MM2: Financial Accounting an der Karlsruher Institut für Technologie

Karteikarten und Zusammenfassungen für MM2: Financial Accounting an der Karlsruher Institut für Technologie

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Lerne jetzt mit Karteikarten und Zusammenfassungen für den Kurs MM2: Financial Accounting an der Karlsruher Institut für Technologie.

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

Explain the different depreciation methods

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

Valuation approaches for fair value 

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

Which measurement Models are allowed by IFRS for capitalizing PPE and what's the main difference?

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

Subsequent Measurement under the Cost Model

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

Initial Measurement of PPE and Subsequent expenditures?

Rules for capitalizing

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

Fair value hierarchy: What's that? 

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

When to test for impairment?

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

Subsequent Measurement of Intangible Assets with Finite Lives?

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

Recognition and Measurement of Provisions, you fuckface.

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

Which criteria need to be met so that expenditures on development are capitalized?

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

Intangible assets: Recognition and Initial Measurement

Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

What is fair value? How is it determined?

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Beispielhafte Karteikarten für MM2: Financial Accounting an der Karlsruher Institut für Technologie auf StudySmarter:

MM2: Financial Accounting

Explain the different depreciation methods

Estimated salvage value and useful lifetime needed

Straight line:
Cost of the asset is allocated evenly over lifetime

Accelerated:
Allocation of cost is greater in earlier years

Units of production:
Allocation of cost corresponds to actual use in the particular period

MM2: Financial Accounting

Valuation approaches for fair value 

Market approach

Income approach

Cost approach

MM2: Financial Accounting

Which measurement Models are allowed by IFRS for capitalizing PPE and what's the main difference?

IFRS permits:

-cost model

-revaluation model

IFRS requires to apply the same measurement model to all assets within a particular class of assets.

Key difference

Systematic decrease in both cases. Valuation Model might jump above your historical cost. Cost Model only allows decrease in value-

MM2: Financial Accounting

Subsequent Measurement under the Cost Model

PPE is reported at historical cost less accumulated depreciation and impairment losses.

  • Depreciation accounts for a systematic decline in value over an asset’s useful life (land is not depreciated).
  • Impairment losses reflect any unanticipated decline in value while reversals are permitted.

Impairment occurs when the asset’s recoverable amount is less than its carrying amount.

  • Terms and procedure defined in separate IFRS.

When an asset is considered impaired, the company

recognizes the impairment loss in the income statemen

MM2: Financial Accounting

Initial Measurement of PPE and Subsequent expenditures?

Rules for capitalizing

PPE’s are Land, buildings, equipment, machinery, furniture, and natural resources (e.g., mineral and petroleum resources)

At acquisition, capitalize

-purchase price and

-expenditures necessary to prepare asset for intended use

Subsequent expenditures are

-capitalized if expected to provide benefits beyond one year (extend life or capacity)

-expensed otherwise

MM2: Financial Accounting

Fair value hierarchy: What's that? 

A fair value hierarchy is established based on the inputs to

valuation techniques used to measure fair value. The inputs are categorized into three levels, with the
highest priority given to observable inputs, and lowest priority given to unobservable inputs.

Level 1 Inputs: observable

Level 2 Inputs: observable

Level 3 Inputs: unobservable

                         

Appropriate valuation technique(s) should be used by maximising the use of relevant observable inputs, and minimising the use of unobservable inputs. Comprehensive disclosures are required, i.e. information about the valuation techniques and inputs used to develop fair value measurements.

           

MM2: Financial Accounting

When to test for impairment?

Internal indicators

• Evidence of obsolescence or physical damage

• Discontinuance, disposal or reconstructing plans

• Declining asset performance

 

External indicators

• Significant decline in market value

• Changes in technological, market, economic or legal environment

• Changes in interest rates

• Low market capitalization

MM2: Financial Accounting

Subsequent Measurement of Intangible Assets with Finite Lives?

Cost model:

  • Determine useful life.
  • Residual value – assumed zero unless active markets exists.
  • Amortization method.
  • Review above annually.

 

Revaluation model:

  • Fair value at revaluation date.
  • Fair value determined by referring to active market. 
  • If no active market exists, use cost model. 
  • Revaluation done regularly.

 

An intangible asset with a finite useful life is amortized using the same methods as for depreciation of PPE.

MM2: Financial Accounting

Recognition and Measurement of Provisions, you fuckface.

Recognition of Provisions

Provisions are liabilities of uncertain timing or amount. 

Provisions are recognized when:

  • the entity has a present legal or constructive obligation as a result of a past event; and
  • it is probable that an outflow or economic benefits will be required to settle the obligation; and
  • a reliable estimate can be made of the amount of the obligation.

A provision is recognized for:

  • Onerous contract.
  • Restructuring costs if a detailed formal plan is established.


Measurement of Provisions

  • Provisions are measured at the best estimate (with the information I have today) of the expenditure required to settle the present obligation at reporting date.
  • In determining the best estimate, the related risks and uncertainties are taken into account.
  • Where the effect of the time value of money is material, the amount of the provision is the present value of the expenditures expected to be required to settle the obligation.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate

MM2: Financial Accounting

Which criteria need to be met so that expenditures on development are capitalized?

(IT-AAPE)

1. Technical feasibility of completing the tangible asset

2. Intention to complete

3. Ability to use or sell the intangible asset

4. Adequate technical, financial and other resources to complete

5. Probable future economic benefits

6. Expenditure measured reliably

MM2: Financial Accounting

Intangible assets: Recognition and Initial Measurement

Intangible assets:

  • Identifiable, non-monetary assets, without physical substance.
  • Include items that involve exclusive rights, such as patents, copyrights, trademarks, and franchises.

Identifiable if either:

  • Capable of being separated and sold, licensed, rented, transferred, exchanged or rented separately.
  • Arise from contractual or other legal rights.

Initial measurement of an intangible asset depends on how it is acquired.

MM2: Financial Accounting

What is fair value? How is it determined?

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Main assumptions determining fair value

-Market Participants

-Principal Market

-Fair Value in-use or in-exchange

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