Chapter 13: Non-financial and Current Liabilities Flashcards
(53 cards)
The claims rate of warranties
% of sales spent on claims
The accrual rate of warranties
% of sales set aside as warranty accruals
IFRS: Liability
present obligation to transfer economic resources as a result of past events.
All of the following must be satisfied:
1. The entity has an obligation
2. Obligation is to transfer economic resources
3. Obligation results from past event
ASPE: Liability
obligation that arises from past transactions or events, which MAY results in a transfer of assets or provision of services.
all of the following must be satisfied:
1. embody a duty or responsibility to others
2. little or no discretion to avoid the duty
3. transaction or event has already occurred; exists AT DATE OF SFP
Constructive Obligation
past or present company practice shows that the entity acknowledges a potential economic burden.
IFRS/ASPE: Recognition Requirements
non-financial liabilities are recognized only if it is probable that the obligation would result in an outflow of cash or other economic resource.
IFRS/ASPE: Financial Liability
contractual obligation that either 1. delivers cash or another asset. 2. exchanges financial assets under conditions that are unfavourable.
Measurement of Financial Liabilities
At FV (Price + transaction costs), then, accounted at amortized cost.
Changes in transaction costs after acquisition are accounted for as a profit or loss through Net income
ASPE: Non-Financial Liabilities
Non-payable by cash
IFRS: Non-Financial Liabilities
Measured at best estimate of market value. Ex: Unearned Revenue, loyalty programs
IFRS: provisions
liabilities of uncertain timing or amount
Operating Cycle
period of time between acquiring the goods and services for processing in operations and receiving cash from the eventual sale of the processed Goods and services
Normal: <=12 months
Abrnomarl: >1yr
IFRS: Current liability
1 of the following is met:
1. expected to be settled within operating cycle
2. held for trading
3. due within 12 months of SFP reporting
4. no right to defer settlement for at least 12 months after SFP
ASPE: Current Liability
Payable within 1 year of balance sheet or within operating cycle
Line of Credit / Revolving Debt
agreement between company and bank to make multiple borrowings up to a negotiated limit
Accounts Payable
balances owed to others for goods, supplies, or services that are purchased on open account
Notes Payable
Written promise to pay a certain sum of money on a specified future date and may arise from purchases, financing, or other transactions
Types of notes payables
interest-bearing & non-interest-bearing
Zero-interest-Bearing Note issued
included in the face amount. The interest is the difference between the amount received and the amount payable at maturity
Current Maturities of Long-term Debt
bonds, mortgage notes and others that mature within 12 months from the date of sfp. Only the maturing portion of a L-T debt is reported as a current liability
Due on Demand
Callable Debt: callable by the creditor,
When is debt callable?
Violation of debt agreement, failure to maintain minimum equity or debt ratios
IFRS: Debt violation
always payable, even if lender does not demand payment
ASPE: Debt violation
current unless one of the following is met:
1. creditor waives in writing the covenant requirement
2. violation has been cured or rectified within the grace period that is allowed
