Financial Reporting Flashcards
IFRS
Joint Arrangements
- Parties must have joint control
- Determine if joint operation or joint venture
Joint Operations
- Recognizes portion of assets / liabilities / revenues / expenses in F/S
Joint Venture
- Recognize using equity method
- Recognize at the fair value of the consideration given up -If non-cash, gain or loss recorded for portion of the asset that is now owned by third party -Amortize the portion still owned by investor
ASPE
Joint Arrangements
Jointly Controlled Operations
- Each investor uses his own assets and inventory
- Revenue and expenses shared
Jointly Controlled Assets
- Same as IFRS
Jointly Controlled Enterprises
- Uses either:
- Equity method
- Cost method
- Jointly controlled operations
IFRS
Impairment
Determine if CGU
When to test:
- Indicators of impairment
- Annual tests for select assets
Recoverable amount is the higher of:
- Fair value less cost of disposal
- Value in use:
- Estimate future cash flows from: o continuing use o ultimate disposal
- Apply an appropriate discount rate.
Loss = Recoverable amount – Carrying amount If the impairment applies to a CGU:
- The goodwill is written down to nil.
- The remaining balance applied to remaining on prorata basis.
Reversal of impairment
- Impairment on assets other than goodwill can be reversed if there are indications that recoverable amount has increased since loss
- Asset is written up to the lesser of its recoverable amount and the carrying value that would have existed had the asset never been written down.
ASPE
Impairment
Determine if asset groups
When to test:
- Events or changes indicate that carrying amount may not be recoverable
- Compare the carrying amount to undiscounted cash flows (recoverable amount).
- If the carrying amount exceeds recoverable amount, impairment exists; move to Step 2.
- Determine fair value and compare it to the carrying amount.
- Loss = Fair value – Carrying amount
Reversal of impairment not allowed
IFRS
Employee Benefits Interest Cost
DBO Beginning
Past Service
Cost Benefit Payments
x Discount Rate
IFRS
Employee Benefits Interest Income
Fair value plan assets Beginning
Funding payment
Benefit Payments
x Discount Rate
IFRS
Employee Benefits Net Interest Cost
Interest Cost - Interest Income = Net interest cost
IFRS
Employee Benefits Remeasurement Gain or Loss
DBO Beginning
Current Service Cost
Past Service Cost
Interest Cost
-Benefits Paid in the Year
=Expected DBO
-Actual DBO
=Remeasurement Gain or Loss
IFRS
Employee Benefits Plan Asset Loss or Gain
Fair value of plan asset Beginning
Funding payment
Interest Income
-Benefits paid in the year
=Expected Ending Plan Assets
-Actual Ending plan Assets
=Remeasurement Gain or Loss
IFRS
Non-Monetary Transactions
- Determine if definition of NMT met
- Determine if criteria met
- Determine if FV assessment is reasonable
- Use FV of asset received if both available
ASPE
Non-Monetary Transactions
- Determine if definition of NMT met
- Determine if criteria met
- Determine if FV assessment is reasonable
- Use FV of asset given up if both available
ASPE
Contingency
Definition
- Existing Condition
- Uncertainty as to possible gain or loss to an enterprise
- Resolved when future events occur or fail to occur
IFRS Revenue
- Identify Contract
- Combination of contracts
- Contract Modifications
- Identify Transaction Price
- Variable Consideration
- Most likely amount
- Expected amount
- Constraining Estimates
- Identify Performance Obligations
* Distinct Goods - Allocate price to performance obligations
- Determine if performance obligation satisfied
ASPE
Revenue
- Risks and rewards of ownership have transferred.
- Revenue can be measured reliably.
- Collection is reasonably assured.
IFRS
Decommissioning Provision
Meets definition of provision
Recorded if there is a legal liability or reasonably expected that payment will be made
PV of liability recorded as liability
- DR. ASSET
- CR. LIABILITY
Amortized over life
- DR. DEP EXPENSES
- CR. ACCRUED DEP
Interest Expense increases the liability
- DR.INTEREST EXPENSE
- CR.LIABILITY
ASPE
Decommissioning Provision
Meets definition of provision
Recorded only if there is a legal liability
PV of liability recorded as liability
- DR. ASSET
- CR. LIABILITY
Amortized over life
- DR. DEP EXPENSES
- CR. ACCRUED DEP
Operating Expense increases the liability
- DR.ACCRETION EXPENSE
- CR.LIABILITY
IFRS
Government Assistance
- Meets Definition
- Meets criteria
- Decide how to present
- Net impact the same
- Can record at fair value or nominal amount
ASPE
Government Assistance
- Meets Definition
- Meets criteria
- Decide how to present
- Net impact the same
- Can only record at fair value
IFRS
Agriculture
- Definition
- Bearer plants not included
- Criteria
- Biological assets measured at fair value gain or loss recognized subsequent
- Agricultural produce becomes inventory
ASPE
Agriculture
- Definition
- Bearer plants not included
- Criteria
- Biological assets measured at fair value gain or loss recognized subsequent
- Agricultural produce becomes inventory
- Based on industry norm
IFRS
Passive Investments
FVTPL
FVTPL Includes the following:
- Assets not qualified to be classified at amortized cost or at FVTOCI
- Assets classified as held for trading.
- A held-for-trading asset is one that meets one of the following criteria:
- It is acquired or incurred principally for the purpose of selling or repurchasing it in the near term.
- On initial recognition, it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking.
- It is a derivative
- Assets that, upon initial recognition, are designated as FVTPL. An entity may use this designation only when it significantly reduces a measurement or recognition inconsistency.
Transaction costs
Transaction costs of purchasing the investment are expensed in net income when they are incurred.
Subsequent measurement
Each reporting period, assets that are classified as FVTPL are measured at fair value, with all gains and losses recognized in profit or loss.
Impairment
As the investments are adjusted to fair value in each reporting period, impairment losses and recoveries are not separated from the overall change in fair value during the reporting period.
Derecognition
The difference between the carrying amount and the consideration received is recognized in profit or loss.
IFRS
Passive Investments
Amortized Cost
This category includes financial assets held in order to collect contractual cash flows, when the cash flows consist solely of principal and interest.
Transaction costs
Added to the cost of the investment on the balance sheet.
Subsequent measurement
Measured at amortized cost using the effective interest method, less impairment losses.
Impairment
When the present value of estimated future cash flows, discounted using the asset’s original effective interest rate, is less than the asset’s carrying value. The impairment loss is recorded in profit or loss, and the carrying value of the asset is reduced. Impairment losses can be reversed up to the amount of amortized cost that would have been if no impairment had been recognized. The reversal also flows through profit or loss.
Derecognition
The difference between the carrying amount and the consideration received is recognized in profit or loss.
IFRS
Passive Investments
FVTOCI
This category includes:
- Equity investments designated as FVTOCI: This is only allowed for investments that do not qualify as held for trading, which must be classified as FVTPL. This classification is irrevocable and is made at the time of purchase.
- Debt instruments with cash flows that are solely payments of principal and interest: The instrument is held for the purpose of collecting cash flows and to sell the instrument.
Transaction costs
Capitalized as part of the cost of the investment
Subsequent measurement
- For debt investments classified as FVTOCI, the asset is measured at amortized cost using the effective interest method, less impairment losses.
- At each reporting period, the asset is measured at fair value, with gains or losses reported in OCI, net of tax. When a debt investment is classified as FVTOCI is sold, the cumulative unrealized gains or losses are is transferred to net income (that is, recycled from OCI).
- Equity investments classified as FVTOCI are measured at fair value, with gains and losses recognized in OCI, net of tax.
- When an equity investment is classified as FVTOCI is sold, the gain or loss in OCI is not recycled to net income.
- The cumulative gains and losses can be transferred from accumulated OCI to another shareholders’ equity account such as retained earnings.
Impairment
- Any impairment losses on debt investments classified as FVTOCI are reported in net income.
- Equity investments classified as FVTOCI are adjusted to fair value in each reporting period; therefore, impairment losses and recoveries are not separated from the overall change in fair value during the reporting period and are included in OCI.
Derecognition
- The difference between the carrying amount and the consideration received is recognized in profit or loss.
- In addition, for debt investments that had gains and losses in fair value recognized in OCI, the amount of the cumulative gain or loss is removed from OCI and flows through profit or loss.
- When equity investments classified as FVTOCI are sold, the gain or loss in OCI is not recycled to net income.
- It can be transferred from accumulated OCI to another shareholders’ equity account such as retained earnings.
ASPE
Passive Investments
- There are no differences with regards to recognition or initial measurement.
- For subsequent measurement, ASPE measures the following instruments at fair value:
- Investments in equity instruments that are quoted in an active market
- Certain derivatives
- All other financial assets are recorded at amortized cost.
- However, an entity may choose to recognize any financial asset at fair value
- This choice must be made upon initial recognition and the entity must be able to determine fair value in each reporting period.
- When amortized cost is used, ASPE allows the use of both the effective interest method and the straight-line method in the application of amortized cost.
- ASPE does not have OCI
IFRS
Plant Property And Equipment
- Meets definition of PPE
- Meets Criteria
- Consider componentization
- If the asset has a component with a significant cost compared to the total cost of the asset, the component should be depreciated separately from the rest of the asset
- Spare parts
- Can be capitalized if meets definition
- Capitalize borrowing costs
IFRS
Intangible Assets
- Definition
- Criteria
- Impairment
- Amortization
IFRS
Assets Held for Sale
- Component Definition
- Held for sale criteria
- Discontinued Criteria
- Presentation
IFRS
Business Combination
- For combination to exist, following should occure:
- Control obtained over acquiree
- Business has been purchased
- Business definition IFRS
- Identify separate assets
ASPE
Share-Based Payments
- For cash-settled SARs, ASPE uses intrinsic value and not fair value.
- Intrinsic value = Market Price - Exercise price
IFRS
Leases
- Lessee
- Definition
- Criteria
- Lease term
- Lease liability
- Lease Asset
- Depreciation
- Interest Expense
