
1. Revenue Recognition (IFRS15)
1.1. 5 Steps: 1. Identify the contract 2. Identify separable obligations 3. Determine transaction price 4. Allocate transaction price to performance obligations 5. Recognize revenue when each performance is satisfied
2. **Provision and Events after reporting period**
2.1. What's Provision? Dr Expenses Cr Liability (Provision)
2.1.1. When to create provision? (3 step tests) 1. Obligation - Legal or Constructive 2. Probable outflow 3. Reliable measure If pass 3 test, recognize provision, if only possible outflow, disclosure with notes.
2.1.1.1. How to measure provision? By best estimate 1. One off eg. Environment Clean up 2. Large population of events (refunds/warranty) <- probability - weight expected value. Whichever it is, **ALWAYS DISCOUNT DOWN**.
2.2. __Events after reporting date__ To detemine the adjustable events, **see whether it given more information about the condition to the SFP**
2.3. Taxation
2.3.1. To check whether in TB, debit side = under provide so need to add to expenses, credit side means over provide so deduct out from tax expense.
3. **Reporting Financial Performance**
3.1. Discontinued Operations The main purpose is to help predict the future accurately, and it can show the strategy of the company by separating the discontinued and continuing operations within the company
3.1.1. What and why discontinue operations? 1. Separate major business line or geographical area 2. Part of a plan to dispose 3. Subsidiary bought with view to re-sale
3.1.1.1. How to disclose? in Income Statement, Show in profit after tax, gain when re-measuring to FV-CTS In Notes, Revenue/expenses/PAT/Tax
3.2. **Held For Sale** Carrying amount vs FV-CTS, Eg. 100 vs 90, -10 dr PL cr SFP, so the new opening balance will reflect to latest one, if next year revalue to 95, the extra go back to contra PL expense first.
3.3. **Change in Accounting Policy**
3.3.1. When and How? when IFRS mandates it, when it is more relevant and reliable. How? -Be retropestive, now change, previous year also change to be more comparable. -Opening Equity Balance unless prescribe in standard
3.3.2. **Acounting Estimate** -Loss allowance % -Net realisable value -Fair Value -Depreciation Rates
3.4. **Earning Per Shares (EPS) (IAS33)** Basic and diluted Framework Formula : Date, Total Shares, Time, Bonus Fraction, Weight Average
3.4.1. Basic EPS (Earning after Tax - Preference Dividend - NCI) / Weight Average of outstanding Shares
3.4.1.1. in exam, shares issuance have 3 methods, 1. Normal issuances (just weighted average normally) 2. Bonus issue (need to calculate bonus fraction to apply back 3. Rights/Option issues (need to calculate bonus fraction, also the own weight average with option price vs market value)
3.4.2. Diluted EPS (Basic EPS + whatever expected to add to earning/share base if converted
3.4.2.1. Convertible loans If converts, Earning will + due to interest saving, then add the converted shares into share based as well.
3.4.2.2. Options/Warrant. Workout the normal price can buy how many shares, then compare with the option shares, the extra amount will be free shares
4. **Foreign Currency Transaction**
4.1. Terms
4.1.1. Functional -Primary Economic Environment -Currency that influences Selling Price, material prices etc. -Generate Cash -Spend the cash
4.1.2. Presentation - Presentation in FS. (Parent Company in different company
4.2. How?
4.2.1. Buy/Sell
4.2.1.1. SPOT/Historic
4.2.2. Pay/Received
4.2.2.1. SPOT/Historic
4.2.2.1.1. When purchasing date vs due date, the currency is different hence affecting the cash would be different too, the different goes to realize forex gain/loss.
4.2.3. Still owe/owed (monetary A/L)
5. **Regulatory Environment**
5.1. **Accounting Systems**
5.1.1. Rule-Based System
5.1.2. Principle-Based System (CF is based on principles
5.2. **Fundamental Characteristics**
5.2.1. Faithful Representation
5.2.1.1. Substance Over Form
5.2.1.2. Represents economic phenomena
5.2.2. Relevance
5.2.2.1. Info should be predictive or confirmatory. e.g. Discontinued Column
5.3. **Enhancing Characteristics**
5.3.1. Comparable
5.3.1.1. - Good for trend analysis - Change in A/C Policy means changing the comparatives too.
5.3.2. Timely
5.3.2.1. - In time for decisions
5.3.3. Verifiable
5.3.3.1. - This allows independent observers to agree that a transcation faithfully represented.
5.3.4. Understandable
5.3.4.1. Understandbility is enhanced when the information is: 1. Classified 2. Characterized 3. Presented Clearly and concisely Complex information is included though where relevant and necessary
5.4. **Recognition and Measurement**
5.4.1. Recognition (3 Steps Pass)
5.4.1.1. Meet the definition of an asset/liability/Income/Expense
5.4.1.2. Be probable
5.4.1.3. Be reliably measureable
5.5. **Regulatory Framework**
5.5.1. Benefits of adopting framework
5.5.1.1. - They are high-quality and transparent global standards that are intended to achieve consistency and comparability - Companies that use IFRS and have their financial statements audited in accordance with International Standards on Auditing (ISA) will have an enhanced status and reputation
6. **Group Accountings**
6.1. Concepts and Principle of Groups
6.1.1. How to determine an entity as subsidiary - **Control**
6.1.1.1. Subsidiary if: - control it (own more than 50% voting right) - Influences the variable return - gets the 50%+ by an arrangement with other investors - governs the financial and operating policies - appoints the majority of the board of directors - has the majority of votes
6.1.1.2. Don't consolidate if - The parent is itself a 100% subsidiary - The parent isn't a 100% sub bu the other owners don't mind the parent not preparing group accounts - The parent's loans or shares are not traded in a public market. - The parent didn't file its accounts with a stock exchanges (not listed) - The ultimate parent already produces group accounts - The parent loses control of the investment (i.e. country go to war) Consolidate even if - Poor performance of the subsidiary - Poor financial position of the subsidiary - Subsidiary's activities are different from the rest of the group
6.1.1.3. Year End and Accounting Policies - Ideally Parent and Subsidiary should have the same year end - A subsidiary does not need to adopt the accounting policies of the parent in its individual FSs.
6.1.1.4. Intra-group balances - Intra-group balances, transactions, income, and expenses should be eliminated in full. - Intra-group losses may indicate that an impairment loss on the related asset should be recognized - The profit made by Parent on the sale of goods to Subsidiary is only realized when the subsidiary sells the goods to a third party. - Unrealized profits within the group must be eliminated.
7. **Non Current-Assets**
7.1. Tangible NCA
7.1.1. Initial Cost
7.1.1.1. 'Any cost bring the Asset to Working Condition' More calculations on borrowing cost & dismantling cost
7.1.2. Revaluation
7.1.2.1. Cost model/Revaluation Model
7.1.3. Significant Component Depreciation
7.1.3.1. 2 significant asset = Complex asset
7.1.4. Investment Property
7.1.4.1. Purposes? No use then no dep'n, If start using investment property, then it becomes PPE
7.1.4.1.1. Rental Income
7.1.4.1.2. Capital Appreciation
7.1.4.1.3. Measurement - Cost - Depreciation - Revaluation Model Revalued to FV Revalue income goes to IS
7.1.4.1.4. In SFP Investment Property Cost will deemed to be PPE cost If using only 25% then split it out If rent out and provide security services = Investment Property If rent out and management closely = Control it = PPE
7.1.4.1.5. Property rent between Group Company A rent property Company B Consolidated Accounts If the group is using it, it has to be PPE Individual Accounts still can consider investment property
7.2. Intangible NCA
7.2.1. An asset with not in monetary, physical form but controlled and expected future benefits.
7.2.2. How to identifiable? - Separable - from legal rights (taxi license etc)
7.2.3. Measurement? Initially - At cost At year end At cost less amortisation Revalue less amortisation Unless indefinite EUL
7.2.4. How to acquired Intangible assets? - Buy it - or come with a company (government grant, licensing) - Internally Generated.
7.2.5. If internally generated (R&D) - Research expenses all goes to Income Statement - Development phase (recognize only if as below) 1. Technically Feasible 2. Commercially viable 3. Completion intended 4. can demonstrate how will generate benefit.
7.3. Impairment of Assets (Always take the **HIGHER** of recoverable amount)
7.3.1. Fair Value (FV) - Cost to sell (CTS)
7.3.1.1. - IFRS 13 - Direct Costs only (not existing cost or overheads are not allowable)
7.3.2. Value in use (use it)
7.3.2.1. 1. Future net cashflow (5 years) 2. Discounted down into present value 3. Reasonable assumptions. 4. Recent Budgets 5. In current conditions 6. No finance or tax costs/income 7. Ignore for assets to be disposed off <- Recoverable amount = FV-CTS)
7.3.3. Cash Generating Unit (CGU)
7.3.3.1. Recoverable amount = Ideally on an individual assets -> Part of a CGU (the smallest identifiable group of assets that generates cashflow independent largely)
7.3.4. Impairment Loss Reversal - basics
7.3.4.1. If impairment down then RA upwards, bring positive number to impairment expense and reverse the number, debit asset to RA. only up to depreciated historical cost, if more than that, revaluation surplus -> revaluation reserve.
7.4. CA - Inventory and Biological Assets
7.4.1. Inventory Valuations Basic Rule **LOWER** of : Cost + Net Realizable Value Always apply prudence concept
7.4.1.1. Cost If it's interchangable and the same like the screws = FIFO + Weighted Average, if it's not interchangable = cost specific to that asset
7.4.1.2. Net realizable value Estimated Selling Price - Estimate Complete Costs - Estimate cost to sell.
7.4.1.3. Purchase cost - trade discount + transport + duties + other costs that bring to current location and working condition DO NOT ADD -> abnormal wastage, storage, admin overheads, selling costs
7.4.2. IAS 41 - Agriculture (Biological Assets)
7.4.2.1. How to value, and when to recognize? 1. Controllable 2. Probable Economic Benefit 3. Reliable Measure
7.4.2.2. Measurement? Fair Value - Cost to sell (Estimated with no finance cost and tax) Once biological asset **harvested** to agricultural produce, then FV - CTS and it become inventory. Agricultural land might be included in biological asset, but generally recognize under PPE. If gov grants for bio assets, as change in FV, goes into IS.
8. **Financial instrument**
8.1. Financial asset
8.1.1. Investment on equity
8.1.1.1. Two methods to evaluate 1. FVTPL 2. FVTOCI
8.1.1.1.1. 1.FVTPL transaction cost added into income statement along with the differences between initial and year end.
8.1.1.1.2. 2. FVTOCI transaction cost added into initial cost and the differences goes to OCI in equity section.
8.1.2. Derivatives
8.1.2.1. Only one method is applicable which is FVTPL because it is tend to be speculative.
8.2. Financial liability
8.2.1. Amortisation cost
8.2.1.1. Payable loans
8.2.1.1.1. Eg. Without issuance cost (10% 1,000 1 year) Initial = 1,000 IS = 100, then paid interest -100 = 1000 payable loans in year end
8.2.1.1.2. Eg. With Issuance cost 100 (10% 1,000 1 year) if there’s issuance cost, then have to calculate the effective rate (1000-100) = 900, issuance cost + interest = 200, 200/900 = 22.2%. Hence initial 900 interest and issuance cost 200, paid interest -100 = 1000 payable loans
8.2.1.2. There’s amortisation in financial asset if they passed these two steps
8.2.1.2.1. 1. Business model (not using the financial asset to trade) 2. Cashflow (capital + interest only)
8.2.1.3. Convertible Loans
8.2.1.3.1. When found out opening balance, apply OP INT PYMT CL to it.
8.2.1.3.2. First, need to find out opening balance (OP, INT, PYMT, CL). Use convertible interest rate to calculate the yearly payment, then use market interest rate to discount down. Final year pay all back, add all together will be the opening balance. then Dr/Cr the differences into the trial balances.
9. Leasing (IFRS 16)
9.1. Right of use assets
9.1.1. 1. Substantially bearing all risk and reward 2. Can direct its use 3. Supplier can't substitute for gain Exemptions: Short term lease (less than 1 year with no purchase option), low value assets (<$5000)
9.1.1.1. Measurement (Similar to convertible loans), calculate lease liability to obtain the opening amounts. then depreciate normally.
9.2. Lease liability
9.2.1. Rate implicit in lease Lessee's incremental borrowing rate
9.2.1.1. Payment type: 1. Fixed (less incentives) 2. Variable (Based on specific index) 3. Option Price (if reasonably certain) 4. Termination penalties 5. Residual value guarantees.
9.2.1.1.1. Simple lease liability with fixed payment. Discount down using the given effective rate, and the total is the opening of right to use asset. How to separate the current liability from NCL, Work out 2 years closing balance then the differences between 2 years closing balance is the CL.