Financial Reporting Flashcards
Revenue recognition criteria - IFRS
- Identify the contract
- Identify performance obligation
- Satisfaction of performance obligation
- Determine transaction price
- Allocate transaction price to performance obligations
Revenue recognition criteria - ASPE
- Collection
- Measurement of consideration - fixed or determinable
- Performance - transfer of risk and reward of the inventory
ASPE additional criteria: - arrangement
- delivery
Qualifying asset?
Asset takes a long time to get it ready to use
Intangible asset - Definition criteria
- Identifiable 2. Control 3. Future economic benefit
Intangible asset - Recognition criteria
- Future economic benefit 2. Measurable
Development criteria
- Technical feasibility
- Intention to sell
- Ability to use or sell
- Ability to measure
- Adequate financial and technical resources
- Future economic benefit
Impairment of asset - Process
- Identify indication of impairment + Conclude
- Recoverable amount versus carrying amount
- recoverable amount is the higher of value in use and FV less costs to sell - Depreciation
- Reversal of impairment loss
Provision - recognition criteria
- Obligation as a result of past event
- Probable outflow of resources
- Reliable estimate of amount of obligation.
Contingency - definition criteria
- Existing condition
- Uncertainty to amount of loss
- Resolve by occurrence or non occurrence of future event
Contingency - recognition criteria
- Likely outcome of legal liability
2. Reliable estimate of amount of obligation.
Onerous contract - Process
- The unavoidable lease costs exceed the economic benefit - conclude
- Provision recognition criteria
ARO - ASPE versus IFRS
ASPE - Liability - legal liability / amount can be measured
IFRS - Provision recognition criteria
Grant / Subsidy - Process
- Reasonable assurance on - collection/ compliance on the conditions
- Timing of the recognition
- Presentation (capital grant/ income grant)
Non-monetary transaction - CV versus FV (default)
IFRS: - FV of the asset received
1. Transaction lack of commercial substance
2. FV of asset received or given up cannot be determined
ASPE: the above two plus - FV of the asset given up
3. Exchange product in the normal course of operation to facilitate sales to customers
4. Transaction involves the owner
Related party transaction - exchanged amount (IFRS) versus carrying amount (ASPE) - UNLESS - decision tree
- Identification of related party
- Measurement of related party transaction - carrying amount unless
1) normal course of operation - monetary transaction or non-monetary transaction with commercial substance
2) not normal course of operation but substantive change in ownership interest and exchange amount is supported by independent evidence
Asset held for sale - Criteria
- Carrying amount recover through sale rather than use
- Available for immediate sale
- Sale is highly probable
- 1 management commitment on sale
- 2 active plan to sell
- 3 sales price is reasonable
- 4 change to plan is unlikely
- 5 shareholder approval
IFRS versus ASPE
- Control
- Investment in associate
- Joint venture
- Development cost
- PPE valuation
- Impairment
- Provision & contingencies
- Related party disclosure
Discontinued operation
- a component of the entity
1) has its own operation 2) generate cash flow - Criteria
1) major line of business 2) single corodinated plan
3) subsidiary acquired with a view to resell
Capital lease criteria - ASPE
- bargain purchase offer or transfer of ownership
- lease term at least 75% of the useful life of the asset
- PV of lease payments at least 90% of FV of the asset
Foreign subsidiary translation
- Integrated operation - temporal method
2. Self sustaining operation - current method
NPO accounting choice
-general/restricted/endowment fund
- restricted fund method
2. deferral method
Commercial substance
- configuration of the future cash flows of the asset received differs from those of asset given up
- the entity-specific value of asset received differs form those of asset given up
PPE recognition criteria
- Future economic benefit
2. Cost can be measured reliably
Betterment criteria - ASPE
- Increase in physical output or service capacity
- Quality of output improved
- Lower operating cost
- Useful life of asset extended
Biological asset
- Consumable biological asset - used for sale
- - measured at FV less costs to sell - Bearer biological asset - used for production
- - measured at quoted price or PV of expected cash flow
Non allowable costs for inventory
- Admin salary
- Storage costs
- Selling costs
- abnormal waste
PPE definition
When all criteria are met:
- Held for use of production of goods or services
- Acquired with intention to use on continuing basis
- Not intended for sale in ordinary course of business (ASPE only)
Inventory definition
One of the following is met:
- Held for sale in the ordinary course of business
- Used in the process of the production
Share based compensation
- Assess the likelihood of meeting conditions
1) performance requirement 2) employee turnover - Measured at FV of shares at grant date
- Vesting period discussion
1) vested immediately 2) vested over the service period
