jer's notes

Question 1

When is revenue recognized under ASPE?

Answer 1

Revenue is recognized when performance is achieved, reasonable assurance over measurability of consideration exists, and collection is reasonably assured.

Question 2

What is the consideration when revenue is recognized over time?

Answer 2

For services or goods provided over time, the percentage of completion method or completed contract method can be used.

Question 3

How is revenue recognized when right of return is involved?

Answer 3

Revenue is not recognized until after the return period is over, unless there is an existing contract with reasonably estimated amounts, in which case a refund liability is used.

Question 4

How does ASPE 3400 guide the treatment of non-refundable deposits?

Answer 4

Non-refundable deposits should be evaluated to assess if the item is independent of goods/services provided. They typically are not independent.

Question 5

What is the impact of refundable deposits on revenue recognition under ASPE?

Answer 5

Refundable deposits create uncertainty over the measurement of consideration and should be evaluated under ASPE 3400.04-05.

Question 6

When should collection be reasonably assured for revenue to be recognized?

Answer 6

Collection is reasonably assured when there is no significant uncertainty about the entity’s ability to collect consideration for goods or services provided.

Question 7

What is the difference between agent and principal revenue recognition?

Answer 7

The difference is evaluated using the criteria in ASPE 3400.24 to determine whether the entity acts as an agent or a principal in a transaction.

Question 8

Under IFRS, how is the contract identified for revenue recognition?

Answer 8

A contract is identified under IFRS 15.9, and revenue can only be recognized when consideration is received and all performance obligations are satisfied.

Question 9

What does IFRS 15.26 require regarding performance obligations?

Answer 9

IFRS 15.26 requires assessing whether goods/services provided are distinct, which is relevant when non-refundable deposits are involved.

Question 10

How are customer loyalty programs treated under IFRS 15?

Answer 10

Under IFRS 15 B40, if the program provides a material right to the customer, revenue is recognized when the future goods/services are transferred or upon expiry of poin

Question 11

How is the transaction price determined under IFRS?

Answer 11

The transaction price is estimated using either the expected value or the most likely amount, with consideration for refundable amounts, right of return, or take-or-pay arrangements.

Question 12

How is transaction price allocated to performance obligations under IFRS?

Answer 12

It is allocated based on methods such as adjusted market approach, expected cost plus margin, or residual approach, depending on whether standalone values can be determined.

Question 13

How should discounts be allocated under IFRS?

Answer 13

Discounts should be allocated on a proportional basis, but specific criteria can apply to allocate a discount to only one performance obligation.

Question 14

How are loyalty programs treated for transaction price allocation under IFRS 15?

Answer 14

Transaction price is allocated based on the standalone value of the original contract plus redemption value, using this for the calculation of percentage of completion.

Question 15

When is revenue recognized under IFRS?

Answer 15

Revenue is recognized when performance obligations are satisfied either over time (IFRS 15.35) or at a point in time (IFRS 15.38).

Question 16

What is the treatment for inventory under ASPE 3031 and IFRS IAS 2?

Answer 16

Inventory is held at the lower of cost and NRV under both ASPE and IFRS. Recognition criteria for COGS apply when inventory is sold.

Question 17

How is PPE treated under ASPE 3061?

Answer 17

PPE is defined as long-lasting assets, with costs eligible for capitalization if related to constructing the asset or getting it ready for use. Betterments increase the service potential of PPE.

Question 18

What is the treatment of betterments under ASPE 3061?

Answer 18

Betterments should be capitalized if they increase the service potential of the asset, as per ASPE 3061.14.

Question 19

How is amortization treated under ASPE 3061?

Answer 19

Amortization is necessary once an asset is capitalized, and capitalized costs begin at the point the asset is ready for use.

Question 20

How does IFRS (IAS 16) differ from ASPE regarding PPE?

Answer 20

IFRS does not explicitly define betterments, but evaluates them under the treatment of subsequent costs, such as major replacements, under IAS 16.13.

Question 21

How is impairment of assets treated under ASPE 3063?

Answer 21

Impairment is assessed by comparing undiscounted cash flows to the carrying value. If impaired, the asset’s fair value is calculated and recognized as an impairment expense.

Question 22

What is the lowest level of aggregation for impairment under IFRS?

Answer 22

Under IFRS, the lowest level of aggregation is the cash-generating unit, which is generally smaller than asset groups in ASPE.

Question 23

How is impairment calculated under IFRS?

Answer 23

Impairment is the difference between the asset’s fair value and its recoverable amount, with the recoverable amount being the higher of fair value less costs of disposal and value in use.

Question 24

What are the criteria for current liabilities under ASPE?

Answer 24

Current liabilities are obligations that require settlement through future transfer of assets or services and are triggered by past events.

Question 25

How is trade receivables treated under ASPE 3856 and IFRS 9?

Answer 25

Trade receivables are initially measured at cost and then re-measured at cost with an allowance for uncollectable amounts. Impairment is assessed under both ASPE 3856.16 and IFRS 9.

Question 26

How are related party transactions measured under ASPE 3840?

Answer 26

Related party transactions are measured at carrying amount unless they have commercial substance, in which case they are measured at exchange amount.

Question 27

What is the accounting treatment for leases under ASPE 3065?

Answer 27

Under ASPE 3065, leases are evaluated to determine if they should be classified as operating or capital leases, and ROU assets and liabilities are recognized for capital leases.

Question 28

How is lease accounting under IFRS 16 different from ASPE 3065?

Answer 28

IFRS 16 has no distinction between operating and capital leases. All leases are capitalized unless short-term or low-value. ROU assets and liabilities are recognized for all leases.

Question 29

What is the treatment of intangible assets under ASPE 3064 and IFRS 38?

Answer 29

Intangible assets must meet recognition criteria for capitalization, with research costs being expensed and development costs being capitalized based on specific criteria.

Question 30

How is investment in associates accounted for under ASPE and IFRS?

Answer 30

Under ASPE, investments in associates are accounted for using the equity or cost method. Under IFRS, the equity method is applied.

Question 31

How are foreign currency transactions treated under IAS 21?

Answer 31

Foreign currency transactions are initially measured using the exchange rate at the transaction date. Subsequent measurement involves translating monetary items at the closing rate and non-monetary items at historical rates.

Question 32

What is the treatment of foreign currency transactions under ASPE 1651?

Answer 32

ASPE 1651 is similar to IAS 21, except for the revaluation date. Non-monetary items are not updated for changes unless carried at fair value.

Question 33

How do you record warranty provisions and related journal entries in accounting?

Answer 33

When the sale is made: Dr. Warranty Expense Cr. Warranty Liability When a warranty claim is made: Dr. Warranty Liability Cr. Cash/Inventory/Parts (depending on the nature of the claim)

Question 34

How do you record lease deposits in accounting?

Answer 34

When the deposit is made: Dr. Lease Deposit (Asset) Cr. Cash When the deposit is returned: Dr. Cash Cr. Lease Deposit (Asset)

Question 35

How do you account for lease inducements in accounting?

Answer 35

When lease inducements are received: Dr. Cash Cr. Lease Inducement Liability Over the lease term (to recognize the inducement): Dr. Lease Inducement Liability Cr. Rent Expense (spread over the lease term)

Question 36

Q: What is the difference between provisions and contingent liabilities, and how are they recorded?

Answer 36

Provisions are recognized when a liability is probable, and the amount can be reliably estimated. Dr. Expense Cr. Provision (liability) Contingent Liabilities are only disclosed if the outflow is probable or possible but not yet certain. They are not recorded on the balance sheet but are disclosed in the notes.