timing issues Flashcards
criteria for a sale
1) delivery of goods OR setting aside
2) transfer of LEGAL TITLE
3) allowing other to USE ASSETS
4) revenue from performace recognized in the period serices rendered
- reason for waiting for sale to take place is objectivity
4 categories of IFRS revenue recognition
1) sale of goods
2) rendering of services
* % of completion method
3) interest/royalties/dividends
* interest is effective interest method
* royalties are on accrual
* dividends when shareholder rights established
4) construction contracts
multiple element arragements
FV allocated to seperate elements, then recognized seperatly based on each elements criteria
Accrual accounting
employing revenue recognition rule and matching principle.
Records events AS THEY OCCUR..NOT when cash is collected.
Revenue when EARNED
Expenses when obligation incurred
deferral
money received but NOT EARNED YET
accrual
Asset/liability recorded but NOT YET PAID
period costs
cost expire during the period ex) selling/GA/administrative
expired costs
expire during period and have no future benefit
unexpired costs
capitalized and matched against future revenues
deferred charges
not related to a tangible asset, but do pertain to future operations (bond issue costs)
critera to recognize sale with a right of return
1) fixed price
2) buyer has risk
3) paid some form
4) product sold is substanially complete
5) amount of FUTURE RETURNS can be ESTIMATED
How are purchased intangible assets recorded?
at COST
- legal and regristration fees incurred to obtain are CAPITALIZED
Intertanly developed intangible assets are….
EXPENSED!! ex) gw from advertising/trademarks/cost to develop gw
patent is amortized over what
the SHORTER of its useful life or legal life
worthless asset
write off entire remaining cost to expense
revaluation LOSSES are reported on the…
I/S……a loss that reverses a priovous gain goes to OCI and reduces revalaution surplus in AOCI
revaluation gains go to…
OCI……unless gain reverses a pervious loss…then it goes on I/S to the extent that they reverse a loss
how is the initial franschise fee for FRANCHISEE recorded
as INTAGNIBLE ASSET and AMORTIZED
organizational cost income tax benefit
can deduct up to 5,000 or each expenditure. Each 5000 is reduced by any amount over 50,000. Amortized over 180 months
NOT r&D
- routine design changes
- troubleshooting in production
- marketing research
- qualtity control testing
- reformulation of chemical compound
computer software cost developed to be SOLD/LEASED/LICENSED
amortization of capitalized is GREATER OF
1) % of revenue = total capitalized amount X gross revenue for period/total est gross revenue for product
2) SL= total capitalized amount X 1/useful life
* reported at LCM
computer software developed INTERNALLY
EXPENSE for preliminary project state ex) tranining/maintenance
CAPITALIZE after preliminary project state ex) direct costs of materials/services, interests cost/ cost of employees
- if originally internal then SOLD proceeds first applied against CV then recognized as revenue
GAAP intangibiable asset impairment test DEFINITE LIVES
1) CV to undiscounted future cash flows
2) CV to FV
GAAP intangible asset impairment test INDEFINITE LIVES INCLUDING GOODWILL
1 step
1) FV to CV
reporting unit
an operting segment, or one level below
GOodill impairment- US GAAP
2 steps
1) FV of reporting units to CV
2) if FV less than CV then compare implied FV of GW to carrying amount of that GW
*to find IMPLIED FV of GW allocate the FV of the reporting unit to all assets and liabilities of the unit…what ever is left over is impied GW
If implied < carry amount then recognize impairment
IFRS goodwill impairment
at CGU level
1 step
1) CV to recoverable amount
