IFRS
The Steps for Revenue Recognition under IFRS
1. Identify the contract
2. Identify separate performance obligations
3. Determine the transaction price
4. Allocate transaction price
5. Recognize Revenue
What is the correct treatment for measurement of inventories?
Inventories shall be measured at the lower of cost and net realisable value.
Name 3 out of the 6 factors that the CRA uses to determine the status of employee (Employee vs. Contractor)
- Control
- Tools and Equipment
- Ability to subcontract work/ hire assistants
- Financial risk
- Opportunity for profit (financial rewards)
- Responsibility for investment management
The criteria to identify a liability
(a) the entity has an obligation;
(b) the obligation is to transfer an economic resource; and
(c) the obligation is a present obligation that exists as a result of past events
What is included in CCA class 8?
Class 8 (20%): Property that you use in your business and that is not included in another class.
I.E. Equipment, various machinery, furniture
How do you account for an asset retirement obligation under ASPE? (need to get one of the following correct)
Recognition
Initial Measurement
Subsequent Measurement
RECOGNITION - An entity shall recognize a liability for an asset retirement obligation in the period in which it is incurred when a reasonable estimate of the amount of the obligation can be made. If a reasonable estimate of the amount of the obligation cannot be made in the period the asset retirement obligation is incurred, the liability shall be recognized when a reasonable estimate of the amount of the obligation can be made.
Initial Measurement - The amount recognized as an asset retirement obligation shall be the best estimate of the expenditure required to settle the present obligation at the balance sheet date. - i.e. the present value of the future obligation is added to the value of the related asset and an ARO liability is recognized.
Subsequent measurement -
Depreciation - An entity shall subsequently allocate that asset retirement cost to expense using a systematic and rational method over its useful life.
Accretion - In periods subsequent to initial measurement, an entity shall recognize period-to-period changes in the liability for an asset retirement obligation resulting from:
(a) the passage of time; and
(b) revisions to either the timing, the amount of the original estimate of undiscounted cash flows or the discount rate.
Who pays eligible dividends? What is the gross up percentage and dividend tax credit percentage/fraction for an eligible dividend?
Non-CCPCs like public companies and CCPC when paying GRIP dividends pay eligible dividends.
Dividend gross up: 138% or 38%
Dividend tax credit: 15.02% of grossed-up dividend or 6/11 of gross-up
What are the 2 key possible issues you need to consider if you see a business combination on the CFE?
- Determine acquisition date
- allocate purchase price
Corporate Income Taxes Payable: What would be corporate tax rate(s) for a CCPC with no aggregate investment income? (assuming no associated companies and over $500k in taxable income)
First $500,000:
38% basic rate
less: 10% federal tax abatement
less: 19% Small Business Deduction
= 9%
The rest of the taxable income:
38% basic tax rate
less: 10% federal tax abatement
less: 13% general rate reduction
= 15%
IFRS 16:Leases
What is the difference between an operating and a finance lease and who is required to determine the type of lease?
A lessor shall classify each of its leases as either an operating lease or a finance lease.
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset.
Name 3 of the 6 criteria to determine if an internally generated intangible asset has entered the development phase?
An intangible asset arising from development (or from the development phase of an internal project) is recognized if, and only if, an entity can demonstrate all of the following:
(a) the technical feasibility of completing the intangible asset so that it will be available for use or sale;
(b) its intention to complete the intangible asset and use or sell it;
(c) its ability to use or sell the intangible asset;
(d) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;
(e) its ability to measure reliably the expenditure attributable to the intangible asset during its development; and
(f) how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.