relisable value of inventory, settement discount must be deducted from the expected selling price.
- In arriving at the cost of inventories, FIFO, LIFO and weighted average cost formulas are acceptable.
- It is permitted to value finised goods inventories at material plus labour cost only without adding production overhead.
Answer: None of them is correct
No 3: Sai vì đấy phải là trade discount, not settlement discount
IAS 41: Agriculture:
- What are they?
- Criteria for recognition.
- How to record initial and subsequent?
- Gain/ loss
- How to present in SOFP?
-Agriculture: Agricultural product (harvesting crops) and Living plants and animals (biological asset: fruit, cows)
- 3 Criterias for recognition:
+Control over the asset.
+Generate future economic benefit.
+ Reliable estimate.
-Initial recognition: Cost (if purchased)
-Subsequent recognition: F/V model
+It is compulsory.
+ F/V arrived = sale price minus point of sale cost.
-No Depreciation but only impairment test, follow IAS 36
-Gain/loss on biological asset from 1 SOFP date to another SOFP date -> P/L
-Biological assets in SOFP ->presented under non C.A after all the depreciating assets.
IFRS 15: Revenue with customer
- Warranties:
- Within sale price
- Separate payment
2.Sale and repurchase
- Warranties:
-Within sale price: Recognise revenue fully and make a provision for warranty based on reliable estimate.
- Separate payment = separate performance obligation:
+ Revenue on delivery of laptop
+ Warranties: deferred income
Eg: Cost : $1200 x 84.4% = 1013
3 year waranty : $400 x 84.4% = 337 - Sale and repurchase: No intension to sell -> loan
I. Construction contract: 4 steps
II. Issue / Adjustment : - Expected future loss
- Variation order
-Rectification costs
1.Estimated total profit/loss on the whole contract.
=Total contract price - Total Estimated contract cost
* Cost to date.
* Plus cost to complete
- Estimated % of completion to date: 2 ways
* Revenue based
* Cost based - P/L (current year)
* Revenue ( 1 x 2 - previous year recognition)
* Less COGS ( 1 X 2 - previous year recognition) - SOFP: Current asset / current liability
Cost to date (Actual) x
+- Profit/loss to date x
-Progress billing / payment to date (x)
C.A - Amount due from contractee
C.L -Amount due to contracted
II.
- Expected future loss on contract: prudence concept-record % of loss immediately -> Step 3
- Varian order: Change original estimate in step 1 in current year
- Rectification cost: Change to P/L as an additional cost in step 3 and included it in cost to date in step 4
