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ACCOUNTING 5

FINANCIAL ACCOUNTING 2
Schedule:
ACA MTThF 7:30-9:00
ACB MTThF 9:00-10:30
Attendance: per student handbook
Exam rules:
1. No bathroom breaks during exam.
2. Delayed exam will only be given for major exams (per handbook). None for short or long
quizzes.
Edmodo page: XU Accounting 5 2015-2016 - https://edmo.do/g/iyck8k
Facebook class page: XU ACTG 5 ACA & ACB 2015-2016 https://www.facebook.com/groups/946785415392555/

ACCOUNTING 5
FINANCIAL ACCOUNTING 2
Course Outline
Topic 1 LIABILITIES

Definition of liabilities
Examples of liabilities
Initial measurement of liabilities
Subsequent measurement of liabilities
Amortized cost of financial liability
Fair value option of measuring financial
liability
Current and noncurrent liabilities
Measurement of current liabilities
Measurement of noncurrent liabilities
Long-term debt falling due within year
Refinancing of financial liability
Covenants
Breach of covenants
Presentation of current liabilities
Estimated liabilities

Topic 2 PREMIUM AND WARRANTY


LIABILITY

Premiums
Customer loyalty program
Warranty
Accrual approach for warranty
Expense as incurred approach for
warranty
Sale of warranty

Topic 3 ACCRUED LIABILITIES AND


DEFERRED REVENUE

Payroll taxes
Value added taxes
Gift certificates payable
Refundable deposits
Bonus computation
Deferred Revenue

Topic 4 PROVISION AND CONTINGENT


LIABILITY

Definition of provision
Recognition of a provision
Measurement of a provision

Other measurement considerations


Decommissioning liability
Restructuring
Contingent liability
Contingent asset
Events after reporting period
Financial statements authorized for issue

Topic 5 BONDS PAYABLE

Definition of bond
Features of a bond issue
Contents of a bond indenture
Types of bonds
Issuance of bonds at a premium or
discount
Initial and subsequent measurement of
bonds payable
Recording interest on bonds payable
Bond issue cost
Bond retirement on maturity date
Bond retirement prior to maturity date
Treasury bonds
Bond refunding
Fair value option of measuring bonds
payable
Change in fair value of financial liability
recognized in other comprehensive
income

Topic 6 EFFECTIVE INTEREST METHOD

Nominal interest rate


Effective interest rate
Effective amortization of discount
Effective amortization of premium
Effective amortization of bond issue cost
Market price of bonds payable
Computation of effective interest rate

Topic 7 COMPOUND FINANCIAL


INSTRUMENT

Definition of financial instrument


Examples of financial instrument
Financial Liability

ACCOUNTING 5
FINANCIAL ACCOUNTING 2

Examples of financial liability


Equity instrument
Examples of equity instrument
Compound financial instrument
Accounting for compound financial
instrument
Bonds payable issued with share warrants
Convertible bonds payable original
issuance and conversion
Payment of convertible bonds payable at
maturity
Payment of convertible bonds payable
before maturity

Topic 8 NOTE PAYABLE

Initial measurement of note payable


Subsequent measurement of note
payable
Amortized cost of note payable
Fair value option of measuring note
payable
Note issued solely for cash
Interest bearing note issued for property
Noninterest bearing note issued for
property

Topic 9 DEBT RESTRUCTURE

Definition of debt restructure


Asset swap
Dacion en pago
Equity swap
Modification of terms
Substantial modification of terms
Nonsubstantial modification of terms

Topic 10 OPERATING LEASE

Definition of lease
Operating lease lessee
Operating lease lessor
Unequal rental payments
Disclosures for operating lease lessee
Disclosures for operating lease lessor

Topic 11 FINANCE LEASE LESSEE

Definition of finance lease


Criteria for a finance lease
Cancelable and noncancelable lease
Cancelable lease deemed
noncancelable
Inception of the lease
Commencement of the lease
Land and building lease
Implicit interest rate
Incremental borrowing rate
Minimum lease payments
Actual purchase of leased asset
Disclosures for finance lease - lessee

Topic 12 DIRECT FINANCING LEASE


LESSOR

Finance lease classification lessor


Gross investment in the lease
Net investment in the lease
Direct financing lease with initial direct
cost
Direct financing lease with guaranteed
residual value
Direct financing lease with unguaranteed
residual value

Topic 13 SALES TYPE LEASE LESSOR

Gross investment in the lease


Net investment in the lease
Sales and cost of sales
Sales type lease with residual value
Sales type lease with initial direct cost
Sales type lease with bargain purchase
option
Actual sale of leased asset
Disclosures for finance lease - lessor

Topic 14 SALE AND LEASEBACK

Definition of sale and leaseback


Leaseback as an operating lease
Leaseback as a finance lease

Topic 15 ACCOUNTING FOR INCOME TAX

Accounting income and taxable income

ACCOUNTING 5
FINANCIAL ACCOUNTING 2

Permanent and temporary differences


Deferred tax liability
Tax base
Accounting income higher than taxable
income
Deferred tax asset
Taxable income higher than accounting
income
Operating loss carryforward
Method of accounting for income tax
income statement approach and
statement of financial position
approach
Net deferred tax expense or benefit
Current tax liability and current tax asset
Presentation of deferred tax asset or
liability
Measurement of deferred tax asset or
liability
Intraperiod and interperiod tax allocation
Disclosures related to income tax

Topic 16 POSTEMPLOYMENT BENEFITS

Definition of employee benefits


Examples of employee benefits
Postemployment benefits
Contributory and noncontributory plans
Funded and unfunded plan
Defined contribution plan
Defined benefit plan
Postemployment benefits under the law
Insured benefits
Accounting for defined contribution plan
Disclosures defined contribution plan
Accounting for defined benefit plan
Components of defined benefit cost
Actuarial valuation method
Current service cost
Net interest
Past service cost
Plan assets
Qualifying insurance policy
Measurement of plan assets
Recognition of return on plan assets
Fair value of plan assets
Accumulated benefit obligation

Projected benefit obligation


Actuarial gains and losses
Actuarial assumptions
Recognition of actuarial gains and
losses
Basic accounting consideration FVPA
and PBO
Prepaid/Accrued benefit cost
Settlement of plan
FVPA more than PBO surplus
Asset ceiling
Disclosures - defined benefit plan
Transitional provision of PAS 19R
Accounting and reporting by retirement
benefit plan
Report of defined contribution plan
Report of defined benefit plan

Topic 17 Other Employee Benefits

Short-term employee benefits


Recognition and measurement of
short- term employee benefits
Short-term paid absences
Profit sharing and bonus plans
Recognition and measurement of profit
sharing and bonus plan
Other long-term employee benefits
Recognition and measurement of other
long-term employee benefits
Termination benefits
Recognition and measurement of
termination benefits

Topic 18 - SHAREHOLDERS EQUITY

Concept of corporation
Organization of a corporation
Articles of incorporation and by-laws
Preincorporation subscription
agreement
Components of corporation
Books and records of a corporation
Organization cost
Elements of shareholders equity
Share capital ordinary share and
preference share

ACCOUNTING 5
FINANCIAL ACCOUNTING 2

Legal capital
Trust fund doctrine
Accounting for share capital
Issuance of share capital for noncash
consideration
Issuance of share capital for services
Share issuance costs
Costs of public offering of shares
Share issued at a discount
Watered share and secret reserve
Delinquent subscription
Preference share callable,
redeemable and convertible
Rights issue and share warrants
Treasury shares
Donated shares
Assessments on shareholders
Recapitalization

Topic 19 RETAINED EARNINGS

Unappropriated and appropriated


Dividends cash, property, stock and
liquidating
Dividends as expense
Appropriation of retained earnings
Statement of retained earnings
Meaning of reserves
Statement of changes in equity
Components of comprehensive income
Other comprehensive income
Quasi-reorganization

Topic 20 SHARE-BASED COMPENSATION:


SHARE OPTIONS

Share-based compensation plan


Equity settled share-based
compensation
Cash settled share-based compensation
Share options
Measurement of share options
Fair value and intrinsic value
Recognition of compensation expense
Acceleration of vesting
Subsidiary employees granted rights to
the equity instrument of parent

Topic 21 SHARE-BASED COMPENSATION:


SHARE APPRECIATION RIGHT

Cash settled share-based payment


transaction
Share appreciation right
Measurement of compensation
Recognition of compensation
Cash and share alternative

Topic 22 BOOK VALUE PER SHARE

Definition of book value per share


Liquidation value of preference share
Preference as to assets
Preference as to dividends
Cumulative, noncumulative, participating
and nonparticipating preference share

Topic 23 BASIC EARNINGS PER SHARE

Definition of earnings per share


Public and nonpublic entities
Presentation of earnings per share
Uses of earnings per share

Definition of terms ordinary share, equity instrument, potential ordinary share, financial
instrument, warrant or option
Basic earnings per share
Average shares outstanding
Participating preference share
Bonus issue
Rights issue
Basic loss per share

Topic 24 DILUTED EARNINGS PER SHARE

ACCOUNTING 5
FINANCIAL ACCOUNTING 2

Simple and complex capital structure


Potential ordinary share
Dilution and antidilution
Diluted earnings per share
Convertible bonds payable
Convertible preference share
Options and warrants
Treasury share method
Diluted loss per share
Multiple potential ordinary shares
Written put options
Contingent ordinary shares
Convertible bonds payable settled in shares or cash

Reference(s):

Peralta, J., Valix, C. & Valix C. (n..d.). Financial accounting: Volume two. (2015 ed.). Manila,
Philippines: Gic Enterprises & Co., Inc.