recognition, FS and adjustment Flashcards
PPE recognition rules
if it is probable that future economic benefits will flow to the entity and the cost of the item can be measured reliably
Settlement discount is shown as other income on IS
Held at cost - accumulated depreciation and impairment losses
Revalued at fair value
Restate asset at revalued amount, remove accumulated depreciation and credit revaluation reserve
Decrease in market share is written off against revaluation reserve
intangible asset recognition rules
recognised only if it is probable that future economic benefits will flow and costs can be measured reliably
DONT include advertising, training or research
Development can be capitalised IF technically feasible, intention yo complete, ability to use or sell, commercially viable and expenditure can be measured
NBV = original cost - amortisation and impairment
impairments
decrease in market value written off against revaluation reserve
Remainder to income statement as impairment
Shouldn’t be carried at any more than their recoverable amount
Recoverable amount = higher of net selling price and value in use (PV of future cash flows from use and disposal)
revised carrying amount = lower of carrying amount or recoverable amount
Impairment required = revised carrying amount - current carrying amount
non current assets held for sale
if carrying amount will be recovered principally through a sale transaction rather than continuing use
Must be available for immediacy sale in present condition, highly probable sale
Measured at lower of carrying amount and net selling price
discontinued operations
a component of the entity that has been disposed of or classified as held for sale and represents a major line of business
accounting policy
estimates are accounted for prospectively - future periods
Prior period errors are accounted for retrospectively - historical, current and future periods
liability recognition
recognised in SOFP when it is probable that an outflow of resources will result when settling a present obligation AND can be measured reliably
Contingent liabilities not recognised, only disclosed
provision recognition
recognised when there is a liability from a present obligation resulting from a past event with a probable outflow and a reliable estimate can be made
If not probable but possible, disclose
Dr income statement
Cr provision son SOFP
contingent asset recognition
only recognised if virtually certain
DONT recognise if probable or less than probable
inventory valuation
valued at lower of cost and net realisable value (estimated selling price - estimated cost of completion and selling)
Deduct trade discounts and subsidies
what is adjustment to cost of sales
carrying value of inventory
Losses of inventory
Reduction in value to NRV
Dr expense Cr inventory
revenue recognition
exclude borrowings, shareholder contributions and gains on disposal
Recognise when the entity satisfies a performance obligation
Basis is subjective for construction contracts - recognise when control passes
financial instrument issue recognition
account for professional fees
Don’t account for internal costs as they would’ve been incurred anyway
Recognise when the entity enters into the contractual provisions of the financial instrument in SOFP
statement of comprehensive income
Sales
Cost of sales
Gross profit
Other income
Distribution costs
Admin expenses
Profit from operations
Finance cost
Profit before tax
Tax
Profit after tax
statement of financial position
Assets
non current assets
Intangible assets
Goodwill
PPE
Current assets
Inventory
Trade and other receivables
Cash and cash equivalent
Assets held for sale
total assets
Equity and liabilities
capital and reserves
Issued share capital
Retained earnings
Share premium
non current liabilities
Preference shares
Borrowings
Provisions
current liabilities
Trade and other payables
Provisions
Current tax payable
Provisions
Wages
Dividends
