FAR Flashcards
What’s the the qualities characteristics of the conceptual framework
2 fundamental characteristics
- relevance
- faithful representation
4 enhancing characteristics
- comparability
- understandability
- timeliness
- verifiability
What are the elements of financial statements?
-asset
-liability
- equity
-income
-expenses
When do you allow recognition
- The item meets the element definition
- It provides useful information to the user
When does derecognition occur
When the item no longer meets the definition of an asset or liability
What are the two main measurement basis?
Historical cost
Current value
What should be excluded for ppe recognition
- cost after asset is ready for use but not yet being used
- repair / maintenance work
- incidental income
What costs should be capitalised for an asset under contstruction
Labour costs
Material costs
Directly attributed bleeping costs
What period does an asset depreciate
From when it is available for use to the point when it is sold or helps for sale
How often should the useful life, residual value and depr method be reviewed?
Annually
How much can be transferred from revaluation surplus and retained earnings
The difference between the depreciation charge due to revaluation and the depreciation charge of the original cost
When is an impairment review carried out
- Annually for intangibles with indefinite UL and goodwill
- When there is an indication of impairment
What are some indications of impairment
-operating losses
-net cash flow
- decline in market value
- obsolescence / physical damage
- significant changes to business or market
How do you calculate recoverable amount
Higher of
1. Value in use
2. FV less costs
What are the criteria of a non current asset held for sale
- asset must be available for sale in its present condition
- sale must be highly probable (12 months)
- it must be actively marketed at a reasonable price
Can an asset that is intended to be abandoned be classed as hfs?
No
How can a low value short term lease be recognised
Can choose to recognise as a lease payment in pnl or as a lease liability
What are the two ways of recognising a sale and lease back transaction?
I’d it is
1. A sale
2. Not a sale
- Recognise the liability which is equal to the proceeds received
- Recognise an rou asset as a proportion of the previous carrying amount. A lease liability will also be recognised
What are the five steps or revenue
- Recognise the co tract
- Identify the separate performance obligations
- Determine the transaction price
- Allocate the transaction price to the performance obligations
- Recognise revenue as it when a performance obligation is satisfied
What are some evidences of a loan
- sale value does not equal market value
- buyer charges interest in the sales value when calculating the repurchase price
- likely that the seller will get the asset back
- seller gets to use asset after sale date
When can you make a provision
-when there is a present obligation it past event
- probable transfer of economic benefit
- measure reliably
How are provisions measured
Best estimate of the present value of the future obligation
Can a provision be made for the following
1. Future operating losses
2. Onerous contract
3. Reorganisation
- No - there is no obligation / past event
- Yes - recognise as the lower cost of meeting the contract or exiting the contract
- Yes - only if announced before y/e
Can counter claims be recognised?
Only recognise if certain. The asset can only be the amount of the provision
How are inventories valued?
- lower of cost and npv
