Set 2 - FR Chapter 3 Cash and Receivables Flashcards
Is there any difference between ASPE and IFRS in regards to cash and cash equivalents?
No
Name 3 types of assets determined to be cash
- legal tender on hand, including petty cash
- deposits at banks on demand, such as savings or checking accounts
- foreign currency that can be easily converted to operating currency
Name 4 types of cash equivalents
- drawn bank overdrafts used as part of cash management
- term deposits with maturity less than 3 months from date of purchase
- investments in money market funds
- t’bills with maturity of less than 3 months
Name some items that are not considered cash equivalents
- restricted cash
- foreign currency where there is limited market for exchange into operating currency
- foreign currency where fx rate is unstable
- t-bills maturing over 3 months
- term deposits maturing over 3 months
- publicly traded shares/bonds
What is restricted cash? How is this presented on balance sheet?
- minimum balance requirements
- escrow funds
- donations held for a specific purpose
it is presented as a separate line, and disclosed in FS
What are the 3 types of A/R classification and initial recognition? Which is most common?
Amortized cost - most common
FVOCI
FVTPL
Conditions for using amortized cost
(a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
(b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding - BOTH NEED TO BE MET
Initial measurement under amortized cost
FV.
What is the criteria for FVOCI and FVTPL recognition?
FVOCI - if entity holds A/R also for re-sale
FVTPL - if entity holds A/R for re-sale as part of a portfolio
How are re-measurements measured using amortized cost? (assumed)
Effective Interest Rate less any impairment losses.
entries if AR receivable longer than a year
DR AR (for PV of payment amounts) CR Revenue (same amount)
When payment received
DR cash
CR AR
CR Int rev (for difference)
Under IFRS how are impairments recorded? When are reviews taken place?
AFDA is set up. Annually. It’s equal to the PV of all cash shortfalls over life of receivable. DR bad debt, CR AFDA.
Can impairments be reversed?
Yes - goes through P+L. Can be reversed up to the amount of amortized cost that would have been if no impairment had been recognized.
If a company is bankrupt, how is entry done?
DR Bad debt, CR AR
ASPE differences?
Impairment is based on a triggering event.
NRV determined as highest of:
- PV of cash flows expected
- Amount realized if sold
- Amount expected if exercised right to collateral (net of costs)
