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59 Cards in this Set
- Front
- Back
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When should asset be recognised? |
Probable that the future economic benefits flow to the entity and can be measured reliably |
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When should government grants be recognised? |
Reasonable assurance conditions complied with and grant will be received |
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What borrowing costs can be capitalised? When does capitalisation start? |
Only directly attributable costs to acquisition, construction or production of an asset. This begins when expenditure occurs or borrowing cost incurred or activity to prepare asset underway |
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When is someone a third related party? 4 options What should be disclosed? |
They are third party if… Close family member Relation has control Relation has significant influence Relation key management personnel Disclose name, benefits, nature of relationship and information about transactions |
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As per financial instruments what is a financial asset? |
Contractual right to receive cash |
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As per financial instruments what is a equity instrument? |
Evidence of residual interest in assets of an entity after deducting all of its liabilities |
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As per financial instruments what is a financial liability? |
Contractual obligation to deliver cash |
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When should a provision be recognised? 3 options |
All the following met… Present legal obligation as a result from a past event Probable outflow of future cashflows Reliable estimate of costs |
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When should a restructure provision be recognised? 2 options |
Detailed formal plan in place Valid expectation of those affected or binding sales agreement Cannot recognise marketing, relocating, investment, retraining |
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What is a contingent liability? |
Possible obligation, not recognised but disclosed |
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What is a contingent assets? |
Possible asset, not recognised but disclosed where probable |
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When should development expenditure be capitalised? 6 options |
All the following met… Technically feasible to finish Intention to complete Ability to use or sell asset Adequate resource to complete Probable economic benefits Measured reliably |
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How should debt instrument held to collect cashflows, and cashflows are solely principal and interest be recorded? |
Fair value + trans , amortised cost |
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How should debt instrument held to collect cashflows and sell, cashflows are solely principal and interest be recorded? |
Fair value + trans , fair value through OCI |
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How should investments not held for trading be recorded? |
Fair value + trans , fair value through OCI |
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If no change in credit risk what loss allowance should be recognised? |
12 months of expected credit loss |
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What loss allowance should be recognised if increase in credit risk? |
Recognise lifetime expected credit losses |
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What loss allowance should be recognised if evidence of impairment? |
Recognise lifetime expected credit losses |
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What is the revenue five step model? |
Identify contract Identify performance obligation Determine transaction price Allocate per performance obligation Recognise revenue |
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When should revenue be recognised? 6 options |
All the following… Contract approved Rights and payment terms identified Commercial substance Probable consideration If not the above then if… Entity has no obligations to customer and all consideration received and is not refundable Contract terminated and not refundable |
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What is transaction price in revenue recognition? |
Price is amount expected to be entitled to |
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When should you recognise revenue over time? 3 options |
If any of the following are met… Customer simultaneously receives and consumes all of the benefits Entity’s work creates or enhances an asset controlled by the customer (WIP) Entity’s create a specialised asset and the entity has enforceable right to payment for performance complete to date |
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What determines a lease? 3 options |
Right to control use of an identified asset for a period of time in exchange for consideration. Right to obtain substantially all economic benefits Right to direct the use of identified asset |
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How is lease liability and right of use asset recorded? What period is lease recorded over? Exemption for lease recording? |
Lease liability - present value of future lease payments (Increase by interest minus payments) Right of use asset - initial lease liability less deposit + direct costs + restoration costs Asset depreciated over earliest of useful life and lease term Short term leases under 12 months or underlying asset is of low value |
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When does a lessor record a finance lease? (Receivable) 5 options |
Ownership transfers at end of lease Option to purchase is lower than fair value Lease is major term of lease life Payments for all value of assets Specialised for lessee |
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When should assets be recorded as held for sale? 6 options |
Must be available for immediate sale in present condition And sale must be highly probable, which following… Price is reasonable for market Unlikely to withdraw sale Management must be committed to sale Active programme to locate a buyer Sale expected within a year |
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What is a discontinued operation? 3 options |
A component of an entity that either has been disposed or is held for sale and: Represent a major line of business Is part of a single coordinated plan to dispose of a major line or business Is a sub acquired to resell |
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What is a joint arrangement, then also a joint operation and joint venture? |
JA - A contractual arrangement in which two or more parties have joint control JO - joint arrangement not structured through separate vehicle - use % for statements JV - joint arrangement through a separate vehicle - treat like associate |
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What is functional currency? And 5 options which help determine? |
Primary economic environment in which entity operates Currency influences sales prices Currency of country which forces and regulations determine sales prices Currency of labour, material, and other costs Currency from financing activities Receipts from operating activities |
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Translation rules for the following… Assets and liabilities Share capital & pre reserves Profit / OCI Dividend |
Assets and liabilities - Closing Rate Share capital & pre reserves - Rate at acquisition Profit / OCI - Average Rate for year Dividend - Actual rate of payment |
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Advantages and disadvantages of APM’s - Alternative performance measure 3 positives and 4 negatives |
+ enhance understanding of users Gives mnmgt more freedom and flexibility to tailor measures to the entity Allows users to evaluate performance through eyes of mngnt - terminology is not defined Subject to mngnt bias No standards governing APM’s Scepticism about quality and reliability |
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What is the definition of an operating segment? 3 options For which an entity needs to provide segment information about revenues, profits, and assets by major business area |
Component of an entity that… Engages in business activities from which it may earn revenues and incur expenses Results are reviewed by chief operating decision maker to make decisions about resources to the segment For which discrete financial information is available |
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When should operating segment be reported for separately? 4 options |
Revenue internal and external is 10% more than total revenue Profit or loss is 10% or more of all segments in profit Assets are 10% or more or total 75% revenue must be disclosed |
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Why has sustainability become important aspect for investors? 5 options |
Improvement of financial performance from increased investment Improved trust and credibility due to understanding risks and opportunities Reduced risk for investors avoiding being implicated in publicised issues Appetite for pro social and environmental conduct Mitigation of negative impacts on ESG |
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What’s the difference between SMEs standards and IFRS standards? 9 options |
SMEs have a framework which is relevant, reliable and useful for users Single standard divided into simplified sections for each relevant IFRS standard, except earnings per share and segmental reporting Assets held for sale not allowable under SMEs Intangible assets must be amortised over useful lives, if not known 10 years Disclosure requirements substantially reduced compared to full IFRS, as they are not useful for users needs and cost benefit considerations SMEs are not usually publicly accountable Less guidance then full IFRS, as often irrelevant Simplified and written in clear language R&D must be expensed |
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How can information symmetry affect investors of SMEs? 3 options |
SMEs decrease asymmetry because of its recognition, measurement and disclosure requirements. Investors will lack information and be more disadvantaged with less knowledge on credit and risk. Investors may raise lending rates to compensate for increased risks or may not invest at all |
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What is integrated reporting and how does it help users? 6 points |
Combines financial reporting and sustainability with aim of helping users understand three elements of the value of a business Current shape and performance Effect of mngnt plans, external issues and opportunities Long term value of a business Allows business to Make effective allocation of resources Helps investors understand how business is performing against the capitals |
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What are the three fundamental characteristics? |
Relevance, materiality and faithful representation |
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What are four enhancing qualitative characteristics? |
Comparability, verifiability, timeliness, and understandability |
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Definition of an asset conceptual framework? |
Present economic resource controlled by the entity as a result of past events |
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Definition of a liability as per conceptual framework? |
A present obligation of the entity to transfer economic resources as a result of past events |
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Definition of equity as per conceptual framework? |
Residual interest in the assets of the entity after deducting all its liabilities |
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Definition of income as per conceptual framework? |
Increase in assets, or decrease in liabilities, that result in increases in equity |
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Definition of expenses as per conceptual framework? |
Decreases in assets, or increases in liabilities, that result in decreases in equity |
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What are requirements of IFRS Management Commentary? 7 options |
Provide mngnt views of entity’s performance, position and progress Supplement and complement information in financial statements Detail nature of business Mngnt objectives and strategies Most significant resources, risks and relationships Results of operations and prospects Evaluation of performance |
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What are the 6 capitals of integrated reporting? |
Financial Manufactured Intellectual Human Social & Relationship Natural |
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Pension obligation pro forma |
Opening Interest Current service cost (Benefits paid) Loss or gain Closing |
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Pension assets pro forma |
Opening Interest Contribution paid (Benefits paid) Gain or loss Closing |
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What is the fair value of an asset? |
Price that would be received or paid to transfer a liability in an orderly transaction between market participants at the measurement date |
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What are the three fair value valuation techniques? |
Level 1 - Quoted prices in active markets for identical assets Level 2 - Inputs other than quoted prices within level 1 that are observable for the asset Level 3 - Unobservable inputs for the assets |
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Proforma profit from disposal sub to associate |
Proceeds Investment retained Less Net assets at disposal Goodwill at disposal Less NCI at disposal = Profit or loss |
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Definition of a business combination? |
Arises when an acquirer obtains control of a business |
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Definition of a business? |
Integrated set of activities that provides goods or services, generating investment income or generating other income from ordinary activities. A business has inputs and processes which are applied to create outputs. |
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As per conceptual framework when does recognition occur? 2 points |
Meets definition of an element Provides relevant information that is a faithful representation at cost |
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As per conceptual framework when does derecognition occur? 2 points |
Asset control is lost Liability no longer obligation |
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As per conceptual framework what measurement is there? 2 points |
Historic cost Fair value |
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Pro forma for associate to subsidiary |
Associate remeasured to fair value, going through profit or loss. Fv consideration Fv prior held associate Non controlling interest Less Fv net assets at acquisition |
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What is the principal market as per fair value? If not available what should you do? |
Market with the greatest volume and activity for the asset Most advantageous market - Maximum price |
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What implies control? |
Power to direct relevant activities Exposure or rights to variable returns Ability to use power over investee to affect investors returns |
