Lecture 3 Non-Financial & Current Liabilities 代写

Lecture 3 Non-Financial & Current Liabilities While you are waiting, please take out and display your name cards 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