Timing Issues

Question 1

What are the four criterias that must be met for each element of the contract before any revenue can be recognized?

Answer 1

Persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed and determinable, and collection is reasonably assured

Question 2

What are the revenue recognition rules for sale of goods under IFRS?

Answer 2

Measured reliably, economic benefits, risk and rewards, and not retain managerial involvement

Question 3

What method is used to recognize rendering of services under IFRS?

Answer 3

Percentage of completion method

Question 4

What are the conditions for revenue recognition for rendering services under IFRS?

Answer 4

Measured reliably, economic benefits, and stage of completion

Question 5

What are the conditions for revenue recognition for revenue from interest, royalties, and dividends under IFRS?

Answer 5

Measured reliably and economic benefits

Question 6

What are the conditions in revenue recognition for construction contracts under IFRS?

Answer 6

Measured reliably, economic benefits, and stage of contractt measured reliably

Question 7

What is reported when cash is received before earned?

Answer 7

Deferred credit

Question 8

What principle states that expenses should be recognized?

Answer 8

Matching principle

Question 9

What occurs when the entity obtains cash or the right to receive cash or has converted a noncash resource into cash?

Answer 9

Realization

Question 10

What is the actual recording of transactions and events in the financial statements?

Answer 10

Recognition

Question 11

What type of accounting is required by GAAP and is the process of employing the revenue recognition rule and the matching principle to the recognition of revenues and expenses?

Answer 11

Accrual accounting

Question 12

What are the 3 different types of expired costs?

Answer 12

Insurance expense, costs of goods sold are directly allocated to the periods in which the sales take place, and period costs

Question 13

What financial statement does unexpired costs appear on?

Answer 13

Balance sheet

Question 14

What section is deferred credits located in on the balance sheet?

Answer 14

Liability

Question 15

When is royalty revenue recognized?

Answer 15

When earned

Question 16

What is net method calculation for royalty income?

Answer 16

Royalty collections + reduction in unearned royalties - reduction in royalties receivable = royalty revenue

Question 17

What is revenue received in advance recorded as?

Answer 17

Liability

Question 18

When should continuing franchise fees be reported?

Answer 18

When earned

Question 19

What conditions have been met for “substantial performance”?

Answer 19

Franchisor has no obligation to refund any payment, initial services have been performed, and all other conditions have been met

Question 20

What are a few examples of intangible assets?

Answer 20

Patents, copyrights, franchises, trademarks, and goodwill

Question 21

Is research costs related to an intangible asset expensed under IFRS?

Answer 21

Yes

Question 22

What life is the patent amortized by?

Answer 22

Shorter of estimated life or remaining legal life

Question 23

What amortization method is used for intangible assets?

Answer 23

Straight-line method

Question 24

Is Good will amortized? If not, what approach is used?

Answer 24

No, impairment approach is used

Question 25

What models can intangible assets be reported under with IFRS?

Answer 25

Cost and revaluation

Question 26

What method is used when intangible assets are reported at cost adjusted for amortization and impairment?

Answer 26

Cost model

Question 27

What model is used for intangible assets are initially recognized at cost and then revaluated to fair value at a subsequent revaluation date?

Answer 27

Revaluation model

Question 28

Where is revaluation losses reported?

Answer 28

Income statement unless revaluation gains were previously reported in Other Comprehensive Income

Question 29

Where is revaluation gains reported?

Answer 29

Other Comprehensive Income unless revaluation loss was previously reported on income statement

Question 30

Where is impairment reported in the revaluation method?

Answer 30

First to revaluation surplus to zero then income statement

Question 31

Are start-up costs expenses?

Answer 31

Yes

Question 32

Are organizational expenses capitalized?

Answer 32

No

Question 33

What method is calculated as goodwill is the excess of an acquired enity’s fair value over the fair value of the entity’s net assets?

Answer 33

Acquisition method

Question 34

Annual amortization of capitalized sofware costs is the greater of?

Answer 34

Percentage of revenue and straight line

Question 35

What basis of amortization should be used when capitalizing costs for computer software developed internally for internal use only?

Answer 35

Straight-line method

Question 36

What are 2 steps when testing a fixed asset or an intangible asset with a finite life for impairment?

Answer 36

Determining the impairment(use undiscounted future net cash flows) and amount of impairment(use fair value(discounted cash flow))