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IAS

Key points from IAS required for AAT level 4 (2019 syllabus)

TermDefinition
IAS 16 - What is the Revaluation Model The asset is carried at a revalued amount, being its FAIR VALUE at the date of revaluation less subsequent depreciation and impairment, provided that fair value can be measured reliably.
IAS 16 - Depreciation methods (3) 1) the straight-line method 2) the diminishing balance method (or Sum of digits depreciation as a proxy for the diminishing balance method) 3) the units of production method - a charge based on the expected use or output
IAS 38 - THREE critical attributes of an intangible asset 1)identifiability 2)control (power to obtain benefits from the asset) 3)future economic benefits (such as revenues or reduced future costs)
IAS 38 - WHEN is an intangible asset identifiable? 1) Is separable (capable of being separated and sold, etc.) or 2) Arises from contractual or other legal rights
IAS 38 - For development costs to be capitalised the “intangible asset” must meet SIX criteria 1)Separately identifiable expenditure 2)Expenditure clearly defined on the project 3)Commercially viable 4)Technically feasible 5)Overall profit expected (future income greater than costs) 6)Resources exist for completion
IAS 38 - How do you account for research costs? Charge all RESEARCH COST to expense as too remote from a future benefit
IAS 36 - Indicators of impairment 1) Decrease in the market value of an asset 2) Evidence of damage 3) A reduction in the usage of an asset 4) Evidence that the asset has performed worse that expected
Fundamental principle of IAS 2 Inventories are required to be stated at the lower of cost and net realisable value (NRV)
IAS 2 - Inventories 1) assets held for sale in the ordinary course of business (finished goods), 2) assets in the production process for sale in the ordinary course of business (work in process) 3) materials and supplies that are consumed in production (raw materials)
IAS 2 - INCLUDE in the cost of inventories (3) 1) costs of purchase (including taxes, transport, and handling) net of trade discounts received 2) costs of conversion (including overheads) and 3) other costs incurred in bringing the inventories to their present location and condition
IAS 2 - EXCLUDE from cost of inventories 1) abnormal waste 2) storage costs 3) administrative overheads unrelated to production 4) selling costs 5) foreign exchange differences 6) interest cost when inventories are purchased with deferred settlement terms
IAS 37 - When should a provision be recognised (3) if, and only if: 1) An entity has a present obligation (legal or constructive) that has arisen as a result of a past event (the obligating event), 2) payment is probable ('more likely than not'), and 3) the amount can be estimated reliably.
IAS 16 - Recognise an Items of PPE only if (2) 1) it is probable that the future economic benefits associated with the asset will flow to the entity, and 2) the cost of the asset can be measured reliably
IAS 16 - Initial measurement of an item of PPE At cost: 1) Purchase price; plus 2) any further costs directly attributable to bringing the item to location and condition necessary for its intended use
IAS 16 - Initial measurement of an item of PPE - examples of costs you CAN include 1) Delivery costs, 2) Assembly costs 3) Professional fees 4) Cost of testing an asset
IAS 16 - Initial measurement of an item of PPE - examples of costs you CAN NOT include 1) Day to day servicing 2) general administrative expenses and overheads 3) cost of opening or promoting asset (or product produced from it)
IAS 16 - When can you include SUBSEQUENT EXPENDITURE in the cost of an item of PPE If it will probably result on future economic benefits to entity (by improving performance) Do NOT include servicing costs e.g. repairs & maintenance
IAS 16 Measurement subsequent to initial recognition IAS 16 allows the entity to choose either the cost model or the revaluation model as its accounting policy and shall apply that policy to an entire class of property, plant and equipment
IAS 36 Impairment review Assets should be measured at the LOWER of the Carrying amount or the Recoverable amount - (the HIGHER of an asset's fair value less costs to sell and its value in use)
IFRS 15 - The five-step model - step 1 Identify the contract(s) with a customer
IFRS 15 - The five-step model - step 2 Identify the performance obligations in the contract
IFRS 15 - The five-step model - step 3 Determine the transaction price
IFRS 15 - The five-step model - step 4 Allocate the transaction price to the performance obligations in the contract
IFRS 15 - The five-step model - step 5 Recognise revenue when (or as) the entity satisfies a performance obligation
IFRS 15 -The five conditions for a contract with a customer to be within the scope of IFRS 15 1 the contract has been approved by the parties to the contract; 2 each party’s rights can be identified; 3 the payment terms can be identified; 4 the contract has commercial substance; and 5 it is probable that the consideration will be collected.
IAS 16 - Definition of depreciation the systematic allocation of the depreciable amount of an asset over its useful life
IFRS 16 - Initial measurement of a right-to-use asset measure the right-of-use asset at cost- the amount of the lease liability adjusted for lease incentives, payments at or prior to commencement
IFRS 16 - Initial measurement of the liability measure the lease liability at the present value of the lease payments over the lease term, discounted using the interest rate implicit in the lease, if that rate can be readily determined. Alternatively use the lessee’s incremental borrowing rate
IFRS 16 - Recognition exemption • short-term leases; • leases for which the underlying asset is of low value (such as personal computers or small items of office furniture) – this election can be made on a lease-by-lease basis
IFRS 15 - indicators control has passed to customer • The entity has the right to payment • The customer has the legal title to the asset • The customer has taken possession of the asset • Risks & rewards have been transferred • The customer has accepted the asset