Section 3/4 Flashcards
Under FRS how should financial assets and financial liabilities be treated in terms of accounting
Should initially be measured at transaction price, which should also include transaction costs.
However, if a financial instrument is measured at fair value through profit or loss (e.g. equity in a listed company) transaction costs are excluded
How are dividend paying shares treated in accounting?
Dividends relating to the shares will be treated as an interest expense in the income statement
How are non-dividend paying shares treated in accounting?
There is no fixed maturity and the issuer does not have a contractual obligation to make any payment therefore they are recognised as equity.
what is a fair value hedge in terms of risk management objectives and policies?
a hedge of the exposure to changes in fair value of a recognised asset or liability
what is a cash flow hedge in terms of risk management objectives and policies?
Essentially a hedge of an exposure to variability of cash flows
When should a company recognise a financial asset or financial liability on its balance sheet.
When the company becomes party to the contractual provisions of the instrument rather than when the contract is settled.
When does de-recognition of a financial asset occur?
- If the contractual rights to the cash flows of the financial assets have expired
- The financial asset has been transferred and the transfer qualifies for derecognition based on the extent of the transfer of risks and rewards of ownership for the financial asset
what is revenue recognition
recognise revenue in a way that shows the transfer of goods/services promised to customers in an amount reflecting the expected consideration in return for those goods or services.
what is a statement of changes in equity?
Statement to summarise the movement in equity accounts during the year
explains the composition of equity and how it has changed throughout the year
