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SBR Flashcards

1
Q

Definition of control - subsidiaries (3)

A

Power over investee
Exposure or rights to variable returns from the investee
The ability to use power over the investee to affect the reporting entity’s returns from the other
company - dividends?

So usually 50%+ but can be lower if above are met

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2
Q

Principles of CSFP. Treatment, Reason

Share capital and premium

A

P’s only
Group accounts are prepared for P’s shareholders

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3
Q

Consolidated Profit and Loss basics

A

100% of subsidiary time apportioned added first

Profit then apportioned. Unrealised profit, movement in fair value and impairment of goodwill.

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4
Q

Intragroup transactions and balances P&S

A

Make balances agree, e.g cash/goods in transit
Cancel balances on rec/payables
Cancel sales/purchases
Remove unrealised profit on PPE, Inv. DR COS/RE, CR INV/PPE

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5
Q

Fair Value adjustments to subsidiaries net assets

A

PPE, Intangibles, Contingent Liability

At acqu’n - goodwill
Movement - retained earnings working (sub)
At year end - To individual asset/liability in SCFP

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6
Q

NCI at fair value (given, or shares x SP) - Goodwill, CSFP and CSPL

A

Goodwill - Recognise 100% of goodwill

CSFP - Deduct all impairment in GW
Deduct group share in RE
Deduct NCI share in NCI

CSPL - Add all impairment to expenses
Deduct impairment from subs PFY in NCI

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7
Q

NCI at proportionate share of subs net assets (sub net assets x NCI%) - Goodwill, CSFP and CSPL

A

Goodwill - Recognise only group % of goodwill - higher %

CSFP - Deduct all impairment in GW
Deduct all impairment in RE

CSPL - Add all impairment to expenses
Deduct impairment from subs PFY in NCI

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8
Q

CGU Impairment

A

First goes to Goodwill. If GW calc at prop net assets then need to gross this up and then back down when impairing

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9
Q

Exemption from preparing group accounts

A

It is itself a wholly-owned subsidiary, or partially-owned with the consent of the non-controlling
interest and
Its debt or equity instruments are not publicly traded and
The ultimate or any intermediate parent produces group accounts that comply with IFRS
Standards.

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10
Q

Fundamental Qualitative Characteristics

A

Relevance - capable of making a difference in decisions. Predictive value and confirmatory value

Faithful representation - showing economic substance of transactions not just legal form. Neutral, Free from Error, Complete

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11
Q

Enhancing Qualitative Characteristics

A

Verifiability - can be double checked
Comparability - same entity across periods, similar entities
Understandability - users of FS assumed to have reasonable business knowledge
Timeliness

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12
Q

Asset Definition

A

A present economic resource controlled by the entity as a result of past events

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13
Q

Economic resource

A

A right that has the potential to product economic benefits. Right - receive cash, or use

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14
Q

What is control - Asset

A

Present ability to:
Direct the use of the asset
Obtain economic benefits

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15
Q

Liability Definition

A

A present obligation of the entity to transfer economic resources as a result of past events

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16
Q

Obligation

A

A responsibility that the entity has no practical ability to avoid
Legal or contructive obligation (past practice creates expectation)

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17
Q

Goods/service are distinct if 2 conditions are met

A

Customer can benefit from the G/S on its own or together with other readily available resources

The entitys promise to transfer the G/S is separately identifiable from other promises in the contract. Integrating, modify/customise

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18
Q

Contract modification. How to treat

A

Scope increases because of addition of G/S
Price increases by amount that reflects stand alone selling prices - no discount

Yes - Account for as separate contract
No - termination of existing and creation of new contract

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19
Q

Sale and Repurchase. Call Option, forward and put option

A

Call option - seller has right to repurchase asset. can buy back if seller wants
Forward - obligation to repurchase the asset. seller must buy it back
Put option - obligation to repurchase asset only if customer requests

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20
Q

Sale and repurchase agreement. Call option and forward treatment

A

Original price less than repurchase price - loan
Repurchase price less than original price - lease

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21
Q

Sale and repurchase agreement. Put option treatment

A

Repurchase price higher than expected MV - obligation as will be forced to buy so either loan or lease
Expected MV higher than repurchase price - sale with right of return, refund liability could be recognised

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22
Q

Derivative meaning and treatment

A

EG forwards, futures, options etc. Change in exchange rate, interest rate etc

Measured at fair value through P/L, any transaction costs expensed to P/L

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23
Q

A PERSON is a related party of the reporting entity if (3)

A

 have control or joint control over the reporting entity;
 have significant influence over the reporting entity;
 are a member of the key management personnel of the reporting entity or of a parent of the
reporting entity.

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24
Q

AN ENTITY is a related party of reporting entity if (6)

A

 They are members of the same group (e.g. a parent-subsidiary or parent-associate or parentjoint venture relationship would be a related party relationship and two subsidiaries of the
same parent company would also be related parties because they are under common control.)
 One is an associate or a joint venture of the other
 Both entities are joint ventures of the same third party (or one is an associate and the other is a
joint venture of the same third party)
 The entity is a post-employment benefit plan for the benefit of employees
 The entity is controlled or jointly controlled by any of the persons identified above
 A person (or close family member) with control or joint control of the reporting entity has
significant influence over the entity or is key management personnel of the entity.

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25
Disclosure for related parties
The name of the entity's parent and, if different, the ultimate controlling party irrespective of whether there have been any transactions;  Where there have been transactions between related parties: (i) nature of the related party relationship (ii) information about the transactions. As a minimum, this includes:  Amount of the transaction  Amount of outstanding balances  Provisions for doubtful debts and bad debt expenses  Key management compensation - total
26
Tangible and intangible assets are recognised if (2)
 It is probable that the entity will receive probable future economic benefits from the asset, and  The cost of the asset can be measured reliably
27
Intangible PIRATE
– Probable future economic benefits – Intention to complete the asset and use or sell it – Resources available to complete the development and to use or sell the asset – Ability to use or sell the asset – Technical feasibility of completing the asset – Expenditure can be measured reliably.
28
Investment property
Either cost and dep or FV Model - FV Annually - gains/losses to P/L - no dep All inv prop has to be valued with same method Land and buildings held for rental income and/or capital appreciation
29
An asset is impaired if
An asset is impaired if its carrying amount is greater than its recoverable amount, where recoverable amount is the higher of:  Fair value less costs of disposal  Value in use = the present value of the future cash flows that the asset is expected to generate
30
NCA Held for sale. SALE. Classification
Seeking. Available. Likely. Expected. Do to date Next: revalue at lower of carrying amount and fair value less costs to sell – this is similar to performing an impairment review. Any loss is recognised in profit or loss. Move to. CA Any subsequent downwards movement in fair value less costs to sell is recognised as a further loss in profit or loss.  However, if fair value less costs to sell increases in the future (a bit like a revaluation), this increase cannot exceed cumulative impairment losses to date
31
Intangible Assets Definition
Identifiable (separable), non monetary, without physical substance
32
Recognition & Derecognition criteria
Recog: Meets the definition of an element and provides useful info Derecog: Assets control lost. Liabilities no present obligation
33
Revenue 5 Step Model - Use this in answers!
1. Identify contract with customer - probable to collect consideration 2. Identify the separate performance obligations: 2 rules 3. Determine transaction price - variable, time value etc 4. Allocate the transaction price - based on standalone prices 5. Recognise revenue as perf obligation is satisfied - ove time, point in time. When control transferred
34
Revenue - Warranties (3)
Standard warranty - provision IAS 37, not perf obligation Extended warranty (can be bought separately) - separate perf ob Warranty & Service - Provision & Separate perf ob
35
Revaluation Model
FV then subsequent acc depreciation Gain - OCI/RV surplus Excess depreciation between revaluation surplus and retained earnings
36
Exam Technique: Accounting standards
1. Rule - state rules from the acc standard 2. Apply/conclude - apply to scenario: Initial measurement Subsequent measurement YE Balances Incorrect treatment
37
Borrowing costs
complete this lol
38
Discontinued operation
P/L - Single item Post tax P/L + Post tax gain/loss on disposal or remeasurement to FV - cost to sell
39
Financial Instrument - Financial Asset Definition
Cash + contractual right to receive cash / financial asset or equity instrument of another entity
40
Financial Instrument - Financial Liability Definition
Contractual obligation to deliver cash/financial asset or settled in a variable amount of entities own equity instruments
41
Financial Instrument - Equity instruments Definition
Any contract that evidences residual interest in assets after deducting all liabilities - eg ordinary shares, share options, irredeemable pref shares
42
Financial Instruments
STILL TO NOTE
43
IFRS for SME's leaves out (4)
EPS Interim Financial Reporting Segment Reporting Assets held for sale For entities with no public accountability
44
SMES Intangible Assets
Measured using cost model - no revaluation Development costs must be expensed Useful life cannot exceed 10 years
45
SMES : purchased Goodwill Borrowing costs Financial instruments
GW: Amortised over useful life, presumed 10 years Borrowing costs: all expenses Financial instruments: simplified reporting, measured at amortised cost (not if publicly traded or whose FV can be reliably measured)
46
Conditions of a lease
transfers to the lessee the right to control the use of an identified asset for a period of time in exchange for consideration
47
Depreciate a lease
Shorter of lease term and useful life
48
Lessor accounting - operating lease treatment
lease payments received taken to P/L
49
Lessor accounting - finance lease STOMP
Specialised asset Transfer of ownership Option to purchase Major part of the useful life PV of lease payments = FV of asset
50
Defined benefit plan - dr/cr - contributions
Dr plan assets SOFP Cr cash
51
Defined benefit plan - dr/cr - interest on plan assets (estimate on day 1 of the year)
Dr plan assets SOFP (x% x bf plan assets) Cr interest on plan assets P/L - netted off against interest cost/unwinding of discount (later on)
52
Defined benefit plan - dr/cr - benefits to former employees
dr pension liability sofp cr plan assets sofp
53
Defined benefit plan - dr/cr - current service cost
dr current service cost PL cr pension liability sofp
54
Defined benefit plan - dr/cr - interest cost/unwinding of discount (est on day 1)
at each YE the PV of each employees pension will inc due to time value of money dr int cost PL (X% x bf pension liability) - netted off against int on plan assets cr pension liability sofp
55
Defined benefit plan - dr/cr - past service cost/curtailment
past service cost normally arise when rules of pension scheme change, additional obligation now. P/L IMMEDIATELY dr past service cost PL cr pension liability SOFP curtailment - material reduction of employees dr pension liability sofp cr profit or loss
56
Befined benefit plan - asset ceiling test
Net pension asset must not be above recoverable amount Measured lower of: net pension plan asset PV of any refunds/reduction of future contributions available from plan (asset ceiling) Diff recognised immediately in OCI
57
Deferred tax - temporary difference / deferred tax a/l
carrying amount v tax base = temporary difference temporary difference x tax rate = deferred a/l
58
Deferred tax asset or liability
Asset : carrying amount > tax base = liability Liability : carrying amount > tax base = asset
59
Recognition criteria for provision
Present obligation as a result of past events - legal vs constructive obligation (past practice creates ob) Probable outflow of economic resources Amount can be measured reliably
60
Contingent assets / liabilities
Assets - disclosed if probable Liabilities - disclosed if possible
61
Future operating losses provision
NO - do not meet definition of a liability
62
Onerous contracts - provision
Unavoidable costs of fulfilling the contract exceed economic benefits expected to receive under it Measured at lower of net cost of fulfilling the contract and any penalties payable as a result of exiting from it
63
Share based payments - c/f equity/liability for employee services calculation
no of employees entitled (remove estimated leavers over whole period) x no of instruments per employee x FV (at grant date if equity, YE of cash settled) x portion vested
64
share based payment - choice of cash / equity
if company has the choice - treat as equity unless obligation to settle in cash if other party has the choice - compound financial instrument, like convertible debt.
65
Share based payment - vesting conditions, market non market
Market, eg achieving certain share price - ignored as already inc in FV Non market - eg growth in profit or working for certain period of time. Best estimate and revised each year
66
Share based payment - deferred tax
Carrying amount - equity so no asset/liability Tax base = no of employees entitled x no of shares per employee x intrinsic value (diff between SP at YE and the exercise price (price employee has to pay to obtain shares))
67
Fair value is an exit price in either
Principal market, market with greatest volume of activity for asset In absense of ^ the most advantageous market
68
Non financial assets (buildings) highest and best use
Highest and best use of an asset by market participants Uses which are physically possible, legally permissable and financially feasible Current use is persumed to be best but not always
69
Fair value heirarchy (3)
Level 1 - Unadjusted quote prices in active markets for identical things Level 2 - Inputs other than quoted prices in level 1 that are observable for that a/l - similar assets in active market Level 3 - Unobservable inputs, based on best info available eg estimated PV of future CF relating to an item
70
Government grant recognise criteria
It will comply with the conditions attached to the grant The grant will be received
71
Biological Assets measurement
Measured on ititial recognition YE at FV less costs to sell
72
Agricultural produce measurement
Measured at point of harvest at FV less costs to sell. Then becomes inventory subsequently recorded as inv at lower of cost/initial FV less costs to sell and NRV
73
Bearer plants measurement
Non current asset eg apple tree But apple would be agricultural produce
74

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