FAR 36 Flashcards
When are dividends reported as a liability
- they are not reported as a liability until they are actually declared
- at the time they are declared:
dr R.E.
cr. dividends payable
How are all deferred tax assets and liabilities classified on the balance sheet
They are always classified as NON - current Liabilities - both deferred tax Assets and deferred Tax liabilities
What must a entity consider when determining if an accrual of a liability is appropriate
- the degree of probability
- the ability to reasonably
estimate the amount of loss - if the liability occurred as of the date of the F/S
- for this reason the period during which the underlying cause of the threatened litigation occurred will be considered to determine if an accrual is appropriate
How do you accrue for an executive bonus guaranteed for the following three years after they stay for first five years
If the bonus is for year 6,7,8 but is entitles after year 5.
The executive does not have to be employed after year 5 so the compensation is spread out over the first 5 years
This is an expense that has current, but has not yet been paid
d
What amount do you use if you are given both a range and a likely amount of a probable liability
You use the most likely amount as opposed to the minimum (which is usual)
IFRS - you use the midpoint
When a Co is no longer a going concern and assets are liquidated - how is their value calculated and how are liabilities values
- assets are valued at the amount expected to be generated upon liquidation
- Liabilities are valued according to US GAAP and costs expected to be incurred during liquidation should be accrued
How do you report a liability if you have the intent to refinance ST debt to long term, but not the ability
- You must classify its as a short term liability - or current liability
if they can’t honor the agreement then the deal is off and you must still classify LT debt coming due as St debt
What do you include in Current liabilities when you have a note payable
You include ether amount that is due in the next calendar year and any accrued interest from the last payment till the end of the year
900,000 at 5% payment son Sept 30th
CL = 300,00 due next year +
300,000 * .05 = 30,000 (3/12) Oct, Nov. Dec. for a totl of 7,500
so Current liabilities are reported as 307,500
What is the difference between IFRS and GAAP with regards to reclassifying l short term debt to long term debt
GAAP - require only that you have the intent and ability
IFRS - requires thatch agreements must actually be in place at the balance sheet date in order to report a current liability as non-current
Are dividend in arrears on cumulative preferred stock included in current liabilities
No - only when declared -
Under IFRS what is a contingent liabilities that is accrued called
a provision
a provision is a recognized liability
- It is like a accrued contingency under GAAP
- must be probably
- must be from a past event
- the amount must be estimable
Under IFRS what is a contingency
- These are potential obligations not recognized as liabilities - these are disclosed, but not accrued
its really about the terms a provision is accrued and disclosed
a contingency is disclosed only
Can you disclose a gain contingency
yes - you can if they are probably or reasonably possible NEVER accrued
Is there interest payable on a non-interest bearing note?
No interest is payable so no interest is recorded .
the interest rate is instead imputed and the initial discount is amortized to interest expense each period
dr. interest expense
cr discount
When is warranty expense recorded
At the time of sale
2% of sales
dr cash 300,000
cr sales 300,000
warranty expense 6,000
cr est warranty liability 6,000
When warranty repairs are incurred - this reduced the remaining estimated warranty liability, but doe snot effect warranty expanse
dr. est warranty liability xxx
cr cash for repairs xxx
