AFM291 Study Guide - Midterm Guide: Contingent Liability, Current Liability, Accrued Interest
28 Jun 2018
School
Department
Course
Professor
Non financial settled through goods/services. e.g. unearned revenue
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Financial vs non
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financial
Non
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current, anything after 13 months
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Current vs non
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current.
Measure almost all liabilities at amortized cost
We don't present value A/P because of materiality
Gross method vs net method for A/P
GST and HST are refundable. But not PST
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Net payable and recoverable. We have a legal right to do so
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Sales taxes
Payroll deductions
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current liabilities
List it as note payable instead of A/P
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A 0% interest note is set at fair value, and amortize it to face value
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Supplies bought from suppliers and you can't pay it right away
Expense approach: Record all the revenue and all the expenses now
○
Manufactures warranties
•
Has unearned warranty revenue as liability
Revenue approach: record the sale of the product now, and record sales of the warranty as
we earn it.
○
Those sold separately
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Warranties
Set aside a part of the loyalty obligation
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Loyal program
See the graph to determine re
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negotiating terms to make it a long
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term liability
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25 years mortgage that's due next year and I have to re
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finance it. This is a current liability
Contingent asset need over 95% to record it
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Contingent liability need over 50% to record it
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Contingencies
Chapter 12
Firm commitment vs best effort
Convertible bond, callable bonds, etc.
When we issue a bond, we issue it at fair value = PV of all its cash flows
Fair value different from face value when coupon rate =/= interest rate
Accrued interest payable
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when you sell a bond later
Midterm 1 review
February 6, 2018 4:14 PM
AFM 391 Page 1
Document Summary
Non financial settled through goods/services. e. g. unearned revenue. We don"t present value a/p because of materiality. We have a legal right to do so. Supplies bought from suppliers and you can"t pay it right away. List it as note payable instead of a/p. A 0% interest note is set at fair value, and amortize it to face value. Expense approach: record all the revenue and all the expenses now. Revenue approach: record the sale of the product now, and record sales of the warranty as we earn it. Set aside a part of the loyalty obligation. 25 years mortgage that"s due next year and i have to re-finance it. See the graph to determine re-negotiating terms to make it a long-term liability. Contingent asset need over 95% to record it. Contingent liability need over 50% to record it. When we issue a bond, we issue it at fair value = pv of all its cash flows.
