Non-monetary Exchange Flashcards
When transaction lacks of commercial substance, the FV of assets received is
Value of the assets in this case = old bet cv of the assets + any cash given up (more reliable)
or FV of new asset - any gain recognized (less reliable if there is no gains)
Is it lack of commercial substance transaction or has commercial substance use the ratios to recognize transactions gains?
When lack of commercial substance
What is research and development cost?
Research: the attempt to discover new knowledge aimed to develop a new product, service, process, tech, or significant improvement of an existing product.
Development: the translation of research funding knowledge into a plan or design new product or significant improvement in an existing product or process either for sale or use. Costs including design, testing of product alternative, construction of prototype and operating of pilot plants
R&D key words:
Laboratory research
Formulation and design product or alternative
Modification the formula
Design,construct, testing tools and model
Design a pilot plant
Common excluded :
Routine testing
Legal works
Software development cost
Quality control
Assets acquired for R&D,
1. what is the accounting for FA used in several projects?
- Only used in temporary R&D project?
- Use in only one project?
- As normal depreciable assets
Dr. Dep expense CR. AD
- Only the portion for timeframe of the R&D is expensed in annual R&D cost
- Entire cost of the assets is expensed immediately.
What is the treatment for legal fees and other costs associated with registration of the patent?
Capitalize it
Required risk and uncertainty disclosure
- Nature of operation (product and service,geo locations, principal market that risk can be identified)
- Use of estimates (general and certain significant estimate) (FS, approximate amt and estimates assumed for future events)
- Current vulnerable due to significant concentration in certain aspects of operations
- Ability to going concern
(Current financial condition, conditional and unconditional obligations, funds ready to maintain operations, and other conditions)
Apply to complete interim and annual reports
Purpose of segment reporting and what kind of value segment reporting contains?
Who the segment data report to?
What are the three common Threshold that segment reporting uses?
Purpose: asset financial stmt users to understand the entity performance
Quantitative quality: predictive value and conformance value
Report to chief operating officer
10% of revenue, income and assets
What characteristics of the operating segments and what are the segment reporting tests?
Characteristics: segment ha involved in revenue and expense from activities
Operating results are reported to the main decision maker in regular basis
There is discrete financial info available for the segment
Test: 1. segment revenue from all source (internal and external) is >=10% of the combined revenue of ALL reported company segments
- The segment operating profit and loss is >10% of the greater of 1) combined profit if all segment didn’t report a loss or 2) the combined loss of all segment that did report a loss
If there are more than one segment in one area and all meet the reporting segment criterion, how to report the segment for that area?
Combine all segments together to eliminate excessive reporting
What is the overall % the external revenue from the reportable segment should have account towards the company’s consolidated revenue? If less than that, what should the company do?
75% of segment revenue out of 100% total revenue
If less than that, the company must report more segment, even if the reporting criteria didn’t meet
Usually when the reporting segments reaches 10, the company has to consider the cost of adding additional
The requirement for reportable segment disclosures
Factors used to ID segments
Products and service about the segment
Intently and external revenue, measure of P/L and total assets
Interest revenue / expense
All depletion, amortization and depreciation expense
GAAP and IFRS differences
Mostly the same except the IFRS required disclosure of total liability if the info is provided to the decision maker
Liabilities also included in the reconciliation of segment info with total firm data
How to present revenue from foreign operating in segment reporting?
Disclose separately the amount of sale to unaffiliated customer and the amount of interco sales between geo areas.
There are two methods to amortize capitalized computer software costs, what are they and their calculations? Which amortization cost to recognize?
Revenue method and SL method
Revenue method
BV of capitalized software * (CR / (CR + future estimated revenue)
SL method
BV / yrs remaining for product sales
Recognize the larger of the amortization cost from the two methods
After amortizing this software cost, the CV is compared with the NRV (future benefit -operating cost).
If the ending cv is > NRV, the new CV is the NRV, no write up is allowed
What is the ending balance for amortizable CV?
IFRS and GAAP difference
Under IFRS, research cost is expensed
Development cost is capitalized
What is the first thing to consider when dealing with cloud computing?
Why is the reason to consider if having software license or not?
Consider if the software license is part of the arrangement
Consider software license exist if 1) the customer has contractual rights to take possession at time during the hosting period W/O significant penalty
2) customer can run the software on its own hardware or contract with third party
To consider if have software license or not is for treating the purchase as acquired intangible license agreement that will be capitalized and amortized
What is Subsequent event also called?
What date is referred as SE? Examples?
Post balance sheet event
Date: after the date is FS, but before the statement is issued or available to be issued
Examples:
Lawsuits, change in operating structure, issuance of debt and security, major acquisitions, and significant G/L
What are the SE conditions and their treatments ?
Condition 1: the condition lead to SE existed on the BS date
Treatment: recognize and disclose
2: condition exist after the BS date
Footnote disclose only for events have material effect on FS
Disc ribs nature of event, and estimates made and if no estimates can be made explain why
What kind of stmts need to report SE
Annual reports and interim reports
IFRS for SE
Stock split or reverse split need to be adjusted only if it’s before the FS are issued
When issue stock for service at fixed shares, JE?
When issue stock at fixed value. JE?
At fixed shares, the share value record at FV at time of derive contract, ignore the price increase in the future.
Record as. Dr. Service expense. At FV
CR. CS. At par
CR. PIC. At the difference
Record service value is fixed
Dr. Service expense at new FV
CR. CS =fixed value /new share value * par
CR. PIC. The rest
** shares changed from 1000 shares to 800 shares due to price change
