Overview Flashcards
(181 cards)
1
Q
How must inventory be measured under ASPE 3031?
A
At the lower of cost or net realizable value (NRV), where NRV equals fair value minus selling price.
2
Q
How should inventory write-downs be applied?
A
On an item-by-item basis unless items are similar and can be grouped.
3
Q
What is the impact of an inventory write-down?
A
It decreases both assets and income.
4
Q
When are tests for recoverability required under ASPE 3063?
A
When the carrying value of an asset may not be fully recoverable.
5
Q
What criteria indicate an impairment under ASPE 3063?
A
When the carrying amount of an asset is not recoverable and is greater than its fair value.
6
Q
How is impairment expense calculated?
A
Impairment expense = Recoverable amount - Carrying amount.
7
Q
How is the recoverable amount determined?
A
It is the lesser of fair value and value in use (discounted net cash flows).
8
Q
What are the revenue recognition criteria under ASPE 3400?
A
- Collection is reasonably assured.
- Performance is complete, and goods have been transferred to the buyer.
- Reasonable assurance exists for the measurement of the consideration.
9
Q
What are the components of OFSL risk?
A
Inherent risk, control risk, and factors that reduce risk.
10
Q
Define inherent risk in the context of OFSL.
A
The likelihood that the financial statements are misstated before considering internal controls.
11
Q
Define control risk in the context of OFSL.
A
The likelihood that misstatements due to inherent risk will not be prevented, detected, or corrected by the client’s internal controls.
12
Q
What factors can reduce OFSL risk?
A
Previous audit risk assessments.
Established client base and reputation.
Compliance with ASPE.
13
Q
What should be concluded for OFSL risk?
A
Whether the risk is medium or high.
14
Q
What is the formula for Audit Risk?
A
Audit Risk = Inherent Risk (IR) × Control Risk (CR) × Detection Risk (DR).
15
Q
What is the formula for Risk of Material Misstatement (RMM)?
A
RMM = Inherent Risk (IR) × Control Risk (CR).
16
Q
What happens if IR and CR are high?
A
The risk of detection must be low.
17
Q
What does assertion-level risk address?
A
It focuses on risks related to a specific class of transaction, balance, or disclosure.
18
Q
What is the first step in determining overall materiality?
A
Identifying users of the financial statements and understanding what is important to them (e.g., revenue, assets, or ratios).
19
Q
What benchmarks can be used for materiality?
A
Normalized profits before tax.
Gross profits.
Total revenue.
Total assets.
Total expenses.
Total equity.
20
Q
What percentage range is typically used for income materiality?
A
3-7%.
21
Q
How does risk affect materiality percentages?
A
Higher risk lowers materiality.
Lower materiality increases testing on smaller balances.
Higher materiality decreases testing on higher balances.
22
Q
What is the range for performance materiality?
A
60-75%.
23
Q
What should be considered for specific account materiality?
A
Whether a specific account has increased risk.
24
Q
What are the types of engagement approaches in auditing and briefly explain?
A
- Review engagement – Involves inquiry, analytical procedures, and limited assurance.
Assurance is provided unless something indicates material misstatements. - Substantive engagement – Used when controls are weak and control risk is high.
- Combined engagement – Used when controls are acceptable, and control risk is low, combining test of controls and substantive tests.
25
What is the purpose of substantive procedures?
To detect material misstatements at the assertion level.
26
What is the purpose of a test of controls?
To evaluate the operating effectiveness of controls in preventing, detecting, and correcting material misstatements at the assertion level.
27
What are the steps involved in determining overall materiality? (5)
- Identify users of the financial statements and what is important to them (e.g., revenue, assets, ratios).
- Decide the benchmark for materiality, such as:
Normalized profits before tax.
Gross profits.
Total revenue.
Total assets.
Total expenses.
Total equity.
- Determine the percentage for materiality (e.g., 3-7% for income, 1-3 for assets and revenue):
Higher risk leads to lower materiality, requiring more testing on smaller balances.
Lower risk leads to higher materiality, reducing testing on higher balances.
- Set performance materiality, typically at 60-75% of overall materiality.
- Decide on specific account materiality, considering whether certain accounts have increased risk.
28
What section of ASPE covers inventory write-downs?
ASPE 3031.
29
What section of IFRS outlines the criteria for revenue recognition?
IFRS 15.
30
What does IFRS 15 state about the criteria for revenue recognition?
It outlines that revenue can only be recognized if the following criteria are met:
- The contract is approved (orally or in writing).
- The rights and obligations of all parties are identifiable.
- Payment terms are determinable.
- The contract has commercial substance (it affects cash flows).
- Collection of the consideration is probable.
31
When should revenue be recognized if these criteria are not met under IFRS 15?
Revenue should be recognized when cash is received.
32
What section of IFRS governs accounts receivable write-downs?
IFRS 9, specifically section 5.5.15.
33
What does IFRS 9 (5.5.15) state regarding accounts receivable write-downs?
If accounts receivable (AR) is measured using amortized cost, the company must recognize:
An expected loss for receivables unlikely to be collected.
Any accounts confirmed as uncollectible as a reduction in AR.
34
What are the journal entries for recognizing an expected loss for an AR?
Debit Bad Debt Expense
Credit Allowance for Doubtful Accounts (AFDA)
35
What are the journal entries for recognizing a confirmed bad debt for AR?
Debit AFDA
Credit Accounts Receivable
36
What section and subsection of IFRS covers loyalty points?
IFRS 15, subsection 15.22.
37
What does IFRS 15.22 state about loyalty points?
Loyalty points are separate performance obligations, recognized as deferred revenue when issued. Revenue is recognized when points are redeemed.
38
What is the journal entry when issuing loyalty points?
Debit Cash
Credit Revenue
Credit Deferred Revenue (Loyalty Points)
39
What is the journal entry when loyalty points are redeemed?
Debit Deferred Revenue (Loyalty Points)
Credit Revenue
40
What section of IFRS governs assets held for sale?
IFRS 5.
41
What conditions must be met under IFRS 5 for an asset to be classified as held for sale?
- The asset must be available for immediate sale in its current condition.
- Terms of sale must be usual and customary.
- Sale must be highly probable (e.g., active marketing, expected sale within a year, and no withdrawal plan).
42
How is the value of an asset held for sale determined under IFRS 5?
It is measured at the lower of carrying amount or net realizable value (fair value less costs to sell)
43
What is the journal entry to reclassify an asset as held for sale with impairment?
Debit Asset Held for Sale (HFS)
Debit Accumulated Depreciation
Debit Impairment Loss (if any)
Credit Original Asset
44
What section of IFRS defines inventory?
IAS 2.
45
What does IAS 2 definition about inventory?
- Held for sale in the ordinary course of business.
- In production for sale.
- Materials or supplies to be consumed in production or rendering services.
46
What section of ASPE governs assets held for sale?
ASPE 3475.
47
How does ASPE 3475 differ from IFRS 5 regarding assets held for sale?
ASPE 3475 specifies that:
- Assets are classified as current if sold before the financial statement completion.
- Impairment losses can only be reversed up to the original recorded loss.
48
What does ASPE 3400 A45-A48 say about upfront fees and revenue recognition?
- Upfront fees must be assessed for their utility separate and independent of the main transaction.
- If the upfront fee is not independent, it should be recognized at the same pace as the associated transaction.
- Additionally, the three revenue recognition criteria should be analyzed.
49
When should an upfront fee be considered independent according to ASPE 3400 A45-A48?
When the utility provided by the fee is distinct and not dependent on the main transaction (e.g., if paying an upfront fee allows ongoing access to a website, but a separate monthly fee applies, the upfront fee may not be independent enough).
50
What journal entry would be made for an upfront fee recognized over time?
At the time of payment:
Cash XXX
Deferred Revenue (Upfront Fee) XXX
As revenue is recognized:
Deferred Revenue (Upfront Fee) XXX
Revenue XXX
51
What criteria determine whether an entity is acting as a principal under ASPE 3400.23?
The entity:
- Has primary responsibility for providing goods/services.
- Bears inventory risk.
- Establishes pricing.
- Bears customer credit risk.
52
How is revenue recognized if the entity is considered an agent under ASPE 3400.23?
Revenue is recognized only on a net basis for the gain made on the transaction.
53
What journal entry reflects revenue recognition as an agent?
Cash 1,000
Revenue (Commission) 100
Payable to Principal 900
54
What are the conditions under ASPE 3065 for a lease to be classified as a capital lease?
- Reasonable assurance of asset ownership transfer (e.g., bargain purchase option).
- Lease term covers 75% or more of the asset's useful life.
- The present value of minimum lease payments equals or exceeds 90% of the asset's fair value.
55
What journal entries would the lessee record for a capital lease under ASPE 3065?
At inception:
Lease Asset XXX
Lease Obligation XXX
For payments:
Interest Expense XXX
Lease Obligation XXX
Cash XXX
56
What is the three-part test for determining a lease under IFRS 16?
- Identification of an asset that can be specified.
- Right to economic benefits from using the asset.
- Right to direct the use of the asset.
57
What journal entries does a lessee record for a lease under IFRS 16?
At lease commencement:
Right-of-Use Asset XXX
Lease Liability XXX
For subsequent lease payments:
Interest Expense XXX
Lease Liability XXX
Cash XXX
58
What factors indicate significant influence under ASPE 3051?
- Ownership of 20%-50% of outstanding shares.
- Representation on the board of directors.
- Participation in key business decisions of the investee.
59
What accounting methods are used under ASPE 3051 for investments with significant influence?
- Equity Method: Recognize the investor's share of income/loss, depreciation, etc.
- Cost Method: Used when equity method does not apply.
60
What journal entries reflect the equity method under ASPE 3051?
To record the share of income:
Investment in Associate XXX
Income from Investment XXX
To record dividends received:
Cash XXX
Investment in Associate XXX
61
When asked to provide audit procedures, answer with RAP - what does it stand for?
Risk, Account and Assertion Issues, Procedure(s).
62
What are some typical audit procedures for revenue?
- Recalculating revenue.
- Vouching entries from the general ledger to the contract.
- Inspecting contract terms to determine when obligations are met.
63
What is a typical audit procedure for investments?
Inspecting the shareholder agreement for accuracy, allocation, and valuation of investors' rights.
64
Under ASPE 3064, when can development costs be capitalized?
Development costs can be capitalized only when all the following criteria are met:
- Feasibility of completing the asset.
- Intent to complete the asset.
- Ability to use or sell the asset.
- Probable future economic benefits.
- Adequate resources available to complete development.
- Ability to measure expenditures reliably.
65
Why are research costs expensed under ASPE 3064?
Research costs are expensed because it cannot be proven that they will bring future economic benefits.
66
What journal entries are made when capitalizing development costs?
When costs are incurred
Development Costs (Asset) XXX
Cash/Accounts Payable XXX
When amortizing the asset after completion:
Amortization Expense XXX
Accumulated Amortization XXX
67
What criteria must be met to accrue a contingent loss under ASPE 3290.08?
- It is likely that a future event will confirm:
- An asset has been impaired, or
- A liability has been incurred as of the financial statement date.
- The amount of the loss can be reasonably estimated.
68
What happens if only one of the ASPE 3290.08 criteria is met?
The contingent loss is disclosed in the notes to the financial statements but not accrued.
69
What journal entry reflects an accrued contingent liability?
If the loss is $10,000
Contingent Loss Expense 10,000
Contingent Liability 10,000
70
How does ASPE 3400 treat revenue when a right of return exists but the amount of return is uncertain?
Revenue is not recognized because the performance obligation and amount to be collected criteria are not met
71
When can revenue be recognized with a right of return under ASPE 3400?
- If returns can be estimated based on historical data, revenue is recognized up to the amount expected to be received and not returned.
- A refund liability is recorded for the expected returns, and a refund asset is recorded for the cost of goods sold (COGS).
72
What journal entries reflect estimated returns?
At sale (recording revenue):
Cash/Accounts Receivable XXX
Revenue XXX
Refund Liability XXX
At sale (recording COGS):
COGS XXX
Refund Asset XXX
Inventory XXX
73
What are the steps to value a business purchase using a multiple of income or assets?
- Normalize income and perform accounting adjustments.
- Multiply normalized income by the agreed rate.
- Compare the price being paid to the portion of the business being acquired based on the valuation.
- List the pros and cons of the deal.
74
What is the purpose of normalizing income during a business valuation?
To adjust for unusual, non-recurring, or owner-specific expenses that may distort the company's true earning potential.
75
What are some typical pros and cons when valuing a business using multiples?
Pros:
- Quick and simple calculation.
- Provides a market-based benchmark.
Cons:
- Ignores unique business risks or opportunities.
- May not reflect future growth potential.
76
What is required for financial statements to assess risks and creditworthiness according to banking requirements?
Financial statements must be prepared under GAAP.
77
What financial information is needed for assessing a client's creditworthiness?
Historical financials (including balance sheets) are needed, not just cash flow projections.
78
Can private companies choose between ASPE and IFRS?
Yes, private companies can choose between ASPE and IFRS, but IFRS is mandatory for public companies.
79
What type of operations should use ASPE versus IFRS?
ASPE should be used for simple operations, while IFRS is better suited for more complex systems.
80
What should a company consider when deciding whether to use ASPE or IFRS in terms of resources and cost?
Choose ASPE for limited resources and simpler accounting needs, and IFRS for more complex and resource-heavy reporting.
81
What type of companies should use ASPE regarding disclosure requirements?
ASPE is suitable for companies with few external stakeholders and less stringent disclosure needs.
82
Which accounting framework should a company use if it has no plans to become publicly accountable?
ASPE should be used if there are no plans to become publicly accountable.
83
Which accounting framework is best for small companies with simple operations?
ASPE is the best choice for small companies with simple operations.
84
What is the cash accounting method under ASPE 1000?
The client recognizes revenue when the cash comes through the company's bank account.
85
What does ASPE 1000 state about the basis of accounting for financial statements?
ASPE 1000 states that items recognized in the financial statements must be done so through an accrual basis of accounting.
86
What is the process for going from cash basis to revenue accrual under ASPE 1000 for AR?
Cash/Sales recorded + Cash taken and not recorded + Beg A/R Bal' - End A/R Bal'. = sales
87
How are inventories treated under ASPE 3031 for cash accounting?
When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized.
88
What formula is used to calculate Cost of Goods Sold (COGS) under ASPE 3031?
Beg inv. + purchase - End inv. = COGS.
89
What criteria must be met for an asset to be capitalized under ASPE 3061?
- The asset must be held for use in production, supply of goods, for rental, or administrative purposes,
- acquired with the intention of being used on a continuing basis, and
- not intended for sale.
90
What costs can be capitalized under ASPE 3061?
Purchase cost (less discount or rebate), duties and unrecoverable taxes, inspection costs, and borrowing costs (choice in ASPE, must be capitalized in IFRS).
91
What are the key considerations a client should take into account when deciding between ASPE and IFRS?
Bank requirement: Financial statements must be prepared under GAAP to assess risks and creditworthiness.
Financial information: Historical financials (including balance sheets) are needed, not just cash flow projections.
ASPE vs. IFRS: Private companies can choose between ASPE and IFRS, but IFRS is mandatory for public companies.
Operations complexity: Use ASPE for simple operations and IFRS for more complex systems.
Resources and cost: Choose ASPE for limited resources and simpler accounting needs, and IFRS for more complex and resource-heavy reporting.
Disclosure requirements: ASPE is suitable for companies with few external stakeholders and less stringent disclosure needs.
Future plans: Use ASPE if there are no plans to become publicly accountable.
Operations complexity: For small companies with simple operations, ASPE is the best choice.*
92
When is revenue from sales and service transactions recognized under ASPE 3400.04?
Revenue is recognized when performance is satisfied.
93
How should a refundable deposit be assessed under ASPE 3400.04?
The refundable deposit should be assessed for its utility and independence from the main obligation and transaction. If the performance obligation and measurement of revenue criteria are not met, revenue should not be recognized.
94
What is the general rule for measuring non-monetary transactions under ASPE 3831?
Non-monetary transactions should be measured at the more reliable of the fair value of the asset given up, or the asset received, unless any of the following exceptions apply:
- The transaction lacks commercial substance.
- The exchange is for a product or service sold in the course of business.
- Fair value is not available for either asset given or received.
- The transaction is non-monetary and non-reciprocal.
95
What conditions must be met for an onerous contract to be accrued under ASPE 1000.29?
An onerous contract must be treated under liabilities if the following conditions are met:
- A responsibility will be settled by a future transfer of assets or services.
- The responsibility cannot be avoided.
- An event has occurred that gives rise to the obligation
96
How are contingent gains treated under ASPE 3290?
Contingent gains are not accrued in financial statements, as this could result in the recognition of revenue that might never be realized. However, an asset can be disclosed in the notes if it is likely that a future event will confirm that an asset has been acquired or a liability reduce
97
What does ASPE 3290.16 say about contingent gains?
ASPE 3290.16 specifies that contingent gains are not accrued in financial statements because recognizing them could result in the recognition of revenue that might never be realized.
98
What does ASPE 3290.22 say about contingent gains?
ASPE 3290.22 states that an asset can be disclosed in the notes when it is likely that a future event will confirm that an asset has been acquired or a liability has been reduced.
99
What are the three steps in determining whether an asset is impaired according to IFRS IAS 36?
According to IFRS IAS 36, the three steps in determining whether an asset is impaired are:
Determine the asset grouping (CGU) as the smallest identifiable group of assets that generates cash flow independently (IAS 36.6).
Assess for indicators of impairment (IAS 36.12).
Compare the carrying value to the recoverable amount, where the recoverable amount is the lesser of value in use (discounted cash flows) or fair value minus selling costs.
100
What does IFRS 16.22 state regarding lease commencement?
IFRS 16.22 states that at the commencement date, a right of use (ROU) asset and a lease liability must be recognized.
101
What does IFRS 16.24 say about the composition of the right of use (ROU) asset?
IFRS 16.24 specifies that the right of use (ROU) asset shall be comprised of the initial measurement of the lease liability, which is the lease liability at recognition minus any payment made at the beginning of the lease term.
102
What are the requirements in IFRS 16.22 regarding the composition of the ROU asset?
IFRS 16.22 outlines the requirements for what the ROU asset is composed of, and each point must be addressed, including the recognition of the initial lease liability and payment conditions.
103
Over what period should the right of use (ROU) asset be depreciated according to IFRS 16?
The ROU asset should be depreciated over the lease term or the useful life of the asset, depending on which is shorter.
104
What interest is to be accrued on the lease liability under IFRS 16?
Interest will be accrued on the lease liability every period, calculated using the effective interest method.
105
What does IFRS 15.B48-49 say about non-refundable fees?
According to IFRS 15.B48-49, a non-refundable upfront fee should be assessed to determine if it is for a separate obligation. If the fee is part of the main obligation, it should be spread over the length of the contract.
106
What does IFRS 15.B21 state about revenue recognition for right of return sales?
IFRS 15.B21 states that revenue can be recognized only for the amount the entity is entitled to, and a refund liability must be recognized for the amount expected to be refunded. An asset being returned must be recognized when doing COGS, but only if the asset is still usable.
107
What factors increase the likelihood of reversal of revenue under IFRS 15.57?
According to IFRS 15.57, factors that could increase the likelihood of reversal of revenue include:
Consideration received is highly influenced by external factors.
Uncertainty about the amount of the return will last for a long time.
The entity has limited experience with these types of contracts.
108
What should be done if there is no evidence on how much will be returned under IFRS 15?
If there is no evidence on how much will be returned, revenue should not be recorded until the end of the return period, according to IFRS 15.
109
What is the process following a notice of reassessment?
Following a notice of reassessment, the following steps should be taken:
Recalculate the CCA (Capital Cost Allowance) or taxable income.
Provide suggestions on support to provide to the CRA.
A notice of objection may be filed within 90 days of the reassessment.
If no response is received or the initial appeal is dismissed, another appeal can be made to the Tax Court of Canada.
110
What does ASPE 3400.A45-48 say about upfront fee revenue recognition?
ASPE 3400.A45-48 states that an upfront fee should be assessed to determine if it has any utility or is independent from the main transaction. If the fee is not separate, it should be recognized alongside the revenue from the main transaction.
111
What does ASPE 3031.07 define as inventory?
ASPE 3031.07 defines inventory as assets held for sale in the ordinary course of business, or in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process.
112
How is Cost of Goods Sold (COGS) treated under FOB destination according to ASPE 3031?
Under FOB destination, COGS should not be recorded until inventory is delivered to the buyer, as per ASPE 3031.
113
What does ASPE 3061.14 state about betterments?
ASPE 3061.14 states that costs incurred to enhance the service potential of capital assets, such as increased capacity, extended useful life, or decreased operating costs, are considered betterments. If it is a betterment, the cost should be capitalized and depreciation should be accounted for.
114
According to IAS 32.11, how is a note receivable classified?
A note receivable meets the definition of a financial asset as per IAS 32.11.
115
What are the two conditions for a financial asset to be measured at cost according to IFRS 9?
According to IFRS 9, a financial asset will be measured at cost if both of the following conditions are met:
The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows.
The contractual terms of the financial asset give rise to cash flows on specified dates.
116
How is the present value of a note receivable calculated?
The present value of a note receivable is calculated by using the coupon rate for the payment each period and the interest rate for interest expense and discounting.
117
How is a note receivable treated under ASPE?
A note receivable meets the definition of a financial instrument under ASPE 3856, and its fair value is measured the same as under IFRS.
118
What is RAP used for in the context of audit procedures?
RAP is used to describe the procedure portion of RAMP in audit procedures.
119
What is the procedure to confirm the accuracy of a note receivable?
The procedure to confirm the accuracy of a note receivable includes:
Sending a confirmation to a third party to confirm the amount of the note payable due on their end.
Recalculating the amortized cost and comparing it to the amount on the general ledger (GL).
Obtaining terms of the note and recalculating the amounts that should be recorded as short-term liabilities.
120
Are warranties considered financial liabilities under IFRS?
No, warranties are not considered financial liabilities under IFRS IAS 32.
121
What CAS section contains audit procedures?
CAS 500
122
What are the audit procedures to ensure revenue occurrence related to contracts?
Inspect a sample of the contracts to identify the fees and verify their accuracy.
123
What audit procedure ensures that inventory delivery aligns with revenue occurrence?
Inspect copies of shipping documents to confirm inventory delivery.
124
Under ASPE 3831.06, how should an entity measure a non-monetary transaction?
Measure the asset exchanged at the most reliable fair value (FV) of the asset given up or received, unless exceptions apply.
125
What are the exceptions under ASPE 3831.06 where fair value measurement is not used?
- The transaction lacks commercial substance.
- The transaction is an exchange of an asset that is sold in the normal course of business or within the same line of business.
- Neither fair value is available.
- The transaction is non-monetary and non-reciprocal.
126
How is the new asset recognized if a non-monetary transaction lacks commercial substance under ASPE 3831.06?
Recognize the new asset at the carrying amount of the asset given up and derecognize the old asset.
127
What journal entry might reflect a non-monetary transaction where gain is recognized?
Debit: Asset New
Debit: Accumulated Depreciation
Credit: Asset Old
Credit: Gain on Non-Monetary Transaction
128
What does ASPE 3065.16 state regarding the initial recognition of leases?
it outlines the requirements for recognizing leases at inception, including recording the asset and liability at fair value or discounted value of lease payments.
129
How does ASPE 3065.17 address subsequent measurement of leases?
It provides guidance on subsequent measurement, typically involving amortization of the lease liability and recognition of expenses or income over the lease term.
130
What ASPE section covers both initial and subsequent measurement of leases?
ASPE 3065.16 covers initial recognition, and ASPE 3065.17 addresses subsequent measurement.
131
How is a foreign currency transaction initially recognized under IFRS IAS 21?
At the spot rate and in the functional currency.
132
Under IFRS IAS 21, how are monetary items remeasured at the period end?
Monetary items (balance sheet accounts) are updated to reflect the spot rate at the period end.
133
What rate is used to measure interest in foreign currency transactions under IFRS IAS 21?
The average rate.
134
What rate is used for remeasurement of non-monetary items under IFRS IAS 21?
The future rate is used.
135
At what cost is equipment measured under IFRS IAS 21?
Equipment is measured at historical cost.
136
What are the criteria for an asset to be considered intangible under IFRS IAS 38?
Identifiability.
Control.
Future economic benefit.
137
Which IFRS standard outlines the criteria for intangible asset capitalization?
IFRS IAS 38.
138
What is an asset retirement obligation (ARO) under ASPE 3110?
A legal obligation tied to the retirement of a tangible long-lived asset.
139
When should an ARO liability be recognized under ASPE 3110?
In the period it is incurred when a reasonable estimate can be made.
140
How is an ARO measured under ASPE 3110?
It is measured as the present value (PV) of the future cost to retire the asset.
141
How is an ARO expensed if there is no underlying asset to increase?
It is expensed as part of Cost of Sales (COGS)
142
What journal entry recognizes ARO accretion expense under ASPE 3110.19-20?
Recognize accretion expense as ARO * interest rate.
143
What are the two methods available for accounting for significant influence under ASPE 3051.05?
The equity method and the cost method.
144
Which method is better for financial statement presentation under ASPE 3051.05?
The equity method.
145
How is income from an associate calculated under the equity method in ASPE 3051?
Income of associate * months owned * % owned.
146
What journal entry is used to record income under the equity method?
Debit: Investment in X
Credit: Equity income in X.
147
What is a discontinued operation under ASPE 3475.03?
A portion of an enterprise that has been disposed of or is classified as held for sale, meeting one of these:
A separate major business line or geographical area.
Part of a plan to dispose of a major line of business.
A subsidiary acquired for the purpose of being sold.
148
What criteria must be met for a component to be classified as held for sale under ASPE 3475.08?
- Management with authority has a plan to sell.
- Available for immediate sale.
- Entity is actively trying to find a buyer.
- Sale is probable.
- Marketed at a reasonable price.
- Unlikely changes to the plan to sell.
149
How is a discontinued operation measured under ASPE 3475?
At the lower of its carrying amount or fair value less cost to sell.
150
What items must be presented separately on the balance sheet for discontinued operations?
Items of the segment must be presented as a separate line.
151
How is net loss calculated for discontinued operations?
Loss from segment - loss on asset write-down * tax rate = tax recovery. Total loss + recovery = net loss.
152
What are the two types of subsequent events under ASPE 3820?
- Conditions that existed at the date of the financial statements.
- Conditions that arose subsequent to the financial statement date.
(date of financial statements is the date when management authorizes the statements)
153
What is required for subsequent events that do not require adjustment under ASPE 3820.11?
A description of their nature and an estimate disclosed in the notes.
154
How are errors accounted for under ASPE 1506?
Retrospectively.
155
What are the steps for calculating the net decrease/increase in income for errors under ASPE 1506? and what would be a sample entry for incorrect depreciation
Expense recorded.
Less correct expense.
= Additional expense required.
Multiply by tax rate.
Net decrease (increase) in income.
DR - RE
DR - Tax Payable
CR - Acumm Depr
156
When is an entity considered a related party under IAS 24?
If it meets any of the conditions in IAS 24.9(b).
157
What disclosure is required for the parent and ultimate controlling party under IAS 24.13?
The name of the parent and ultimate controlling party must be disclosed, even if no transactions occurred.
158
What details of related party transactions must be disclosed under IAS 24.18?
Amount of transactions.
Outstanding balances, terms, and guarantees.
Provisions for doubtful debts.
Expenses related to bad or doubtful debts.
159
What nature of the relationship must be disclosed under IAS 24.18?
The nature of the relationship between the related parties must be disclosed.
160
What are the criteria for recognizing property, plant, and equipment (PPE) under IAS 16?
PPE must be held for use in the production or supply of goods or services, rental to others, or administrative purposes.
PPE must be expected to be used for more than one reporting period.
161
What options does ASPE provide for the treatment of bond payable?
ASPE gives the option to use the effective interest rate method or the straight-line method for bond payable.
162
How should bonds payable be initially measured under ASPE?
Under ASPE 3856.07, bonds payable are initially measured at fair value, with no gain or loss recorded.
163
How is bond payable subsequently measured under ASPE?
Under ASPE 3856.11, bond payable is subsequently measured at amortized cost, unless otherwise specified.
164
What must be recorded if coupons are issued in the current year under ASPE?
A liability must be recorded in the current year, even if the coupons are used in the next year, and this is assessed under liabilities for ASPE.
165
What does ASPE 3400.11 say about separately identifiable components?
ASPE 3400.11 allows separately identifiable components to be recorded as needed, with revenue recognition assessed for each component.
166
How should a building and land be capitalized when being constructed under ASPE?
Under ASPE, a building and the land must be capitalized separately as land cannot be depreciated.
167
How is land allocated under ASPE 3061.18 during construction?
ASPE 3061.18 requires the allocation of costs to separable components, including land, demolition costs, and land transfer.
168
What criteria must be met for bill and hold revenue recognition under ASPE 3400.A43?
ASPE 3400.A43 requires the following criteria for bill and hold transactions:
Risks of ownership must have passed to the buyer.
The customer must have made a fixed commitment to purchase the goods.
The buyer must request the transaction on a bill and hold basis and must have a substantial business purpose.
There must be a schedule for delivery that is reasonable and consistent with the buyer's business purpose.
The seller must not retain specific performance obligations such that the earning process is incomplete.
The ordered goods must be segregated from the seller's inventory and not used for other orders.
The product must be complete and ready for shipment.
169
What does ASPE 3856.16/7 say about accounts receivable (A/R)?
ASPE 3856.16/7 outlines how accounts receivable (A/R) should be assessed.
170
What does IFRS 15.B40-42 say about customer loyalty points?
IFRS 15.B40-42 states that loyalty points create a performance obligation that provides a material right to the customer, and the transaction price must be allocated on a stand-alone basis. A contract liability is recognized for the points.
171
What are the conditions for recognizing provisions under IAS 37?
IAS 37 outlines that provisions should be recognized if:
There is a present obligation.
It is probable that an outflow of assets will occur.
A reliable estimate can be made for the amount.
172
What does IAS 37.28 say about contingent liabilities?
IAS 37.28 requires contingent liabilities to be assessed based on their remoteness.
173
What does IFRS 16 require for assessing lease liabilities and ROU assets?
IFRS 16 requires assessment of both lease liabilities (sections 26-27) and right-of-use (ROU) assets (sections 22-24).
174
How should intangible assets be assessed according to the Market Report under IFRS?
To assess whether an intangible asset definition is met, the criteria include:
Identifiability: Can it be sold on its own?
Control: Does the entity have exclusive rights to it?
Future economic benefit.
175
What is IFRS’s stance on betterment and PPE?
IFRS does not recognize betterment, and improvements should be assessed under the criteria for whether they should be considered property, plant, and equipment (PPE), including:
Held for use in the production or supply of goods or services.
Expected to be used for more than one period.
Future economic benefits will flow to the entity.
The cost of the item can be measured.
176
What does IFRS say about day-to-day servicing costs?
IFRS states that day-to-day servicing costs are not capitalized.
177
What does IAS 24 say about related party transactions under IFRS?
IAS 24 outlines that an entity is related to a reporting entity if both are members of the same group, including parent, subsidiary, and fellow subsidiaries. The entity must disclose:
- The name of its parent.
- The amount of the transaction.
- Amount of outstanding balances.
- Provisions for doubtful accounts.
- Expenses related to bad debt.
178
What is IFRS's definition of performance obligation in relation to coupons and loyalty points?
In IFRS, loyalty points assess the definition of a performance obligation as per IFRS 15.73, relating to transaction prices.
179
What does ASPE 3400.23 say about sales taxes and revenue?
ASPE 3400.23 states that amounts collected on behalf of third parties, such as sales taxes and goods and services taxes, are not economic benefits that flow to the enterprise and do not increase equity. Therefore, they are excluded from revenue.
180
What does ASPE 3400.24 say about acting as an agent versus a principal in consignment sales?
ASPE 3400.24 provides criteria to determine whether an entity is acting as an agent or as a principal in consignment sales, which affects how gross or net revenue is reported.
181
What is the journal entry for a sale on consignment under ASPE?
The journal entry for a sale on consignment is:
DR: Cash
CR: Commission revenue
CR: Due to consignor
