KIT Flashcards
When g or s is dinstict
when both of foll terms are met
1. customer can benefit from g or s on its own or together with available resource which are ready to use
2. entity’s promise to transfer g or s is separately identified from other promises in the contract
Perf oblig
promise to transfer g or s which is distinct
when promise is not sep-ly identifiable
promise is not separ-ly identifiable from other promises if the customer contracted for a combined g or s
HOw much the final is dependent on input!
Final license relies on data collected and processed during the course, the data and processing have no use or relevance without the license. THe license and data are highly interdependent and interrelated
is there added value - furthemore, there is no added value for the customer before license is obtained, it cannot process the data by itself and obtain a license (can the item be separately used). The license does not form part of a separate PO
Revenue PIT or OT
before the survey is complete customer has access to data though pres-s but license is not granted yet. After license is granted, the Copmany doesn’t analyse data and there is no service provided to client . Cons, revenue should be recognised at a point in time when the license is granted (or when the contract is exited) as a signle PO. ANY SERVICE PHASE component does not have any significant value. The customers of Jassie
Co contract for a combined good or service which includes the survey data, processing
and granting of the licence. These are not separate performance obligations, but they
are inputs to a combined item.
Oliio ethical issue
Key points
1. when reading pinpoint key scenarios
- Understanding of big data (CFO feels its too complex and no need for him to understand) CDO reports to CFO - BDA and algorithms ar eimportant for business. Accountants maynot have necessary skills or experience to ensure clear accountability within the buisnes. J Co appointed CDO to ensure clear accountability. CFO needs someone to reliably interpret in order to effectively deal with customers. HOwever, CFO does need some understanding of technology in order to determine strategy and uphold company values and culture. The view is that accountability lies with senior mng incl CFO
2. Rerunning of the data - bias from historical unrelated data. even when correctly manipup and processed, big data maynotdeliver expected outcome. As the revised report used historic data it maybe embedded with bias fro the past due to the way it was collected or acquired. If this is the case, it maybe unethical or illegal to use this data for customer decision kmaking. CFO has obviously put the CDO under pressure to rerun to find more favourable result. THIS WOULD APPEAR TO BE SELF-INTEREST BEHAVIOUR. Customer should be confident that fair treatment of customers is central to the corp culture.
3. IFRS 16 - lease as ROUA. Mr CFO should ask himself whether he has maintained necessary skills and experience to carry out his role. Another example of his possible lack of profesional competence is recomending to use IFRS 16. IFRS 16 specifically excludes licenses of this nature from the scope. Main issue is that he gave advice without checking nature of that advice. It demons lack of due care and poor professional behavior which would discredit himself and the company. He has demon lack of expertise and knowledge in several areas, the results of which could impact on himself and company. He has acted in ways which conflicts with ACCA’s professional values
4. Professional behaviour - state situation. In addition, he knows that Mr X holds shares in O and has suggested to his friend that share prices were likely to fall. There are several ethical issues here. CFO manipulated the data to produce more faourbale outcome. He has disclosed confidentila information, which will affect share price. Bc this is confidential information is not accessible to other shareholders and investors, CFO is giving his friend an unfair advantage over the rest of market which is ethically immoral since they affect others unfairly. However the main issue is that the report was manipulated and a false report given
5.Biased report
6. Resolutions 1. identify parties affected by his action and lack of expertise 2. consider who should be involved in resolution of problems he has created 3. may consider contacting ACCA for advice and guidance, or colelgaues
Senior: shoudl discuss with directors adn the potential consequences for the business. if directors do not agree to part course of action, it may be appropriate to consider his position within the company
During resolution he should document the substance of the discussions held, who was involved, and the reasons for decisions that were made
how should disposal be valued.
lower of carrying value and FV-cost to sell
carrying amount for disposal group
net assets of subsidiary and goodwill
if no loss of control in disposal
no gain or loss on disposal is recognised, ONLY NCI’s shareholding will increase
To calculate NCI’s share = FV of NCI existing + additional share of net assets and goodwill at disposal
if NCI would not be on FV but net assets, then just share of net assets would be taken
how should disposal that doesn’t lead to loss of control should be accounted
Dr Cash from sale of shares (700K)
Cr NCI (10% (or any increase in NCI share)Net assets at disposal date)
Cr Equity (B)
Net assets at disposal date
Share capital - sharesnomival value - $1m
RE - 4658
Profit for the period before disposal = 9/12*profit for the year
PPE reval not recognised
Goodwill
meaning of price concession
value of consideration is VARIABLE and UNCERTAIN
IFRS 15 revenue from contracts with customers requires the entity to estimate the amount it is entitled to in exchange for goods or services
methods to estimate consideration
- expected value method
- most likely outcome
whichever method will better predict amount of the consideration
Expected value since history of offerring price concession. in the absence of further information midpoint method would be appro - 8-35 -> midpoint is 23 -> revenue would be $20050077%)
when revenue should be recognised for sales with variable consideration
it must only be recognised to the extent that there is no possibility for significant reversal of cumulative revenue in the future
The risk of obsolescence means that value of consideration Luna is entitled to is highly contingent on factors outside the control of Luna/. SInc ehisto granted upto 38% of concession, there high probability for significant reversal of cumulative revenue. therefore it would be reasonable to take 35%; and reduce revenue by 350K.This is the maximum
amount that is highly probable that a significant reversal of revenue will not be
required. Since the whole $1,000,000 {$200 x 5,000) has been included within
revenue, the accounting treatment adopted is not correct.
PUP what should be the value of inventory
it should be cost to the parent! parent bought it at $80 per unit (400K) and now it is valued at 1000K, should adj by 600K = add 600 to COS
change in net assets
profits-dividends
when losses to parent should be recognised in JV vs parent transaction
where downstream transaction provides evidence that asset is impaired. As P sold PPE to S (downstream transaction) at loss of $2m. Since $8m is market value, indeed PPE was impaired before. P shoudl recognise impirment loss both within individual and consol FS
the investment in join venture and share of profits of JV will not be affected by transaction. JV is not part of single entity concept, intra-group transaction should not be wliminated
