Lecture 3 Non-Financial & Current Liabilities 代写

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  • Lecture 3
    Non-Financial & Current Liabilities
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    1 RSM 221 Intermediate Financial Accounting II: Winter 2016
    Agenda
    — Introduction to Liabilities
    — Financial Liabilities
    — Non-Financial Liabilities
    — Contingencies
    — Presentation & Disclosure
    2 RSM 221 Intermediate Financial Accounting II: Winter 2016
    Introduction to Liabilities
    RSM 221 Intermediate Financial Accounting II: Winter 2016 3
    Definition of a Liability
    RSM 221 Intermediate Financial Accounting II: Winter 2016 4
    — A liability is a present obligation that
    results from past transactions or events and
    usually involves giving up resources
    embodying economic benefits
    ◦ An obligation is a duty or responsibility to act
    or perform in a certain way
    ◦ The entity has little or no discretion to avoid
    the obligation
    ◦ The transaction or event that obliges the entity
    has already occurred
    Proposed Definition (IFRS)
    RSM 221 Intermediate Financial Accounting II: Winter 2016 5
    — A liability is a present obligation of the
    entity to transfer an economic resource
    as a result of past events
    ◦ The obligation exists at the present time
    ◦ An obligation must be capable of generating
    outflows of economic benefits (can be uncertain)
    ◦ The entity must be the party that is bound by
    the obligation
    Financial Liabilities
    RSM 221 Intermediate Financial Accounting II: Winter 2016 6
    Financial Liabilities
    RSM 221 Intermediate Financial Accounting II: Winter 2016 7
    — A liability is recognized as a financial
    liability if it involves a contractual
    obligation to:
    ◦ Deliver cash or other financial assets to
    another entity
    ◦ Exchange financial assets or financial
    liabilities with another entity that are
    potentially unfavourable
    Financial Liabilities
    RSM 221 Intermediate Financial Accounting II: Winter 2016 8
    — Under IFRS, a liability is also considered to
    be a financial liability for certain contracts
    that will or may be settled using the entity’s
    own equity instruments
    Financial Liabilities
    RSM 221 Intermediate Financial Accounting II: Winter 2016 9
    — Financial liabilities are initially measured at
    fair value
    ◦ However, when liabilities are relatively short-
    term in nature, they are usually measured at
    maturity value
    — Most financial liabilities are subsequently
    measured at amortized cost
    Short-Term Debt
    RSM 221 Intermediate Financial Accounting II: Winter 2016 10
    — Short-term debt includes:
    ◦ The maturing portion of long-term debt
    ◦ A liability that is due on demand or callable
    ◦ The total amount of long-term debt if the
    agreement is violated as at the balance sheet
    date
    ◦ Most debt that is in the process of being
    refinanced at the balance sheet date
    Short-Term Debt
    RSM 221 Intermediate Financial Accounting II: Winter 2016
    11
    — ASPE
    ◦ Allows violations of debt agreements to remain
    as long-term as long as both of the following are
    present:
    – The creditor waives the requirements or the violation
    is cured within the grace period
    – It is likely that a violation will not happen again within a
    year from the balance sheet date
    ◦ Allows debt that has been refinanced after the
    balance sheet date to be shown as long-term
    instead of current
    Discussion Question
    RSM 221 Intermediate Financial Accounting II: Winter 2016 12
    — Question 1: E13-8
    Non-Financial Liabilities
    RSM 221 Intermediate Financial Accounting II: Winter 2016 13
    Non-Financial Liabilities
    RSM 221 Intermediate Financial Accounting II: Winter 2016 14
    — Any liability that does not meet the
    definition of a financial liability
    ◦ Therefore, they are usually not payable in cash
    — ASPE
    ◦ Measured in a variety of ways
    — IFRS
    ◦ Initially and subsequently measured at the best
    estimate of what the entity would pay to settle
    the obligation
    Product Guarantees
    RSM 221 Intermediate Financial Accounting II: Winter 2016 15
    — Expense Approach
    ◦ Measures the product guarantee at its cost
    – Recognized as an accrued liability
    ◦ IFRS uses the expected value versus the most likely
    estimate that is used in ASPE
    — Revenue Approach
    ◦ Measures the product guarantee at its value
    – Recognized as a separate revenue stream (i.e. multiple
    deliverables)
    ◦ IFRS defines an onerous contract to exist where the
    costs exceed the unearned revenue
    – When an onerous contract exists, a loss and related liability are
    recognized for any expected shortfall
    Decommissioning & Restoration
    RSM 221 Intermediate Financial Accounting II: Winter 2016 16
    — Obligations that are associated with the
    eventual retirement of long-lived assets in
    certain industries
    ◦ Also referred to as an asset retirement
    obligation (ARO) or site restoration requirement
    ◦ Does not include the costs related to
    environmental clean-up costs due to current
    events
    Decommissioning & Restoration
    RSM 221 Intermediate Financial Accounting II: Winter 2016 17
    — IFRS
    ◦ Recognized when the obligation is incurred
    ◦ Considers legal and constructive obligations
    ◦ Capital asset cost only includes the costs related
    to the acquisition of the asset
    ◦ The interest adjustment due to the passage of
    time is recognized as a borrowing cost
    Decommissioning & Restoration
    RSM 221 Intermediate Financial Accounting II: Winter 2016 18
    — ASPE
    ◦ Recognized when the obligation can be
    reasonably estimated
    ◦ Considers only legal obligations
    ◦ Capital asset cost includes the costs related to
    the acquisition of the asset and the subsequent
    use of the asset
    ◦ The interest adjustment due to the passage of
    time is recognized as an operating cost
    Discussion Question
    RSM 221 Intermediate Financial Accounting II: Winter 2016 19
    — Question 2: WA13-1 (Part 3 only)
    Contingencies
    RSM 221 Intermediate Financial Accounting II: Winter 2016 20
    Contingencies
    RSM 221 Intermediate Financial Accounting II: Winter 2016 21
    — ASPE
    ◦ A contingent liability is based on one or more
    future events that will confirm the existence or
    the amount payable
    ◦ Contingent gains and assets are not recognized
    until received but can be disclosed
    ◦ Contingent losses are recognized only if:
    – It is likely that a future event will confirm the loss
    – The loss amount can be reasonably estimated
    Contingencies
    RSM 221 Intermediate Financial Accounting II: Winter 2016 22
    — IFRS
    ◦ A contingent liability includes existing or possible
    obligations that are not recognized in the
    financial statements but are disclosed
    ◦ A contingent asset can only be recognized if the
    realisation of income is virtually certain,
    otherwise it is disclosed
    Contingencies
    RSM 221 Intermediate Financial Accounting II: Winter 2016 23
    — IFRS
    ◦ A provision is recognized when:
    – There is a present obligation as a result of a past
    event
    – It is probable that the outflow of economic benefits
    will be required
    – A reliable estimate can be made for the amount of
    the obligation
    Discussion Question
    RSM 221 Intermediate Financial Accounting II: Winter 2016 24
    — Question 3: E13-24
    Presentation & Disclosure
    RSM 221 Intermediate Financial Accounting II: Winter 2016 25
    Presentation & Disclosure
    RSM 221 Intermediate Financial Accounting II: Winter 2016 26
    — A current liability meets one of the
    following conditions:
    ◦ It is expected to be settled within the normal
    operating cycle
    ◦ It is held primarily for trading
    ◦ It is due within 12 months of the end of the
    reporting period
    ◦ The entity does not have an unconditional right
    to defer its settlement for at least 12 months
    after the balance sheet date
    Presentation & Disclosure
    RSM 221 Intermediate Financial Accounting II: Winter 2016 27
    — IFRS
    ◦ Either current or long-term assets may be
    presented first in the statement of financial
    position
    ◦ The current liabilities may be listed in the order
    of either their maturity or their liquidity
    — ASPE
    ◦ Current liabilities are presented first in the
    balance sheet
    ◦ The current liabilities are ordered by liquidity
    Discussion Question
    RSM 221 Intermediate Financial Accounting II: Winter 2016 28
    — Question 4: IC13-2
    Coming up…
    RSM 221 Intermediate Financial Accounting II: Winter 2016 29
    — Lecture 4
    ◦ Make sure to complete the required readings
    and discussion questions before lecture