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Core 1 Textbook > Financial Reporting > Flashcards

Financial Reporting Flashcards

1
Q

What is cash based accounting?

A

Record transaction / events based on cashflows

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2
Q

What is accrual accounting?

A

Record transactions / events based on occurrence.

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3
Q

How is inventory measured?

A

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

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4
Q

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

A

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

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5
Q

What costs can you capitalize for PPE?

A

Any costs that make it ready for use

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6
Q

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

A
  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
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7
Q

Straight line depreciation method formula:

A

Cost - RV / Useful life

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8
Q

Decline Method of depreciation:

A

Carrying amount x Depreciation rate

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9
Q

Units of production depreciation method:

A

Cost - RV / Total Units Produced

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10
Q

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

A

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

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11
Q

Can the revaluation method for PPE be used under ASPE?

A

No

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12
Q

When can you derecognize a PPE under IFRS and ASPE?

A

IFRS - when replaced
ASPE - option to derecognize when replaced

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13
Q

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

A

IFRS - Indicators and annual tests
ASPE - Only indicators

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14
Q

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

A
  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
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15
Q

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

A
  1. Contract between parties
  2. Transaction price
  3. Allocation of price
  4. Performance obligations
  5. Recognize overtime or at single point
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16
Q

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

A
  1. Risk/rewards have been transferred
  2. Measurable
  3. Collectible
17
Q

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

A
  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
18
Q

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

A
  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
19
Q

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

A
  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
20
Q

How to recognize operating lease?

A

Expense lease payments

21
Q

What are the 2 initial recognition entries for finance lease?

A
  1. Dr. Revenue, Cr. Cash or Receivable
  2. Dr. COGS, Cr. Inventory
22
Q

What is a Leaseback transaction?

A

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.

23
Q

What are the 2 types of non-monetary transactions?

A
  1. Reciprocal
  2. Non-reciprocal
24
Q

What is an NMT (usually) measured at?

A

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

25
Q

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

A
  1. Reclassify the asset as held for sale
  2. Separate discontinue operation in OCI
26
Q

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

A
  1. Lower of: Cost vs. FV - cost to sell
  2. Stop depreciating
27
Q

What is the presentation of income from a discontinued operation?

A

Separated as discontinued operation in OCI post-tax

28
Q

What is the presentation of income from a discontinued operation?

A

Separated as discontinued operation in OCI post-tax

29
Q

What is an example of a decommissioning obligation?

A

Restoring land at the end of it’s use

30
Q

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

A
  1. Present obligation
  2. Estimable
  3. Probable
31
Q

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

A
  1. PV of obligation
  2. Dr. Asset, Cr. Decomm. Provision
32
Q

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

A
  1. Asset - depreciate
  2. Liability - Changes of PV, recognize as an accretion expense
33
Q

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

A

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

34
Q

What are temporary differences?

A

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

35
Q

How to account for tax losses?

A

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

36
Q

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

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

Core 1 Textbook (3 decks)

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