Individual Accounts Flashcards
Finance Lease - steps
1) Inception: Dr NCA, Cr FLL (lower of FV and PVMLP)
2) Depreciate Asset: Dr Dpn expense (I/S), Cr Acc dpn (use shorter of lease term and UEL)
3 & 4 can be the other way round depending on advance or arrears
3) Pay instalments: Dr FLL, Cr Cash (in accordance with terms)
4) Accrue interest: Dr Finance Cost (I/S), Cr FLL (interest charge for the period)
Per IAS 38, in order to recognise an intangible asset in your individual company financial statements the asset must:
1) Be identifiable
2) Be controlled by the entity
3) Result in future economic benefits for the entity
4) Have cost that can be measured reliably
Finance charges types
1) Actuarial method
2) Sum of digits method
3) Straight line method
Finance charge - actuarial method
Preferred method under IAS 17
basically reducing balance method - accrue interest on balance each year
Finance charge - sum of digits method
Allowed as a reasonable approximation.
1) total finance charge = total lease payments(inc. deposits) + amount borrowed(lower of FV and PVMLP)
2) SOD fraction:
numerator = number of interest bearing periods remaining
denominator = (n(n+1))/2
n=number of interest bearing periods
3) total finance charges x SOD fraction (for each year) - charges from every year should add up to total finance cost
Finance charges - straight line method
Not normally allowed
1) calculate total finance charges (total lease payments (inc. deposits) - amount borrowed (lower of FV and PVMLP)
2) allocate on a straight line basis.
Operating lease - accounts
Do not recognise NCA
1) Charge rentals to I/S in a straight line basis:
= total payments/lease term
2) Any difference between charged and paid will be shown as prepayments/accruals on SFP.
Operating lease - disclosure
1) accounting policy
2) Note detailing non-cancellable operating lease commitments under gross basis:
The minimum lease payments under non-cancellable operating leases are:
Within 1 Yr. x
2-5 yrs. x
after 5 yrs. x
Revaluation, positive & negative
Positive - take to revaluation reserve
Negative - take from the revaluation reserve only for the the portion that relates to that specific asset, the remainder is an impairment loss - send through p&l - Related expense (CoS or admin)
Sale and repurchase agreement
IAS revenue - is there a sale in substance - risk and reward transferred?
If no SiS - do not recognise profit on sale, treat proceeds as a loan and accrue finance cost at appropriate rate.
Initially: Cr NCL, Dr cash
Subsequently: Cr NCL, Dr finance cost
Decommissioning costs
IAS 37 - Provisions
Provide for decommissioning costs at PV and recognise a finance cost as the discount unwinds
Initially: Dr NCA, Cr provision
Subsequently: Dr finance cost, Cr provision
Provision increases initial cost of asset so increase dpn accordingly.
(Provision / UEL)
Weighted average number of shares - bonus or rights issue.
Apply bonus fraction to any period before the issue.
bonus denominator = denominator, total +1 for numerator
E.g :1 for 4 bonus fraction = 5/4
Borrowing costs
IAS 23 Borrowing Costs
BC directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of the asset (capitalise). Depreciate new total cost from time the asset is ready for use
Use weighted average borrowing costs only relating to the period of construction/production
PPE note
Cost or valuation B/F Additions Disposals C/F
Depreciation
Disposals
Charge for the year
C/F
Carrying amount
B/F
C/F
Convertible bonds
Compound instrument = split accounting
Split into debt and equity components:
Debt = PV of all future cash flows (coupon payments & final full repayment) using non-convertible interest rate for discounting
Equity = balance between total and debt PV
Interest: charge at rate of equivalent non-convertible debt
Asset held for sale
IFRS 5
- assets must be available for immediate sale in its current condition
- sale must be highly probable
If using valuation model, revalue to FV prior to held for sale.
Should be held at lower of CV and fair value less cost to sell.
Capital expenses - disallow
Admin overheads
Marketing & marketing related fees
Recoverable VAT
Capital expenses - allow
Site preparation costs materials testing labour construction overheads dismantling costs (at present value) Interest incurred on loan to finance factory building (IAS 23)
Intangible assets note
Asset. Asset. Total Cost at year opening additions at year closing
Amortisation
at year opening
charge for the year
at year close
Carrying amount
at year opening
at year close
PPE note
Asset. Asset. Total Cost at year opening additions at year closing
Depreciation
at year opening
charge for the year
at year close
Carrying amount
at year opening
at year close
the conceptual framework
Relevance & Faithful Representation
file note format
File note:
Prepared by:
Date:
