Accounting

Enhancing qualitative characteristics - Overview

- Comparability -Verifiability -Timeliness -Understandability

Construction Contracts - Costs that may be attributable to contract activity in general and can be allocated to specific contracts include

- insurance -costs of design and technical assistance that are not directly related to a specific contract and -construction overheads (e.g. preparation and processing of construction personnel payroll) Allocation shall be: -Systematic and rational and applied consistently -based on the normal level of construction activity

Impairment of Assets - Reversal of impairment loss - Revaluation model

-A reversal of an impairment loss on a revalued asset is recognized in other comprehensive income -However, to the extent that an impairment loss on the same revalued asset was previously recognized in profit or loss, a reversal of that impairment loss is also recognized in profit or loss

Fundamental Qualitative Characteristics - Faithful representation - Completeness

-All information necessary for a user to understand the phenomenon being depicted, including all necessary descriptions and explanations, i.e. a complete depiction of a group of assets includes i) a description of the nature of the assets, ii) a numerical depiction iii) a description of what the numerical depiction represents (e.g. fair value)

Recognition criteria of equity according to framework - overview

-As a result of the definition, the amount at which equity is shown in the balance sheet is dependent on the measurement of assets and liabilities -The following sub-classification of equity is recommended ...paid-in capital ...retained earnings ...cumulative translation adjustments ...revaluation surplus ...other comprehensive income -IAS 1.54 requires that, at a minimum, the following items must be presented: ...non-controlling interest, presented within equity ...issued capital and reserves attributable to owners of the parents

Impairment of assets - Reversal of impairment loss

-Assessment whether there is any indication that an impairment loss recognized in prior periods no longer exists or may have decreased at the end of each reporting period -Assessment shall be based on external or internal indications -Carrying amount of the asset shall be increased to its recoverable amount -Cost model ...Carrying amount shall not exceed carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized in prior years ...Any increase in the carrying amount of an asset above the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized is a revaluation. The standard applicable to the asset is to be applied ...Depreciation charge needs to be readjusted

Finance leases - Measurement (Lessee) - Initial measurement

-Asset and liability are measured at the lower of fair value of the leased property and present value of the minimum lease payments (determined at inception) -Discount rate to be used is interest rate implicit in the lease or the lessee's incremental borrowing rate -Any initial direct costs of the lessee are added to the amount recognized as an asset

Finance leases - Measurement (Lessee) - Recognition

-Asset and liability shall be recognized at the commencement of the lease term -asset and liability cannot be set off

Finance leases - Measurement (Lessee) - Subsequent measures - Depreciation

-Asset is deprecating according to IAS 16 and tested for impairment in accordance with IAS 36 -Depreciation policy shall be consistent to that applicable to owned assets -If no reasonable certainty that lessee obtains ownership by the end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life

Measurement Concepts according to framework - Realisable (settlement) value

-Assets are carried at the amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposal -Liabilities are carried at their settlement values; that is, the undiscounted amounts of cash or cash equivalents expected to be paid to satisfy the liabilities in the normal course of business

Measurement Concepts according to framework - Current cost

-Assets are carried at the amount of cash or cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently -Liabilities are carried at the undiscounted amount of cash or cash equivalents that would be required to settle the obligation currently

Measurement Concepts according to framework - Present value

-Assets are carried at the present discounted value of the future net cash inflows that the item is expected to generate in the normal course of business -Liabilities are carried out at the present discounted value of the future net cash outflows that are expected to be required to settle the liabilities in the normal course of business

Intangible Assets - Impairment

-At each reporting date, an entity shall assess whether there is evidence that an intangible asset was subjected to an impairment and if so test that asset for impairment according to IAS 36.

Impairment of Assets - Recoverable amount - Fair value less costs to sell

-Binding sale agreement, adjusted for costs directly attributable to the disposal of the asset -Active market: market price less the costs of disposal -Best information available

Impairment of assets - Impairment loss - Recognition of an impairment loss

-Carrying amount is the amount at which an asset is recognized after deducting any accumulated depreciation (amortization) and accumulated impairment losses thereon -If, and only if: recoverable amount < carrying amount -> Carrying amount is reduced to its recoverable amount (impairment loss) -An impairment loss is recognized immediately in profit or loss (unless asset is carried at revalued amount) -When estimated impairment loss is greater than the carrying amount, a liability is recognized only if required by another accounting standard -Depreciation charge needs to be adjusted(taking into account revised carrying amount less residual value (if any) and remaining useful life of the asset)

Fundamental Qualitative Characteristics - Faithful representation - overview

-Completeness -Neutrality -Free from error

Construction Contracts - Methods to determine stage of completion and revenue to be recognized - Output based method

-Completion of a physical proportion of the contract work (units of delivery method) Example: Company's best estimate of physical proportion completed is 60% Revenue to be recognized: 10,000 * .6 = 6,000 -Progress payments and advances received from customers often do not reflect the work performed.

Construction Contracts - Recognition of construction contracts

-Construction contracts are usually recognized separately -If a single contract covers a bundle of assets, each asset shall be treated separately if: ...separate proposals have been submitted for each asset ...each asset has been subject to separate negotiation and the contractor and customer have been able to accept or reject that part of the contract relating to each asset and ...the costs and revenues of each asset can be identified -A group of contracts shall be treated as a single construction contract when: ...the group of contracts is negotiated as a single package ...the contracts are so closely interrelated that they are, in effect, part of a single project with an overall profit margin and ...the contracts are performed concurrently or in a continuous sequence -Optional construction of additional asset shall be treated as a separate construction contract when ...asset differs significantly in design, technology or function from the asset or assets covered by the original contract or ...price of the asset is negotiated without regard to the original contract price

Intangible Assets - Initial Measurement - 1. Separate acquisition - Directly attributable costs

-Costs of employee benefits arising directly from bringing the asset to its working condition -Professional fees arising directly from bringing the asset to its working condition -Costs of testing whether the asset is functioning properly

Construction Contracts - Contract cost shall comprise

-Costs that relate directly to the specific contract; among others: ...site labor costs, including site supervision ...costs of materials used in construction ...depreciation of plant and equipment used on the contract ...costs of hiring plant and equipment ...costs of moving plant, equipment and materials to and from the contract site ...costs may be reduced by any incidental income that is not included in contract revenue -Costs that are attributable to contract activity in general and can be allocated to the contract and -such other costs that are specifically chargeable to the customer under the terms of the contract -Contract costs usually include costs attributable to a contract from the date on which the contract is secured until its final completion -Costs include cost incurred to secure a contract (e.g. tendering costs).

PPE - Subsequent measurement - Depreciation

-Depreciable amount equals cost recognized initially less residual value -residual value: expected net selling price at time of disposal -Depreciation begins with the assets availability for use -Useful life reflects the asset's expected utility to the entity and depends on ...expected usage of the asset ...expected physical wear and tear ...technical or commercial obsolescence ...legal or similar limits on the use of the asset

Impairment of Assets - Recoverable amount - Value in use

-Discounted future cash flows the entity expects to derive from the asset -Discount rate is risk adjusted current market risk-free rate of interest

Additional measurement concepts - overview

-Fair value: The amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction -Recoverable amount is the higher of: ...value in use which is the present value of the future cash flows expected to be derived from an asset or cash-generating unit (firm-specific value) and ...fair value less costs to sell which is the amount obtainable from the sale of an asset or csh-generating unit in an arm's length transaction between knowledgeable, willing parties, less the costs of disposal

Construction Contracts - Costs that cannot be attributed to contract activity or cannot be allocated to a contract are excluded from the costs of a construction contract. Such costs include

-General administration costs for which reimbursement is not specified in the contract -Selling costs -Research and development costs for which reimbursement is not specified in the contract and -depreciation of idle plant and equipment that is not used on a particular contract

Measurement Concepts according to framework - overview

-Historical cost -current cost -realizable (settlement) value -present value

Impairment of Assets - Identification - identifying an asset that might be impaired

-Indications that an impairment might have occurred shall be derived based on (at least) information external or internal to the entity as presented below -Irrespective of an indication, acquired goodwill, intangible assets not yet available for use and intangible assets with indefinite useful life have to be tested for impairment on an annual basis

Construction Contracts - Contract revenue

-Initial amount of revenue agreed in the contract and -Variations in contract work, claims and incentive payments if they are ...probable to occur and ...can be reliably measured -Contract revenue is measured at the fair value of the consideration received or receivable (uncertainties!). -If estimates need to be revised ->contract revenue may increase or decrease from one period to the next, e.g. revenue may decrease as a result of penalties

Finance leases - Measurement (Lessee) - Subsequent measurement - Lease payments

-Minimum lease payments are split into a finance charge and the reduction of the outstanding liability -The finance charge shall represent a constant periodic rate of interest on the remaining balance of the liability -Absolute annual amount of finance charge decreases, amortization increases over lease term

Impairment of Assets - Identification - Internal sources of information

-Obsolescence of physical damage of an asset -Significant changes in the extent to which, or manner in which, an asset is used or is expected to be used -Evidence that economic performance of an asset is, or will be, worse than expected

PPE - Derecognition

-On disposal or -when no future economic benefits are expected from its use or disposal -Gain or loss of disposal equals net disposal proceeds less carrying amount of an item -Gain or loss shall be recognized in profit and loss -Gain usually is not recognized as revenue

Intangible Assets - Derecognition

-On disposal or when no future economic benefits are expected from its use or disposal -Gain or loss of disposal equals net disposal proceeds less carrying amount of an item -Gain or loss shall be recognized in profit and loss -Gain usually is not recognized as revenue

Property, Plant & Equipment - Initial measurement - overview

-Property, Plant and Equipment shall be recognized at cost. Cost includes all expenditure incurred initially to acquire or construct an item of property, plant and equipment.

Constraints on relevant and reliable information - balance between benefit and cost

-Reporting financial information imposes costs, and it is important that those costs are justified by he benefits of reporting that information -If needed information is not provided users incur additional costs to obtain that information elsewhere or to estimate it -It is not possible for general purpose financial reports to provide all the information that every user finds relevant -In applying the cost constraints the Board assesses whether the benefit of reporting particular information are likely to justify the costs incurred to provide and use that information -Because of the inherent subjectivity, different individuals' assessments of the costs and benefits of reporting particular items of financial information will vary

Intangible Assets - Definition - Future Economic Benefit includes

-Revenue from the sale of products or services -Cost savings -Other benefits resulting from the use of the asset by the entity

Impairment of Assets - Identification - External sources of information

-Significant decline in asset market value -Significant changes in the technological, market, economic or legal environment -Significant decrease of the asset's recoverable amount due to increase in market interest rates -Carrying amount of the net assets of the entity is more than its market capitalization

Deferred Taxes - Overview

-Temporary differences -Deferred tax asset -Deferred tax liability -Deferred tax expense(income) -Tax expense

Fundamental Qualitative Characteristics - Overview

-Usefulness -Relevance

Fundamental qualitative characteristics - Relevance

-making a difference in the decisions made by users -Materiality: omission or misstatement could influence the decisions made by users on the basis of financial information about specific reporting entity (entity specific aspect of relevance)

Going concern

-usually the entity is assumed to continue in operation for the foreseeable future -Entity neither has the intention nor the need to liquidate or curtail materially the scale of its operations

The IASB and the IASC Foundation pursue the following major purposes:

1. to develop a single set of high quality, understandable, enforceable and globally accepted international financing reporting standards (IFRS) through its standard-setting body, the IASB 2. To promote the use and rigorous application of those standards 3. to take account of the financial reporting needs of emerging economies and small and medium-sized entities (SMEs) and 4. to promote and facilitate adoption of IFRSs, being the standards and interpretations issued by the IASB, through the convergence of national accounting standards and IFRSs.

Construction Contracts - Definition

A construction contract is a contract specifically negotiated for the construction of -an asset or -a combination of assets that are closely interrelated on interdependent in terms of their design, technology and function on their ultimate purpose or use

Leases - Definition

A lease is an agreement -whereby the lessor conveys to the lessee the right to use an asset -for an agreed period of time -in return for a payment or series of payments -A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset; title may or may not eventually be transferred -an operating lease is a lease other than a finance lease (lease does not transfer substantially all the risks and rewards incidental to ownership).

Module 1

Accounting fundamentals

Property, Plant and Equipment - Initial measurement

Acquisition costs -Purchase price less price discounts/rebates -Directly attributable costs ...employee benefits ...costs of site preparation ...installation/assembly costs ...professional fees (e.g. attorneys) Production costs -direct material and production costs -overhead costs related to production Costs in case of exchange of assets Financial expenses -Costs of dismantling or removing the item and of restoring the site provided that a provision is required to be recognized and that expenditure has been caused by the installation or its subsequent use which has not been the production of inventories DO NOT INCLUDE: -Costs of opening a new facility -Costs of introducing a new product or service -Costs of conducting business in a new location or with new customers (inc.staff training) -Administration and other general overhead costs

Intangible Assets - Subsequent measurement

After recognition as an asset, an intangible asset shall be carried at: -Cost less any accumulated depreciation and any accumulated impairment losses (cost model) -Revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses (revaluation model) ...Restriction: existence of an active market ...Revaluations shall be made with sufficient regularity (=difference of fair value and carrying amount shall not be material) ...Entire class of intangible assets shall be revalued ...Fair value determination: by reference to an active market

Property, plant & Equipment - Subsequent measurement - after recognition as asset, PPE shall be carried at what cost?

After recognition as an asset, an item of PPE shall be carried at -cost less any accumulated depreciation and any accumulated impairment losses (cost model) or -revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses (revaluation model) ...restriction: fair value can be measured reliably ...fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction ...revaluations shall be made with sufficient regularity(=difference of fair value and carrying amount shall not be material) ...entire class of PPE shall be revalued, e.g., land and buildings

Intangible Assets - Subsequent measurement - Amortization

Amortization depends on the intangible asset having a finite or indefinite (not infinite!) useful life -Useful life reflects the asset's expected utility to the entity Depreciation method shall reflect the pattern in which the asset's future economic benefits are expected to be consumed by the entity ...straight-line method ...diminishing balance method ...units of production method

Active Market

An active market is a market in which all the following conditions exist: a)the items traded in the market are homogenous b)willing buyers and sellers can normally be found at any time c)prices are available to the public

Recognition criteria of assets according to framework - definition of an asset

An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity

Impairment of Assets - Identification - Definition

An asset is impaired when its carrying amount exceeds its recoverable amount

Intangible Assets - Recognition - Internally generated - research

An entity classifies the asset generation into a research phase and a development phase -research is the original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding -> Expenditure on research (or the research phase of an internal project) shall be recognized as an expense when it is incurred

Intangible Assets - Recognition - Development - criteria

An intangible asset arising from development (or from the development phase of an internal project) shall be recognized only if an entity can demonstrate all of the following: a) Technical feasibility of completion for use or sale b) Intention to complete, use or sell the asset c) Ability to use or sell the intangible asset d) How the intangible asset will generate probable future economic benefits e) Availability of adequate technical, financial and other resources to complete the development and to use or sell it f) Ability to measure reliably the expenditure during its development -Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance shall not be recognized as intangible assets. -Internally generated goodwill shall not be recognized as an asset

Intangible Assets - Definition - Overview

An intangible asset is an identifiable, non-monetary asset without physical substance where an asset is a resource: -controlled by the entity as a result of past events and -from which future economic benefits are expected to flow to the entity

Intangible Assets - Initial Measurement

An intangible asset shall be measured initially at cost. The determination of cost depends on the way the intangible asset is acquired: 1. Separate acquisition 2. Acquisition as part of a business combination 3. Acquisition by way of government grand 4. Exchange of assets 5. Internally generated intangible assets

PPE - Impairment

At each reporting date, an entity shall assess whether there is evidence that an item of property, plant and equipment was subject to an impairment and if so test that asset for impairment

Enhancing qualitative characteristics - Understandability

Classifying, characterizing and presenting information clearly and concisely

Construction Contracts - Fixed Price Contract

Construction contract in which the contractor agrees to a fixed contract price, or a fixed rate per unit of output (added cost like $21 doesn't harm, risk is on constructor's side)

Construction Contracts - Cost plus contract

Construction contract in which the contractor is reimbursed for allowable or otherwise defined costs, plus a percentage of these costs or a fixed fee -need a reliable measure how much has been realized this profit

Module 5

Construction contracts Leases

Recognition criteria of assets according to framework - Overview

Control -Entity needs to control the benefits which are expected to flow from the property -Right of ownership is not essential (substance over form) Past transaction -Completed purchase or production of assets -Intention to purchase or produce does not meet the definition Future economic benefit -Potential to contribute, directly or indirectly, to the flow of cash / cash equivalents to the entity Recognition criteria also need to be fulfilled -Sufficient certainty that future economic benefits (not profit) will flow to an entity (>50%). -Item has a cost or value that can be measured with reliability (notes disclosure)

Intangible Assets - Initial Measurement - 5. Internally generated intangible asset

Cost includes: -All directly attributable costs necessary for the asset to be available to use -Borrowing cost according to IAS 23 -Examples of directly attributable costs are: ...Costs of materials and services ...Costs of employee benefits ...Fees to register a legal right ...Amortisation of patents and licenses used to generate the intangible asset -Only expenditure incurred from the date when asset first meets the recognition criteria -Reinstatement of expenditure previously recognized as an expense is prohibited -Not components of the cost of an internally generated intangible asset are: ...selling, administrative and other general overhead expenditure unless directly attributable ...identified inefficiencies and initial operating losses incurred before the asset achieves planed performance ...expenditure on training staff to operate the asset

Intangible Assets - Initial Measurement - 1. Separate acquisition

Cost of a separately acquired intangible asset comprises: -Purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates -Any direct attribute cost of preparing the asset for its intended use -Borrowing cost according to IAS 23 (qualifying asset) -Government grants according to IAS 20 Way of acquisition impacts recognition criteria: -Probability recognition criterion is always considered to be satisfied for separately acquired intangible assets -Cost of a separately acquired intangible asset can usually be measured reliably

Intangible Assets - Initial Measurement - 1. Separate acquisition - NOT directly attributable costs

Costs that are not costs of an intangible asset are e.g. -Costs of introducing a new product or service (including costs of advertising an promotional activities) -Costs of conducting business in a new location or with a newer class of customer(including costs of staff training) -Administration and other general overhead costs

deferred taxes - Tax expense

Current tax expense + deferred tax expense

Leases - Classification

Depends on transfer of risks and rewards incidental to ownership of a leased asset -risks include the possibilities of losses from idle capacity or technological obsolescence and of variations in return -rewards mays be represented by the expectation of profitable operation over the asset's economic life and of gain from appreciation in value or realization of a residual value -has to be made at inception of the lease -depends on the substance of the transaction rather than the form of the contract (substance over form)

PPE - subsequent measurement - depreciation method

Depreciation method shall reflect future economic benefit distribution: -straight-line method -diminishing balance method -units of production method Each significant part of an item shall be depreciated separately

Intangible Assets - Subsequent measurement - Finite useful life

Determination of the length of, or number of production or similar units constituting, useful life is possible ->an intangible asset with a finite useful life is amortized -Depreciable amount equals cost recognized initially less residual value -Residual value of an intangible asset with finite useful life shall be assumed to be zero unless: ...there is a commitment by a third party to purchase the asset at the end of its useful life or ...there is an active market for the asset by reference to which residual value can be determined and it is probable that such a market will exist at the end of the asset's useful life -Amortization of an asset begins with its availability for use

Intangible Assets - Recognition - Internally generated - development

Development is the application of research findings to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services.

Enhancing qualitative characteristics - Verifiability

Different knowledgeable and independent observers could reach consensus, although not necessarily complete agreement, that a particular depiction is a faithful representation, e.g., direct observation (counting cash) or indirect (indirect verification means checking the inputs to a model etc. and recalculating the outputs using the same methodology).

Enhancing qualitative characteristics - Comparability

Enables users to identify and understand similarities in, and differences among, items

Recognition criteria of equity according to framework - definition of equity

Equity is the residual interest in the assets of the entity after deducting all its liabilities

Enhancing qualitative characteristics - Timeliness

Having information available to decision-makers in time to be capable of influencing their decisions

Measurement concepts - an overview

Historical cost -> amortized cost current cost selling price -> fair value less costs to sell present value -> value in use fair value less costs to sell+value in use -> recoverable amount fair value

Fundamental Qualitative Characteristics - Usefulness

If financial information is to be useful, it must be relevant and it faithfully represents what it purports to represent. The usefulness of financial information is enhanced if it is -comparable -verifiable -timely -understandable

Module 4

Impairment of Assets

Module 3

Intangible Assets

Intangible Assets - Recognition - Examples

Intangible Assets: -Copyrights, patents, other rights -Computer software -Licenses and franchises -Recipes, modules, design Usually not intangible assets: -Newly developed management concept -Portfolio of customers, market shares, customer relationships, customer loyalty -Internally generated brand names

Intangible Assets - Recognition - acquisition/generation

Intangible assets can be acquired externally or generated internally -Intangible assets can be obtained externally through: ...separate acquisition ...acquisition as part of a business combination or ...exchange of assets -Internally companies can generate: ...goodwill or ...other internally generated intangible assets

Financial Leases - Measurement (Lessor) - Recognition

Lessor recognizes financial asset (receivable) instead of asset

Other comprehensive income vs. revaluation surplus

Other Comprehensive income (OCI) -Items of income and expense that are not recognized in profit or loss as required or permitted by other IFRSs ...positive revaluation ...gains and losses on available-for-sale financial assets -refers to changes of the current year Revaluation surplus -accumulates past increases in other comprehensive income

Construction Contracts - Criteria to be satisfied for the outcome to be reliably estimable depends on type of contract - Fixed price contract

Outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: -Total contract revenue can be measured reliably -It is probable that economic benefits associated with the contract will flow to the entity -Both the contract costs to complete the contract and the stage of contract completion at the end of the reporting period can be measured reliably -The contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract costs incurred can be compared with prior estimates

Module 2

PPE

Property, Plant & Equipment - Recognition criteria

Property, plant and equipment are tangible items that are: -held for use in the production or supply of goods or services, for rental to others, or for administrative purposes and -expected to be used during more than one period The cost of an item of property, plant and equipment shall be recognized as an asset if, and only if -it is probable that future economic benefits associated with the item will flow to the entity and -the cost of the item can be measured reliably

Construction Contracts - Methods to determine stage of completion and revenue to be recognized - Input based methods

Proportion of contract costs incurred for work performed to date relative to estimated total contract costs (cost to cost method) Example: Expected sales value: 10,000 Incurred cost: 4,000 costs to complete: 3,000 revenue to be recognized: 4/7 * 10,000 Surveys of work performed (effort expended method) Example: Independent surveyor certifies stage of completion of 55% Entity is entitled to receive payments of 5,225 (5% retention) Revenue to be recognized: 5,225/.95%= 5,500

PPE - initial measurement - calculation

Purchase (purchase price incl. import duties and non-refundable purchase taxes) ./. trade discounts/rebates Construction (Elements of costs according to IAS 2) + any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management +costs of dismantling and removing the item and restoring the site on which it is located (provided that the entity incurs an obligation) + borrowing costs according to IAS 23 (qualifying assets) ./. government grants = Cost of asset

Impairment of Assets - Recoverable amount - Definition

Recoverable amount is the higher of fair value less costs to sell and value in use Determination of recoverable amount reflects economic rationale: -Sell if fair value less costs to sell (net selling rice) is higher than value in use -Use if value in use is higher than fair value less costs to sell

Leases - Classification - Strong indicators

Strong indicators for a lease being classified as a finance lease are: -Transfer of ownership to the lessee by the end of the lease term -Purchase option at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable ->it is reasonably certain at the inception of the lease that the option will be exercised. -The lease term is for the major part of the economic life of the asset even if title is not transferred -At inception, present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset -Leased assets are of such a specialized nature that only the lessee can use them without major modifications

deferred taxes - Deferred tax asset

The amounts of income taxes recoverable in future periods in respect of deductible temporary differences

deferred taxes - Deferred tax liability

The amounts of income taxes recoverable in future periods in respect of deductible temporary differences

Deferred taxes - temporary differences

The differences between tax and financial reporting bases of assets and liabilities that will result in taxable or deductible amounts in the future

Construction Contracts - Criteria to be satisfied for the outcome to be reliably estimable depends on type of contract - Cost Plus Contract

The outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: -It is probable that the economic benefits associated with the contract will flow to the entity and -The contract costs attributable to the contract, whether or not specifically reimbursable, can be clearly identified and measured reliably If outcome of a construction contract cannot be estimated reliably: -Revenue shall be recognized only to the extent of contract costs incurred that it is probable will be recoverable and -Contract costs shall be recognized as an expense in the period in which they are incurred -An expected loss on the construction contract shall be recognized as an expense immediately

Intangible assets - Subsequent measurement - Indefinite useful life

There is no foreseeable limit to the period over which the asset is expected to generate net cas inflows for the entity ->an intangible asset with an indefinite useful life is not amortized, but tested for impairment on an annual basis -Intangible assets shall be depreciated straight-line if pattern cannot be determined reliably

Construction Contracts - Recognition of contract revenue and expenses

When construction projects take a number of periods to complete, a number of accounting issues arise. Most importantly: -Is revenue recognized throughout the construction period or after completion of the project? If: Outcome of a construction contract can be estimated reliably Then: Contract revenue/contract costs are recognized as revenue and expenses respectively by reference to the stage of completion at the end of the reporting period However: An expected loss has to be recognized as an expense immediately Criteria to be satisfied for the outcome to be reliably estimable depends on the type of contract

Fundamental Qualitative Characteristics - Faithful representation - Neutrality

Without bias in the selection or presentation of financial information, i.e., information is not slanted, weighted, (de-)emphasized or otherwise manipulated

Measurement Concepts according to framework - historical cost

assets are recorded at -the amount of cash or cash equivalents paid or -the fair value of the consideration given to acquire them at the time of their acquisition liabilities are recorded at -the amount of proceeds received in exchange for the obligation, or -in some circumstances (i.e. income taxes), at the amounts of cash equivalents expected to be paid to satisfy the liability in the normal course of business

Intangible Assets - Definition - Control

is the power to -obtain the future economic benefits flowing from the underlying resource and -restrict the access of others to those benefits

Fundamental Qualitative Characteristics - Faithful representation - Free from error

no errors or omissions in the description of the phenomenon, and the process used to produce the reported information has been selected and applied with no errors in the process.

Construction Contracts - Costs that are specifically chargeable may include:

some general administration costs and development costs for which reimbursement is specified in the terms of the contract

deferred taxes - Deferred tax expense

the change during a reporting period in the deferred tax liabilities and deferred tax assets of an entity

Intangible Assets - Definition - Identifiability

to distinguish intangible assets from goodwill: -is separable or -arises from contractual or other legal rights