Shizzle To Remember Flashcards
What is meant by an intangible asset according to IAS38, intangible assets?
Identifiable non-monetary asset with no physical substance. An intangible is an asset which is a non current asset so is expected to be used to generate economic benefit for more than one period.
What are the two types of goodwill?
Purchased goodwill
Internally generated goodwill
Can purchase goodwill be recognised in statement of FP?
Yes because it has a cost that can be reliably measured.
Can internally generated goodwill be recognised?
No
How do you deal with patents?
May be purchased or internally generated and will be valued using either the cost model or revaluation model.
What is the criteria that must be met to capitalise development expenditure?
PIRATE
Probable future economic benefits will be generated by the asset
Intention to complete and use/sell asset
Resources adequate and available to complete and use/sell asset
Ability to use/sell the asset
Technical feasibility of completing asset for use/sale
Expenditure can be measured reliably
In consolidated P + L is it the whole amount of the subsidiary used in revenue and cost of sales in the working?
Yes all the revenue.
What are the 5 limitations of ratios?
Historical information/timing - all past on past data
Comparison to other companies - not like for like info - different polices or sizes
Window dressing - May recover lots of debt before the year end which alters view
Non financial information - only consider financial aspect no qualitative data
Markets and size - business in same industry may operate in different markets and different sizes have different economies of scale
Where does revaluation sit in P + L?
Other comprehensive income for the year
Define a contingent asset
This is an asset in which the possibility of an economic benefit depends solely upon future events that can’t be controlled by the company. Due to the uncertainty of the future events these assets are not place on the FP. However in the company’s financial statements notes the contingent asset will be disclosed.
A contract only falls within the scope of IFRS 15 when which of the following are satisfied.
1) the parties have approved the contract and are committed to carrying it out
2) the contract has commercial substance
3) it is probably that the entity will collect the consideration to which it will be entitled
4) the rights and payment terms regarding the goods and services to be transferred can be identified
All of the above
If a company closed a factory and made a significant number of redundancies if this an adjusting event?
No as long as it’s not the only factory and that closed down the whole business
What are the profitability ratios?
Gross profit % Operating profit % Expense/Revenue % Asset turnover Return on capital employed Return on shareholders funds
What are the liquidity ratios?
Current and quick ratios
What are the use of resources ratios?
Inventory holding days Inventory turnover Receivable collection period Payables payment period Working capital cycle
