Roger Chapters 11-14 Flashcards
What is the purpose of a direct financing lease?
Lease that is used only to earn interest. Like selling something just to get interest off of it.
What is a Type II subsequent event?
Event where the conditions of the event did NOT exist before balance sheet date. Ex: Fire that destroys warehouse
Disclose but do not recognize
How do you calculate the accrued liability for warranty cost?
Sum of total expected %s / and multiply by total revenue collected
Expense estimates over the whole period
What journal entry does the lessee make when they pay for their lease?
- lease expense
- lease liability
- cash
* right of use asset
- cash
When can you refinance from a ST to a LT basis under IFRS?
If the entity has entered into an agreement to refinance on a LT basis
What is a Type I subsequent event?
Event where conditions of the event existed before balance sheet date. Ex: Settlement of a litigation for difference amount other than accrued amount
Recognize (adjust) financial statements.
When do we get a deferred tax asset?
When book expense > tax expense, book income < tax income
What is the journal entry to record the lease and asset for a lessee at the start?
- right of use asset
* lease liability
When can a compensated absence be booked?
If it is probable, estimable, the services have been rendered, and it can be accumulated or vested
When can you refinance a payable from a ST to LT basis?
If you have the intent and ability to do it (firm agreement and creditor lets you)
What tax rate do we use when finding deferred tax assets/liabilities for GAAP?
Enacted tax rate
What is the equation to get pension expense?
+ Service cost
+/- Prior service cost
+ Interest cost
+/- Deferred Gain (unrecogized pension g/l)
+/- Excess amortization on deferred g/l
- actual Return on Plan assets
+/- Amortization of existing net obligation or net asset implemented
What life is used to depreciate a finance lease?
The shorter of legal or useful life UNLESS you have a purchase option. Then you use useful life.
How do you recognized a sale-leaseback transaction that is a loan-type?
Account for as a LOAN if you have at least one of the finance criteria (SPoT 75-90)
initial JE
- cash
- note payable
2nd year
- interest expense
- note payable
- cash
When are you required to book vacation days? Sick days?
Must book if vacation days accumulate or vest
Must book sick days if the days vest. Optional if they accumulate only.
What steps do you take to determine the estimated liability for unreedemed coupons?
- Determine total face value of coupons issued
- Add the handling fee %
- Multiply by % of coupons expected to be reedemed
- Subtract payments already made to merchants
What is the corridor equation for excess amortization of a deferred g/l for pensions?
[Beg deferred amount - 10%(higher of beg PBO or beg FVPA)]
If this number is bigger than the deferred number we need to amortize the excess over the average remaining service life
How are leasehold improvements accounted for?
They are amortized over the shorter of the lease life or useful life
When do you accrue AND disclose a loss contingency?
If it is probable and estimable
What tax rates can we use when finding deferred tax assets/liabilities for IFRS?
Substantially enacted tax rate or enacted tax rate
When do we get a deferred tax liability?
When book expense < tax expense, book income > tax income
What is a provision under IFRS?
Liability that is uncertain in timing or amount. It is accrued and disclosed.
3 conditions
- Entity has present obligation as result of past event
- Probable that an outflow of resources is required
- Obligation can be reasonably estimated
When can an uncertain tax position benefit be recorded?
If there is a more-likely-than-not chance (>50% cumulative chance)
When this threshold is met, record at the amount that is the LARGEST and over the 50% cumulative change
What is a contingency under IFRS?
Liability that is not probable or estimable
How do you recognize the exercise price of a purchase option reasonably certain to be exercised?
Treat as a lump sum payment at the end of the non-cancellable lease term
How are uneven rental payments recognized by the lessor?
Recognized uniformly
Total cash payments for the lease/# of years`
How are initial direct costs treated for a sales-type lease?
Expensed immediately if there is selling profit. Deferred over the lease term is there is no selling profit.
What is the equation to get change in PBO?
Beg PBO \+ service cost \+ interest cost \+/- prior service cost \+/- actuarial g/l - benefits paid out ---------------------------------- Ending PBO
When can you not use “major part” or “substantially all” criteria to determine if a lease is a finance lease?
If the asset is in the last 25% of its useful life
How do you recognized a sale-leaseback transaction that is an operating lease?
Account as SALE of asset and then lease again. Has none of the finance criteria.
At “sale”
- Cash
- A/D
- Equipment (at cost)
- gain on sale-leaseback (PLUG
What are the criteria for determining a finance lease?
Specialized nature
Purchase Option resonably certain to exercise
Transfer of title
75% of total useful life (“major part”)
90% of asset’s value (“substantially all”)
What is the initial journal entry for a sales-type lease without profit?
- lease receivable
* equipment
When do you disclose or accrue a gain contingency?
Disclose if it is probable and estimable. NEVER accrue.
What is the initial journal entry for a sales-type with profit lease?
- lease receivable
* equipment
* gain on sale
