Payables And Accrued Liabilities Flashcards
Trade Accounts Payable
-trade accounts owed for stuff like inventory and raw materials
-recorded as purchase or as inventory
-non-interest bearing so an operating liability
-purchases recorded as either gross method (wait until discount is taken) or net method (record net of discount)
Trade note payable
-interest bearing so financing liability
-formal, written promises to pay on a certain date
Interest payable
-interest expense recorded in period incurred, not when the coupon is paid
Current portion of long-term debt
-long term debt
-current obligations that are EXPECTED (intent and ability to do so) to be refinanced may be excluded from current liabilities and included in noncurrent liabilities
Accrued liabilities and expenses
-accrued salaries and wages payable is the unpaid portion of salaries and wages
-book expense without paying the bill
-other expenses incurred but not been paid include utilities, rent, and insurance
Taxes payable
-not all taxes expensed to the corp. tax could be a payable
-sales tax is payable-collected from customers on behalf of taxing authority.
Employee related liabilities
-payroll taxes are expenses to the employer but payroll deductions are not an expense for the employer
-payroll deductions are treated similar to sales taxes payable
-deductions for social security, Medicare, and income taxes withheld from employees out of gross pay from paychecks.
-expense to the employee not employer
-credited to payables account until remitted.
Accrued vacation-SOCR
-recorded in year earned if SOCR is met:
S: services already rendered by employees
O: obligation relates to rights that vest or accumulate
C: payment of the compensation is probable
R: amt can be reasonably estimated
If only first 3 met, disclosure in a note to FS is adequate
Bonuses
-part of salary and wages expense and based on company profits
Exit and dispose activity-how to record
As a liability
Examples of exit and disposal activities
Severance pay
Breach of contract
Consolidating facilities or move pp&e
Relocating employees
Criteria for liability recognition
-Obligating event occurred (announcement or notice)
-duty or responsibility (severance or cost to relocate)
-little or no discretion to avoid
Liability measurement for exit or disposal
-Measures at FV
-May be changed in future periods due to revisions of timing or estimated cash flows
-Revisions recorded prospectively-don’t restate prior years
-part of income from continued ops
-if using estimated future operating losses-don’t record until they actually occur
Record as discontinued ops if it is part of that strategic shift (net of tax)
Asset retirement obligation (ARO)
-recorded as a liability for future payment required to clean up,close down, or restore the condition of an asset
-Liability=amt to be paid in future x present value factor
-recorded at the present value of future cash flow or discounted cash flow (DCF)
Initial measurement of ARO
-qualifies for recognition when recorded as a liability (Meets the 3 criteria)
-Record as FV on BS
