FR - Trade receivable

Question 1

What is trade receivable?

Answer 1

Accounts receivable where assets are sold or services provided on credit

Question 2

What handbook is used under IFRS trade receivable?

Answer 2

IFRS 9 - Financial instruments

Question 3

How is trade/accounts receivable normally classified under IFRS?

Answer 3

It is normally classified under amortized cost

Question 4

Provide two conditions that have to be met for A/R to be classified as amortized cost

Answer 4

1. Financial assets are held within the business model whose objective is to hold the financial asset
2. Contractual obligation of financial assets gives rise to a specified date to cash flow on principal payment

Question 5

What are two other forms of classification for A/R

Answer 5

1. FVPL
2. FVOCI

Question 6

What are nontrade receivables?

Answer 6

Almost due to entity of unrelated selling goods or providing services
Ex. Tax refund, amount owing to an employee on the advancement

Question 7

How is the initial measurement recorded

Answer 7

Asset on Statement of FP
When the satisfied performance obligation is met of transfer for goods and services. Recorded at transfer price
Dr. A/R
Cr. Revenue

Question 8

What two types of methods can be recorded for discount and payment terms

Answer 8

1. Gross method
2. Net method

Question 9

What method of interest is used if the accounts receivable is outstanding for more than 1 year

Answer 9

Use the effective interest method

Question 10

How do you record the interest at the end of the year

Answer 10

Notes receivable * Interest rate * Elapsed days/365
Dr. Cash
Cr. Interest receivable
Cr. Interest revenue

Question 11

What is recorded when payment is made to the notes receivable

Answer 11

Dr. Cash
Cr. Notes receivable

Question 12

What is determined for the subsequent measurement

Answer 12

Need to determine the customer expectation of payment that’s to be made each year.
It’s recorded the amount expected was not collected as an Allowance for Doubtful account (AFDA). Based on the net realizable value (NRV)

Question 13

Allowance for Doubtful Account

Answer 13

Is a contra asset account that reduces the accounts receivable present value from the cash inflow coming in.

Question 14

What are the two types of method to record bad debt

Answer 14

1. Balance sheet method - uses the % of aged A/R outstanding in the year based on management experience
2. Income statement method - uses credit sales based on % of credit sales

Question 15

Provide 3 derecognition that can occur for accounts receivable

Answer 15

1. Collection occurs on the normal course of business
2. They are written off
3. When the account is sold to a third party - Factoring

Question 16

What is the handbook used under ASPE

Answer 16

ASPE 3856 - Financial instruments

Question 17

Provide the difference between IFRS & ASPE

Answer 17

ASPE - Impairment needs to require assessment at the end of the period while IFRS is adjusted only when required
ASPE - does not specify the method to use for interest revenue. You can use either the effective interest method or the straight line amortization method