Payables And Accrued Liabilities Flashcards
Exit and disposal costs
-involuntary employee termination benefits
-cost to terminate a contract that is not a capital lease
- other related costs
including cost to consolidate facilities or relocate employees
Liability recognition criteria
Liability is only recognized when all the following criteria are met:
1: an obligating event has occurred
2: the event results is a present obligation to transfer assets or to provide services in the future
3: the entity has little or no discretion to avoid the future transfer of assets or providing of services
Secured by collateral classified as
A liability that is secured by collateral should be classified as a loan payable
Periodic payment of interest classified
A liability that requires the periodic payment of interest should be classified as an accrued liability or debt
Sales taxes payable &;; payroll deductions
Should be credited to a payable account.
Not an expense.
Property taxes payable
2 methods of accrual
- accrued prior to the receipt of the tax invoice
- recorded as a payable upon the receipt
Bonuses
Should be recorded to salaries and wages expense
Sick pay benefits
Not required to accrue as liability for nonvesting accumulating right
Accrue for vested amounts
Asset retirement obligation (ARO)
Liability
With certain assets that have environmental impact or are affected by other regulations -there will be significant costs to dispose of the asset. These future costs need to be accounted for as an ARO
Credit adjusted interest rate is used to calculate ARO
Beginning ARO x Risk-adjusted rate
Sales revenue
Credits to sales revenue / sales tax plus one
ARO balance sheet approach
When an asset retirement obligation exist and qualifies for recognition, an entity records an asset and a liability on the balance sheet equal to the fair value of the asset retirement obligation.
if a reasonable estimate of fair value can be made.
Fair value is generally equal to the present value of the future obligation
Asset retirement cost (ARC)
Asset
The ARC is the amount capitalized (asset) that increases you carrying amount of the long lived asset when a liability for an ARO is recognized.
DR. ARC
CR. ARO
Accretion expense
The ARO is increased each year as time goes on,this is accretion expense, which is increasing the present value of the ARO up to its full amount the closer it gets to being retired
The accretion expense is the ARO balance X the discount rate at initial measurement
Annual accretion expense is an operating expense and is not considered interest expense
DR. accretion expense
CR. ARO
Credit adjusted interest rate is used to calculate ARO
A decommissioning liability (under IFRS)
Same as an ARO under GAAP
Any change in value of the liability after the property has been fully depreciated will be recognized in profit or loss
Accumulated or vested paid days
Vacation days accrue is it vests OR accumulates.
Sick days only accrue if vested
