Chapter 2 Flashcards
Franchise Fee - Franchisor
Unearned Franchise Fee (PV)
Discount on N/R (contra asset)
Purchased Intangibles
Purchase price + legal fees + registration fees
Internally Developed Intangibles
Expensed except for: Legal fees for successful defense Registration and consulting fees Design costs Direct costs to secure
Finite Intangibles Amortization
Straight line over shorter of legal or estimated life
Intangibles Valuation
US GAAP - Cost
IFRS - Cost or Revaluation (Gain OCI, Loss I/S)
Intangibles Impairment - US GAAP
Finite - 2 Steps
Indefinite - 1 Step
Goodwill - 2 Steps @ reporting levels
Reversal not permitted except for Held for Sale
Intangibles Impairment - IFRS
Finite/Indefinite - 1 Step BV vs NRV
NRV = Greater of FV-Cost to Sell and PV of CF
Goodwill - 1 Step @ CGU
Loss allocated 1. GW 2. Prorata to other assets
Reversal permitted
Impairment for Held for Sale
Impairment Loss + Disposal Cost
Do not amortize
Reversal permitted
Franchise - Franchisee
Initial Fee = capitalize + amortized over life of franchise
Discount = amortized over payment period using effective interest
Tax Rule
Goodwill, Startup costs - amortize over 15 years
US GAAP
- Qualitative test - greater than 50% chance that FV < BV
2. Quantitative test
R&D - US GAAP
Expensed except
- PP&E with other use - depreciation R&D
- On behalf of others - COS
R&D - IFRS
Research -Expensed
Development - Capitalized
Not R&D
Only with “NEW”
- Marketing research
- Qualitative control testing
- Routine periodic research
- Reformation
Computer Software - US GAAP
- For Sale, lease, license
- After technological feasibility but before release for sale
- Amortize greater of straight line or % of revenues - For Use
- After preliminary project state
- Straight line amortization
Long Term Construction Contracts
- Completed contract
- % of Completion (IFRS prohibited)
- Current Asset
a. Construction in Progress or Costs in Excess of Billings
b. Due on A/R - Current Liability
Progress Billings or Billings in Excess of Costs
CA (CL) = Actual Costs + Gross Profit - Billings
Installment Sales
Earned GP = Cash Collection x GP%
Deferred GP = Installment Receivable x GP%
(contra asset)
Non-Monetary Exchanges - GAAP
- Commercial substance
- G/L recognized - No commercial substance
- Loss recognized, Gain rules:
Proportional gain = Boot received < 25% FV
Full gain= Boot received >= 25% of FV
Non-Monetary Exchanges - IFRS
- Dissimilar
- G/L recognized
- If FV = BV, G = cash received, L= cash paid - Similar
- L recognized, no G
Monetary A/L
Fixed (Cash, Receivables, Payables)
Loss = Monetary assets during inflation
Gain = Monetary liabilities during inflation
Non-monetary A/L
Flucuate
Reporting Currency
US 1
Functional Currency
Currency of primary economic environment
Foreign Currency Accounting
- FC Translation
- Remeasurement/Temporal - I/S
- Translation/Current Rate - OCI - FC Transaction - I/S
