Académique Documents
Professionnel Documents
Culture Documents
Fundamnetal qualities
REVENUE-recognition 5 conditions
1. Transfer of risk
2. No managerial control
3. Can be reliably measured
4. Probable economic inflow
5. Cost can be reliably measured
6. Stage performed (services)
FX Changes in the value of asset in functional currency should be recognised in the PL during year end
(AR,FVTPL, AFS)
- FOB Shipping point/Destination (transfer of risk is at shipping point/destination normally the one
paying for the shipment will bear the risk)
- Consignor owns the property, so its consign the item to consignee
Perpetual Periodic
- Purchases add to inventory - Purchases go to purchase account
- Record COGS immediately at the point of sales - COGS will be adjusted at year end as the
- WA calculated at the point of sales balancing figure for: Beginning inventory
+ Purchases – Ending inventory = COGS
- WA weighted average is calculated at
the end of the perod (so 1 fix COGS rate)
PPE
Depreciation Straight-line, Double declining (if straight line is 10%, then decline at 20%, rmb need to
remove scrap when calculating the declining), units of production.
Cost model vs Revaluation model When reverting to revaluation model, entire asset class, accumulated
depreciation still remains (so revaluation amount is calculated by comparing the CV with FV then exercise
Dr/Cr on the Cost of the Asset) goes to RR and OCI
Impairment when CV higher than recoverable amount (higher of FV less cost of disposal & Value-in-use
(NPV)) after impairment need to account under accumulated impairment loss
Intangible assetidentifiable non-monetary asset without physical substance Identifiable (separate from
entity i.e. can be sold), control, existence of future economic benefit)
6 criteria technical feasible, intention to complete and ability to use or sell, cost can be measured reliably
Investments:
- Associate take in only Net Income, not responsible for sales or revenue (significant control or 20%)
dividend reduce asset value
- Subsidiaries take in every thing account for NCI (must be 50% above voting rights)
- Investment and financial assets
-
FVTPL (sell in one year) AFS (not associate, not FVTPL) - Fina
ncia
- Transaction cost hit P/L - Transaction cost capitalise
l
- Changes in value hit P/L under unrealised - Changes in value hit OCI under AFS
gain/loss reserve
- Mark to Market (without disposal cost) - Mark to market (without disposal cost)
- Realise P/L on sale - Recycle AFS Reserve to P/L
assets are non-physical assets whose value is derived from a claim can be cash, receivables, loans, equity
instruments
- Investment’s FX gain/loss is accounted in OCI
- Dividend FVTPL and AFS hit income statement
Bond issue:
If Effective rate is not the same as coupon, must report ER as the interest expense. The balance of ER and coupon
will be used to grow/amortise the bond itself
- Condition A: Identifiable asset esits: Supplier must have no right to the asset & no benefit to supplier
- Condition B: Right to control exists: Customer has right to all economic benefits from asset and direct
use of it
Share Authorizedtotal legal amount of shares
Share buy-back can be immediately cancelled to reduce outstanding and issued shares
- Pressure
- Rationalization
- Opportunity
Need to:
- Safeguard assets
- Encourage emplyees to follow company’s policies
- Promote operational efficiency
- Ensure accurate, reliable accounting records
- Comply with legal requirements
Internal controls:
- Seperation of duties
- Comparison and Compliance Monitoring
- Adequate Records
- Limited Access
- Proper Approvals
- IT
Bank Reconciliation
Change the BOOKS cause bank statement is the correct cash amount
DUPONT ratio
Unbilled(accrued) revenue=/= accounts receivable accounts receivable is billed i.e. invoiced sometimes unbilled
revenue is when you performed the service contract but not billed(think phone)
Cost asset is at cost value with 2 contra acc dep and acc gain/loss in FV must revalue when below NPV
FV basis cannot return back to cost, will have acc dep account if change from cost model (ASK HOW IS IT
SHOWN IN FS)
Bucket purchase when we buy a asset bundle cost is allocated to the proportion of FV (land and building combo
is the most typical)
Accounting on financial structures
Cash flow
Look into big ticket items. (depreciation, stock base compensation, share buyback, dividend payout, share issuance)
IT they like to pay share base compensation (because the most valuable is intangible asset, growth focus and
cause they lack cash)
Direct and indirect method only affects the operating cash flow. No difference in investing and financing
(Total asset/ equity) Financial Leverage For every dollar in asset, company use % in equity and % in debt to finance
Net profit margin measures how effective management is at generating profit on every dollar of sales.
Gross Margin After subtracting the cost of producing or purchasing goods, Company was able to generate % on
every dollar of sales.