P2Mindmap (JoeFang)

JOE FANG
JOE FANG
Accounting standards mind map

slide show for P2
JOE FANG
IAS 16 PPE JOE FANG
Features PPE excludes Directly Initial Other Amount

Recog criteria
attributable recognition Directly att. expensed
cost (capitalised) cost
Physical Control
substance Rented to
others Site prep
Provision for Feasibility
(IAS 40) Purchase cost
decomissioning study
Probable future economic (net trade
Non Installation (IAS 37)
benefits disc)
monetary
Held for Transport Borrowing Insurance
resale Cost
Directly costs
> 12 (IAS 2)
Holding cost attributable (IAS 23)
months
costs Maintenance
Under Import tax
Owner construction (non-refund) Present
occupied (IAS 16 Repair
location
or IAS 2)
Prof fees
Present
Safety
condition
installation
Facebook: askjoefang@gmail.com
JOE FANG
IAS 16 PPE JOE FANG
Other Initial Cost Revaluation Subsequent Derecognition

issues recognition
expenditure
Asset criteria Historical Revalued

Changes cost Loss control
to FV
useful
life Capital Revenue
Initial Less:Acc depn
measurement Gain to RR
Disposed
Changes Improve
Maintenance
residual performance
value Cost If FV not Loss charged
avail Exchange
to RR then asset
Subsequent
SOPL Prolong life Repair cost
Complex measurement
asset Trade in
Cost savings Utility
Cost Revaluation Abandon

Upgrade
component
JOE FANG
JOE FANG
IAS 21 The effect of changes in Foreign Exchange Rates
Foreign Currency Foreign Operation

Transactions (Functional Currency to Presentation
Currency
Foreign currency to
Sales Purchases
Functional currency
Non monetary items Rev (AVE)
PPE (CR) (COS) (AVE)
ITA (CR) (Depn) (AVE)
Transaction date Inventory/PPE/asset GW (CR)
or (AVE) (Amor) (AVE)
Non monetary items Inventory (CR)
Rev (AVE) (Imp) (AVE)
PPE (HR1) Monetary items
(COS) (Op Exp) (AVE)
Transaction date ITA (HR2) TR (CR)
- (Op Inv) (IOR) (F.Costs) (AVE)
(ICR)/(HR)/(REV) GW (ACQN) Bank (CR)
Trade receivables - (Purch) (AVE) (Loan) (CR) (Tax) (AVE)
Inventory (ICR)
Cs Inv (ICR) (TP) (CR)
Monetary items
Payables TR (CR) (Depn) (HR1)
Bank (CR) (Amor) (HR2)
Closing Rate (CR) (Imp) (ACQN)
(Loan) (CR)
(TP) (CR) (Op Exp) (AVE)
Closing Rate (CR) (F.Costs) (AVE)
(Tax) (AVE)
JOE FANG
IAS 38 Intangible Assets JOE FANG
Features Recog criteria Capitalised Expensed Initial

recognition
Non (Old)
physical Control Computer software
Internally gen. brand
substance Saleable customer lists
Internally gen. masthead Separate
Probable future Patents
Internally gen.titles purchase
economic benefits License
Non Internally gen. customer Cost incurred
Franchise
monetary lists
Cust. & Supplier contracts
Internally gen. goodwill
Cost Computer games
Start up costs Business
> 12 Phone apps
Training costs Combination
months GPS system
Past event Relocation costs FV at acqn
Players registration rights
Pre-operating losses
Identifiable Granted
Identifiable
Cost or FV
Contractual Internally gen.

Separable
rights GW-not recog
R&D-Cap Dev only
Exchange asset
FV of acqn ITA
JOE FANG
Meet ALL criteria: Initial recognition

(Acquisition)
Technical feasibility
R&D
Dev capitalised:
Available market or usage
In process R&D
Capitalised
Intention to sell or use
Internally generated
brands, masthead
Probable future economic benefits Expensed
Computer software:
Cost measured reliably
Purchased Cap
Operating Cap as PPE
Internally dev. Refer R&D
Available resources to complete
JOE FANG
Initial Cost Revaluation Useful life of

recognition
ITA
Asset criteria Historical Revalued

cost to FV
Finite Indefinite
Initial Less:Acc amor*
measurement Gain to RR
Amortise No
over life amortisation
Cost If FV not Loss charged
avail to RR then
SOPL Straight line Impairment review
Subsequent
annually
measurement
Residual value
Active market: zero
Many buyers and sellers
Cost Revaluation Many transactions
Review
Homogeneous
annually
JOE FANG
IAS 37 Provisions, Contingent Liabilities and AssetsJOE FANG
Initial Measurement Types of

recognition Provision
(Provision) Capitalised within PPE Depreciate over asset
Provision for
Decommissioning
one-off event
Present obligation cost Accrue Provision Unwind provision
Retrenchment
Includes
Payment is Large population Onerous contract
Restructuring
probable event
Excludes Retraining
Cost measured Marketing
reliably Onerous Investment in new
contracts system
Prov. for Future losses
Past events Penalty/Fine Expected loss on
Cost of cleaning up disposal
Environmental
Compensation to victims
costs
JOE FANG
JOE FANG
IAS 36 Impairment of Assets
Lower of
Carrying Amount Recoverable Amount

CA RA
Higher of
Value in Use Fair Value Less Selling Costs

FVLSC
VIU
JOE FANG
IAS 36 Impairment of Assets JOE FANG
Triggers Allocation of
Frequency VIU FVLSC
impairment loss
Annually Market value drop Operating cash flows

PEST factors In the following order:
Exclude tax and int 1. Specific asset impaired
Increased Int. rates Disposal costs
Physical damage Fair Value Selling costs 2. Purchased goodwill
Any Scrap value 3. Pro-rated to remaining
Lower production Exclude depn
impairment assets (except Inv and
Major competitor Limit to 5 years
trigger
Inventory sold below
Highest Sales monetary items)
cost price commission
Arms length REVERSAL of

Disposal costs impairment loss
Willing buyers In the following order:

and sellers Modification 1. Asset previously impaired
costs 2. No reversal for Goodwill
3. Pro-rated to remaining
assets (except Inv and
monetary items)
JOE FANG
JOE FANG
IAS 17 Leases
Finance Lease Operating Lease

BUY using LOAN RENT
Substantial risks & Substantial risks &

rewards lie with rewards lie with
LESSEE LESSOR
JOE FANG
IAS 17 Leases JOE FANG
Determining whether an
Meet ANY criteria arrangement is or contains lease
Additional guidance: Ownership transfer to Risks and rewards of the arrangement

Lessee
Lessee guarantees Bargain purchase

residual value Right to use asset or direct others to
option use
Lessee bears cancellation costs Lease term is for major Right to control the use of asset by
useful life operating or directing others to
operate asset
Second term renewal at special

PVMLPS is substantially FV
rate
Who obtains much benefit from asset
Specialised asset
JOE FANG
IAS 17 Leases
Sale and Leaseback
JOE FANG
Operating Leaseback Finance Leaseback
SALE LOAN
SP = FV SP > FV SP < FV SP = FV SP > FV SP < FV
Profit/loss = FV CA Profit/loss = FV CA NO profits NO Profit

FV=SP=Sales Proceed FV=Sales Proceed FV=SP=Lease FV=Lease obligation
NO Deferred Income Shortfall SP<FV is obligation Shortfall SP<FV is
Or Prepayment Prepayment Prepayment
Prepayment amortised Prepayment amortised
Profit/loss = FV CA NO Profits
FV=Sales Proceed FV=Lease obligation
Excess SP>FV is Deferred Excess SP>FV is
Income Deferred income
Def Inc amortised Def Inc amortised
JOE FANG
IAS 40 Investment Property JOE FANG
Purpose Subsequent measurement
Rental to other
Capital appreciation
Both Cost model Fair value model
Not owner occupied
Historical cost FV annually

- Acc. Depn No depreciation
- Impairment Gain or losses
Disclose FV recog to SOPL
JOE FANG
IAS 18 Revenue JOE FANG
Sale of goods Rendering of Royalties Interest income Dividend income

services
Significant risks Percentage Substance of Time accrual

and rewards to completion agreement basis
buyer Dividend
declared
No managerial Revenue measured
involvement or reliably
effective control
Cost measured
Revenue measured reliably
reliably
Probable future
Cost measured economic benefits
reliably
Probable future
economic benefits
JOE FANG
Separately Time value Sale and repurchase Sale or return

identified of $$$
components
Discounting
necessary
> 12 months
Separate if: Combine if:

No sale if: Recog sale if:
Each component Single sale package No sale if: Recog sale if:
is stand alone or Repurchase very Repurchase unlikely
optional likely
Cant reliably estimated
Return very Return unlikely
different components
Genuine customer likely
Different supplier Finance company is
for each component customer
Buyer returned Buyer never return

Repurchase based on FV before
Repurchase price
fixed at sale date
Buyer can insist

repurchase
JOE FANG
Agent or principal relationship Revenue measurement issue
Foreign Price changes

Agent Principal transaction
Recognise sales Recognise entire

commission sales Trade Receivable
remeasured with gains or
losses to SOPL
Revenue based
Trade Receivable based
No inventory Charge cost of sales on transaction
on Closing rate
(Sale) rate
Capitalise inventory
JOE FANG
JOE FANG
IFRS 5 Non-Current Assets Held For Sale
Lower of
Carrying Amount Fair Value Less Selling Costs

CA FVLSC
1. Depreciation ceased
2. Mixture of CA and FVLSC for Disposal group is NOT
allowed
JOE FANG
IFRS 5 NCA held for sale JOE FANG
Scope ALL criteria met: Accounting Disclosure Discontinued

treatment operation
Individual Description of NCA
asset Commitment to sell
Classified as current
asset Component of
Available for immediate Facts of sale and timing entity:
Disposal
group sale
NCA held for sale
(Depn ceased) Impairment loss & reversal
Active marketing
Disposed off
Selling price = fair value
Held for sale

Sale highly probable < 12
months
Action unlikely to reverse
JOE FANG
IAS 19 Employee Benefit JOE FANG
Short Term Long Term

Wages and salaries, annual leave
Post employment Other long term Termination benefits

benefits benefits
Retirement benefit Long service leave,
(pension and lump sum Sabbatical leave,
payment), Jubilee,
Post employment life Long term disability benefit
insurance, medical care
Facebook: askjoefang@gmail.com 20
JOE FANG
Post employment benefits JOE FANG
Defined contribution plan Defined benefit plan
Fixed contribution paid to the Promised benefit

fund
Obligation for shortfall

No further obligation
Net employee asset/liability

(Plan asset minus PV obligation)
Net income/expense
(Return on plan asset minus
interest on PV obligation)
Remeasurement recognised to
OCI
JOE FANG
JOE FANG
IFRS 9 Financial Instrument
Financial Asset Financial Liability
Equity Debt Amortised

FVTPL
Instrument Instrument Cost
FVTPL FVTOCI FVTPL FVTOCI Amortised Cost
i) Business objective
ii) Contractual Cash flows
JOE FANG
3 stages of impairment for debt instrument JOE FANG
Stage 1 Stage 2 Stage 3
Low credit risk/credit risk has not

Credit risk has deteriorated significantly Credit risk deteriorated significantly
deteriorated
No objective evidence Objective evidence exists
12 months impairment loss

Lifetime impairment loss Lifetime impairment loss
JOE FANG
JOE FANG
Expected loss approach
Q1(N4) P2 June 2010 amended
On 1 May 2007, Ashanti purchased a $20m five-year bond with annual interest
of 10% payable on 30April. The purchase price of the bond was at par $20m.
The nominal interest equals to the market interest rate for such bond at the
time of purchase. However, credit rating has recently downgraded the bond in
view of the recent economic turmoil. Interest is not yet due but the directors
express fear that the bonds may have been impaired and wishes to recognise it
in the profit or loss. It is expected that as at the current financial year ended
30 April 2010 the best estimates of total future cash receipts are $1.5 million
on 30 April 2011 and $14 million on 30 April 2012. No further payment is
expected for the bond interest.
Calculate the impairment loss based on:
(a) 12 months expected credit losses
(b) Lifetime expected credit losses
JOE FANG
JOE FANG
5-yrs Bond = $20m

Nominal Interest = Market interest = Effective interest = 10%
0 1 2 3 4 5
1.8 2 2 2 2 2
20
1.7
1.5
20
1.4
1.2
12.4
JOE FANG
JOE FANG
Nominal Interest = Market interest = Effective interest = 10%
5-yrs Bond = $20m Y/E 30/4/10
0 1 2 3 4 5
2 2 2 2 2
20
Interests already received
Expected cash inflows 1.5 14

Original cash inflows (2) (22)
Impairment loss (0.5) (8)
20
(0.45)
(6.61)
12.94
JOE FANG
JOE FANG
Impairment 12 months
SOFP
30/4/10 30/4/11
10% Loan rec 20
Impairment (0.45)
19.55 1.95 21.50 (1.50) = 20
Cash (20) 1.50

= =
ES
RE
SOPL
Impairment (0.45)
Eff. Int income @10% 1.95
JOE FANG
JOE FANG
Impairment - Lifetime
SOFP
30/4/10 30/4/11 30/4/12
10% Loan rec 20
Impairment (7.06) 14.24 14
12.94 1.3 (1.50) 1.26 (14)
12.74 -
Cash (20) 1.50 14

= = =
ES
RE
SOPL
Impairment (7.06)
Eff. Int income @10% 1.3 1.26
JOE FANG
JOE FANG
Types of hedge accounting
There are three types of hedging relationships:
(a) fair value hedge: a hedge of the exposure to changes in fair value of
a recognised asset or liability or an unrecognised firm commitment, or a
component of any such item, that is attributable to a particular risk
and could affect profit or loss.
(b) cash flow hedge: a hedge of the exposure to variability in cash flows that is
attributable to a particular risk associated with all, or a component of,
a recognised asset or liability (such as all or some future interest payments on
variable rate debt) or a highly probable forecast transaction, and could affect
profit or loss.
(c) hedge of a net investment in a foreign operation as defined in IAS 21.
JOE FANG
JOE FANG
Fair Value Hedges
As long as a fair value hedge meets the qualifying criteria, the hedging relationship
shall be accounted for as follows:
1. The gain or loss on the hedging instrument shall be recognised in profit or loss (or
other comprehensive income, if the hedging instrument hedges an equity
instrument for which an entity has elected to present changes in fair value in
other comprehensive income).
2.The hedging gain or loss on the hedged item shall adjust the carrying amount of
the hedged item (if applicable) and be recognised in profit or loss. However, if the
hedged item is an equity instrument for which an entity has elected to present
changes in fair value in other comprehensive income, those amounts shall remain in
other comprehensive income. When a hedged item is an unrecognised firm
commitment (or a component thereof), the subsequent cumulative change in the fair
value of the hedged item is recognised as an asset or liability with a corresponding
gain or loss recognised in profit or loss.
JOE FANG
JOE FANG
Cash Flow Hedges
As long as a cash flow hedge meets the qualifying criteria, the hedging relationship
shall be accounted for as follows:
(a) The separate component of equity associated with the hedged item (cash flow
hedge reserve) is adjusted to the lower of the following (in absolute amounts):
(i) the cumulative gain or loss on the hedging instrument from inception of the
hedge; and
(ii) the cumulative change in fair value (present value) of the hedged item (ie
the present value of the cumulative change in the hedged expected future cash
flows) from inception of the hedge.
(b) The portion of the gain or loss on the hedging instrument that is determined to
be an effective hedge (ie the portion that is offset by the change in the cash flow
hedge reserve calculated in accordance with (a)) shall be recognised in other
comprehensive income.
(c) Any remaining gain or loss on the hedging instrument (or any gain or loss required
to balance the change in the cash flow hedge reserve calculated in accordance with
(a)), is hedge ineffectiveness that shall be recognised in profit or loss.
JOE FANG
IFRS 2 Share based payment JOE FANG
Equity settled with cash

Equity settled Cash settled
alternatives
Goods Services Goods Services

Issuer option Holders option
Increase Inventory Expense to SOPL Increase Inventory Expense to SOPL

Either equity or Separate equity
Increase Equity Increase Equity Increase Liability Increase Liability
liability from liability
JOE FANG
Employee share option JOE FANG
Equity settled Cash settled Other issues
FV option measured at GRANT date FV option remeasured at each year end Intrinsic vs extrinsic value
No remeasurement of FV option Employees expected to

Vesting period
leave
Vesting period
Performance target
Share based vs business

combination
JOE FANG
IFRS 8 Operating Segment JOE FANG
Definition of 10% quantitative threshold Reportable segment Aggregation

Component (ANY ONE): 75% rule criteria
Total External Similar economic

revenue characteristics
1.Can earn revenue and 10% Revenues 10% Profit or loss
incur expenses (External and (whichever is 10% Total Assets
2.Results are reviewed by Internal) higher)
Chief Operating Decision
Maker (CODM) i.e. COO,
CEO, CFO, etc
3.Discrete financial
Common costs
information available
Allocated
Unallocated
(based on reasonable basis)
JOE FANG
Differences between SOPL & OCI (based on P2 examiners JOE
article)FANG
Purpose Reclassification
Presentation SOPL Other
adjustment
Comprehensive
Income (OCI)
Entitys
1. Combined Amounts recycled to
financial All items of
SOPL&OCI SOPL in the current
performance
period
Items reclassified to Items not reclassified

Wide range 2. Separated Income
profit or loss to profit or loss
of users SOPL&OCI
But recognised in OCI
in current/previous
periods Revaluation surplus
Expenses Foreign currency
Assess gains on disposals
future
net cash
inflows
Includes Actuarial gains/loss on
Realised cash flow
reclassification defined benefit plan
hedges
adjustments
Accumulated gains or
losses on FVTOCI
JOE FANG
Reclassification (based on P2 examiners article) JOE FANG
Arguments for Arguments against
If reclassification ceased, no
Complexity of reporting
need to define profit or loss
thus, presentation based on
specific IFRS
Protects the integrity of Lead to earnings management

profit or loss
Provides relevant information

Change in asset/liability occurred
in previous period
Improves comparability
JOE FANG
3 Approaches to profit or loss and reclassification (based JOE
on P2 FANG
examiners article)
Prohibits Narrow approach Broad approach

reclassification
Allows OCI for

All items either to bridging or
mismatched
remeasurements Transitory measurements
SOPL Eg. Remeasurement of defined
benefit obligation
Restricts items
recognised in OCI
OCI
No reclassification
adjustments
Bridging Mismatched
Eg. Debt instrument at FV (SOFP) Eg. Cash flow hedge reclassifies gains
while SOPL at amortised cost or losses when it affects SOPL
JOE FANG
Integrated reporting JOE FANG
Purpose SIX Capitals: EIGHT Key components Advantages:
How organisation Organisational overview Shows relationship with key

creates value Financial stakeholders
Manufactured Governance structure

Shows how value is created
Over time
Business model
Intellectual
Identifies opportunities and threats
Risks and opportunities
Human
Better allocation of resources
Strategy and resource allocation
Social and relationship
Long termism
Performance and achievement of
strategic objectives
Natural capital
Outlook and challenges
Basis of presentation
JOE FANG
Conceptual Framework for Financial Reporting JOE FANG
Report Purpose Info. needed Revised

What info Elements
financial for? Conceptual
obtained?
health Framework
Present & Prospect future cash
Economic
potential flows Asset
resources
SOFP
Enhancing
Fundamental Qualitative
Investors, Changes in Stewardship Qualitative Characteristi Liability
SOPL&OCI lenders and econ.
Characteristics
creditors resources c
Predictive
SOCFs Relevance Comparability Equity
Make decision Fin. Perform
(including
on cash flows Confirmatory Materiality)
SOCE Verifiability Income
Claims not Completeness Faithful
Buy, sell or
financial representation Timeliness
hold
Notes to performance Neutrality Expense
account
Freedom Understandability
Equity or debt from error
instrument
JOE FANG
IAS 20 Accounting for Government Grants JOE FANG
Initial Principles Presentation

recognition
Comply with Match income

condition with related
costs Deferred Deduct from
income CA
Grants will be
received
Non monetary NCL-Def Income PPE reduce by
grant at FV created grant amount
Def Inc amortised Lesser Depreciation

If no condition over useful life
cant recog to charge
equity
JOE FANG
IAS 2 Inventories JOE FANG
Profits vs Inventory Inventory valuation

Concepts
valuation Lower of
Accrual
Sales match
with cost of Inventory
Inventory Cost Net realisable value
sales DECREASE
INCREASE
Profits Purchase cost

Profits Selling price
INCREASE + Cost of conversion
DECREASE - Selling costs
+ other costs to
Prudence bring to present
Inv recog at location and condition
lower of
cost/NRV

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JOE FANG

Accounting standards mind map

Features PPE excludes Directly Initial Other Amount

Other Initial Cost Revaluation Subsequent Derecognition

Asset criteria Historical Revalued

Cost Revaluation Abandon

Foreign Currency Foreign Operation

Features Recog criteria Capitalised Expensed Initial

Contractual Internally gen.

Meet ALL criteria: Initial recognition

Initial Cost Revaluation Useful life of

Asset criteria Historical Revalued

Initial Measurement Types of

Carrying Amount Recoverable Amount

Value in Use Fair Value Less Selling Costs

Annually Market value drop Operating cash flows

Arms length REVERSAL of

Willing buyers In the following order:

Finance Lease Operating Lease

Substantial risks & Substantial risks &

Additional guidance: Ownership transfer to Risks and rewards of the arrangement

Lessee guarantees Bargain purchase

Second term renewal at special

Operating Leaseback Finance Leaseback

SP = FV SP > FV SP < FV SP = FV SP > FV SP < FV

Profit/loss = FV CA Profit/loss = FV CA NO profits NO Profit

Purpose Subsequent measurement

Historical cost FV annually

Sale of goods Rendering of Royalties Interest income Dividend income

Significant risks Percentage Substance of Time accrual

Separately Time value Sale and repurchase Sale or return

Separate if: Combine if:

Buyer returned Buyer never return

Buyer can insist

Agent or principal relationship Revenue measurement issue

Foreign Price changes

Recognise sales Recognise entire

Carrying Amount Fair Value Less Selling Costs

Scope ALL criteria met: Accounting Disclosure Discontinued

Selling price = fair value

Held for sale

Action unlikely to reverse

Short Term Long Term

Post employment Other long term Termination benefits

Defined contribution plan Defined benefit plan

Fixed contribution paid to the Promised benefit

Obligation for shortfall

Net employee asset/liability

Financial Asset Financial Liability

Equity Debt Amortised

FVTPL FVTOCI FVTPL FVTOCI Amortised Cost

Stage 1 Stage 2 Stage 3

Low credit risk/credit risk has not

12 months impairment loss

5-yrs Bond = $20m

5-yrs Bond = $20m Y/E 30/4/10

Expected cash inflows 1.5 14

Cash (20) 1.50

Eff. Int income @10% 1.95

Cash (20) 1.50 14

Eff. Int income @10% 1.3 1.26

(c) hedge of a net investment in a foreign operation as defined in IAS 21.

Equity settled with cash