Understanding Balance Sheet Flashcards
Current Asset
Assets used within one year or one operating cycle of business
Current liabilities
It is expected to be settled in the entity’s normal operating cycle;
It is held primarily for the purpose of being traded;4
It is due to be settled within one year after the balance sheet date; or
The entity does not have an unconditional right to defer settlement of the liability for at least one year after the balance sheet date.5
Contra accounts calculation
written off by reducing AR and allowance for doubtful accounts.
Measure and techniques inventory costs IFRS vs. GAAP
lower of cost and net realisable value (estimated) in IFRS
lower of cost and market value in GAAP
When to write down inventory
when net realisable value or market value falls below carrying amount -> loss in I.S.
Notes payable
financial liabilities owed by a company to creditors, including trade creditors and banks, through a formal loan agreement due within one year or operating cycle
PPE measurement
IFRS: cost model or revaluation model
GAAP: only cost model
- carried at amortised cost
Impairment
Recoverable amount < carrying amount
Recoverable amount: The higher of an asset’s fair value less cost to sell, and its value in use.
Fair value less cost to sell: The amount obtainable in a sale of the asset in an arms-length transaction between knowledgeable willing parties, less the costs of the sale.
Value in use: The present value of the future cash flows expected to be derived from the asset.
Intangibles
IFRS: cost or revaluation
GAAP: cost model
Identifiable intangibles
identifiable intangibles are expensed
IFRS: must identify research (expensed) and development (capitalized) phase.
- technological feasibility, ability to use or sell the resulting asset, ability to complete the project
GAAP: all costs expensed
