Financial Reporting

Question 1

Revenue recognition (ASPE) - criteria

Answer 1

Risks and rewards of ownership have transferred / Performace obligation met
Revenue can be measured reliably
Collection is reasonably assured

Question 2

• Revenue (IFRS)

Answer 2

Recognition criteria:
Step 1: identify contract
Step 2: identify separate performance obligation
Step 3: determine overall transaction price
Step 4: allocate transaction price to separate performance obligation
Step 5: determine when performance obligation is complete and revenue can be recognized

Question 3

Revenue recognition - Performace obligation timing

Answer 3

A. at the inception of the contract
B. over the course of the contract

Question 4

Revenue criteria (IFRS)

Answer 4

parties have approved the contract
each party’s rights
payment terms
commercial substance
collectability

Question 5

Revenue - Loyalty program

Answer 5

Under IFRS 15.B39, Revenue from Contracts with Customers, loyalty points are considered customer options for additional goods or services

Question 6

Discontinued Operations - held-for-sale criteria

Answer 6

6 criteria:
1. Approved plan to the sell
2. Available for imediate sale
3. Active program to locate a buyer
4. Sale is probably within one year
5. Actively marketed at reasonable price
6. Significant changes are unlikely

Question 7

Subsequent event - types

Answer 7

Adjusting events provide evidence of conditions that existed at the end of the reporting period.
Non-adjusting events are indicative of conditions that arose after the reporting period.

Question 8

Accounting change - types

Answer 8

A. Voluntary (reliable and more relevant information) -> Retrospectively
B. Standard requires -> depends on standards
C. Change in estimate (new information that was not previouly available) -> Prospectively
D. Error in prior year -> Retrospectively

Question 9

Impairment - steps

Answer 9

1. Individual asset or CGU?
2. Indicator of impairment exists?
3. Calculate the fair value less costs to sell
4. Calculate the value in use
5. Determine recoverable amount (the higher of fair value less costs of disposal and value in use)
6. Calculate impairment loss

Question 10

Leases (IFRS) - Leesee

Answer 10

For leesees, ROU and Lease Liabilities must be recorded
Exempt: short-term leases of one year or less and leases for low-value items

Question 11

Revenue recognition - right of return

Answer 11

A. susceptible to factors outside entity’s influence
B. lack of experience with similar arrangements
C. expected consideration may fluctuate

Question 12

PPE - betterment

Answer 12

Output or capacity increase
Operating cost decrease
Life or useful life is extended
Quality of output is increased

Question 13

Inventory

Answer 13

Lower of cost and NRV (net realizable value)

Question 14

Financial Instruments (IFRS)

Answer 14

Amortized cost:
hold with the business model
cash flow is solely principal and interest

Question 15

Non-monetary transaction (NMT) - fair value exemptions

Answer 15

commercial substance
ordinary course of business - similar in nature
no reliable fair value
non-monetary non-reciprocal transfer to owners

Question 16

NMT ASPE x IFRS

Answer 16

IFRS does not have a separate section
IFRS: revenue is recorded for the fair value of the asset received

Question 17

Lease (ASPE)

Answer 17

transfer of ownership
economic benefits transfer (>75% of useful life)
recovery of investment (>90% of net present value of minimum lease payments)

Question 18

Revenue - principal x agent

Answer 18

Principal (gross) x agent (net)
responsibility for providing goods/services
inventory risk
establishing prices
credit risk

Question 19

• Intangible definition and recognition criteria

Answer 19

+definition criteria:
identifiability
control
future economic benefit
+recognition criteria:
probable future benefits
reliable measurement
+calculate depreciation
life of contract/unidentifiable

Question 20

Intangible - development costs criteria

Answer 20

6 criteria:
technical feasibility
intention to complete
ability to use or sell
availability of resources
ability to measure expenditures
generates future economic benefits

Question 21

Contingent liability

Answer 21

future event likely
reasonably estimated

Question 22

IFRS versus ASPE

Answer 22

simplicity of reporting system/operations
cost/complexity of administration
training resources required/available
number of external equity investors
plans for becoming public

Question 23

Liability - criteria

Answer 23

future obligation
unavoidable
past event

Question 24

Audit engagement

Answer 24

Reasonable assurance
Higher level of assurance
Detailed procedures and tests
communicates FS are presented fairly, in all material respect, in accordance with standards
more work, more time to complete, and more cost for the auditee
inquiry, analysis, confirmation, recalculation, observation

Question 25

Review engagement

Answer 25

limited assurance
communicated that nothing has come to the reviewer’s attention that makes them believe FS in not in accordance with ASPE
lower level of assurance
less detailed
inquiry and analysis only

Question 26

CCA

Answer 26

1 - building
3 - building prior to 1988
8 - funiture
10 - Automotive equipment
12 - books, tableware; kitchen utensils costing less than $500
13 - Leasehold improvements
14 - Patents, franchises, concessions or licences
17 - Roads, sidewalks, airplane runways, parking areas
44 - Patents
50 - Computer hardware and systems software
53 - Manufacturing and processing equipment

Question 27

Corporate tax calculation

Answer 27

1. Calculate taxable income
2. Calculate basic tax (38% of taxable income)
3. Calculate federal tax abatement (10% of taxable income)
4. Calculate the small business deduction (SBD) (19% of max 500,000 for the consolidated business)
5. Calculate manufacturing and processing credit (M&P) (13%)
6. Calculate the GRR (13% of taxable income - SBD - M&P - investment income)

Question 28

Biological assests

Answer 28

• held for sale in the ordinary course of business
• in the process of agricultural production to be held for sale or for use in a productive capacity
• in the form of raw materials and supplies to be consumed in the enterprise agricultural process
• held for use in a productive capacity with short productive lives

Question 29

Investment property (IFRS)

Answer 29

IAS 40:
Investment property criteria: held to earn rentals or for capital appreciation or both. Therefore, an investment property generates cash flows largely independently of the other assets held by an entity. This distinguishes investment property from owner-occupied property.
An owned investment property shall be recognised as an asset when, and only when:
(a) it is probable that the future economic benefits that are associated with the investment property will flow to the entity; and
(b) the cost of the investment property can be measured reliably.
Initial measure:
An owned investment property shall be measured initially at its cost.
The cost of a purchased investment property comprises its purchase price and any directly attributable expenditure. Directly attributable expenditure includes, for example, professional fees for legal services, property transfer taxes and other transaction costs.
Subsequent measure:
Cost: cost with depreciation
Fair Value: market price. It must continue to measure the property at fair value until disposal, and cannot revert back to the cost model, “even if comparable market transactions become less frequent or market prices become less readily available” (IAS 40.55).
Recommendation

Question 30

Non-monetary transaction (ASPE)

Answer 30

Issue
Definition: non-monetary exchanges, which are exchanges of non-monetary assets, liabilities or services for other non-monetary assets, liabilities or services with little or no monetary consideration involved
+ Case fact
+ Conclusion
Measurement
An entity shall measure an asset exchanged or transferred in a non-monetary transaction at the more reliably measurable of the fair value of the asset given up and the fair value of the asset received, unless:
(a) the transaction lacks commercial substance;
(b) the transaction is an exchange of a product or property held for sale in the ordinary course of business for a product or property to be sold in the same line of business to facilitate sales to customers other than the parties to the exchange;
(c) neither the fair value of the asset received nor the fair value of the asset given up is reliably measurable; or
(d) the transaction is a non-monetary non-reciprocal transfer to owners to which paragraph 3831.14 applies.
Met/Not Met + case facts
+Calculation
+ Conclusion

Question 31

Grant (IFRS)

Answer 31

IAS 20/ ASPE 3800
Grant criteria:
(a) the entity will comply with the conditions attaching to them; and
(b) the grants will be received.
Recognition:
Other income, offset expense, offset asset
Conclusion + amounts

Question 32

Related parties (ASPE)

Answer 32

Definition
Related party: Related parties exist when one party has the ability to exercise, directly or indirectly, control, joint control or significant influence over the other. Two or more parties are related when they are subject to common control, joint control or common significant influence. Related parties also include management and immediate family members (see paragraph 3840.04).
Transaction: A related party transaction is a transfer of economic resources or obligations between related parties, or the provision of services by one party to a related party, regardless of whether any consideration is exchanged. The parties to the transaction are related prior to the transaction. When the relationship arises as a result of the transaction, the transaction is not one between related parties.
Measurement:
Carrying x exchange amount
A related party transaction shall be measured at the carrying amount, except as specified in paragraphs 3840.18 and 3840.29.
See 18 and 29.
Conclude+amount