IFRS Flashcards
Government Grants - IAS 20?
Main Points:
differentiate between government grant or government assistance
Definition:
Government grant (GRA) = in forms of transfers of resources to entity in return for future compliance with conditions
Related to asset = acquisition of asset
Related to income = reimbursement of a cost
Government Assistance (GAS) = Gov’t Actions that provide economic benefit under certain criteria
Recognition (ALL must be met):
Grants related to assets/income/monetary/non-monetary
1. entity will comply with conditions
2. entity will receive grant consideration
Grants related to assets
Record grant over usefull life of asset
Two choices
* Deferred income: recognize as revenue (then move to P&L when related depr expense occurs
* Deduct from PPE’s CV: then move to P&L when related depr expense occurs
Grants related to income
For current/future expenses => recognize in period when costs incurred
For past expenses => recognize immediately in P&L
Joint Arrangements
- Assess if a joint arrangement exists (PER IAS)
- Assess whether JV OR JO
- IF below 4 criteria are not MET then = JA
Criteria: (IF ALL YES then JV)
1. Structure - is it structured through financial vehicle and separately identifiable
- Legal form
- Own net assets = JV
- own specific assets = JO - Contractual terms
- is there agreements on the contract?
If JV = use equity method to record (i.e dr investment, cr. cash)
If JO = record specific assets/liability
Check to see if equity method can be used per IAS
Non-Monetary IFRIC 17
Common Issues:
1. when to recognize dividends payable
Recognize liability earlier of:
- declaration approved by authority
- when declared
- how to measure D/P
- measures at FV of assets to be distributed - How to account for difference between CV of asset distributed and CV of D/P
- recognize in P&L
IAS 38 - Intangible asset (SACF)
2 must be met (definition + Recognition)
Definition SACF (must be met to be classified as intang)
- Separable
- Arises from contractual/legal right
- Control of future economic benefits
- Future economic benefits generation
Recognition:
- expected economic benefits will flow to entity
- costs reliably measured
Move on if intangible asset was internally developed
Research phase
- expensed as incurred
Development Phase (IC Farm)
- Intention to complete
- costs reliably measured
- technical feasibility (Can it be completed)
- Ability to use/sell
- Adequate resources
- Market Exists
- If all not met, expense
Leases - leesee
LEESEE:
Step1: identify lease contract
- must contain right of control the use of asset
- obtain substantially all eco benefits and right to direct use
- Identify separate lease components
- Determine commencement date of the lease
- Determine lease term & Discount rate
Step 2: Initial measurement
1. recognize ROU asset at cost (initial measurement+lease pmt made before date+initial direct costs)
2. Recognize lease liability
- PV of all future pmts
- include: Guaranteed residual amount (FMV of asset at end of lease, BPO, fixed payments) . Only add costs incremental to obtaining the lease
Step 3: subsequent measurement
ROU Asset
- ROU asset = cost less accumulated desperation
- if BPO (i.e if entity will own asset after term) = depreciation period is assets useful life
- if no BPO = lower of lease term or useful life
Lease Liability
- Recorded at PV
- increase carrying value by interest expense
- Decrease by lease payments made
(Balance + Interest - Payment) = New Liablity Bal
ROU asset decreases as payments made and lability increases
CV of asset + interest - Payments = new CV
Leases - LESSOR
Finance Lease (only one needs to be met)
- transfer of ownership or BPO at end of lease term
- lease term is 75% of economic life of asset
- PV of all at least 90% of FB leased asset (exclude UGRV)
If ALL above not met then use operating lease
Measurement
Finance lease:
1. Asset is derecognized and gain/loss is recognized
2. recognize receivable equial to net investment of lease
- using PV you can calc the lease receivable (inlude UGRV is needed)
operating lease:
- keep asset on SFP
- lease income recognized on straight line basis over lease term
IFRS 15
Step 1: Identify Contract (Per IFRS - include if any controversial aspects)
Step 2: Identify PO:
1. Goods or services is distinct (i.e you get one thing and another later)
2. Series of goods/services with same pattern of transfer (i.e all delivered at once)
Distinct if (PO CHECK)
Separability: Can customer benefit from good or service on its own or together with other resources (I.e can you enjoy now or will it need another component to enjoy?)
Identifiability: Promise to transfer goods is seperatley identifiable from other promises which is if they are highly integrated or seperable)?
- Determine Transaction Price
Common: - Allocate Price to the PO’s
if construction then: - output method = what customer gets while completed phases
- Input = what supplier has completed (costs incurred)
- Recognize revenue as PO is fullfilled
- At a point of t ime
- Or over time
RTP IAS 24
IFRS, the the measurement is the exchange amount by default.
Person/entity is related to the entity prepping the F/S
More about how to disclose:
- relationship between parent/subsidiary
- key management personnel compensation
- RPT
IAS 28 - Investment in associates and Joint Venture
Definition of Associate:
- entity over which investors has SI
Recognition
SI = holds > 20% and can be demonstrated by
- participation in policy making
- representation on BOD
Initial measurement:
- Investment recorded at cost
Subsequent measurement
- CV adjusted to recognize investors share in P&L of investee
- distribution received from investee reduces CV
IFRS 5 - HFS
Recognition for HFS (all must be met) ASC SAM
- actively marketed at reasonable price
- steps to locate a buyer and complete sale
- changes to plan unlikely or plan will be withdrawn
- sale probably to be expected within one year
- available for immediate sale
- management commits’ to sell
Discontinued op, a component of of entity (one must be met)
- represents separate major line of business
- part of single coordinated plan to dispose of separate major line of business (classified as HFS)
Measurement/subsequent:
- NCA classified as HFS:
–> lower of CV or FV less costs to sell
- not depreciated
Warranties (IFRS 15 OR IAS 37
Two Types of warranty:
1. Assurance type: Sold with product and cannot be separated (usually because of govt regulations).
Measurement:
- Use IAS 37 to see of criteria of provision applies.
if yes = record provision at estimated amount of warrenty that might be claimed
- Service type warranty: Warranty is sold separately (customer have option) if bought, creates a performance obligation for company
See if PO criteria applies
if yes = recognize PO over period of warranty time and recognize revenue for product sold at point of time
Decommission Provision
Recognize as liability if provision criteria is met
Record at the best estimate and add to net PPE and liability (if related to PPE)
Prep costs can be capitalized in PPE as it brings asset to its working condition
Lease - Leasehod improvments
Initial direct costs can be included in ROU asset are incremental cost of obtaining lease that would not be incurred if lease has not been obtained (i.e was this required to obtain lease or not)
if not = do not include in ROU asset and treat as PPE
Depreciate over lesser of useful life and lease term
Investment Property
Defitnion: land or building held by owner to earn rental income or capital appreciation or both
Recognition:
1. future economic benefits
2. cost of invetment is relaibly measured
If yes to both = recognize as asset
Initial measurement = recognize the property at cost
Subsequent measurement =
1. can choose fair value or cost model
Fair value method = gain/losses arising from change in FV from asset is recognized in P&L. No Depreciation recognized just adjusted for fair value at reporting period
Cost Model = depreciation recognized over the assets usefull life.
PPE IFRS
Definition:
1. held for use in production/supply of goods/services
2. expected to be used more the one period
Recognition:
1. probable future economic benefit will flow to entity
2. costs can be measured reliably
Measurement:
If above met = record at cost which include
- purch price, attributable costs, estimate cost to dismantle
Subsequent measurement:
1. Cost = historical cost - acum dep - impairment loss
2. reval = fv at date of reval - accum dep - impairment
Derecognition:
1. on disposal
2. no future economic benefit provided
Other:
Spare parts, stand by, servicing equip = PPE if they meet definition/recognition otherwise they are inventory
Components (major components like airplane wing)
- if separable, allocate and depreciate separately
Inspections/replacements
- if they meet PPE recognition crit. Then capitalize otherwise expense.
