Components of a company’s pension liability

by

Last update 22/12/2019 Components of a company’s pension liability – A company’s defined-benefit pension plans have three basic components: accrued-benefit obligations, or the future liabilities created by employees’ service; plan assets, used to pay pension benefits; and unamortized actuarial gains and losses. Setting aside unamortized actuarial gains and losses, when plan assets are less than … Read more

Enhancing qualitative characteristic

by

Last update 10/08/2019 A qualitative characteristic that makes financial information more useful if the information both is relevant and provides a faithful representation. Comparability, verifiability, timeliness and understand-ability are qualitative characteristics that enhance the usefulness of information that both is relevant and provides a faithful representation of what it purports to represent. The enhancing qualitative … Read more

Complete detection of all IFRS 3 intangibles

by

Last update 13/11/2019 Complete detection of all IFRS 3 intangibles explains it all, because detecting intangible assets can be a complex and challenging matter. Strategies to detect identifiable intangible assets vary depending on the facts and circumstances of the business combination and usually require a full review of the transaction. It is important to understand … Read more

Embedded derivatives

by

Last update 04/01/2020 Embedded derivatives are part of a financial instrument that also includes a non-derivative host contract. The embedded derivative requires that some portion of the contract’s cash flows be modified in relation to changes in a variable, such as an interest rate, commodity price, credit rating, or foreign exchange rate. If a derivative … Read more

Common Elements of Customer Relationships

by

Last update 16/11/2019 Common Elements of Customer Relationships determines whether a (intangible) customer relationship asset exists for IFRS 3 Business Combinations, one should consider several elements that create that intangible asset. Common Elements of Customer Relationships Topics hide Required Information Expectation of repeat patronage of its customer base Lifespan of customer relationships Common Elements of … Read more

Effective interest rate

by

Last update 14/12/2019 Effective interest rate – The rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, an entity … Read more

Common cash flow classification errors in practice

by

Last update 23/12/2019 Common cash flow classification errors in practice – Although the definitions of operating activities, financing activities and investing activities may appear straightforward, in practice a number of classification errors are frequently made. These include: Common cash flow classification errors in practice 1. Cash outflows related to the acquisition of intangible assets and … Read more

Effective interest method

by

Last update 14/12/2019 The effective interest method is used in the calculation of the amortised cost of a financial asset or a financial liability and in the allocation and recognition of the interest revenue or interest expense in profit or loss over the relevant period. But many assets and liabilities valued at amortised cost are … Read more

Commitments in financial statements

by

Last update 01/12/2019 Commitments in financial statements are items that are not reported as liabilities as of the balance sheet date. Some of these items are reported in the notes to the financial statements. Examples include non-cancelable (as at balance sheet date) binding contracts to rent space in the future or to purchase items at … Read more

Effective hedge – Example

by

Last update 10/08/2019 Accounting policy example Financial assets are recognised initially at fair value, normally being the transaction price plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The subsequent measurement of financial assets depends on their classification, as set out below. The group de-recognises … Read more