Financial Reporting

Question 1

What is cash based accounting?

Answer 1

Record transaction / events based on cashflows

Question 2

What is accrual accounting?

Answer 2

Record transactions / events based on occurrence.

Question 3

How is inventory measured?

Answer 3

Lessor of:
1. Cost
2. NRV (Selling price - costs to sell)

Question 4

What are the only differences for inventory between ASPE and IFRS?

Answer 4

IFRS - Borrowing costs must be capitalized
ASPE - Option of capitalizing or expensing borrowing costs

Question 5

What costs can you capitalize for PPE?

Answer 5

Any costs that make it ready for use

Question 6

What are the 2 ways to subsequently measure PPE after it is recognized? Explain each.

Answer 6

1. Revaluation method: Must revalue based on FMV - gains go to OCI, losses go to NI. STILL HAVE TO DEPRECIATE.
2. Cost method: Depreciate using straight-line, decline, or units of production

Question 7

Straight line depreciation method formula:

Answer 7

Cost - RV / Useful life

Question 8

Decline Method of depreciation:

Answer 8

Carrying amount x Depreciation rate

Question 9

Units of production depreciation method:

Answer 9

Cost - RV / Total Units Produced

Question 10

How are borrowing costs dealt with for PPE under IFRS and ASPE

Answer 10

Same as Inventory
IFRS - Capitalize
ASPE - Option to capitalize or expense

Question 11

Can the revaluation method for PPE be used under ASPE?

Answer 11

No

Question 12

When can you derecognize a PPE under IFRS and ASPE?

Answer 12

IFRS - when replaced
ASPE - option to derecognize when replaced

Question 13

When do you test for impairment of an asset under IFRS and ASPE?

Answer 13

IFRS - Indicators and annual tests
ASPE - Only indicators

Question 14

What is the 3-step process for impairment of an asset?

Answer 14

1. Check for impairment
2. Measure recoverable amount:
   - Recoverable amount is greater of:
   a) FMV - cost to sell
   b) Value-in-use: Discounted cashflows from asset
3. If recoverable amt. < carrying amount, recognize loss in NI

Question 15

What is the five step process of recognizing revenue under IFRS?

Answer 15

1. Contract between parties
2. Transaction price
3. Allocation of price
4. Performance obligations
5. Recognize overtime or at single point

Question 16

What are the 3 criteria for rev. rec under ASPE?

Answer 16

1. Risk/rewards have been transferred
2. Measurable
3. Collectible

Question 17

What are the 2 things that must be recognized as a Lessee? Explain what is included in each recognition.

Answer 17

1. ROU of asset:
   - Lease liability cost
   - Any lease payments before or at lease commencement
   - BPO amount
   - Restoration costs
   - Other lease costs
2. Lease liability:
   - PV of lease payments
   - Use implicit rate, if not, borrowing rate

Question 18

How does the Lessee subsequently measure the ROU and Lease liability?

Answer 18

1. ROU: depreciate over 1. Useful life if purchased at end or 2. lessor of lease term vs. useful life
2. Lease liability: Expense the interest expenses

Question 19

As a Lessor, how do you determine if Finance Lease?

Answer 19

1. Title transfer to Lessee
2. BPO
3. PV of lease payments > FV
4. Most of useful life is used by Lessee
5. Asset is specialized for Lessee

Question 20

How to recognize operating lease?

Answer 20

Expense lease payments

Question 21

What are the 2 initial recognition entries for finance lease?

Answer 21

1. Dr. Revenue, Cr. Cash or Receivable
2. Dr. COGS, Cr. Inventory

Question 22

What is a Leaseback transaction?

Answer 22

Seller POV: As a seller of a property, you sell to a buyer. Once sold to buyer, you become a Lessee of the property you just sold.

Question 23

What are the 2 types of non-monetary transactions?

Answer 23

1. Reciprocal
2. Non-reciprocal

Question 24

What is an NMT (usually) measured at?

Answer 24

Most reliable of:
1. FV of asset given up
or
2. FV of asset received

Question 25

What are the 2 things you must always do for a Asset held for sale from a discontinued operation?

Answer 25

1. Reclassify the asset as held for sale 2. Separate discontinue operation in OCI

Question 26

What is an asset held for sale measured at? And what must you stop doing once reclassified as HFS?

Answer 26

1. Lower of: Cost vs. FV - cost to sell 2. Stop depreciating

Question 27

What is the presentation of income from a discontinued operation?

Answer 27

Separated as discontinued operation in OCI post-tax

Question 28

What is the presentation of income from a discontinued operation?

Answer 28

Separated as discontinued operation in OCI post-tax

Question 29

What is an example of a decommissioning obligation?

Answer 29

Restoring land at the end of it's use

Question 30

When do you recognize a decommissioning provision? (3 criteria)

Answer 30

1. Present obligation 2. Estimable 3. Probable

Question 31

What is the initial measurement and entry of a decommission provision?

Answer 31

1. PV of obligation 2. Dr. Asset, Cr. Decomm. Provision

Question 32

How do you subsequently measure an asset & liability related to a decommissioning provision?

Answer 32

1. Asset - depreciate 2. Liability - Changes of PV, recognize as an accretion expense

Question 33

What are the differences between IFRS and ASPE regarding decommissioning provisions?

Answer 33

IFRS - Legal and constructive obligations ASPE - Only legal, decomm. provision known as Asset Retirement Obligation

Question 34

What are temporary differences?

Answer 34

When an asset / liability have a different accounting base versus tax base

Question 35

How to account for tax losses?

Answer 35

Backwards - up to 3 years Forwards - up to 20 years

Question 36

What are the journal entries for accounting for tax losses backwards vs. forwards?

Answer 36

1. Backwards - Dr. Income tax receivable, Cr. Income Tax expense 2. Forward - Dr. Deferred Tax Asset, Cr. Income Tax Expense