Week 6 Flashcards
(15 cards)
Under ASPE, what information is used to estimate the Allowance for Doubtful Accounts?
Historical and current information only (no forward-looking info like IFRS).
What does IFRS presume if an investor owns 20% of voting shares?
The investor has significant influence unless proven otherwise.
Why was Bombardier’s cash classified as restricted at year-end?
Because bank guarantees were in place at the reporting date (even if released after year-end).
Which of the following is NOT correct about non-strategic investments under ASPE?
ASPE records unrealized gains/losses on FVPL investments to OCI. (Incorrect: ASPE does not have OCI.)
What is restricted cash?
Cash that cannot be freely used because it is tied to obligations like bank guarantees.
Where is restricted cash shown on the balance sheet?
As a separate line under current assets or disclosed in the notes to financial statements.
Is the release of a bank guarantee after year-end an adjusting or non-adjusting event?
Non-adjusting. It does not affect year-end financials but is disclosed in the notes.
What is a bank guarantee?
A promise from a bank to cover a company’s obligation if it defaults, often requiring collateral (restricted cash).
Why might a company elect FVOCI for an equity investment?
To reduce income statement volatility and reflect a long-term holding strategy.
What is the default IFRS 9 classification for equity investments?
FVPL (Fair Value Through Profit or Loss).
What does it mean to make an election for FVOCI?
It’s an irrevocable decision at initial recognition to measure a non-trading equity investment through OCI.
When are fair value gains/losses recycled to net income under FVOCI for equity investments?
They are NOT recycled—gains/losses stay in OCI permanently.
What does “influence” mean in accounting?
The ability to participate in financial and operating policy decisions of another entity.
How much ownership is typically needed for significant influence?
Usually 20% or more of voting shares.
Does ASPE allow FVOCI as a measurement basis?
No
