Från översiktsmindmap Flashcards
Which are the criteria for recognition of a good?
1 .Reliable measurement of amount and costs
- It is probable that the economic benefits will be received
- The entity has transferred to the buyer the significant risks and rewards of ownership of the goods
- No continuing effective control over the goods sold
What is the income statement?
The entity’s net income (profit /loss) during
a specific period
Define income
Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.
Define expense
Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
Define revenue
Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an enterprise when those inflows result in increases in equity, other then increases relating to contributions from equity participants
When and how is revenue from service recognized
When the outcome of the transaction can be estimated reliably. Revenue is measured by reference to the stage of completion.
Which are the criteria for recognition of a good?
Reliable measurement of amount and costs
It is probable that the economic benefits will be received
Control/ownership:
• The entity has transferred to the buyer the significant risks and rewards of ownership of the goods
• No continuing effective control over the goods sold
When is revenue for a good typically recognized?
Revenue is normally recognised when the buyer accepts delivery, and installation and inspection are complete
In which situations is revenue for a good recognized immediately?
If the installation process is simple in nature, or…
The inspection is performed only for purposes of final determination of contract prices
What is the disposition of the income statement?
Sales profit
Sales revenue
Cost of sales
(Cost of materials/services)
(COGS)
Operating expenses
Personnel expenses
Depreciation/amortization/impairment
Other operating expenses
Operating profit
Profit for the year
Non-operating income
Non-operating expensesWhat is a cash flow statement?
The entity’s cash flows (inflows and outflows)
during a specific period
Which are the components of the cash flow statement?
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Which variables are taken into account when calculating cash flows with the indirect method?
\+ Operating profit
± Adjustment for non-cash items, e.g. depreciation
± Change in working capital (excl. cash)
Inventory
Increase in inventory
– cash
Decrease in inventory
\+ cash
Trade receivables
Increase in trade receivables
– cash
Decrease in trade receivables
\+ cash
Trade payables
Increase in trade payables
\+ cash
Decrease in trade payables
– cashWhich are my three tips for calculating cash flows with the indirect method?
Recievables/payables
…är motsatsen till det man tror
Payables blir plus (konstigt nog!)
Recievables blir minus (konstigt nog!)
…och “minus” innebär att man vänder tecknet
Är år-till-år-skillnad…
…snarare än absoluta siffror
Net income och depreciation är absolut siffror…
…eftersom siffrorna “nollställs” vid årsskiftet
Vänd tecknet på depreciation (som man kanske först förväntar sig ska vara negativt)
What do income statements show?
The entity’s ability to…
…generate positive cash flows
…meet payment requirements
…to distribute dividends
…the entity’s investments
…the entity’s need for external financing
…the relationship between net income and cash in-and outflows (cash conversion)
What does the statement of financial position do?
The entity’s assets and how they have been financed at a given point in time
What does the balance sheet equation look like?
Standard layout
Assets = equity + liabilities
Alternative layout
Assets - liabilites = equity
Define an asset
An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
What is a current asset?
An asset that the entity…
…expects to realize, sell or consume in its normal operating cycle
…holds primarily for the purpose of trading
…expects to realize within twelve months after the reporting period
Or the asset is cash or a cash equivalent
What is a non-current asset?
Assets that are not current assets
Held for use in production or supply of goods or services, for rental to others, or for administrative purposes
Expected to be used during more than one period
Give six examples of financial assets
Cash
Equity instruments of another entity
Contractual right
To receive cash or another financial asset from another entity
To exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity…
Contract that will or may be settled in the entity’s own equity instruments
Debt
Derivative
What is goodwill?
Goodwill is the residual part of the acquisition cost of a subsidiary that cannot be allocated to separately identifiable and recognizable assets and liabilities of the subsidiary at the time of the acquisition (measured at fair value).
What is the equation for goodwill?
= cost - net assets
= cost - (fvA-fvL)
How can goodwill become an expense?
When an impairment test is performed, and the intangible non-current asset “goodwill” is written down
At what value is inventory reported in the statement of financial position?
Lowest of…
Cost
Net realizable value
What is “net realizable value”?
The estimated selling price, or fair value, of the inventory once it has all been manufactured into finish products, minus the costs to finish and sell the goods.
Name nine examples of assets
Inventories Prepaid expense Trade Receivables Deferred tax Investment property Pensions PPE Financial instruments Intangible
What is equity?
Equity is the residual interest in the assets of the entity after deducting all its liabilities.
How can equity be seen as a security?
Equity serves as a “risk-buffer” for losses
Name six examples of equity
Financial liabilities Leases Contingent liabilities Pensions Deferred tax Provisions
What is a liability?
A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
Name six examples of liabilities
Financial liabilities Leases Contingent liabilities Pensions Provisions Deferred tax
