Further Accounting Standards Flashcards Preview

Financial Statements of Limited Companies > Further Accounting Standards > Flashcards

Flashcards in Further Accounting Standards Deck (14):
1

What is the definition of a lease term

the non cancellable period for which a lessee has contracted to lease the asset

2

What is the definition of a finance lease

a lease that transfers substantially all the risks and rewards of ownership

3

what is the definition of an operating lease

It is similar to a rental agreement and its not likely the lessee will keep or buy the asset at the end of the agreement

4

what does IAS 17 say about lease agreements

that you must account for finance leases and operating leases be treated differently.

5

how do you account for a finance lease

the fair value is treated as an asset and the present value of the amount owed is a liability

6

when should a provision be recognised as a liability

when a company has a present obligation due to a past event
it is probable that an outflow of economic benefit will be required
a reliable estimate can be made of the amount of the obligation

7

what is a contingent liability

a possible obligation which can only be confirmed by the occurrence or non occurrence of a future event which is not within your control

8

how do you account for a contingent liability

a brief description and estimate within the notes

9

how do you account for a contingent asset

a note

10

4 examples of adjusting events

1) a settlement of a court case at year end
2)impairment of an asset
3) net realisable value of inventories falls below cost
4) Trade receivables become insolvent

11

when should you account for going concern

if at year end management decides to liquidate or cease trading

12

what criteria must be met for revenue to be recognised

the seller has transferred all risks and rewards to the buyer
seller retains no managerial involvement of goods
amount can be reliably measured
economic benefits will flow to the seller
the costs incurred to the transaction can be measured reliably

13

what must be written off expenditure when an intangible asset is recorded

start up costs
research expenditure
pre operating expenses

14

what is not an acceptable method of inventory valuation according to IAS 2

LIFO