ACTG 3120 - Midterm Review

93 views2 pages
Published on 29 Sep 2011
School
York University
Department
Accounting
Course
ACTG 3120
TOPIC PART I – IFRS PART II – ASPE
Choosing a
standard
- Plans of going public
- Competitors are public
- Bank requires it
- No plans of going public
Revenue
recognition
- Multiple deliverables?
oA sales/performance contract has multiple deliverables only if
Each component of the contract has value to the customer on
a stand-alone basis
There is objective and reliable evidence of the fair value of
each component
- Gross vs. net revenue?
- Critical event?
oCash collection
If you are unsure of whether the customer will pay or not
No historical evidence
oDelivery
Performance completed
oBad debt expense
oWarranty expense
Revenue
recognition – long-
term contracts
- Percentage completion
- Cost recovery method
- Percentage completion
- Cost recovery method
- Completed contract
Financial
instruments –
public company
shares
- Fair value through profit or loss
oChanges go into net income
oTypically you buy shares
because you expect them to
appreciate in value so you
would want those increases
to affect net income
- Available for sale
oChanges go into OCI until
exercised – then the
changes go into net income
oWorried about fluctuating
share prices
- Fair value every balance sheet
date
oChanges go into net income
Hedge accounting
– cash flow hedge
vs. fair value
hedge
- Changes go to OCI until
exercised—then changes go
into net income
- Fair value every balance sheet
date
oChanges go to equity
-Don’t elect hedge accounting measure at fair value every balance
sheet date
Financial
instruments –
debt and equity
instruments
- Convertible rights are assigned
a value
- Convertible rights can be
assigned a value of $0
-Clue to debt classification:
oCompany bears the risk of fluctuating share prices (i.e. share
price not fixed)
-Retractable preferred shares
oRedemption
Contractually required – liability
At the investor’s option – liability
At the company’s option – equity
Escalating dividend – liability
-Convertible debt – hybrid
oPrincipal portion
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Document Summary

Cash flow hedge vs. fair value hedge. No plans of going public: a sales/performance contract has multiple deliverables only if. Each component of the contract has value to the customer on a stand-alone basis. There is objective and reliable evidence of the fair value of. If you are unsure of whether the customer will pay or not. Fair value every balance sheet date: changes go into net income each component. Performance completed: delivery, bad debt expense, warranty expense. Fair value through profit or loss: changes go into net income, typically you buy shares because you expect them to appreciate in value so you would want those increases to affect net income. Available for sale: changes go into oci until exercised then the changes go into net income, worried about fluctuating share prices. Changes go to oci until exercised then changes go into net income sheet date. Clue to debt classification: a value price not fixed) Convertible debt hybrid: principal portion.

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