SLIDES WEEK 5 Flashcards
(32 cards)
four main categories non current assets
- PPE
- natural resources
- intangible assets
- long term investments
all costs incorrect to acquire and get land ready for use are CAPITALIZED
Land
are all the three depreciation methods acceptable under IFRS?
Yes
two issues regarding depreciation
- must update and recalculate depreciate
- each part should be depreciated separately
Revaluation surplus is reported as part of
other comprehensive income
Revaluation of assets→Recording the loss
dr accumulated depreciation
dr impairment loss
cr equipment
Revaluation of assets→Recording the gain
dr accumulated depreciation
cr equipment
cr revaluation surplus
sometimes companies exchange non current assets like an old delivery truck for a new one, an exchange can have commercial substance and lack commercial substance
commercial substance: When the exchange changes the timing or amount of future cash flows produced by the asset
lack commercial substance: When the exchange does not change future cash flows produced by the asset
Depletion
the allocation of the cost of a natural resource over its useful life
When can an intangible asset be included in the financial statements?
It will likely bring future economic benefit
Its cost can be measured reliably
What are patents and how are they accounted for?
Patents give exclusive rights to sell a product, usually for 20 years. Costs are amortized over the shorter of legal life or useful life.
What are copyrights and how are they accounted for?
Copyrights protect artistic/published works. Costs (including legal defense) are amortized over legal or useful life, whichever is shorter.
What are trademarks and trade names?
Rights to use a name or symbol for a product — usually renewable, so they have indefinite life and are not amortized.
If a company creates its own brand name or logo (instead of buying it), can it include that as an “asset” in its financial statements?
No — only purchased trademarks can be recognized on the financial statements.
How are franchises and licenses accounted for?
If they have a definite life, they are amortized. Costs to buy them are intangible assets, but regular payments are operating expenses.
What is goodwill and when does it arise?
Goodwill happens when a company pays more than the fair value of another company’s net assets during an acquisition.
Is goodwill amortized?
No — it has an indefinite life. But it must be impaired if its value drops.
Technical feasibility
You’ve shown the product can be built or developed (it’s no longer just a theory or prototype)
In accounting (especially under IFRS), feasibility is
the point where an idea becomes a real, usable, valuable thing.
Commercial feasibility
You have a plan to sell or use it and it will probably bring economic benefits
whats the relationship between feasibility and R&D process
Everything spent before technical and commercial feasibility is proven must be expensed in the R&D process
Current liabilities 5 categories
Short term loans
Amounts to be paid to others
Deferrals
Current maturities of long-term debt
Provisions
