IFRS Flashcards
Under IFRS an intangible is defined as…
an identifiable, nonmonetary asset without physical substance.
Intercompany Account Receivable (or payable) on Consolidated B/S
Total parent and subsidiary’s A/R (or A/P). Any difference between the total and the amount shown in Consolidated column is an intercompany A/R (or A/P)
When calculating GP for percentage of construction what will be considered:
Progress Billings to date
Income Previously Recognized
Income Previously Recognized (only)
Treatment of BIC after bond issuance
IFRS – Amortize BIC using Effective Interest Method (reducing the CV of the bonds)
GAAP – Noncurrent Asset, amortized using S/L Method over period that Bonds are outstanding
What does BIC include?
Printing and engraving costs
Legal and accounting feeswhat
Underwriter commission
Promotion costs (printing of prospectus)
What methods does IFRS allow for Cash Flow Statements?
IFRS – Direct, Indirect and Modified
Negative cash balance in C/F rptd as negative Cash Equiv.
(negative asset)
GAAP – Direct and Indirect only
Negative cash balance is reported as a current Liability
On IFRS Stmt of CASH FLOWS, how are interest and dividends categorized?
IFRS –
INTEREST = INVESTING or Int Paid may be FINANCING
(although Interest PAID may be FINANCING)
DIVIDENDS RECEIVED = INVESTING
(unless in lending business, then its operating)
GAAP –
INTEREST = OPERATING
DIVIDENDS RECEIVED are OPERATING
DIVIDENDS PAID are INVESTING
How does IFRS classify Interest paid on L-T Debt on the Cash Flow Statement
IFRS –
L-T Interest Expense = OPERATING or FINANCING activity
GAAP –
L-T Interest Expense and Revenue = OPERATING activity
In IFRS, Purchase of PPE Machinery -
How do you account for FREIGHT IN
How do you account for LOAN INTEREST
FREIGHT IN is part of readying for Intended Use - CAPITALIZE
LOAN INTEREST is expesed as incurred
IFRS Lawsuit Reporting - When do you report (accrue) a contingent Loss?
IFRS – Contingent Loss must be recognized if it is “more likely than not”
GAAP –
Unsuccessful suit is Expensed
Successful suit, award and expenses are Capitalized
For reporting - a Loss must be PROBABLE, which is defined as “likely.” (51% is not enough)
IFRS Terminology difference for contingencies
IFRS:
PROVISION - when Probable & Estimable
(Disclose & Accrue)
Ex: Warranty Oblig or probable loss of suit D & A
CONTINGENCY - when NOT Probably and Estimable
(Disclose Only)
Potential obligation not recognized as liability either because not probable or estimable.
IFRS treatment of “CONTINGENCIES”
DISCLOSED only
Viewed as not probable or estimable therefore not recognized as a liability.
IFRS treatment of “PROVISION”
DISCLOSED and ACCRUED
Recognized as liabilities on balance sheet
outflow is probably; amount is estimable
IFRS treatment of PENSIONS PLANS, VAC & SICK PAY
IFRS – Vacation and sick pay that accumulate are required to be accrued
PROJECTED UNIT CREDIT Method is applied for defined benefit pension plans
Actuarial gains and losses are recognized immediately in OCI.
GAAP treatment of PENSION PLANS, VAC & SICK PAY
Vacation pay that accumulates or vests and sick pay that vests must be accrued.
Benefits-Years-of-Service Method used for defined benefit pension plans.
Corridor approach used for recognizing actuarial gains and losses in pension expense.
IFRS criteria for operating or “finance” lease
Only criteria for FINANCE (GAAP calls CAPITAL) is that
Lease appears to have BPO:
Life of lease must be major portion of life of asset (60% qualifies)
That it “transfers substantially all rights and risks of ownership to lessee.
Initial direct costs are CAPITALIZED with a finance lease.
GAAP LEASE (OPERATING or CAPITAL)
TT
BPO
75 EST ECON LIFE
90 MIN LEASE PMTS
An operating lease is never recorded on B/S
Initial Direct Costs are EXPENSED by lesee as incurred
IFRS differences in valuation of inventory for reporting
IFRS -
- LIFO not allowed
- Inventory rpt at LCNRV (GAAP is LCM)
- Allows recoveries after write-downs if NRV increases
IFRS differences in valuation of receivables and allowances
Uses Allowance Method but calls it “Provision Method”
Required to be tested for impairment each period ending. Impairment loss MAY be recovered
Transaction Costs are included in CV reducing effective rate.
IFRS Required Disclosures on “Statement of Profit and Loss” (I/S)
FINANCE COST (FAT) TAX EXPENSE (TIRE) INCOME (IPA)
IFRS HEDGE ACCOUNTING
Affects which two types of Hedges?
Where does IFRS Hedge Acct recognize gains and losses?
IFRS HEDGE ACCOUNTING applies to
- Cash-Flow Hedge
- Hedge of Net Investment in Foreign Operations
Recognizes gains and losses in OCI
IFRS COMPOUND BONDS e.g. ‘convertible bonds’
Compound (convertible) bonds are separated into Liabilty and Equity components
– also, don’t forget –
IFRS requires CV be reduced by debt issue costs (BIC) resulting in lower Bonds/Payable amount and Higher Effective Interest Rate
How does IFRS account for bonds and track interest?
IFRS Amortizes Cost using the EFFECTIVE INTEREST METHOD, [S/L Method NOT allowed]
Results in LOWER B/P amount and HIGHER effective interest.
FV Election is possible, but irrevocable
Initially record at FV - transaction costs at issuance - FVTPL
