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Management and Organizational Studies 3360A/B Study Guide - Midterm Guide: Moving Average, Finished Good, Credit Risk


Department
Management and Organizational Studies
Course Code
MOS 3360A/B
Professor
Stacey Hann
Study Guide
Midterm

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MOS 3360 Midterm Review
Chapter 4
Comprehensive income ONLY used in IFRS.
Comprehensive income= Net Income + Other Comprehensive Income
**Presented on the income statement NET OF TAX**
Discontinued Operations- Components that have been disposed of or are classified as for sale
including: major line of business or geographical area, subsidiary acquired for resale.
Criteria for Assets Held for Sale:
1. Authorized plan to sell exists
2. Asset is available for immediate sale
3. There is an active search for a buyer
4. Sale is probable within a year
5. Asset is reasonably priced and marketed
6. Unlikely that the plan to sell will change.
Once an asset held for sale is written down subsequent gains can only be recognized up to the
amount of original losses.
Under ASPE, assets held for sale RETAIN their original classification (ie current/noncurrent
assets)
Under IFRS, assets held for sale are classified as current assets.
**Discontinued Operations are shown NET OF TAX**
Unusual gains or losses: gains or losses that occur due to something abnormal (ie loss on
property due to an earthquake.)
These are presented as income from continuing operations.
Two ways of presenting your income statement:
1) Single Step
Only two main groupings are used: revenues and expenses.
Expenses and losses are deducted from revenues and gains to get net income.
2) Multi-Step
A multi-step income statement separates operating transactions from non-operating transactions
and matches costs and expenses with related revenues. (shows the difference between regular
activities and incidental activities)
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Statement Sections:
1) Continuing Operations
A) Operating Section- Revenues/Expenses from the company’s principal operations
i) Sales or Revenues- presents sales, discounts, allowances, returns etc.
ii) COGS
iii) Selling Expenses
iv) General Admin Expenses
B) Non-Operating Section- Revenues/Expenses from the company’s secondary operations.
i) Other Revenues and Gains
ii) Other Expenses and Losses
C) Income Tax- the income tax from CONTINUING OPERATIONS
2) Discontinued Operations- Material gains or losses resulting from the disposition of a part of
the business. Shown NET OF TAXES.
3) Other Comprehensive Income- Other gains/losses that are not required by GAAP to be
included in net income. Also includes all other changes in equity that do not relate to shareholder
transactions. Shown NET OF TAXES.
Under IFRS, expenses must be presented by either Nature or Function.
ASPE does not have a similar requirement.
Nature: refers to the type of expense (ie depreciation, purchase of materials, transport costs and
employee benefits.)
Function: refers to the business function or activity. (selling vs admin)
*Must disclose somewhere how you are presenting your expenses*
Intraperiod Tax Allocation: refer to exhibit 4-16 on page 172.
EPS= Net Income-Preferred Dividends
……Weighted Avg # of common Shares
For public companies, EPS must be disclosed on the face of the statement of comprehensive
income.
If a company has discontinued operations, 3 EPS must be shown:
1. Continuing Operations
2. Discontinued Operations
3. Net Income
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IFRS Presentation of Statement of Changes in Equity
Shown in columnar form. (Reference exhibit 4-20 on page 175)
Chapter 5
Current Assets:
Cash
Short term investments- Valued at cost/amortized costs or fair value
Receivables- valued at the estimated amount that is collectable. Disclosure required for:
i)Amount and nature of non-trade receivables ii) receivables pledged as collateral.
Inventory- valued at lower of cost and net realizable value. Must disclose which inventory
method you use.
Net realizable value= Estimated selling price- cost to sell.
Manufacturing companies must disclose how much inventory is in the various stages.
Prepaid Expenses
Long-Term Assets
Non-Current investments
Investments that are held for strategic reasons.
PPE
Valued at cost or amortized cost.
IFRS allows for the fair value valuation.
Intangible Assets
Two categories
1. Finite lives- amortized and expenses over their useful life. (ie patent)
2. Infinite lives- No amortization.
Current Liabilities
Derivative financial instruments included here.
Not reported in any consistent order.
** Ensure to take out one year’s portion of long term debt and make it a current liability- current
portion of long term debt.**
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