Tuesday summary

This week I have 4 days to get through 48 points of Unknown stuff; I’m using these posts to review what I did each day before moving on to the next day’s work.

 

Day 1: Tuesday.

 

Abbreviations

  • SSAP = Statement of Standard Accounting Practice

 

True & Fair Over-rides

  • CA: Must disclose in notes to accounts: TFV departure, reason & effect
  • e.g. investment properties – no depreciation (SSAP 19)
  • e.g. accounting for banking investments

 

Conflict b/t CA & Accounting Standards

  • No depreciation on investment properties (SSAP 19)
  • Unrealized gains & losses à P&L
  • Amortisation of GW.

 

ISAB (London-based) established 2001

  • Emphasizes dev’t of sttds based on sound and clearly-stated principles
  • IFRS process: consultative documents – discussion papers, exposure drafts
  • Consultation with investors, analysts, regulators, bus ldrs, acctg stdd setters & the accountancy profession (6)

 

Objectives of IFRS:

  • Increase decision usefulness of ec info presented in fin’l stmts

 

IFRS FOUNDATION Objectives:

  • Dev’p a single set of high quality, understdble, enforceable & globally accepted IFRSs through IASB
  • Promote use & rigorous application of IFRSs
  • take account of fin’l report’g needs of emerging economies and SMEs
  • convergence of national acctg stdds & IFRS

 

IFRIC (Interpretations Committee)

  • review widespread acctg issues arising within context of current IFRSs
  • provide authoritative guidance

 

AC (Advisory Council)

  • advisory body to IASB & IFRS Found’n Trustees
  • members appointed by Trustees
  • comprises representatives of: user groups, preparers, fin’l analysts, academics, auditors, regulators, prof’nl acctg bodies, investor gps (8)
  • meets 3x yr
  • focus on practical application & implementation

 

IASB FRAMEWORK

  • CONCEPTUAL: Objectives, Assumptions, Characteristics, Definitions, Criteria (5)
  • à guide IASB à develop new/revise existing standards
  • à assist national stdd setters

 

IFRS & NFP/PUBL SECTOR (charities, housing assoc’ns, local authys, further/higher ed’n)

  • (2009) IFRS for SMEs à applied to NFPs
  • Proposed ‘Publ Benefit Stdd’
  • Existing stdds often silent on NFP acctg
  • SORPS (Stmt of Recommended Practice) – (4)
  • ‘Publicly accountable’ ie. Listed debt, publicly traded equity à use full IFRS
  • Otherwise use IFRS for SMEs
  • Cost/benefit balance of providing fin’l info

 

DIRECT METHOD CASHFLOW

  • OPERATING: receipts fm customers LESS cash paid to supplrs/emplees
  • = (subtotal) Cash generated from operations
  • LESS: intst paid, inc taxes paid
  • = Net cash flows fm operatg actys
  • INVESTING: equip sales proceeds, dividends rec’d
  • = Net cash flows fm investg actys
  • FINANCING: dividends paid,
  • = Net cash flows fm financg actys
  • TOTAL: Net increase in cash & cash equivalends
  • + C&CE, beginning of yr
  • = C&CE, end of yr

 

NON-CURRENT ASS: CAPITALISATION OF BORROWING COSTS

  • Stdds; IAS23 Borrowing Costs, FRS 15 Tan.Fix.Ass
  • IAS23: MUST capitalise all directly-attributable costs including borrowing, as pt of ass cost
  • FRS15: OPTIONAL capitalis’n of borrowing costs à strict rules, only finance costs on expen incurred
  • FRS 15: NO Subsequent Capitalis’n (MUST stop captalis’n once ass complete/avail for use even if not used)

 

FRS 15: When Subsequent Expenditure can be Capitalised;

  • Enhancemt of ec bens in excess of previous stdd of perfmce
  • Restoration of component of ass treated septely for dep’n
  • Major inspection/overhaul à restorg ec bens previously consumed/dep’d

 

REVAL’N OF NON-CURRENT ASS

  • Stdds: IAS 16 (Plant, prop’y & equipmt), FRS 15 Tan.Fix.Ass
  • IAS 16 – no specified reval’n period, depends on MV changes
  • FRS 15 – max period for FULL Reval’n – 5yrs, INTERIM Reval’n – 3yrs
  • IAS 16 no requiremt for impairmt review
  • FRS 15 – ANNUAL impairmt review for all ass with UEL of 50yrs+/infinite
  • FRS 15 – LOSSES fm reval’n written off against reval’n surplus UNLESS reflects a consumption of ec bens.

 

GOV’T GRANTS

  • Stdds: IAS 20, SSAP4, CA
  • SSAP4: 2 treatments for capital Govt Grants
    • Write/off ag cost of fix ass & depreciate reduced cost
    • Ass val @ full cost à dep’n; grant = deferred credit
  • CA does NOT allow Govt Grants to be deducted fm ass cost
  • MUST show as deferred credit – portion released to revenue each yr

 

RECOGNITION OF INTAN.ASS

  • Stdds: IAS 38 (Intan.Ass), FRS 10 (GW&Intan.Ass)
  • IAS38 – can recognise non-separable Intan.Ass where arise fm contractual/other legal rights
  • FRS10 – only recgnse Intan.Ass that can be sold septely

 

AMORTISATION of GW/Intan.Ass

  • IAS 38: NO AMORTISATION, annual impairment test
  • FRS 10: Amortis’n over ec life, no amortis’n if indefinite life

 

NEGATIVE GW (consolidated)

  • Occurs fm “distressed sale” – consid’n lower than FV of ass
  • Stdds: IFRS 3 (Bus combinations), FRS10 (GW&Intan.Ass)
  • IFRS3: REQUIRES immediate gain in P&L
  • IFRS3: Neg GW capitalised as septe ass
  • FRS10: test FV of ass for impairment & check acq’d liabys
  • FRS10: remaining Neg GW – regnise on face of BS under GW
  • FRS10: Include net total of Positive & Neg GW
  • FRS10: release Neg-GW to periods wch benefit

 

LEASE DETEMINATION – 90% TEST

  • SSAP21
  • 90% Test: Present Val of Minimum Lease Payments =
  • At least 90% of Ass Fair Val then
  • = FINANCE LEASE
  • Consider wider ec substance of transaction

 

INVESTMENT PROP’YS

  • Propy’s held for investm’t potential – imptce of current val
  • Dep’n inappropriate (SSAP!)
  • Stdds: IAS 40, SSAP19
  • IAS40: choice b’t Cost (Dep’n) & Fair Val (review)
  • SSAP19: NO Dep’n. Must be FV.
  • IAS40: all gains à P&L
  • SSAP19: Gains/Lossesà STRGL unless Permanent Deficit in FV

 

 

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