What are the five classification criteria of a Finance Lease? - AnswerIFRS 16 ASPE 3065 Chapter 8 1. Title transfers to the lessee by the end of the term. 2. A bargain purchase option exists and it is certain the lessee will do it. 3. The lease term is

What are the five classification criteria of a Finance Lease? - AnswerIFRS 16 ASPE 3065 Chapter 8 1. Title transfers to the lessee by the end of the term. 2. A bargain purchase option exists and it is certain the lessee will do it. 3. The lease term is such a duration that the lessee will utilize most of the economic benefits of the asset 4. The PV of the minimum lease payments amounts to basically all of the FV of the asset. 5. The asset is specialized in nature and only the lessee can use it without modifying it. What are some inclusions, exclusions, and restricted cash examples? - AnswerIAS 7 ASPE 1540 Chapter 3 Inclusion: legal tender, deposits, foreign currency. Exclusion: limited market foreign currency, public shares, public bonds, T Bills Restricted: minimum balance requirements, donations. What are the two recognition criteria for Accounts Receivable at amortized cost? Hint: Amortized cost is regular. - AnswerIFRS 9 Chapter 3 1. the financial asset is held within a business model to collect cash flows 2. the contractual terms of the financial asset give rise on specific dates of payment. What are the Accounts Receivable differences between IFRS and ASPE? - AnswerIFRS 9 ASPE 3856 Chapter 3 IFRS: impairment assessed each year, Net realizable value is adjusted for expected losses ASPE: Impairment from triggering events, Net realizable value is the highest of: - PV cash flows - amount if sold - amount of right to collateral Why would there be a subsequent measurement on Accounts Receivable? How would you record this measurement? - AnswerIFRS 9 Chapter 3 Reason: there is an increased risk of collection and the company deems the amount to be uncollected. Recording: Dr. Bad Debt Expense Cr. AFDA When would a company classify accounts receivable as FVTPL or FVTOCI? - AnswerIFRS 9 Chapter 3 FTVPL: the company is selling the receivable FVTOCI: the company collects cash flows or sells the receivables How are passive investments initially measured under FVTPL, FVTOCI, and amortized cost? - AnswerIFRS 9 Chapter 4 All at Fair Value What are 3 classifications of a passive investment? Describe each. - AnswerIFRS 9 Chapter 4 Amortized Cost: financial assets held to collect cash flow consisting of principal and interest. FVTPL: asset is not amortized costs and is designated as FVTPL FVTOCI: Held for collecting cash or selling the investment. Non strategic and not a significant influence. Equity or Debt. How would you subsequently measure a passive investment under amortized cost, FVTPL, and FVTOCI? - AnswerIFRS 9.5 Chapter 4 Amortized Cost: Amortized costs effective interest less impairment. FVTPL: FV gain and losses to P&L FVTOCI: Debt: amort costs effective interest rate less impairment. Gain and loss to OCI and at derecognition to P&L. Equity: FV with gains and losses to OCI and does not derecognize to P&L. How to classify unrealized gains and losses for passive investments for Amortized cost, FVTPL, and FVTOCI? - AnswerIFRS 9 Chapter 4 Amortized Cost: there will be none FVTPL: profit and loss FVTOCI: OCI net of tax How to recognize the impairment of a passive investment for amortized cost, FVTPL, and FVTOCI? - AnswerIFRS 9 Chapter 4 Amortized Cost: When the PV of estimated future cash flows is lower than the carrying value, impairment loss is recorded in profit and loss. FVTPL: No change as it is always fair value FVTOCI: Debt investments reported in net income Equity investments adjusted to fair value each reporting period. How are passive investments derecognized for amortized cost, FVTPL, and FVTOCI? - AnswerIFRS 9 Chapter 4 Amortized cost: gains and losses in P&L FVTPL: gains and losses in P&L FVTOCI: Debt gains and losses are transferred to P&L Equity remains in OCI. How does ASPE 3856 deal with measuring, subsequent measuring, classification of unrealize G&L, impairment, and derecognize passive investments? - AnswerASPE 3856 Chapter 4 Initial: Fair Value Subsequent: Equity instrument is FV if on active market or cost if not If not equity, amortized cost Unrealized Gains: Profit and Loss Impairment: Highest of PV of expected cash flows, selling price, or collateral Derecognize: gains and losses in profit or loss What is an inventory? - AnswerIAS 23 ASPE 3031 Chapter 5 and asset held for sale, in the process of production, in the form of materials or supplies What is inventory measured at? - AnswerIAS 23 ASPE 3031 Chapter 5 Lower of cost and NRV (proceeds less selling costs) What are ASPE differences from IFRS for Inventories? it's to do with capitalizing. - AnswerIAS 23 ASPE 3031 Chapter 5 ASPE can either capitalize or expense borrowing costs. What are the two recognition criteria for a capital asset? - AnswerIAS 16 ASPE 3061 Chapter 6 1. The benefit associated will flow to the entity 2. the cost of the item can be measured reliably What are some costs that can increase the cost of a capital asset? - AnswerIAS 16 ASPE 3061 Chapter 6 - Purchase price - import duties - nonrefundable taxes - costs bringing the asset to the location - dismantling costs - commissions - legal fees - title search - property transfer taxes What are the 3 types of depreciation? Describe each. - AnswerIAS 16 ASPE 3061 Chapter 6 Straight line: Cost - residual life / estimated life Declining balance: cost x depreciation rate Units of Production: total units left to create / total units over life When the revaluating a capital asset, what are the two options IFRS can use? Bonus Point for which one ASPE can use of the two. - AnswerIAS 16 ASPE 3061 Chapter 6 Cost model or the revaluation model. ASPE can only use cost model. Describe the cost model and the revaluation model for capital assets. - AnswerIAS 16 ASPE 3061 Chapter 6 Cost model is historical cost - the depreciation (the regular way of things) Revaluation uses the FMV each year any gains are recorded is OCI and any losses are recorded in P&L. Only one may exists so losses are posted against Gains and vise versa. What are some differences between IFRS and ASPE for capital assets? - AnswerIAS 16 ASPE 3061 Chapter 6 ASPE can choose to capitalize borrowing costs only use the cost model for revaluating What is a biologic asset? - AnswerIAS 41 Chapter 7 A living thing. This includes a consumable biological asset which is something that can be harvested. Sheep, trees, dairy cattle. What is Agricultural Produce? - AnswerIAS 41 Chapter 7 A product taken from a biological asset. Wool or lumber. What criteria are needed to recognize a biological asset? How is is measured? - AnswerIAS 41 Chapter 7 - the entity controls the asset as a result of past events - it is probable that there will be economic benefits from the asset - reliably measure the fair value or the cost. Measured at FV less the cost to sell. How and when do you need to subsequently measure a biological asset? - AnswerIAS 41 Chapter 7 At the end of each reporting period measure at FV less the cost to sell. Any changes go to P&L Who is the lessee and the lessor in a lease contract? - AnswerIFRS 16 ASPE 3065 Chapter 8 The lessee uses the asset and pays the payments The lessor gives up the asset and records receiving the cash on the payments. What are the two classifications when leasing an asset? - AnswerIFRS 16 ASPE 3065 Chapter 8 Finance Lease Operating Lease Explain how to calculate the minimum lease payments to be substantially the FV of the asset criteria for a finance lease. - AnswerIFRS 16 ASPE 3065 Chapter 8 Take the PV of all of the payments on the lease with the implicit rate as your interest rate and setting the residual value as your future value. Compare this PV to the fair value of the asset. If it is close or more, you have met this criteria What will the entry look like for a finance lease for the lessor? - AnswerIFRS 16 ASPE 3065 Chapter 8 Dr. Lease Receivable (for the PV of the minimum of lease payments) Dr. COGS (the value of the asset given in the lease) Cr. Revenue (for the PV of the minimum of lease payments) Cr. Inventory (the value of the asset given in the lease) With a finance lease, how are payments recorded of the lease payments? - AnswerIFRS 16 ASPE 3065 Chapter 8 The principal payment will reduce the lease receivable. Dr. Cash Cr. Lease Receivable The Interest will be recorded on the income statement and increase the lease receivable. Dr. Lease receivable Cr. Interest income. With an operating lease, does the lessor still have to record depreciation on the asset? - AnswerIFRS 16 ASPE 3065 Chapter 8 Yes How will the lessor record the initial lease transaction if it is an operating lease? - AnswerIFRS 16 ASPE 3065 Chapter 8 Dr. Cash Cr. Deferred Lease Revenue Under ASPE the finance lease is called something different. What is it called and what are the criteria for it? - AnswerIFRS 16 ASPE 3065 Chapter 8 Capital lease: - there is reasonable assurance the ownership of the asset will change hands at the end of the term. - the term is long enough that the assets benefits are all used up - the PV of minimum lease payments is 90% or more of the FV - the credit risk is normal when compared to the risk of collection of similar receivables - the amounts of unreimbursed costs that are to be incurred can be estimated. What are the criteria of an intangible asset? - AnswerIAS 38 ASPE 3064 Chapter 9 - Can be identifiable as: a. separable (can be sold) b. arise from a contract or other legal right - the entity controls the benefits from it - the asset will generate future benefits - The benefits will flow to the entity - its cost can be measured reliably How does a company internally generate their own intangible assets? - AnswerIAS 38 ASPE 3064 Chapter 9 Through research and development. How are the costs form research recorded? - AnswerIAS 38 ASPE 3064 Chapter 9 these are expensed as they cannot demonstrate a future economic benefit. What are the criteria to show the company is in the development phase of R&D? - AnswerIAS 38 ASPE 3064 Chapter 9 1. Is it feasible that the company will complete the intangible 2. the company intends to use or sell the intangible 3. The companies ability to use or sell the asset 4. How the intangible will generate future economic benefits 5. the availability of technical, financial, and other resources to complete the development 6. the ability to measure reliably the expenditures What is the difference between an finite and indefinite life intangible? - AnswerIAS 38 ASPE 3064 Chapter 9 Finite assets depreciate over their life and indefinite don't. Indefinites get assessed for impairment annual (IAS 36) What are ASPE differences for Intangible assets? - AnswerIAS 38 ASPE 3064 Chapter 9 ASPE may capital or expense development costs. Does not have to specify guidance of a government grant. Does not address residual value. Does not require annual impairment tests. When is an asset impaired? - AnswerIAS 36 ASPE 3063 Chapter 10 When an entity is unable to recover the carrying amount of the asset. The four steps of asset impairment are: 1. Asset Grouping 2. Impairment test requirements 3. Recoverable Amount 4. Impairment Test and Write-down What does step 1 Entail? - AnswerIAS 36 ASPE 3063 Chapter 10 Assets are tested independently unless the assets recoverable value cannot be determined. Assets are groups based on cash generating units ( are group of assets used together to generate cash) The four steps of asset impairment are: 1. Asset Grouping 2. Impairment test requirements 3. Recoverable Amount 4. Impairment Test and Write-down What does step 2 Entail? - AnswerIAS 36 ASPE 3063 Chapter 10 There are indicators of impairment or it is the annual test for selected assets. The four steps of asset impairment are: 1. Asset Grouping 2. Impairment test requirements 3. Recoverable Amount 4. Impairment Test and Write-down What does step 3 Entail? - AnswerIAS 36 ASPE 3063 Chapter 10 The recoverable amount is the higher of Fair value less the cost to dispose or value in use. Value in use is the estimated future cash flows from continuing use and ultimate disposal both applied at an appropriate discount rate. The four steps of asset impairment are: 1. Asset Grouping 2. Impairment test requirements 3. Recoverable Amount 4. Impairment Test and Write-down What does step 4 Entail? - AnswerIAS 36 ASPE 3063 Chapter 10 The loss is calculated as: The recoverable amount - the carrying amount. The loss is recorded to net income and the credit is recorded to the asset. What are the ASPE differences for Impaired Assets? - AnswerIAS 36 ASPE 3063 Chapter 10 ASPE must: - Identify the asset group (no CGU's) - monitor for impairment ( no yearly stuff) - recoverable amount (undiscounted) - write down to fair value (discounted) - cannot be reversed! What is a decommissioning provision? - AnswerIAS 37 ASPE 3110 Chapter 11 It is a companies obligation to a future cost possibly pertaining to cleaning up or repairing an asset to its original value when done its use. What is the recognition for a decommissioning provision? - AnswerIAS 37 ASPE 3110 Chapter 11 All the following must apply: - entity has a present obligation as a result of a past event - it is probable an outflow of resources will settle the obligation - a reliable estimate can be made of the amount of the obligation What is the initial measurement of a decommissioning provision? - AnswerIAS 37 ASPE 3110 Chapter 11 It is the present value of the obligation. Dr. equipment Cr. Decommissioning Provision What is the ongoing measurement requirements for a decommissioning provision? - AnswerIAS 37 ASPE 3110 Chapter 11 At the end of each reporting period, the provision should be reassessed to give the best estimate. Recalculate the provision obligation each period. The asset will depreciate over its useful life. What are ASPEs differences for decommissioning provisions? - AnswerIAS 37 ASPE 3110 Chapter 11 ASPE only recognizes legal obligations. recognizes accretion as an operating expense for a passage of time. What is a contingency or a provision? - AnswerIAS 37 ASPE 3290 Chapter 12 A transaction is dependent on another event to exist. What are the criteria to recognize a provision (Contingent Liability)? - AnswerIAS 37 ASPE 3290 Chapter 12 - the entity has a present obligation resulting from a past event - It is considered probable that there will be an outflow of resources - the entity is able to make the reliable estimate of resources What are the different probability types for a provision (contingent liabilities)? - AnswerIAS 37 ASPE 3290 Chapter 12 - remote: low probability - possible: not remote or probable - probable: greater than 50% chance to occur What is the measurement of a provision (contingent liability)? - AnswerIAS 37 ASPE 3290 Chapter 12 If there is a range of outcomes, the most likely is recorded. If there are multiple likely amounts that are the same probability, the average is used. How is a provision (contingent liability) disclosed? - AnswerIAS 37 ASPE 3290 Chapter 12 - brief description of nature, timing, and uncertainty - amount of any expected reimbursements - carrying amount at beginning and end of period. - increases and decreases due to the passage of time. When a provision cannot be recognized and it is now a contingent liability, what are the two options to the company? - AnswerIAS 37 ASPE 3290 Chapter 12 - Do not record but, disclose the information - Do not record or disclose How do companies deal with contingent assets? - AnswerIAS 37 ASPE 3290 Chapter 12 They are not recognized but, they are disclosed What are the ASPE IFRS differences with contingencies? - AnswerIAS 37 ASPE 3290 Chapter 12 Provision is not the term. Instead uses contingent loss. They use likely instead of probable. The disclosures just provide the nature and estimate of the amount. What are the recognition criteria of a revenue contract? - AnswerIFRS 15 ASPE 3400 Chapter 13 1. the contract is approved by all parties 2. the rights regarding the goods can be identified 3. the payment terms can be identified 4. the contract has commercial substance 5. tit is probable the entity will collect What is the 5 steps process of recognizing revenue? This is not the recognition criteria. - AnswerIFRS 15 ASPE 3400 Chapter 13 1. identify the contract 2. Identify the performance obligations 3. determine the transaction price 4. Allocate the transaction price 5. Recognize revenue. What are the ASPE differences for revenue recognition? - AnswerIFRS 15 ASPE 3400 Chapter 13 ASPE Recognizes revenue differently: 1. Risk and rewards have been transferred 2. revenue can be measured reliably 3. Collection is reasonable assured In a non monetary transaction, the transaction is measured at the fair value of what? - AnswerIFRS (None) ASPE 3831 Chapter 14 the asset given up or if the asset given up is not reliable, the asset received. With a non monetary transaction ASPE, when would you not measure a fair value? - AnswerIFRS (None) ASPE 3831 Chapter 14 - transaction lacks commercial substance - the transaction is part of ordinary part of business - the fair value of both assets cannot be measured reliably - the transaction is a non monetary, non reciprocal transfer to owners What is the only difference between ASPE and IFRS of Non monetary transactions? - AnswerASPE 3840 IFRS 15.66 Chapter 14 when a revenue transacitons occurs that does not use cash as consideration, use the fair value of the of the non-cash consideration What is an issue with related party transactions? Basically, why do we study related party transactions? - AnswerASPE 3840 Chapter 15 Sometimes RPT's are not at fair value or could benefit those involved at the expense of other stakeholders. Basically, how should these transactions be measured on the financial statements. How do you measure a non monetary transaction? - AnswerASPE 3840 Chapter 15 either: - The carrying amount (any difference in the carrying amounts goes to contributed surplus or debited to retained earnings if there is a loss with no pre existing contributed surplus) - exchange amount: the amount agreed by both parties. (any difference in exchange price goes to income) what are the reasons you would measure a non monetary transaction at the carrying amount? - AnswerASPE 3840 Chapter 15 - if the change in ownership interests in the item are substantive - if the amount of the exchange isn't supported by independent evidence - If the transaction is exchange of property held for sale in the normal course of operations (if not it still can be carrying value if the transaction does not have commercial substance) what are the reasons you would measure a non monetary transaction at the exchange amount? - AnswerASPE 3840 Chapter 15 - If the transaction is not a non - monetary transaction - Or if it is a non monetary transaction, it has commercial substance How would parties be related with an RPT? - AnswerASPE 3840 Chapter 15 - any party over which the entity has the ability to control or influence - two or more parties when they have common control - members of the immediate family of an individual are a related party What are the IFRS differences for RPT's? - AnswerASPE 3840 Chapter 15 - They need significant disclosures IAS 24 RP disclosures How are grants recognized? - AnswerIAS 20 ASPE 3800 Chapter 16 - the entity will comply with the conditions attached - the grant will be received How are income based grants recorded? - AnswerIAS 20 ASPE 3800 Chapter 16 separately as other income or against a related expense How are asset based grants recorded? - AnswerIAS 20 ASPE 3800 Chapter 16 recorded as a deferred liability and brought into income over the life of the asset as depreciation is incurred. Or it can be deducted from the assets carrying amount. What are ASPE differences for grants? - AnswerIAS 20 ASPE 3800 Chapter 16 - Non monetary grants are recorded at fair value How is an asset considered held for sale? - AnswerIFRS 5 ASPE 3475 Chapter 17 When all conditions apply: - the asset must be available for immediate sale in it's present condition - the terms of the sale must be usual and customary - the sale must be highly probable meaning: there is a plan to sell, active looking for the buyer, should be sold within a year, actions required to complete will not disrupt the sale How are assets held for sale measured? - AnswerIFRS 5 ASPE 3475 Chapter 17 Measured at the lower of it's carrying value and it's fair value less costs to sell. Any losses are recognized to income How are discontinued operations classified? - AnswerIFRS 5 ASPE 3475 Chapter 17 The entity must apply the following steps: 1. determine whether the component meets one fo the three criteria: - represents a separate major line of business - it is part of a single co-ordinated plan to dispose of - it is a subsidiary acquired with the view to resale 2. determine whether the components assets either: a. have been sold b. meet the HFS criteria How are discontinued operations measured? - AnswerIFRS 5 ASPE 3475 Chapter 17 They are measured in the same fashion as Asset HFS. Measured at the lower of it's carrying value and it's fair value less costs to sell. Any losses are recognized to income. What are ASPE differences for assets HFS and Discontinued operations? - AnswerIFRS 5 ASPE 3475 Chapter 17 Assets held for sale are classified and non current assets. The HFS criteria does not apply for ASPE What transactions are recorded at the spot rate? - AnswerIAS 21 SAPE 1651 Chapter 18 Revenue and expense items. They are measured the day they are incurred. For monetary assets and liabilities such as receivables, payables, and loans, do you recorded the changes in exchange at each period? - AnswerIAS 21 SAPE 1651 Chapter 18 Yes, they are recording at the closing rate each period to show the changes. What are non-monetary items such as; inventory , pre paids, PPE, and intangibles measured at? - AnswerIAS 21 SAPE 1651 Chapter 18 They are measured at the historical rate. When they are purchased they record the exchange and when they are sold they record the exchange again. What is a convertible bond? - AnswerIFRS 9 ASPE 3856 Chapter 19 A compound instrument that includes: Debt paying interest at a specified rate Equity option to exchange bond for common shares What are convertible preferred shares? - AnswerIFRS 9 ASPE 3856 Chapter 19 Preferred shares with the option to convert to common shares. Both equity components What are mandatory redemptions or retractable preferred shares? - AnswerIFRS 9 ASPE 3856 Chapter 19 These are preferred shares that have to be converted on or before a specific date. What is perpetual debt? - AnswerIFRS 9 ASPE 3856 Chapter 19 An instrument where there is a contractual right to receive payments on account of interest at a fixed date extending indefinitely. How are convertible bonds initially measured? - AnswerIFRS 9 ASPE 3856 Chapter 19 Dr. to cash for the inflow received Cr. to bond liability (debt) recorded at fair value Cr. to reserves or contributed surplus (equity) How are convertible bonds subsequently measured? - AnswerIFRS 9 ASPE 3856 Chapter 19 The debt portion is a amortized cost and the equity portion is at historical cost. How are convertible preferred shares initially measured? - AnswerIFRS 9 ASPE 3856 Chapter 19 It is measured at the fair value of the cash or asset received. How are convertible preferred shares subsequently measured? - AnswerIFRS 9 ASPE 3856 Chapter 19 They are measured at historical cost. How are mandatory redemption or retractable preferred shares initially measured? - AnswerIFRS 9 ASPE 3856 Chapter 19 The liability is recorded at fair value of the compensation exchanged. How are mandatory redemption or retractable preferred shares subsequently measured? - AnswerIFRS 9 ASPE 3856 Chapter 19 The liability is measured at amortized costs at the effective interest method. Any dividends are interest expense. How is perpetual debt initially measured? - AnswerIFRS 9 ASPE 3856 Chapter 19 Since the principal is not expected to be returned, the perpetual debt is classified as a liability. It is measured at fair value which is the present value calc for the perpetuity of interest payments. How is perpetual debt subsequently measured? - AnswerIFRS 9 ASPE 3856 Chapter 19 At amortized costs using the effective interest method What is hedging? - AnswerIFRS 9 ASPE 3856 Chapter 20 A process that allows an entity to account for two separate transactions as one linked item. This is to offset temporary losses or profits from volatility in markets. What is the difference between an eligible hedged item and an eligible hedged instrument? - AnswerIFRS 9 ASPE 3856 Chapter 20 Eligible hedged item: the item the entity wants to protect Eligible hedge instrument: an item used to reduce or eliminate exposure from the risk of the variable on the hedged item. What are the qualifying criteria for hedge accounting? - AnswerIFRS 9 ASPE 3856 Chapter 20 1. The relationship must consist of a hedging item and instrument. 2. The relationship is designated stating: the hedging relationship, the objective for undertaking the hedge, the item and the instrument, how the hedging effectiveness will be assessed. 3. The following requirements are met: a. an economic relationship exists between the item and instrument b. credit risk does not dominate the change in value c. the hedge ratio is the same for both the hedge relationship and the quantity of the item and the instrument. What is a fair value hedge? - AnswerIFRS 9 ASPE 3856 Chapter 20 Cash flows are in fixed terms of the foreign currency. The fair value of the hedged item fluctuates with the exchange rate. The instrument will be a forward contract to reduce risk. What is a forward contract? - AnswerIFRS 9 ASPE 3856 Chapter 20 an agreement to exchange at a predetermined future date, currencies of different countries at an exchange rate specified when the contract is issued. What is a cash flow hedge? - AnswerIFRS 9 ASPE 3856 Chapter 20 Cash flow hedge is a hedge to exposure of the variability of cash flows resulting from an asset or liability. The hedged item may be an anticipated transaction. This is something like an item being received at a later date and not being paid for until then. A forward contract is held onto to reduce the risk of the price of the item being purchased. What are the aspe differences for hedging? - AnswerIFRS 9 ASPE 3856 Chapter 20 Conditions for aspe: 1. must designate and document hedging relationship 2. Item and instrument must have the same critical terms 3. When anticipating, the expected transaction must be probable. ASPE may only hedge when using a forward contract to hedge FX cash flow or hedge an anticipated purchase or sale What are short term benefits for employees? - AnswerIAS 19 ASPE 3462 Chapter 21 Benefits expecting to be paid within 12 months. Wages, salaries, vacation time, profit sharing. Recognized if: benefits accrue as an expense in the same period as the work done and or there is a legal obligation to pay and a reliable estimate can be made. What is a defined benefit pension plan? - AnswerIAS 19 ASPE 3462 Chapter 21 Future payments to retired employees. Employers takes on risk surrounding changes in plan asset value while payments to employees remain fixed. Recognized: current service cost for each period past service costs net interest cost remeasurement gains (losses) What are the two share based compensations and what do they do? - AnswerIFRS 2 ASPE 3870 Chapter 22 Share options: it is s right to purchase shares at a pre established price. Share appreciation rights: A redemption of shares at a pre established value. No payment. When calculating deferred income taxes, what are some common temporary differences for accounting or tax purposes? - AnswerISA 12 ASPE 3465 Chapter 23 - warranty liability - leases - decommissioning provisions - lawsuit accruals - PPE (depreciation and CCA) - deferred development costs - accrued liabilities - investments classified as FVTPL or FVTOCI what is a defined contribution pension plan? - AnswerIAS 19 ASPE 3462 Chapter 21 The entity will pay fixed contributions into a separate entity and has no legal obligation to pay further contributions. Employee accepts risk of plan asset value. recognized if: Current service cost for each period (employer required payment) past service granted in the period (initiation costs or amendment) net interest cost. What areas dilute EPS? - AnswerIAS 33 Chapter 24 Convertible bonds: Bond carrying value x interest rate x (1 - tax) rate for income impact and shares on conversion for shares impact. Convertible preferred shares: annual dividend entitlement for income impact and shares on conversion for shares impact In the money stock options: no income impact and # of options x (market - exercise price) / market price for the shares impact When does the equity method apply to investments in associateds? - AnswerIAS 28 ASPE 3051 Chapter 25 If there is joint control or significant influence in the associate . 20-50% How is equity income recorded on an investment in associates? - AnswerIAS 28 ASPE 3051 Chapter 25 Associates net income x ownerships % = Share of associates income. That is then +/- to the FV differential amortization net of tax. Plus realized interco profits from prior year net of tax. Minus unrealized interco profits in current year net of tax. = equity income How do dividends and equity income affect the investment of an associate? - AnswerIAS 28 ASPE 3051 Chapter 25 Dividends will decrease the investment account while equity income will increase the investment account. How are upstream sales from associates to the parent company for equity investments? - AnswerIAS 28 ASPE 3051 Chapter 25 The unrealized profit from this year is to be eliminated at 100% and is as follows: sales in ending inventory x gross profit % x investor % ownership This amount is reduced from equity income in the before the sale to a 3rd party happens and will be included in equity income when it is sold to a 3rd party. How are downstream sales from the parent to the associate company for equity investments? - AnswerIAS 28 ASPE 3051 Chapter 25 The unrealized profit from this year is to be eliminated at 100% and is as follows: Sales in ending inventory x gross profit % This amount is reduced from equity income in the before the sale to a 3rd party happens and will be included in equity income when it is sold to a 3rd party. How does aspe treat investments in associates? - AnswerIAS 28 ASPE 3051 Chapter 25 ASPE does not have to use the equity method and can use the cost method. What are the two types of business combination purchases? - AnswerIFRS 3 ASPE 1591 Chapter 26 Purchase of Net assets Purchase of Shares what is the acquisition process for a purchase of shares? - AnswerIFRS 3 ASPE 1591 Chapter 26 Identify the acquirer Determine the date of acquisition Determine the purchase price Analyze the acquisition differential Allocate Non Controlling interest if any How is deferred income tax treated in a share purchase acquisition? - AnswerIFRS 3 ASPE 1591 Chapter 26 The FV to BV difference on all of the assets are multiplied by the tax rate. We know this will be the deferred income tax since we own the BV of the assets through the subsidiary and record the FV of those assets. What is the non controlling interest in a purchase of shares acquisition? - AnswerIFRS 3 ASPE 1591 Chapter 26 If a company does not purchase the full subsidiary but still controls it, the shareholders that own the other shares are the NCI. We need to record the other share holders interest in equity along with the parent companies. The two methods we can use are: Identifiable net assets approach or fair value enterprise method What is the identifiable net assets approach when calculating non controlling interest? - AnswerIFRS 3 ASPE 1591 Chapter 26 FV of subsidiary asset - FV of subsidiary x NCI percentage of ownership. Goodwill associated will only be the parent companies portion only. What is the fair value enterprise method when calculating non controlling interest? - AnswerIFRS 3 ASPE 1591 Chapter 26 This is the fair value of the shareholders ownership of the NCI. This can be measured with the active market or another valuation method. What is the entry needed to add the subsidiary to the parent company in a share purchase? - AnswerIFRS 3 ASPE 1591 Chapter 26 Record the goodwill on entry set up the NCI if there is any record the differentials because we purchase at FV eliminate RE and CS of subsidiary eliminate parents investment as the liabilities and assets are basically the investment - Answer