Payable and Accrued Liabilities Flashcards
What are costs associated with exist and disposal acitivities?
1- Cost to relocated employees
2- Benefit related to involuntary and (not voluntary) employee termination. Golden Hand Shake
3- Cost to terminate a contract that is not a capital lease.
Are costs to terminate a capital lease an exit and disposal activities
NO - cost to terminate a lease that is not capital is an exit and disposal activity. Capital lease termination costs are accounted for separately from exit and disposal costs.
Is the cost of retiring a fixed asset considered an exit and disposal cost?
No. It is not considered an exit and disposal cost.
Are benefits related to involuntary employees termination?
Yes. Involuntary benefits related to voluntary employee termination are costs associated with exit and disposal activities.
Are benefits related to voluntary employees termination?
No. Voluntary benefits related to voluntary employee termination are not exit and disposal activities.
Is commitment to an exit plan is a liability
No
In a question of compensated absnese, What are key notes to remember?
1- Sick pay days can’t be estimated so they are not reported, only vacation day liability is reported.
2- When they say there is an unadjusted balance of liability on Dec 31, and what amount needs to be reported on FS. The answer is the amount for the current period only. Unadjusted Balance is a Distractor.
After the property is fully depreciated, how the change in decommissioning liability be recognized?
The change in liability is recognized in profit and loss
Should the current portion of refinance loan (that converted short term note to long term note) that in due on Jan 15 Year 3 (one year and 15 days). be included in the Current Liabilities? Year End FS are for 31/12/Y1
No.
What is ARO?
ARO stands for Asset retirement Obligation. That is a Present Value of Future lability. No Expense is recognized. The ARO will increase the value of the asset and depreciation expense will be recorded over the life of the asset which will include the expense related to ARP.
If you have a note that pays principle and Interest, how would you report the liability on the BS?
It will be payment due in 12 months plus the accrued interest. Note: Not the interest you pay in 12 months.
How ARO is recognized
An ARO qualifies for recognition when it meets the definition of a liability
1- Duty or Responsibility
2- Little or no Discretion to avoid
3- Obligation Event
In ARO recognition, does the uncertainty about whether performance will be required defer the recognition of a retirement obligation?
No uncertainty about whether performance will be required to defer the recognition of a retirement obligation, rather the uncertainty is factored into the measurement of the fair value of the liability through the assignment of probabilities to cash flow
What is Balance Sheet approach to measure the ARO?
An entity record an asset and liability on the balance sheet equal to the FAIR VALUE (PV) of the asset retirement obligation. FV is generally equal to PV. If reasonable estimate can’t be made then Asset and Liability is recognized when estimate could be made.
Wha is JE for recording the ARC and ARO?
Asset retirement cost
Asset retirement Obligation
Accretion Expense
Asset retirement Obligation
Depreciation Expense Accumulated Depreciation (ARC)