Topic 1A: Financial Instruments - SFRS (I) 9 receipt Dr Inv in bond ∆FV, Cr if < 0.

receipt Dr Inv in bond ∆FV, Cr if < 0. 1st yr: e -a Firm commitment  Cumulative ∆ in FV of item recognised as FC asset/liability with Cr Inv  Loss on settlement
Financial assets (Receivable, cash, derivatives, equity & debt inst) ● FV + trx cost.  (OCI) Cr FVR/ OCI ∆FVR, Dr if < 0. 1st yr: f corresponding gain/loss in PL. Initial carrying amt of A/L adjusted to include cumulative Cash Flow Hedge: Hedge of exposure to variability in cash flows that is attributable to a
GCA &  EIR (FVTPL: Trx costs expensed off) │Financial liabilities (Payables, Cr Int income c (EIR) FV∆ in FV of the FC when firm meets the FC particular risk associated with recognised asset/ liability or a highly probable forecast
borrowings, derivatives (AC/FVTPL)) ●  FV - trx cost (FVTPL: Trx costs expensed off) Dr Impairment loss (Cr if gain) Default rate x Loss x GCA ●∆FV of item & instrument  PL transaction (≥80%, uncommitted but anticipated) │ ●No entry for item
Equity inst: “Historical cost": Residual interest in A + No contractual obligation to pay Cr FVR ∆Impairment loss^ Step by Step Guide: ① Hedge for Asset. Identify forward & spot rates ●∆FV of inst  HR│Effective portion of inst: ∆IV of option  HR │Ineffective  PL
Instrument Classification Derecog gains/ losses from FVR to I/S Purchase No entries needed. FV of contract = 0 Adjust HR to lesser of: Cumulative gain/loss on inst from inception > FV∆ of hedged item
Ordinary shares Equity Issued Dr Inv in bond P paid *Record deposit if there is. Dr Margin deposit│Cr Cash* Item Instrument PL HR
Redeemable preference shares with fixed dividend each year Liability (PL) Cr Cash P paid Period 1 Dr Derivative asset
∆Forward rate x units 100/-100 -90/+90 0 90 Dr/Cr
Preference share with mandatory redemption by issuer for an Liability Interest Dr Cash b (fixed) Cr PL – Gain on forward contract 100 -110 10 Dr 100 Dr
amt / gives holder the right to require issuer to redeem the inst receipt Dr Inv in bond ∆ Given FV > 0 Record FV∆ of forward (hedging inst): (Beg – End rate) x units > 0 -100 110 10 Cr 100 Cr
Convertible bond into shares to the value of L Liability (PL) Cr PL ∆ Given FV > 0 Dr PL – Loss on inventory
Cr Int income b (fixed) ∆Spot rate x units Step by Step Guide: ① Firm Commitment ●Start: Forward: initial $0 FV  No entries
Convertible bond into fixed number of shares L for bond, E for conversion Cr Inventory
*NO IMPAIRMENT* ●Next period: Dr Forward Asset│Cr HR  ∆FV of inst (New – Old >0)
Record FV∆ of inventory (hedged item): (Beg – End rate) x units > 0 ●Settlement/Expiry: Dr Forward Asset│Cr HR  ∆FV of inst (New – last period >0)
AC ● Held within a business model whose objective is to hold FA to Final year (Close out inv in bond account): Dr Cash, Cr Inv in bond  Face value
Period 2 Repeat above. No entries needed if FV∆ = 0 Dr Bank│Cr Forward Asset  New – Contracted FV of inst (Net settlement)
(Infrequent collect contractual CF Bond Sale: Dr Cash (FV) │Cr Inv in Bond (CF GCA)│Cr Gain/loss (FV – CF GCA) (Expiry) Dr Cash (Contracted P – End Dr Machinery│Cr Bank  Purchase of machinery at final amt
/Rare ● Contractual terms of the FA give rise on specified dates to CF that FVTOCI (Irrevocable choice): Dr Quoted shares (ΔFV), Cr FVR or PL (FVTPL) if gain Cr Derivative asset rate) x units
sales) are solely pmts of P+I on the P amt outstanding Close off: Dr Bank, Cr Quoted S │Cr FVR / PL (If gain in ΔFV) Dr HR│Cr Machinery  ∆FV of item (New – Old > 0)
Record settlement of forward: (Contracted P – End rate) x units > 0 ② Hedge for liability *CF hedge swap if hedged item is a variable rate asset or liability*
Examples: Debt inst (Bonds), cash, receivables Restructuring Bond: ① Yearly P+I repayment ②New i/r given ③Allowance balance *Dr Cash│Cr Margin deposit if a deposit was put in at the start*
● Trade receivables, simple bond with fixed/variable i/r *Depends on swap terms (ie. Receive float rate, pay fixed or vice versa)
(a) Date (Next pmt period from restructuring)│Opening (Reduced amt)│_% int Inventory Dr Cash Selling P x units
● Contractual term that permits issuer to prepay debt inst or put debt Date│Floating rate│Floating rate receipt│Fixed rate payment│Current net receipt/
(new)│Principal payment│Closing (Opening – P pmt)│Cash (P+I) sale Cr Sales Selling P x units
int back to the issuer before maturity & amt substantially represents payment│PV of swap A/L│Change in FV (Current – Previous PV)
(b) Sum up CASH column  Use EIR (1st part) as disc factor  Find NPV of future CF Dr COGS
unpaid amt of P+I *Start date from date where swap was entered
(c) Calculate impairment loss = Bond value (CF GCA at date of restructuring) – PV of Cr Inventory
●B with stated maturity date. Payments of P+I on P amt outstanding * I/Y = floating rate from current period + margin; PV: n = periods remaining (exclude
future CF  - Allowance = PL amount  Dr Imp loss, Cr ECL allowance (PL) or Dr Record sale of the inventory
linked to inflation index. current period); Pmt = Net receipt/pmt from next period
Allowance (Given) Dr Imp loss (PL) Cr Rec (Bal figure) *Effective: Item ∆ (Intrinsic value)│Ineffective: Time value (∆Value – Intrinsic)
● Perpetual inst with continuous extension options and callable Bond issued Dr Cash
(d) Accounting thereafter: Date (Same as (a))│Opening (NPV from (b))│_% int (EIR)│ Issued P
● Trade payables, borrowings, cust deposit accounts *Hedge effectiveness: (Last period – New inst) / (Last period – New item) Cr Bonds payable
Payment (P+I)│Closing (Opening + Int – Pmt)
(e) Journal entries Dr Bank (P+I)│Cr Int Income (EIR)│Cr Bond ((Pmt – Int) >0) ② Hedge for liability. *FV hedge swap if hedged item is a fixed rate asset or liability* Record proceeds from bond issue
AC = GCA [Initial recognition amt – P repmt +/- cum amort (EI
method of (initial – maturity amt))] – Loss allowance (Doubtful D) Bond issued Dr Cash Issued P Enter IRS No entry needed. Cost & FV = 0 -
Compound inst (convert to fixed number of shares):
*Int revenue  Use EIR method  Apply EIR to GCA amt (exclude Cr Bonds payable Next period Dr Interest expense
① Find FV of L (Disc future CF using mkt i/r for similar B w/o conversion) ② E = Bond Variable int on bond/loan
loss allowance)  Except: Purchased/originated credit-impaired fin Record proceeds from bond issue Cr Cash
issued amt OR P (higher of)– L ③ Trx costs allocated to L & E in proportion to ① & ②
assets  Use credit-adjusted EIR OR Subsequently credit-impaired Enter IRS No entry needed. Cost & FV = 0 Record payment of __% interest on the bonds from (period)
Dr Cash  Issued P Dr Unamortised discount on bonds  Face - L
fin assets  Apply original EIR to AC Next period Dr Interest expense Dr HR OR: Dr Swap Asset
Cr CBP  Face Cr Capital reserve  Equity portion Fixed interest on bond
FVTOCI ● Held within business model whose objective is achieved by both Cr Cash Cr Swap liability Cr HR
① Recognise issue of convertible bond
(Extension collect contractual CF & sell FA   Greater freq & value of sales Record payment of __% fixed interest on the bonds Record FV∆ of IRS *Pmt = ∆int (floating - fixed) – < 0  Swap L ; > 0  Swap A*
② Recognition of interest expenses
of AC, ● Contractual terms of the FA give rise on specified dates to CF that Yr│Bond at start (Liability portion)│Payment (-)│__% interest (mkt i/r)│Bond at end Dr Bonds payable Last period Dr Interest expense
New - Old FV < 0 Floating int on bonds
more are solely pmts of P+I on the P amt outstanding * Yr starts when int is paid. Equity portion = Sum of payment + mkt interest * Cr Hedging gain Cr Cash
frequent Measurement: Int income calculated using EIR on GCA  PL Dr PL – Finance costs Mkt int Record FV∆ of bonds (Calc new FV of bond with new i/r, n = periods remaining) Record payment of __% interest on the bonds
sales) - ECL/ gains & impairment gains  PL & OCI/FVR Cr Unamortised disc on bonds/ CBP Mkt int – payment Dr Cash Dr Interest expense OR: Dr Cash (If receipt)
Eg: Debt Fixed – Floating >0 Cr Cash  Fixed - Floating >0 Cr Interest income
FV gains/losses  OCI / FVR Cr Cash Payment Cr Interest expense
inst When FA derecognised, cumulative gain/loss previously recognised Record settlement of net int accrual on IRS for the period: Receive fixed, pay floating Record settlement of net int accrual on IRS for the period: Receive floating, pay fixed
*Yearly. Finance costs = Interest exp + Amort disc on bond
in OCI is reclassified from E to PL as reclassification adjustment *Total finance costs = Cash interest + Amortised disc on bonds  Charged to PL Dr Hedging loss FV∆ > 0  Initial FV = 0 Dr Swap liability From last period
FVTPL ● Held for trading (Purpose of selling/repurchasing it in near term; SOFP: NCL = Bond at end at the date of reporting│Adjusted RE = Beginning RE – Cr IRS revaluation liability New - Old FV < 0: Gain Dr Swap asset New FV
(qualify FL: Part of portfolio & recent pattern of ST profit-taking│Derivative) Amortised bond discount│Capital reserve = %unconverted x E portion│Share capital Record FV∆ of IRS after settlement of interest Cr HR New FV – (-FV from last if L)
for AC & *E inst not held for trading  May make irrevocable election to = Initial SC + Converted E + Converted L = Balancing figure Termination of Hedge: Record settlement of IRS for FV at (date). Record FV∆ of IRS (New – Last period FV)
FVTOCI) - present in OCI for subsequent ∆ in FV on initial recognition Conversion at maturity: Derecognise L & recognise as E Dr IRS Revaluation L│Cr Cash (Par – FV of bond) or (Sum of revaluation account) On maturity of loan & IRS: Swap asset & HR = 0
Eg: Debt, ● Separately recognise int revenue or impairment gains/ losses ● Repeat entries above at maturity year ③ Firm Commitment – Contracted but undelivered: Create FC (suspense/temp) & knock ② Options
E inst Examples: *Failed to meet solely payments of P+I* ● Dr CB (Total amt)│Dr Capital reserve (Full equity portion)│Cr Share Cap(Dr Sum) off against A bought at the end (Cr Machinery Dr FC) Initial (Dr PL- Loss on FC, Cr FC) (a) Price / FV - Intrinsic value = TV  Intrinsic value = ∆FV of item (New – Last amt)
(Bonds if ● Payments of P+I linked to E index No conversion/ Redeem on maturity: Dr CBP │Cr Cash (Total amt) Purchase No entries needed. FV of contract = 0 FV∆, split to TV (reserve)- how much willing to pay, IV (PL): (SP – XP) / item ∆
sold ● Contractual terms that require issuer to impose losses on the Conversion before maturity: ① Extinguishes the converted instrument ②Adjust Next Dr Forward asset Premium paid= Initial TV. Separately write entries to knock off HR for IV and TV.
quickly) holder if the issuer fail to meet regulatory capital requirements ∆FV (New – Old >0) Options at FV usually.
unamortised bond disc & ③capital reserve proportionately period Cr PL – Gain on hedging inst
● Debt inst for which i/r is quoted as a multiple of a benchmark i/r Dr PL – Loss on firm commitment (b) Journal entries: Dr Options│Cr Cash  P paid for options
Dr Convertible bond %converted x total amt
● Perpetual inst but int pmt cannot be made unless issuer is able to ∆FV (New – Old >0) Dr Option│Cr HR (IV)  If ∆value from last period >0. Same for TV.
Dr Capital reserve %converted x equity portion Cr Firm commitment
remain solvent immediately afterwards & deferred int does not ●Close HR: Dr HR│Cr Inventory (Asset)  Find net position from entries & close.
Cr Unamort disc on bonds %converted x (Total amt – End B before conversion) Expiry of Dr Forward asset ∆FV (New – Last
accrue additional int Hedge of forecast trx  Recognised/FC for non-FA/FL (Eg: Future equip/ inventory
Cr Share capital Balancing figure: Converted E + Converted L contract Cr PL – Gain on hedging inst period >0)
● Callable debt inst exercisable at FV which could be < par value purchase, provisions)  Knock off HR into carrying amt.
Yr│Bond at start│Payment (-)│__% interest│Bond at end Dr Bank Settle on net basis
● All investments in E inst Otherwise, to PL. Eg: Recognition of FA/FL during which A acquired or L assumed affects
①Start with amt at conversion date Cr Forward asset FV (New – Old) > 0
●Traded borrowings│●Convertible/ Complicated bond PL (Recognise int exp/income, Forecast sales). Loss in HR & not recoverable  PL
②Deduct Converted L (%converted x End bond)Next period start bond (NCL left) Dr PL – Loss on firm commitment
Impairment of FA ∆FV (New – Old >0) ●Close out call option account: Dr Cash│Cr Call  Spot price of option
③Pmt = Coupon rate x %unconverted x Beg CB amt (Total amt) Cr Firm commitment
12-mth ECL: No sig ∆ credit risk. Lifetime cash shortfalls if default occurs 12 mths after ●Record inventory purchase (depends on nature of trx): Dr Inventory│Cr Cash  Spot P
*Unamortized bond discount = %unconverted x Total amt – Bond at end Dr Machinery Purchase P at end of
reporting date  Prob-weighted │Lifetime ECL  Sig ↑ credit risk (inv grade) ●Inventory sale: Dr COGS Cr Inventory  Books amt; Dr Cash Cr Sales  Spot P
*With conversion, A & RE↑ by interest saved (New – Old int) Cr Bank period
Loss allowance = Lifetime ECL for trade/ lease rec, contract A)  Use provision matrix ③Futures: FV (Futures P x Q) - Intrinsic value = TV  Intrinsic value = Spot P x Q
(No. of days past due, default rate (row))  Current / Ending GCA x Lifetime ECL rate *Convertible inst extinguished before maturity through early redempn / repurchase, where Dr Firm commitment New - Old FV of item *HR: Ineffective portion of gain/loss on inst  PL (Excluding options)
Actual credit loss (write-off/credit-impaired) is calculated by disc expected CF using original privileges are un∆ Allocate consideration paid & trx costs for repurch / redempn Cr Machinery at start > 0 Topic 2: Consolidated FS
original EIR. Dr Allowance Dr Impairment loss Cr Asset to L & E in proportion. PL for gain/loss related to L; E for consideration related to E. ④ Firm Commitment on Shares SFRS 10: Controls investee if a) power over investee b) exposure/ rights to var returns
Step by Step Guide: ①Calculate EIR using fin calculator ① Calculate PV of convertible inst  Allocate portions to L & E Date Per share Total ___Options from involvement w investee c) ability to use power to affect investor’s returns
② Fill in table: Date│Start GCA (Given PV) - a│Int received (coupon)│EIR @ _% (a x ②Recalculate PV of convertible at redemption date (carrying value) & at FV (mkt i/r) Fair value Less: Intrinsic value =∆Item (New – Old at start) Time value ●If new S issued from assoc, calc new voting rights  Control. Make above assumptions
EIR)│Carried forward GCA (a-b+c)│FV (Given)│FVR = FV – AC (e – d) ③Balance attributable to E = Given FV – Calculated FV at ②
 Prepare conso (*NCI share based on original %, unaffected by ∆ownership of rights)
*Ending CF GCA = Face value of bond; FVR at end = 0 ; Sum of EIR = Profit from CF ④ Carrying value FV Difference *Acquisition date: Contract; control acquired in one trx (closing date: consideration &
Hedged Item Hedging Inst
③Journal entries Total L component ② CV ② FV CV - FV shares fully & legally trf); Acquired in stages (date of effective control)
1 No entry since not delivered Dr __option  Amt paid
Issued Dr Inv in bond Face/ Cost (if premium) E component ① Equity ③ CV - FV Cr Cash Expected value of contingent consideration = (Prob of contingent event occurring x
Bond Cr Unamort disc  Face – mkt value Face – mkt value Total Sum of above Given FV Sum of above 2 Dr Loss on FC Dr _option consideration) + (Prob event not occurring x 0)  FV = PVIF x Expected value
(AC) Cr Cash  Paid P (mkt val) Paid P (mkt val) Topic 1B: Hedging Financial Instruments - SFRS (I) 9 Cr FC  ∆Share (New – Old <0) Cr Deferred gain  ∆IV (New-Last) Acquisition related costs not included in purchase consideration:
Interest Dr Cash  b (fixed) b (fixed) Fair Value Hedge: Hedge of the exposure to ∆FV of a recognised asset, equity inv, non- Dr Loss on option (HR) ●Finder’s fees, advisory, legal, valuation, general admin, other prof fees  Expensed
receipt Dr Unamort disc/ Cr Unamort prem c -b FA or a liability or unrecognised firm commitment Cr _ option  TV loss (New-Last) ●Costs of arranging for borrowings  Deduct against proceeds of borrowings & amort to
(AC) Cr Interest income c (EIR) Gain or loss on hedging inst  PL/OCI (If equity inv hedged presented as FVTOCI) 3 Repeat above + Repeat above + PL through higher EIR ●Costs of issuing E inst  Deduct against E issue proceeds
Dr Impairment loss (Cr if gain) Default rate x Loss x GCA FV∆ of TV of option  OCI/HR Dr Investment Dr PL – TV of option  New-Old TV Asset: Resource controlled from past events & future economic benefits expected to flow
Cr Allowance for ECL ∆Impairment loss^ Gain or loss on hedged item Adjust carrying amt of hedged item & recognise in PL Cr Cash  Contract delivery Cr OCI  Close HR & trf to PL to entity │Liability: Present obligation from past events & settlement result in outflow
Issued Dr Inv in bond P paid Dr Cash Dr Cash  FV of option at end ●Identifiable intangible A  Separable (can be sold/rented) & arises from contractual or
Eg: Hedged item is a FA at FVTOCI  PL. E inst (FVTOCI)  Gain/loss remain in OCI
(OCI) Cr Cash P paid Cr Inv  Sell off shares at new P Cr _option  Close option position other legal rights  Unidentifiable subsumed into GW
Interest Dr Cash b (fixed) Dr Loss on FC ●Contingent L:  Present obligation & reliable measure of FV even if not probable
 Asset FV > BV  DTL (FV-BV) x T FV < BV  DTA Trf asset is IMPAIRED: Realised loss  Reclassify COGS (in transferor) to imp loss -Related tax effect
Liability FV < BV  DTL FV > BV  DTA CJE: Adjustment for unrealised loss on up/downstream sale in current year & Adjusted FV of INA of A
Topic 3: Consolidated FS (Biz Combinations) – SFRS(I) 3 reclassify COGS to impairment loss. *NO tax effect* P’s share at _% of adjusted FV
NCI: Acquirer obtains control of sub but  have full ownership of voting rights Dr Sales (Trf P)│Dr Inventory imp loss│Cr COGS (Same formula) Add: Unimpaired implicit goodwill
To determine control: use nominal ownership % through subsidiaries; not effective % 7. Allocate NCI share in adjusted beg RE of Y/ post-acquisition profits up to 1/1/x_ P’s share of FV of INA = BV at acquisition + FV adj -/+DTL/DTA (from FV adj)
Parent exempted from conso FS if (i) parent is a wholly/partly-owned subsidiary & all its Dr Beg RE│Cr NCI Implicit goodwill = Consideration paid – P’s share of INA Cash-settled (L for amt based on value of equity eg SAR, phantom): Dr rem exp│Cr SOL
owners do not object to non-prep (ii) parent’s debt/equity not traded in public mkt (Pte Ltd) Beg RE as at_ vs at incorp/ acq  ∆ in post-acq RE  Less: Adj for unrealised Investment in A at 31/12/x_ FV of SAR is remeasured every yr end to determine unsettled liability until L=0.
(iii) parent not in process of filing for listing of debt/equity AND (iv) its ultimate/intermediate upstream profit (inventory) Add: Tax effect of unrealised profit  Less: Unrealised Topic 6: Foreign Currency Transactions & Foreign Operations At each ex date, Dr remuneration expense│Cr Cash (intrinsic value x exercised SAR)
parents produces FS available for public use and comply w SFRS(I) or IFRS where sub profit on sale of PPE  Add: Overstated tax exp  Add: “Realisation of profit Functional currency for co: ①Econ environment, affect sales & costs ②Financing, Expense over entire plan period= sum (IV x no. of exercised SAR) = total pmt by employer
are conso. eg USA parent does not fulfil (iv) as not complied through reversal of dep  Less: Tax exp on reversal of dep  Adjusted ∆ in post- currency that receipts are retained ③Judgement Modification: ∆FV recognised immediately in PL. Cancelled: L reversed to PL as CR
①FV (NCI’s shares x Mkt P) ②Share of identifiable net A (NCI % x FV of net A) acq RE  NCI share at __% GW +FV adj on acq of foreign op  A+L of sub (kept in functional of sub & convert to EG: 100 SAR each to 500 employees; service condition: 3 yrs  Vesting period = 3yrs
GW = Consideration trf (+ contingent consideration) + ① or ② - FV of identifiable net A *Account for upstream transactions only* presentation curr) → Closing rate. + EFR = (GW + Net assets) x (Closing – opening rate) 1: 95 to leave by end yr3│2: 100 to leave by end yr3│3: 97 left. 150 X│4: 140│5: 113 X
Attribute GW to parent & NCI (Consideration trf/ FV of NCI – Net A acq (Proportion)) *If NCI has no GW  Do not include GW impairment in calculating NCI share* ① Reporting Foreign Currency Balances (Re-measurement/Temporal Method) Yr FV IV Yr Entries Amt
*Account for DTL/DTA (FV-BV of net A x Tax rate)  -/+ to FV of net A  Calc GW 8. Allocate NCI share in adjusted current profit of Y ●Convert own books or wrong functional currency used
Gain from bargain purchase: FV of consideration + NCI + Acquirer’s previously held 1 $14.40 (S– X) 2 Dr Rem exp│Cr SOL 218 933
Dr NCI share of profits│Cr NCI *Use NPAT (Before div declared).Tax exempt* Entity Level: Initial recognition – FC trx recorded in functional curr (FC amt x spot rate)
interest in acquiree < FV of identifiable net A (Negative GW→ Charge to P/L as gain) 2 $15.50 3 Dr Rem exp│Cr SOL 47 127
Current PAT  Add: Realised upstream profit from prior period (3)  Less: Tax At SOFP date: ①Monetary items (Cash & bank, rec, payables (L), loans & borrowings,
●Recognise adj in provisional val used for combi (a) Within 12mths (b) From acq date 3 $18.20 $15.00 Dr Rem exp │Cr Bank 225 000
effect of realised profit  Less: Unrealised upstream profit (4)  Add: Overstated Inv in B, derivatives, cash settled provisions/benefits, cash div L, DTA/L)  Closing rate
●Post-acq ∆ in FV of contingent consideration: Remeasure GW if due to additional info 4 $21.40 $20.00 4 Dr Rem exp │Dr SOL 61360, 218640
tax exp on unrealised profit  Add: “Realisation” of profit through reversal of dep (5) Diff on settlement/translation at rates diff from initial recognition  PL (Ex gain/loss)
obtained that affects position at acq date. Not remeasured if due to events after acq 5 (SAR) $25.00 Cr Cash 280 000
 Less: Tax exp on dep  Adjusted current PAT  NCI share ②NM items (historical cost) Use exchange rate on date of trx  No translation
Any ∆ FV of assets after acq  Goes to PL (either affect asset or accum dep) *Account for upstream transactions only. NCI  share parent’s profits* (Eg: Prepaid assets, intangibles, inventory, investment in equity, PPE)
●Full GW  NCI & parent’s GW│●Partial GW  NCI = Share FV of INA. GW for parent *NCI: No GW  Do not include GW impairment in calculating NCI share* Y Calculation Expense Liability
③NM items (FV)  Use rate at date where FV was determined (Eg: Shares)
CJE 1: Eliminate investment in subsidiary (Re-enactment) r
9. Allocate NCI share in other E components (if any)  Dr NCI share of _│Cr NCI Gain/Loss from NMI recognised in OCI/PL  (Ex gain/loss)
Dr Share capital (S) Dr Beginning RE (S) Dr Goodwill 1 (500-95) x 100 SARs x $14.40 x 1/3 194 400 194 400
For current year, only take ∆ in that equity component (not the end bal) ● COGS = Opening + Purchases – Ending
Dr/Cr DTA/DTL Cr Investment in S Cr NCI ● Retained profits (converted) = Net assets – Other E components (Translated) 2 (500-100) x 100 x $15.50 x 2/3 – 194 400 218 933 413 333
Analytical check:
Dr/Cr FV adjustment to A/L at acq Dr/Cr Identifiable A/L (+ Contingent L) FOREX translation G/L (+ after PBT, before tax)  Obtain RE from BS & work backwards 3 (500-97-150) x 100 x $18.20 – 413333  47 127 272 127 460 460
NCI at end of period = Share of BV of E at period end -/+share of unrealised
CJE_: Crystallisation of contingent liability recognised at acq (Avoid double-counting) Item Currency Amt Transacted rate SOFP rate Ex gain/loss + 150 x 100 x $15 (IV)  225 000
profit/loss from upstream sales at period end + Share of unamortised FV adjt at
Dr Contingent Lability│Cr Provision exp period end (after-tax) + Share of unimpaired GW at period end (full GW) Recon for Forex Translation: (For temporal method) 4 (253-140) x 100 x $21.40 – 460460  (218 640) 61 360 241 820
 Tax effect: Dr Tax Exp│Cr DTL ie. - Unrealised profit included  + Tax effect - Unrealised profit from upstream Identify BS & IS items  translated at CR. Exclude items both M or NM (Dep, Accum dep) + 140 x 100 x $20  280 000
CJE_: Eliminate interco loan and balances (Current year entry, no re-enactment) PPE sale (Interco profit – Accum over-dep thus far)  + Tax effect  Adjusted BV S$ Rate NZ$ 5 (113-113) – 241820  (241 820) 40 680 0
Dr Payable│Cr Receivable + 113 x 100 x $25  282 500
Net MA at acquisition date 310 000 1.00 310 000
CJE_: Eliminate income statement effects of loan *NO tax effect* Apply LCM to ending inventory: P transfers inventory ($100) to S at $120. Total = 225 + 280 + 282.5 (Sum of IV) 787 500
Increases in MA:
Dr Interest income│Cr Int expense 40% remains in ending inventory of S and NRV of this ending inventory is $30. Sales 1 200 000 0.85 1 020 000
CJE_: Eliminate interco transactions *NO tax effect* P S Conso Analysis Decreases in MA: For different NCI options: Impairment of goodwill→ CGU (eg sub) with allocated goodwill
CJE_: Record increase in FV of inv property Sales 120 xxx xxx 1. Dr 120 to eliminate trf P Land (Purchased 1/7/09) (100 000) 1.00 (100 000) after impairing other assets. CA vs recoverable amt (Lesser of FV - costs to sell and VIU)
Dr Inv property│Cr Gain on IP (or Beg RE)  Tax effect: Dr Beg RE│Cr DTL COGS 100 72 60 4. Cr 112 as bal If func currency NZ$ was used for (170 000) - (126 100) → Impair goodwill first & allocate bal to other A of CGU proportionately based on CA. No
CJE_: Record fall in FV of in-process R&D (x120) (60% x 100) (Use COGS formula) recording, net MA at YE (Sum of above): a reversal
Dr Imp loss (or Beg RE)│Cr Accum imp – R&D  Tax effect: Dr DTL│Cr Beg RE End Inv: Net MA at YE has to be translated at CR: b (170 000) 0.75 (127 500)
CJE_: Record amortization of intangible asset in prior years (FV>BV) Cost 48 40 (40% x cost) Forex translation G/L recognised in I/S(b-a) - - (1400)
Dr Beg RE│Cr Accum amortization – IP  Tax effect: Dr DTL│Cr Tax Exp NRV 30 30 (Given) *Net monetary position = Sum of monetary items from opening balance = a
CJE2: Record prior periods’ cumulative GW impairment up to 1/1/x_ *NO tax effect* Inv on BS 30 30 2. No adj since S inv will flow ② Translation to Presentation Currency (Closing Rate Method)
Dr GW impairment loss (or Beg RE)│Cr Accum GW impairment loss Imp loss in PL 18 10 (realised) 3. Cr 8 to ↓imp loss to 10 ●Functional currency  PC or for consolidation of subsidiary
CJE_: Record additional COGS for sale of undervalued inv in prior period/for the yr Dr Sales 120│Cr Inv imp loss 8│Cr COGS 112  No tax impact (Same end inv) At SOFP date: ①Translate A & L at CR ②Income & exp at avg rate / on the date of trx
Dr COGS (or Beg RE)│Cr Inventory  Tax effect: Dr DTL│Cr Beg RE Topic 5: Accounting for Investment in Associates ③Share cap & pre-acq reserves at historical rate on inv/ Resulting ∆RE: Avg rate & add
CJE_: Record impairment loss of inventory Indicators of SI: on BOD; participation in policy-making; material inter-entity trxs; technical to beg converted RE ④Exchange diff (NA – E) recognised in OCI (EFR)
Dr Imp loss on inventory│Cr Inventory  Tax effect: Dr DTL│Cr Tax Exp info; interchange of managers. Effective ownership of ≥20% through subsi or not (prove) EFR balance comes from: (a)Income & exp translated at trx date rate & A&L at CR
CJE_: Recod amortization of excess of FV over BV of inventory Separate FS: Investment in associate→ Cost; FVTOCI; EM. Conso/ EM FS: EM  Diff btw CR & trx rate (b)Opening net A translated at CR diff from previous CR.
Dr COGS│Cr Inventory  Tax effect: Dr DTL│Cr Tax Exp Intercompany balances are not eliminated. If FV in separate FS, reverse FV before EM Functional Currency for Foreign Operations:
CJE_: Eliminate dividends declared by S method. Investor allowed to recognise unrelated owners’ int in “unrealised” interco profits. ●Independence, High RPT?, CF are readily remitted + sufficient
Dr Dividend income│Dr NCI│Cr Dividends declared EA1: To bring beg investment & beg RE to equity accounted numbers (Re-enacted) ●Operationally independent  CR method │Dependent  Temporal
Up/ Downstream Sale: Dr Inv in A│Cr Beg RE (P) Profit (Opposite for loss) Topic 7: Share-based Payment Transactions
*Only if inventory sale occurred in current period* (Not re-enacted, 1st yr) Beg RE of A at 1/1/x_ │ RE at acquisition │ Post-acq after-tax profit before adj Vesting conditions: Service, Performance, Market performance (Share P).
1. Eliminate interco sales & adjustment of unrealised profits (Up + Down) Add / Less: *Include related tax effect for all trx below* Service can be implicit/explicit for 2nd and 3rd condition
Dr Sales│Cr COGS│Cr Inventory -Add dep on undervalued FA at acq  (FV adj / Remaining useful life) x Yrs passed Non-vesting conditions: if satisfy vesting conditions except mkt conditions, recognise
①Interco profit = Trf P – Original cost ②COGS adj = COGS recorded by -Unrealised profit on upstream trf of FA  Trf P – NBV E-settled share-based pmt (S/options): Trx with employees: Measure FV at grant
transferee (% sold x trf P) + unsold portion of COGS recorded by transferor (%unsold -Past over-dep on trf FA  Interco profit / Remaining useful life x Yrs passed date.│Vest immediately→ Dr Goods/ remuneration exp Cr Share option reserves
x original cost) or ③ Inventory adj = Total interco profit x %unsold -Unrealised profit in beg inventory  Interco profit x % unsold Dr Employee exp FV options x Vest period (a/b) x Employees – Cum exp
 Tax effect: Dr DTA│Cr Tax expense (From inventory adj) Adjusted post-acq after-tax profits Cr SOR b: Expected no. of years of vesting  can ∆
*If inventory sale occurred in previous period & entries are asked for current* P’s share at __% Employees = Total – Expected no. leaving – those left
2. Remove unrealised profit in beg inventory & beg RE (Up + Down) (Re-enacted) EA2: Reclassify dividend income (Current) Dr Div income (P)│Cr Inv in A Options Exercised:
Dr Beg RE│Cr Inventory (Unrealised profit from previous period) Dr Cash│Cr Share cap Total options x XP (Receipt from exercised options)
EA3: Recognise share of current after-tax profit of A (Current)
 Account for tax effect: Dr DTA│Cr Beg RE Dr SOR│Cr Share cap Ex options x FV at grant (Close SOR, move to SC)
Dr Inv in A│Cr Share of profit after-tax of A Profit (Opposite for loss)
3. Partial sale of interco inventory brought forward (Up + Down) (Current) ●Subsequent adjustment to total equity after vesting date.
Unadjusted current profit after tax of A
Dr Inv│Cr COGS (Realised profit in current)  Tax effect: Dr Tax exp│Cr DTA ●Spread over expected vesting period, estimate number of options can be revised.
Add / Less: *Include related tax effect for all trx below*
●Do not ∆PY entries. Can reverse PY expenses subject to estimates.
-Add dep on undervalued FA at acq  (FV adj / Remaining useful life) x Yrs passed
PPE Sale: ①Original cost of PPE ②Transfer P & remaining useful life ③Profit on ●Options P∆  Use new P for calculation in that yr
-Current over-dep on trf FA  Interco profit / Remaining useful life x Yrs passed
sale = Trf P – NBV at point of sale: Change S to P & P to S for upstream transfer ●Mkt condition inputted to value FV→ expected vesting period be revised  recognise
-Realisation of unrealised profit in beg inv (upstream)  Interco profit x % sold
4. Re-enact at point of sale: Reinstate to original cost, accum dep & reverse profit even if mkt condition not met but other vesting conditions are satisfied  Actual vesting
-Unrealised profit in ending inventory (downstream)  Interco profit x % unsold
Dr PPE (S) (Orignial cost – trf P)│Dr Profit on sale (P) (③)│Cr Accum dep (S) period shorter than estimated  Accelerate (Vest period =Yr / No. of yrs (↓))
Adjusted current profit after tax ●Do not recognise after vesting period
 Tax effect: Dr DTA│Cr Tax expense (from profit) P’s share at __%
 Change “Profit on sale” to beg RE if sale occurred previously Modifications: ●FV of (modified- original) instrument at date of mod will be additional exp
Analytical Check on Investment in Associate: (benefit employees) over remaining vesting period/ recognise immediately if after vesting
5. Reverse prior year’s over-dep due to unrealised profit included in PPE (Re-enact) Balance of Investment account at 31/12/x_ = Sum of entries above affecting inv account period│●Ignore modifications that ↓FV (worse for employees)  Continue to recognise
Dr Accum dep (S)│Cr Beg RE (S)  Tax effect: Dr Beg RE│Cr DTA *Unrealised profits for both down & upstream transactions must be eliminated. before modification
6. Reverse current year’s over-dep due to unrealised profit included in PPE (Current) Unadjusted BV of A at 31/12/x_ ●Cancellation despite fulfilling vesting conditions: Accelerate  Recognise immediately
Dr Accum dep (S)│Cr Dep (S)  Interco profit / Remaining useful life at point of trf Add / Less: *Include related tax effect for all trx below* (Calculation: Employees remaining before the cancellation x FV at grant x Total options –
 Tax effect: Dr Tax expense│Cr DTA -Outstanding unrealised profit from FA trf  Interco profit / Useful life left x Yrs left Expense recognised in prior years)
Intragroup transfers made at a LOSS: -Outstanding unrealised profit in end inventory (up)  Interco profit x % unsold ●Compensation: Dr SOR│Cr Cash until SOR=0  Then Dr remuneration expense
Transferred asset NOT IMPAIRED: Unrealised loss eliminated & DTL arise -Outstanding unrealised profit in end inventory (down)  Interco profit x % unsold ●Share options repriced (end of yr1): FV at grant= $15.Incremental FV= $8- $5= $3 (FV of
Dr Sales (Trf P)│Dr Inventory (Loss)│Cr COGS (Same formula) Adjusted BV of A option before repricing – FV of repriced option)
 Account for tax effect: Dr Tax expense│Cr DTL Unamortised FV adjustment  (FV adj / Remaining useful life) x Yrs remaining