...known as IFRS is an accounting standard in countries all around the world. The biggest difference between the two is GAAP is rules based and IFRS is more principle based. GAAP and IFRS strive to give accurate information to users but, GAAP gives different objectives for business entities and non-business entities unlike IFRS who only uses one objective for all entities. A balance sheet, income statement, statement of comprehensive income, changes in equity, cash flow statement, and footnotes are all required with GAAP. IFRS requires a balance sheet, income statement, changes in equity, cash flow statement, footnotes and a current and noncurrent report of assets and liabilities. FASB and IASB fair market value Those who use fair value measurements have the ability to see financial statements that show a more precise view of a company and its assets. IFRS and GAAP require businesses to include data in regards to fair value measurements in a financial statement. Businesses are required to report fair value depending on the circumstances. Component Depreciation Component Depreciation occurs when assets have different variables that should be depreciated with different treatments. IFRS businesses are generally required to use component depreciation when the parts of a business offer different patterns of benefits. Under GAAP it is the same however companies in the U.S. rarely use the same practices. A good example of component would be warehouse machinery and the warehouse...
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...convert the U.S. GAAP statements to comply with IFRS. If you were going to make a journal entry, what measurement or other information would you need? Please follow the bullet format I used below, if feasible. For an example – see “Inventory Flow assumption” below, which I completed for you. | Item | GAAP | IFRS | Needed to Convert to IFRS? | | Income Statement Items | 1 | Revenue | * Contingent amounts generally not being recorded as revenue until it’s resolved. * The residual method is precluded * The amount allocable to a delivered item is limited to the amount that is not contingent on the delivery of additional items. * Utilizing a multiple element account model or an incremental cost model to account for customer loyalty program. * When there is a loss on the first element but a profit on the second element, the company may defer the remaining costs until delivery of the second element. * The use of cost-to-cost revenue service revenue recognition is prohibited. * The completed-contract method is allowed which includes gross-profit approach. | * Contingent revenue would be included * The reverse residual method may be acceptable to allocate arrangement consideration. * No limitation on the amount allocated to the first item. * Reward, loyalty or similar programs...
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...ACCT 2015 INTERMEDIATE FNANCIAL ACCOUNTING 11 Current Liabilities, Contingencies & Provisions Required Reading: Alfredson – Chap 5, Keiso – Chaps 13, IAS 37 Learning Objectives 1. CURRENT LIABILITIES: – Define and explain types of current liabilities. – Account for the major types 2. IAS 37 PROVISIONS & CONTINGENCIES – Define Provisions and answer the following questions: • • • Why do them When to provide How much to provide – Calculate and account for Restructuring Provisions – Define Contingent Assets & Liabilities and apply relevant measurement and recognition rules – Apply IAS 37 Disclosure Requirements CURRENT LIABILITIES LIABILITY – Claims against the business arising out of a past transaction that will cause an outflow of resources e.g. loans, notes payable • Long-Term Liability - Obligations that a company does not reasonably expect to liquidate within the normal operating cycle Current Liability - Obligations that a company reasonably expects to liquidate either through the use of current assets or the creation of other current liabilities. • 1 CURRENT LIABILITIES E13-2 (Accounts and Notes Payable) The following are selected 2007 transactions of Sean Astin Corporation. Sept. 1 - Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system. Oct. 1 - Issued a $50,000, 12-month, 8% note to Encino in payment of account. Oct. 1 - Borrowed $50,000 from the Shore Bank by signing...
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...Introduction 3 Chapter 1: Accounting Information and the Accounting Cycle 4 Chapter 2: Financial Statements Overview 7 Chapter 3: Controlling and Reporting of Cash and Receivables 10 Chapter 4: Reporting of Current & Contingent Liabilities 13 Chapter 5: The Time Value of Money 16 Chapter 6: Analyzing Financial Statements 21 Conclusion 25 Introduction I want to thank you and congratulate you for downloading the book, "A Simple Step by Step Accounting Basics Guide Book to Financial Investing and Property For Dummies". Accounting is the language of business. It is the system of recording, summarizing, and analyzing an economic entity's financial transactions. Effectively communicating this information is key to the success of every business. Those who rely on financial information include internal users, such as a company's managers and employees, and external users, such as banks, investors, governmental agencies, financial analysts, and labor unions. These users depend upon data supplied by accountants to answer the following types of questions: • Is the company profitable? • Is there enough cash to meet payroll needs? • How much debt does the company have? • How does the company's net income compare to its budget? • What is the balance owed by customers? • Has the company consistently paid cash dividends? • How much income does each division generate? • Should the company invest money to expand? Accountants must present an organization's financial...
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...cargo revenue is recognized when the transportation service is provided. Passenger tickets net of discounts are recorded as current liabilities in the ‘sales in advance of carriage’ account until recognized as revenue. Yes, this would be handled similarly under U.S. GAAP. Amount 2013: 853 million euros 2012: 750 million euros Yes, transactions would be similar under U.S. GAAP. C2. Read the note for “provisions for liabilities and charges.” a. Do the beginning and ending balances of total liabilities and charges shown in the note for the fiscal year tie to the balance sheet? By how much has the total amount of the BA’s “provisions for liabilities and charges” increased or decreased during the fiscal year? Is the threshold for recognizing a liability associated with these items any different under IFRS than it is under U.S. GAAP? Explain. The balances do not match when you look at the note and balance sheet. It appears that the balance has increased. On the balance sheet there are three different types of provisions. Provisions for deferred tax for 721 and other provisions for 244. These are non-current liabilities. There are also short-term provisions for 292 under current liabilities. The total for all three of these provisions totals 1257. Also there is Employee benefit obligations for 238 under non-current liabilities. Under US GAAP these liabilities would be expense. However, under IFRS these are liabilities. b. Write journal entries for the...
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...3-2 Week 2 Lecture: Analyzing Financing Activities Financial Statement Analysis Overheads from K.R. Subramanyam textbook resources as amended by F.Hui for FIN324 2016. CHAPTER Liabilities (including employee benefits), Equity And off balance sheet transactions Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 3-3 Overview of Chapter Companies operations are financed by various sources: • Liabilities • Capital (Stockholders’ Equity) • Off balance sheet transactions 3-4 Companies’ Financing Sources Liabilities Capital (Stockholders’ Equity) Off balance sheet transactions 3-5 Liabilities Liabilities Alternative Classification Important Features in Analyzing Liabilities • Terms of indebtedness (such as maturity, interest rate, payment pattern, and amount). • Restrictions on deploying resources and pursuing business activities. • Ability and flexibility in pursuing further financing. • Obligations for working capital, debt to equity, and other financial figures. • Dilutive conversion features that liabilities are subject to. • Prohibitions on disbursements such as dividends. Obligations that arise from operating activities--examples are accounts payable, unearned revenue, advance payments, taxes payable, postretirement liabilities, and other accruals of operating expenses Operating Liabilities Obligations...
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...cost of capital because investors can have faith in financial reports and consequently perceive lesser risks. You must have already studied the concept, objectives, benefits and limitations, applicability and compliance of Accounting Standards, in detail, in Chapter 1 of “Accounting” Intermediate (IPC) Course Study Material – Group I. We shall discuss the Accounting Standards (specified in the syllabus) in this chapter taking individual standard in detail. 2. Overview 2.1 AS 4: Contingencies and Events Occurring After the Balance Sheet Date Accounting Standard 4 ‘Contingencies∗ and Events Occurring after the Balance Sheet Date’ covers accounting treatment of ∗ Pursuant to AS 29, “Provisions, Contingent Liabilities and Contingent Assets’ becoming mandatory in respect of accounting periods commencing on or after 1.4.2004, all paragraphs of this standard that deal with contingencies stand withdrawn except to the extent they deal with impairment of assets not covered by other Indian Accounting Standards. For example, impairment of receivables (i.e. provision...
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...countries has created concerns about the extent to which their economies can channel these funds efficiently and sustain economic growth. Further more the International Monetary Fund (IMF) stepped in to initiate a $40 billion program to stabilize the currencies of South Korea, Thailand, and Indonesia, economies particularly hard hit by the crisis. Question 2 Off-balance sheet business has grown to become a significant component of banking operations. i) Explain what is meant by off-balance sheet business, including an examination of the four main categories of off-balance sheet business. An off-balance sheet is a way of keeping track of an asset or debt without including it in the main accounting systems. Most companies have two methods of managing assets and debts, known as on- and off-balance sheets. . Hence, in terms of a business approach, Off-balance sheet transactions are for circumstances when the company/business does not have direct ownership of the money or does not have legal claim or responsibility. It has a contingent liability that will only be recorded on the balance sheet if some specified condition or event occurs. This term is also a common way of...
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...Leonard F. Knobbs Mid Term Exam Fall 2014 MBA 830 – Financial Statement Analysis 1. In order for an asset to be reported on the balance sheet, it must be owned by the company and be expected to provide future benefits. True or False – It is false because doesn’t have to be owned, it can be controlled by the company as well. 2. In addition to purchased assets like inventories and equipment, companies also may report on their balance sheets intangible assets such as the value of a brand name. True or False 3. A credit limit is: 1. A company’s total debt 2. The maximum that a company can borrow 3. The maximum that a creditor will allow a customer to owe at any point in time 4. The property that a company pledges to guarantee repayment 4. A letter of credit: 1. Ensures a company that funds will be available when needed 2. Is analogous to a credit card that companies can draw on as needed 3. Is a representation that a company has a high credit rating 4. Provides a guarantee of payment from the buyer, reducing the credit risk to the seller 5. According to GAAP revenue recognition criteria, in order for revenue to be recognized on the income statement, it must be earned and realized (realizable). True or False 6 In order to report accounts receivable, net, companies estimate the amount they do not expect to collect from their credit customers. True or False 7. The 2011 financial statements...
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...Accounting Insights Accounting for leases: Change is coming. By Matthew Rodgers and Peter McElwain, Baker Tilly September 21, 2010 Leasing of equipment, real estate, and other assets has been and continues to be a significant source of financing for businesses in all industries. As a result, the financial reporting rules for the treatment of lease transactions can be significant to the financial statements and the business operations of lessees and lessors alike. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have undertaken a joint project on leases to improve the financial reporting for lease transactions. The financial reporting standards in the United States currently provide that all lease transactions will be accounted for in one of two ways depending on facts, circumstances, and to some degree the judgment of the users. The two alternative treatments, referred to as operating leases and capital leases, have dramatically different consequences on the financial statements of both lessees and lessors. There are a number of perceived weaknesses in these rules and the manner in which they are applied, which many believe result in inconsistent and incomplete reporting and presentation of an entity’s leasing activities. In response, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have undertaken a joint project on leases to improve the financial...
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...that assets and liabilities from lease contracts are recognized in the balance sheet. August 17, 2010, the FASB issued Proposed Accounting Standards Update – Leases (Topic 840). Because leasing is an important source of finance, the board issued an Exposure Draft (ED) to ensure that this development would be with a complete and understandable picture of an entity’s leasing activities. Following are my opinions about some important questions regarding Proposed Accounting Standards Update – Leases (Topic 840). 1a. Do you agree that a lessee should recognize a right-of-use asset and a liability to make lease payments? Why or why not? If not, what alternative model would you propose and why? I agree that a lessee should recognize a right-of-use asset and a liability to make lease payments. The right-of use concept is an accounting treatment that places assets and liabilities from a leasing contract on the balance sheet of lessees. This treatment would reflect in the financial statement that leased assets and liabilities would be placed on the balance sheet. It would also suitable to most leases agreement. 1b. Do you agree that a lessee should recognize amortization of the right-of-use asset and interest on the liability to make lease payments? Why or why not? If not, what alternative model would you propose and why? I agree that a lessee should recognize amortization of the right-of-use asset and interest on the liability to make lease payments. Once the right-of-use asset and...
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...treatment with respect to borrowing costs? How does this differ from the treatment allowed previously? (P.164 Ch.4 #21) Jefferson Company acquired equipment on January 2, Year 1, at a cost of $10 million. The asset has a five-year life, no residual value, and is depreciated on a straight-line basis. On January 2, Year 3, Jefferson Company determines the fair value of the asset (net of any accumulated depreciation) to be $12 million.... You’re given a list of items bellow, and asked to write onl those items individually in the spaces under Assets of the Consolidated Statement of Financial Position provided int he next page... The term “provision” as it is used in IAS 37, is most closely related to the term in U.S. GAA as “Contingent liability”, where the outflow of resource is probable.... Under IAS 18, if four out of five conditions for recognized revenue from the sale of g... are met, ... the entity is contain that 75 % revenue will be 100,000 credit... B (P.108 Ch.3 #16) How has the U.S. SEC policy toward IFRS changed? (P.157 Ch.4 #12) How are internally generated intangibles handled under IAS 38? How does this differ from U.S. GAAP? (P.161 Ch.4 #14) To determine te amount at which inventory should be reported on the December 31, Year 1, balance sheet, Monroe Company complies the following information for its inventory of Product Z on hand at that date:... An illustrative IFRS income statement of Model Company includes these line items... Complete the Income...
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...payday when the accrued expense of the salaries is eliminated. Aging -- a process where accounts receivable are sorted out by age (typically current, 30 to 60 days old, 60 to 120 days old, and so on.) Aging permits collection efforts to focus on accounts that are long overdue. Appreciation -- an increase in value. If a machine cost $1,000 last year and is now worth $1,200, it has appreciated in value by $200. (The opposite of depreciation.) Assets -- things of value owned by a business. An asset may be a physical property such as a building, or an object such as a stock certificate, or it may be a right, such as the right to use a patented process. Current Assets are those assets that can be expected to turn into cash within a year or less. Current assets include cash, marketable securities, accounts receivable, and inventory. Fixed Assets cannot be quickly turned into cash without interfering with business operations. Fixed assets include land, buildings, machinery, equipment, furniture, and long-term investments. Intangible Assets...
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...inventory inside the US and use FIFO outside the US. * General Mills makes money through their brand (inventory) and their investments (goodwill/intangible assets), and research and development of new products B. What financial statements are commonly prepared for external reporting purposes? What tittles does General Mills give these statements? What does “consolidated” mean? * Balance Sheet and Statement of Earnings * Consolidated Statement of Earnings and Consolidated Balance Sheets * Consolidated – combining assets, equity, liabilities and operating accounts of a parent firm and its subsidiaries into one financial statement. C. How often do publicly traded corporations typically prepare financial statements for external reporting purposes? * They report yearly, every fiscal year in May. D. Who is responsible for the financial statements? Discuss the potential users of General Mills financial statements and type of information they are likely interested in. * Management is responsible for financial statements. * Potential users of statements are stockholders, investors, employees, and competitors because it gives a snapshot of the company’s financial earnings. * Information they are interested in are is statement of earnings (net sales) and balance sheet (assets, liabilities, and owners’ equity) to see what the overall profitability of the company is. E. Who are General Mills external auditors? Describe the two opinion...
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...various accessories, through its online and retail stores. iPhone iPhone is the company’s line of smartphones that combines a phone, music player, and Internet device in one product, and is based on the company’s iOS Multi-Touch operating system. Table of Contents Analysis Annual Report for Apple, Inc...........................................................................................1 Works Cited........................................................................................................................... The position of this research paper is to conduct the financial analysis of the Apple Company. The financial analysis of the Apple is based on the financial statement property and equipment, goodwill, intangible assets, depreciation methods, current liabilities, long-term liabilities, bonds payable, and capital leases. Apple Inc. is a company which is formed with the philosophy of continuous innovation. Unlike any other...
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