timing issues

Question 1

criteria for a sale

Answer 1

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

Question 2

4 categories of IFRS revenue recognition

Answer 2

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

Question 3

multiple element arragements

Answer 3

FV allocated to seperate elements, then recognized seperatly based on each elements criteria

Question 4

Accrual accounting

Answer 4

employing revenue recognition rule and matching principle.

Records events AS THEY OCCUR..NOT when cash is collected.

Revenue when EARNED
Expenses when obligation incurred

Question 5

deferral

Answer 5

money received but NOT EARNED YET

Question 6

accrual

Answer 6

Asset/liability recorded but NOT YET PAID

Question 7

period costs

Answer 7

cost expire during the period ex) selling/GA/administrative

Question 8

expired costs

Answer 8

expire during period and have no future benefit

Question 9

unexpired costs

Answer 9

capitalized and matched against future revenues

Question 10

deferred charges

Answer 10

not related to a tangible asset, but do pertain to future operations (bond issue costs)

Question 11

critera to recognize sale with a right of return

Answer 11

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

Question 12

How are purchased intangible assets recorded?

Answer 12

at COST

• legal and regristration fees incurred to obtain are CAPITALIZED

Question 13

Intertanly developed intangible assets are….

Answer 13

EXPENSED!! ex) gw from advertising/trademarks/cost to develop gw

Question 14

patent is amortized over what

Answer 14

the SHORTER of its useful life or legal life

Question 15

worthless asset

Answer 15

write off entire remaining cost to expense

Question 16

revaluation LOSSES are reported on the…

Answer 16

I/S……a loss that reverses a priovous gain goes to OCI and reduces revalaution surplus in AOCI

Question 17

revaluation gains go to…

Answer 17

OCI……unless gain reverses a pervious loss…then it goes on I/S to the extent that they reverse a loss

Question 18

how is the initial franschise fee for FRANCHISEE recorded

Answer 18

as INTAGNIBLE ASSET and AMORTIZED

Question 19

organizational cost income tax benefit

Answer 19

can deduct up to 5,000 or each expenditure. Each 5000 is reduced by any amount over 50,000. Amortized over 180 months

Question 20

NOT r&D

Answer 20

• routine design changes
• troubleshooting in production
• marketing research
• qualtity control testing
• reformulation of chemical compound

Question 21

computer software cost developed to be SOLD/LEASED/LICENSED

Answer 21

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

Question 22

computer software developed INTERNALLY

Answer 22

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

Question 23

GAAP intangibiable asset impairment test DEFINITE LIVES

Answer 23

1) CV to undiscounted future cash flows

2) CV to FV

Question 24

GAAP intangible asset impairment test INDEFINITE LIVES INCLUDING GOODWILL

Answer 24

1 step

1) FV to CV

Question 25

reporting unit

Answer 25

an operting segment, or one level below

Question 26

GOodill impairment- US GAAP

Answer 26

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

Question 27

IFRS goodwill impairment

Answer 27

at CGU level

1 step
1) CV to recoverable amount