Unit 6 Flashcards
Share Based Compensation Plan
Chapt 43
IFRS 2
ASPE 3870
What are the methods of measuring Share Option (SO) and Share Appreciation Rights (SAR)
- Equity method for
* Share options
* Share Appreciation Rights - Cash method
* Share Appreciation Rights
What are the features of the Equity method
- It is measured at fair value using Option Pricing at grant date.
- Not revalued over vesting period
Diff betw SOs and SARs is that employees do not pay an option price to obtain SARs
How is the compensation expense calculated
(FV at grant date
x
% expected to be vested
x
Proportion of vesting period)
-
Current contributed surplus
Dr Compensation expense
Cr Contributed Surplus - Share options (or SARs)
How to derecognize using the Equity method - If exercised / Expired
Exercised
Dr Cash
Dr Contribution Surplus-SO (or SARs)
Cr Common Shares
If Expired
Dr Contribution Surplus-SO (or SARs)
Cr Contribution Surplus-Expired SO (or SARs)
What are the features of the Cash Method
- FV using option - Pricing model at grant date
- Revalue to FV at each reporting date
- Only used for SARs
How is the compensation expense measured using the Cash Method
(FV
x
% expected to vest
x
Proportion of vesting period completed)
-
Current SAR liability
Dr Compensation expense
Cr SAR Liability
How to derecognize using the Cash method - If exercised / Expired
If redeemed
Dr SAR Liability
Cr Cash
If expired
Dr SAR liability
Cr Compensation expense
Difference ASPE/ IFRS
For cash settled SAR, ASPE uses intrinsic value and not FV
Intrinsic value = market value - exercise price
- cannot be negative
Pension Plans & Other employee future benefits
Chapt 48
IAS 19
ASPE 3462
Defined Contribution Pension Plan
They are post employment benefit plans where an employer contributes a pre-established amt but has no liability as to the risk and performance of the fund.
- Entity pays a fixed contribution into another entity (fund) on behalf of employee
- Entity has no obligation to pay other fixed amount to employee on retirement
- Employee accepts risks associated with changes to the plan
How is DCPP recognized
In statement of comprehensive income
CSC- Current Service Cost - Amt employer is expected to contribute for the period for service provided by employee
PSC - Past service Cost granted in the period - and contributed by employer for past service of employee
Net interest cost on discounted CSC or PSC
How is DCPP measured
If contributions are due 12 months after the service is provided or past service granted, expense is recorded at the PV of future contributuions
What is Defined Benefit Plan
- Future benefits to be paid out to employees on retirement are defined in the terms of the plan
- Employer bears risks such as investment and actuarial risks
- Defined benefit plan affects the f/s in several ways - SCI - P/L, OCI, SFP
What is DBO
The Defined Benefit Obligation is the present value of all future employee benefits estimated by the actuary to be paid. The account is tracked but not recorded in the financial statement.
Pension expense is recognized in each period that a defined benefit plan is in existense.
Difference IFRS Vs ASPE
- Actuarial gain /loss on DBO
IFRS
Immediate recognition in OCI
ASPE
Recognized in P/L in the period it occurs - Acturial gain / loss on Plan Assets
IFRS
Immediate recognition in OCI
ASPE
Recognized in P/L in the period it occurs
Defined Benefits JEs
- Dr to net defined benefit asset/liabililty = cash remitted. It will always be a debit
- Cr to NDB asset/liability - net pension expense. It will always be a credit
- Dr /cr to net defined asset/liability = Net gain / loss
- if there is net credit to OCI, entry in NDB asset/ liabilty will be a debit. And vice versa
Tax Administration
- What chapter is this
Chapt 4
What are important filing & notice deadlines
Filiing - Individual - April 30
Individual with biz - June 15
Deacesed - Filing deadline or 6 months after death, whichever is earlier
Corporate - 6 months after year end
Pay bal due Individual - Apr 30
Corporate - 2 mths after YE. Some CCPCs 3mths
To appeal NOA is later of
- 90 days after NOA
- One yr from the filing due date from the assement
To appeal notice of obj - 90 days after NOO date
Individuals have one yr from last Returns filing
Personal Sources of Income What chapter is this
Chapt 5
What are the steps to calcluate net income for tax purposes
- Determine the sources of income & expenses
- Calculate the income net of expenses
- Conclude on net income for the year
What components are used to calculated income for tax purposes
- Net income
- Net employment income
- Net business income/loss
- Net property income / loss
- Other income
Less
1/2 capital gains net of 1/2 capital losses
Less
Other deductions
- If result is > 0, use result. If result< 0, use 0
Employee Vs Contractor
What chapter is that
Chapt 6
Taxation
What are the criteria for testing relationship - Employee vs Contractor
- Intention
- Ownership of tools
- Control
- Financial risk
- Investment & Management
- Subcontract work or hire assistant
- Opportunity for profit
Employment Income
What chapter is this
Chapt 7
What are the steps to calculate net employment income
- Employment income
- salary
- wages
- bonuses
- gratuites
- tips
ADD - Taxable benefits and other payments
- Allowances
- Board of directors payments
- Gifts & awards
- Recreational facilities / club dues
- Severance package
- Life insurance
DEDUCT - Allowed deductions (common)
- Sales person expenses
- Travel expense
- Motor vehicle expense
- CCA
- Work space in home
- Employee RPP
- Professional dues
Who claims child care expense
- Supporting partner with lower income
- If the higher is in hospital, the lower can claim for the period
Who claims child and spousal support
- The spouse making the payment can deduct from income but child suport takes priority
- This is subject to a maximum amount
What is the basis for workspace in the home calculation
An employee earning
- Regular base salary and
- Commission can
Deduct pro rata portion of
-Property tax
- Home insurance and
- Home office expenses allowed for those that are not paid commission
Property Income
Chapt 10
What is property income
Property income is returns on invested capital as long as the owner does not commit significant time and labour to the income generating process.The various sources include Rent, Dividend & Interest income
How to calculate taxable rental income
- Rental income less eligible rental expenses
- CCA = UCC x CCA rate%
- ## Deduct CCA from the net rental income to get taxable rental income
How is dividend income for Individuals or Trusts taxed
Amount to include in taxable income
- Eligible dividend is grossed up by 38%. The tax credit is 6/11 of the grossed up figure
- Ineligible is grossed up 15% Tax credit is 9/13 of the grossed up figure
- Capital dividend - paid out of capital dividend account - CDA
- Foreign dividend - not grossed up but converted to full CAD
Deductions from property income
- Carrying charges on vacant land - interest on loan, property taxes . Deductible to the extent of income earned on the land. Otherwise add to cost of land.
- Soft costs - interest, legal, accounting, insurance, prop taxes
* Must be able to tie use of funds to income producing assets
Taxable Income for an individual
Chapt 14
Steps to taxable income
Net Income for tax purposes
Less Div C Deductions
- Employee stock options
- Non-capital losses
- Farm losses
- ABILs carried ff or back
- Net capital loss
- Lifetime Capital Gains Deduction
- Deductions for GIS, Welfare WComp included in net income
=
Taxable Income
