Rest Of Topic Flashcards
What are the qualities characteristics of financial information
Fundamental:
Relevance
Faithful representation
Enhancing
Verifiability
Timeliness
Understandability
Comparability
What is fair value?
The price that would be received to sell an asset or paid to transfer a livability in an orderly transaction between market participants at the measurement date
What is OPPIC?
Objectivity Professional behavior Professional competence and due care Integrity Confidentiality
What is functional currency?
The currency of the primary economic environment in which the entity operates
What are the primary factors of functional currency?
Sales price
Purchases and costs
Forces in the country
What are the secondary factors of functional currency?
Financing
Currency of receipts
What is the transaction price?
Consideration the entity is entitled to once it’s fulfilled the performance obligation
Could include:
Variable consideration
Financing
Consideration payable to customer
Non-cash consideration
What is non-cash consideration measured at?
Fair value
When should you recognize revenue?
At a point in time or over a period of time
When should a grant be recognized?
When there is reasonable assurance that it will be received and that the conditions will be complied with
How should a grant for a non-current asset be accounted for?
Over its expected useful life by either:
Deducting the grant from the cost of the asset and depreciate the net cost
OR
Treat the grant as deferred income and release to the P&L over the life of the asset
What borrowing costs be capitalized?
That are directly attributable to the acquisition, construction or production of assets that take a substantial amount of time to get ready
What is a cash equivalent?
Short term, liquid investments that are readily convertible to known amounts of cash and are subject to low risk of change in value
Definition of a lease
A contract that gives the right to use an asset for a period of time in exchange for consideration
What are the three tests to see if a contract is a lease?
- Asset must be identifiable (if can swap out and benefit off this then it is not identifiable)
- Customer to get substantially all the benefits while it uses it
- Customer can direct how and for what the asset is used for
What are financial liabilities measured by?
Amortised cost (most liabilities)
Or
Fair value through P&L (liabilities held for trading, derivatives or what a designation has been made)
How to measure the liability component of convertible debt?
PV of cash repayments discounts using the market rate on non-convertible bonds
What are the ways to measure a investment in shares (FA)?
FVPL (default) Or FVOCI (if not held for short term trading and an irrevocable designation is made)
What are the ways to measure investments in debt?
Amortised cost (FV plus costs - business model to hold to maturity)
Or
FVOCI (FV plus costs - business model involves holding to maturity or selling if better option)
Or
FVPL (FV - neither of the others)
When can an intangible recognise development as an asset?
Technically feasible
Sufficient resources
Asset will be sold
Expenditure can be reliably measured
When can an intangible asset be recognised?
Identifiable
Controlled by the entity
Generate probable future economical benefits
Can be measured reliably
When is revenue recognised?
When a performance obligation is satisfied
What is a joint arrangement?
Where two or more parties have joint control
What is a joint operation and how should it be accounted for?
Venturers have rights to assets and obligations for the liabilities of the arrangement
Account for share of assets, liabilities, incomes and expenses
What is a joint venture and how should it be accounted for?
Venturers have rights to the net assets of the arrangement (joined venture is normally a separate entity)
Equity account (same as associate)
When should an event after the reporting period cause an adjustment in the financial statements?
Gives evidence about conditions at reporting date or impacts going concern
When should a provision for a contingent liability or asset be recognised?
There is a present obligation from a past event
Probable outflow of economic benefits
Probably outflow that can be measured reliably
When should a provision for a restructure of a business be made?
There is a detailed plan
Employees affected are aware of the plan
If an obligation exists to decommission an asset should a provision be made?
Yes
What is a contingent liability?
Possible obligations whose existence will only be confirmed by future events not controlled by the entity
Present obligations where an outflow of of economic benefits is not probably
Present obligations where the outflow of economic benefits cannot be measured
What is a contingent asset?
Possible asset whose existence will only be confirmed by future events not c trolled by the entity
How are contingent liabilities and assets shown in the financial statements?
Disclosed in the financial statements unless probability is low of an outflow
When is a business combination not a business?
All of the FV of the total assets acquired is concentrated in a single identifiable asset or group of similar assets
If it doesn’t have a business and is classed as not a business how do you account for it?
Class it as a purchase of an asset
How should agriculture be measured?
Initially measured at FV less costs
Revalued to FV less costs each year
How are inventories measured?
The lower of cost and net realisable value
How are normal derivatives treated?
Fair Value through P&L
How do you treat an embedded derivative?
Take the embedded derivative out and treat it as FVTPL
What does the related party disclosure say?
A person or a close member of their family is related to that reporting entity if they;
Have control or joint control
Have significant influence over the entity
Member of key management
When are two entities related?
They are parent and subsidiary in the same group
One is an associate of joint venture of the other
A person who is a related party of one who had control over the other entity
A person who controls one entity and has significant influence of the other entity
Why are related party disclosures important?
If you were to sell goods to a related party and discount it the margins would go up but the users of the financial statements would be unaware
What should a related parties disclosure include?
Amount of transactions and amount owed
Amount for irrecoverable debts in respect of these transactions
How is loss allowance accounted for for amortised cost?
Dr P&L
Cr Allowance
How is loss allowance accounted for if measured as FVOCI?
Dr P&L
Cr OCI
What does IFRS 8 operating segments require?
A listed entity to disclose information about each of its operating segments
When can two or more operating segments be reported as a single operating segment?
They are similar in terms of:
Products or services they sell
Production processes
Types of customers
Distribution methods
When should an entity report on an operating segment?
Revenue is 10% or more of the combined revenue of all segments
Profit or loss is 10% of the greater combined profit of all segments (non-loss making) or combined reported lossy
Assets are 10% or more of the combined assets of all operating segments
What % or the entity’s external revenue should be in reportable segments?
75%
