SV_ch06_Cash and Receivables_Kieso_IFRS4_PPT

3/26/2024
Intermediate Accounting
IFRS Edition
Kieso, Weygandt, Warfield
Fourth Edition
Chapter 6
Cash and Receivables
Prepared by
Coby Harmon
University of California, Santa Barbara
Westmont College
This slide deck contains animations. Please disable animations if they cause issues with your device.
Copyright ©2020 John Wiley & Sons, Inc.
Learning Objectives
After studying this chapter, you should be able to:
LO 1 Indicate how to report cash and related items.
LO 2 Define receivables and explain accounting issues related to
their recognition.
LO 3 Explain accounting issues related to valuation of accounts
receivable.
LO 4 Explain accounting issues related to recognition and
valuation of notes receivable.
LO 5 Explain additional accounting issues related to accounts
and notes receivables.
Copyright ©2020 John Wiley & Sons, Inc. 2
1
3/26/2024
PREVIEW OF CHAPTER 7
Learning Objective 1
Indicate how to report cash and related
items.
LO 1 Copyright ©2020 John Wiley & Sons, Inc. 4
2
3/26/2024
Cash
• Most liquid asset.
• Standard medium of exchange.
• Basis for measuring and accounting for all other items.
• Current asset.
• Examples: Coin, currency, available funds on deposit at the
bank, money orders, certified checks, cashier’s checks,
personal checks, bank drafts and savings accounts.
Cash Equivalents (Tương đương tiền)

Short-term, highly liquid investments that are both
Đầu tư có tính thanh khoản cao, ngắn hạn
a) readily convertible into known amounts of cash, and
b) subject to an insignificant risk of changes in value. Sự thay
đổi các giá trị ít quan trọng
Examples: Government bonds (trái phiếu của chính phủ),
commercial paper, and money market funds
3
3/26/2024
Restricted Cash
Companies segregate restricted cash from “regular” cash.
Examples, restricted for:
1) plant expansion,
2) retirement of long-term debt, and
3) compensating balances.
ILLUSTRATION 7.1
Bank Overdrafts
Company writes a check for more than the amount in its cash
account.
• Generally reported as a current liability.
• Included as a component of cash if such overdrafts are
repayable on demand and are an integral part of a company’s
cash management (such as the common practice of establishing
offsetting arrangements against other accounts at the same
bank).
4
3/26/2024
Classification of Cash-Related Items
I.O.U tôi nợ bạn
Bank Overdrafts hối phiếu

ngân hàng
Số dư tối thiểu ở tài khoản

ngân hàng.
ILLUSTRATION 7.2
Define receivables and explain
accounting issues related to their
recognition.
5
3/26/2024
Accounts Receivable and Notes Receivable
Non-Trade Receivables
1. Advances to officers and employees. Tạm ứng cho nhân viên
2. Advances to subsidiaries. Tạm ứng cho công ty con
3. Deposits paid to cover potential damages or losses. Khoản đặt cọc
trả cho trường hợp hư hỏng mất mát)
4. Deposits paid as a guarantee of performance or payment. Đảm bảo
thanh toán
5. Dividends and interest receivable. Cổ tức phải thu
6. Claims against: Insurance companies for casualties sustained;
defendants under suit; governmental bodies for tax refunds;
common carriers for damaged or lost goods; creditors for returned,
damaged, or lost goods; customers for returnable items (crates,
containers, etc.).
6
3/26/2024
Receivables Statement of Financial

Position Presentations
ILLUSTRATION 7.3
Recognition of Accounts Receivables

• Accounts receivable generally arise as part of a revenue
arrangement.
• The revenue recognition principle indicates that a
company should recognize revenue when it satisfies its
performance obligation by transferring the good or
service to the customer.
7
3/26/2024
Recognition of Accounts Receivables

Example
For example, if Lululemon Athletica, Inc. (CAN) sells a yoga
outfit to Jennifer Burian for $100 on account, the yoga outfit is
transferred when Jennifer obtains control of this outfit. When
this change in control occurs, Lululemon should recognize an
account receivable and sales revenue. Lululemon makes the
following entry:
Key Indicators of Change in Control

Some key indicators that Lululemon has transferred and that
Jennifer has obtained control of the yoga outfit.
1. Lululemon has the right to payment from the customer.
2. Lululemon has passed legal title to the customer.
3. Lululemon has transferred physical possession of the goods.
4. Lululemon no longer has significant risks and rewards of
ownership of the goods.
5. Jennifer has accepted the asset. Đã nhận tài sản
8
3/26/2024
Measurement of the Transaction Price

The transaction price is the amount of consideration that a company
expects to receive from a customer in exchange for transferring
goods or services.
Variable Consideration
In some cases, the price of a good or service is dependent on future
events. These future events often include such items as discounts,
returns and allowances (trả lại tiền và chiết khấu), rebates (hoàn
tiền), and performance bonuses (tiền do hiệu suất làm việc).
Trade Discounts (chiết khấu thương mại)
Use to:
• Avoid frequent changes in
catalogs. Tránh thay đổi
thường xuyên trong danh
mục sản phẩm
• Alter prices for different
quantities purchased. Thay
đổi giá cho sản lượng
khác nhau
• Hide the true invoice price
from competitors. Giấu
giá trị thực của hóa đơn
9
3/26/2024
Cash Discounts (Sales Discounts) – CK thanh toán
• Offered to induce prompt

payment.
• Terms such as 2/10, n/30,
2/10, E.O.M., or net 30, E.O.M.
• Gross Method (phương pháp
gộp) vs. Net Method (Giá đã
giảm).
Cash Discounts (Sales Discounts)

Entries Under Gross and Net Methods of
Recording Cash (Sales) Discounts
ILLUSTRATION 7.4
10
3/26/2024
Sales Returns and Allowances
• Sales Returns and Allowances are estimated at the time of
sale and credited to a Return Liability account.
• Sales Revenue is reduced by the estimated amount of
returns.
• The use of the Return Liability account helps to identify
potential problems associated with inferior merchandise,
inefficiencies in filling orders, and delivery or shipment
mistakes.
• If actual returns later prove to be higher or lower than the
estimated amount, Sales Revenue is adjusted.
Sales Returns and Allowances Example (1 of 2)

Illustration: Assume that Max Glass sells hurricane glass to Oliver
Builders. As part of the sales agreement, Max includes a provision
that if Oliver is dissatisfied with the product, Max will grant an
allowance on the sales price or agree to take the product back. Max
should record the accounts receivable and related revenue at the
amount of consideration expected to be received.
On January 4, 2022, Max sells $5,000 of hurricane glass to Oliver
on account. Max expects that $400 of the hurricane glasses will be
returned. Max records the sale on account as follows. January 4,
2022
Accounts Receivable
Sales Revenue
Return Liability
11
3/26/2024
Sales Returns and Allowances Example (2 of 2)

Illustration: On January 16, 2022, Max grants an allowance of $300
to Oliver because some of the hurricane glass is defective. The
entry to record this transaction is as follows. January 15, 2022
Return Liability 300
Accounts Receivable 300
Max reports net sales revenue on the income statement of $4,600. In

addition, Max reports on its statement of financial position the total accounts
receivable balance of $4,700 ($5,000 - $300) and an estimated return
liability of $100 ($400 - $300).
Time Value of Money
• Theoretically, any revenue after the period of sale is interest
revenue.
• Companies ignore interest revenue related to accounts receivable
because the amount of the discount is not usually material in
relation to the net income for the period.
• The profession specifically excludes from present value
considerations “receivables arising from transactions with
customers in the normal course of business which are due in
customary trade terms not exceeding approximately one year.”
12
3/26/2024
Explain accounting issues related to
valuation of accounts receivable.
•
Valuation of Accounts Receivable
Uncollectible
• Accounts Receivable
• Record credit losses as debits to Bad Debt Expense (or
Uncollectible Accounts Expense).
Normal and necessary risk of doing business on credit.
Two methods to account for uncollectible accounts:
1) Direct write-off method
2) Allowance method
13
3/26/2024
Direct Write-Off Method vs. Allowance

Method
Direct Write-Off Method for

Uncollectible Accounts
When a company determines a particular account to be
uncollectible, it charges the loss to Bad Debt Expense.
Assume, for example, that on December 10, 2022, Cruz Ltd.
writes off as uncollectible Yusado’s NT$8,000,000 balance.
The entry is:
Bad Debt Expense
Accounts Receivable (Yusado)
14
3/26/2024
Allowance Method for Uncollectible

Accounts
• Involves estimating uncollectible accounts at the end of each
period.
• Ensures that companies state receivables on the statement of
financial position at their cash realizable value.
• Companies estimate uncollectible accounts and cash
realizable value using information about past and current
events as well as forecasts of future collectability.
Recording Estimated Uncollectibles

Illustration: Assume that Brown Furniture in 2022, its first year of
operations, has credit sales of £1,800,000. Of this amount,
£150,000 remains uncollected at December 31. The credit manager
estimates that £10,000 of these sales will be uncollectible. The
adjusting entry to record the estimated uncollectibles (assuming a
zero balance in the allowance account) is:
Bad Debt Expense
Allowance for Doubtful Accounts
15
3/26/2024
Presentation of Allowance for Doubtful

Accounts
ILLUSTRATION 7.5
The amount of £140,000 represents the cash realizable value of the

accounts receivable at the statement date.
Recording the Write-Off of an

Uncollectible Account
• When companies have exhausted all means of collecting a
past-due account and collection appears impossible, the
company should write off the account.
• In the credit card industry, for example, it is standard practice
to write off accounts that are 210 days past due.
16
3/26/2024
Write-Off of an Uncollectible Account

Illustration: The financial vice president of Brown Furniture
authorizes a write-off of the £1,000 balance owed by Randall plc
on March 1, 2023. The entry to record the write-off is:
Allowance for Doubtful Accounts 1.000

Accounts Receivable 1.000
Recovery of an Uncollectible Account

Assume that on July 1, Randall plc pays the £1,000 amount that
Brown had written off on March 1. These are the entries:
Accounts Receivable 1,000

Allowance for Doubtful Accounts 1,000
Cash 1,000
17
3/26/2024
Estimating the Allowance

Percentage-of-Receivables Approach
• Reports estimate of receivables at cash realizable value.
Companies may apply this method using
• one composite rate, or
• an aging schedule using different rates.
Accounts Receivable Aging Schedule
ILLUSTRATION 7.6
Journal Entry to
Record Estimated
Uncollectibles
18
3/26/2024
What entry would Wilson make

assuming that the allowance account
had a zero balance?
ILLUSTRATION 7.6
Bad Debt Expense
Another Journal Entry to Record

Estimated
Uncollectibles
What entry would Wilson make

assuming the allowance account had
a credit balance of €800 before
adjustment?
ILLUSTRATION 7.6
Bad Debt Expense (26610 -800) 25.810
Allowance for Doubtful Accounts 25.810
19
3/26/2024
Estimating the Allowance Problem

Illustration: Duncan SA reports the following financial information before
adjustments.
Instructions: Prepare the journal entry to record Bad Debt Expense

assuming Duncan Company estimates bad debts at (a) 5% of accounts
receivable and (b) 5% of accounts receivable but Allowance for Doubtful
Accounts had a $1,500 debit balance.

Journal Entry (a)
Illustration: Duncan SA reports the following financial information before
adjustments.
Instructions: Prepare the journal entry to record Bad Debt Expense

assuming Duncan Company estimates bad debts at (a) 5% of accounts
receivable.
Bad Debt Expense
20
3/26/2024

Journal Entry (b)
Instructions: Prepare the journal entry to record Bad Debt Expense assuming
Duncan Company estimates bad debts at (b) 5% of accounts receivable but the
Allowance had a $1,500 debit balance.
Bad Debt Expense
Explain accounting issues related to
recognition and valuation of notes
receivable. (không học)
21
3/26/2024
Notes Receivable (1 of 2)
Supported by a formal promissory note.
• Written promise to pay a certain sum of money at a specific
future date.
• A negotiable instrument.
• Maker signs in favor of a Payee.
• Interest-bearing (has a stated rate of interest) OR
• Zero-interest-bearing (interest included in face amount).
•
Notes Receivable (2 of 2)
•Generally originate from:
• Customers who need to extend payment period of an
outstanding receivable.
•
High-risk or new customers.
•
Loans to employees and subsidiaries.
Sales of property, plant, and equipment.
Lending transactions (the majority of notes).
22
3/26/2024
Recognition of Notes Receivable
Note Issued at Face Value

Illustration: Bigelow SA lends Scandinavian Imports €10,000 in exchange for
a €10,000, three-year note bearing interest at 10 percent annually.
The market rate of interest for a note of similar risk is also 10 percent.
How does Bigelow record the receipt of the note?
ILLUSTRATION 7.7
23
3/26/2024
Computation of the Present Value of the

Note
ILLUSTRATION 7.8
The present value of the note equals its face value because the market
(effective) and stated rates of interest are the same.
Journal Entries to Record Receipt of

Note and Interest
Journal entry to record receipt of note:
Note Receivable 10,000

Cash 10,000
Journal entry to recognize interest revenue each year:
Cash 1,000
Interest Revenue 1,000
24
3/26/2024
Zero-Interest-Bearing Notes
Illustration: Jeremiah Company receives a three-year, $10,000 zero-
interest-bearing note. The market rate of interest for a note of similar
risk is 9 percent. The implicit rate that equates the total cash to be
received $10,000 at maturity to the present value of the future cash
flows is $7,721.80.
ILLUSTRATION 7.9
Jeremiah records the note for the present value of $7,721.80 as
follows:
Note Receivable 7,721.80
Cash 7,721.80
Discount Amortization Schedule—

Effective-Interest Method (1 of 2)
ILLUSTRATION 7.10
25
3/26/2024
Journal Entry to Record Interest

Revenue—Year 1
ILLUSTRATION 7.10
Jeremy records interest revenue at the end of the first year using the
effective-interest method as follows.
Notes Receivable 694.96
Interest Revenue ($7,721.80 x .09) 694.96
Interest-Bearing Notes
Illustration: Morgan Group makes a loan to Marie Co. and receives
in exchange a three-year, €10,000 note bearing interest at 10 percent
annually. The market rate of interest for a note of similar risk is 12
percent. Prepare the journal entry to record the receipt of the note?
ILLUSTRATION 7.11
26
3/26/2024
Journal Entry to Record Receipt of Note
ILLUSTRATION 7.12
Morgan exchanged the note at a discount. Morgan records the present

value of the note as follows.
Notes Receivable 9,520

Cash 9,520
Discount Amortization Schedule—

Effective-Interest Method (2 of 2)
ILLUSTRATION 7.13
Morgan records receipt of the annual interest and amortization of the

discount for the years year as follows.
Cash 1,000
Notes Receivable 142
Interest Revenue 1,142
27
3/26/2024
Notes Received for Property, Goods, or

Services
In a bargained transaction entered into at arm’s length, the stated
interest rate is presumed to be fair unless:
1. No interest rate is stated, or
2. Stated interest rate is unreasonable, or
3. Face amount of the note is materially different from the o
current cash sales price or o from the current market value of the
debt instrument.
Notes for Property, Goods, or Services

Example
Illustration: Oasis Development Co. sold a corner lot to Rusty
Pelican as a restaurant site. Oasis accepted in exchange a five-year
note having a maturity value of $35,247 and no stated interest rate.
The land originally cost Oasis $14,000. At the date of sale the land
had a fair market value of $20,000. Oasis uses the fair market value
of the land, $20,000, as the present value of the note. Oasis therefore
records the sale as:
Notes Receivable 20,000
Land 14,000
Gain on Sale of Land ($20,000 − $14,000) 6,000
28
3/26/2024
Valuation of Notes Receivable

• Companies record and report short-term notes receivable at
their cash realizable value.
• Computations and estimations involved in valuing shortterm
notes receivable and in recording bad debt expense and the
related allowance exactly parallel that for trade accounts
receivable.
Explain additional accounting issues
related to accounts and notes receivables.
29
3/26/2024
Additional Issues Related to Receivables

Derecognition of Receivables
1. When the receivable no longer has any value; that is, the
contractual rights to the cash flows of the receivable no
longer exist.
2. When a company transfers (e.g., sells) a receivable to
another company, thereby transferring the risks and rewards
of ownership to this other company.
Transfer of Receivables
Various reasons for transfer of receivables to another party
• Accelerate the receipt of cash.
• Competition.
• Sell receivables because money is tight.
• Billing / collection are time-consuming and costly. Transfer
of receivables for cash happens in two ways:
1. Sales of receivables.
2. Secured borrowing.
30
3/26/2024
Sales of Receivables
ILLUSTRATION 7.14
Factors are finance companies or banks that buy receivables from

businesses for a fee.
Sale without Guarantee
• Purchaser assumes risk of collection and absorbs any credit
losses.
• Transfer is outright sale of receivable.
• Seller records loss on sale.
• Seller uses a Due from Factor (receivable) account to cover
probable sales discounts, sales returns, and sales allowances.
31
3/26/2024
Sale without Guarantee Example

Illustration: Crest Textiles, Inc. factors €500,000 of accounts receivable with
Commercial Factors, Inc., on a non-guarantee basis. Commercial Factors
assesses a finance charge of 3 percent of the amount of accounts receivable
and retains an amount equal to 5 percent of the accounts receivable (for
probable adjustments). Crest Textiles and Commercial Factors make the
following journal entries for the receivables transferred without guarantee.
ILLUSTRATION 7.15
Sale with Guarantee
Sale with Guarantee
• Seller guarantees payment to purchaser.
• Transfer is considered a borrowing—sometimes referred to as a failed
sale.
Assume Crest Textiles sold the receivables on a with guarantee basis.
IILLUSTRATION 7.16
32
3/26/2024
Secured Borrowing
A company often uses receivables as collateral in a borrowing
transaction.
Illustration: On March 1, 2022, Meng Mills, Inc. provides
(assigns) NT$700,000 of its accounts receivable to Sino Bank
as collateral for a NT$500,000 note. Meng Mills continues to
collect the accounts receivable; the account debtors are not
notified of the arrangement. Sino Bank assesses a finance
charge of 1 percent of the accounts receivable and interest on
the note of 12 percent. Meng Mills makes monthly payments to
the bank for all cash it collects on the receivables.
Entries for Transfer of Receivables—

Secured Borrowing
ILLUSTRATION 7.17
33
3/26/2024
Secured Borrowing Problem

Illustration: On April 1, 2022, Prince Company assigns $500,000 of its accounts
receivable to the Hibernia Bank as collateral for a $300,000 loan due July 1,
2022. The assignment agreement calls for Prince Company to continue to collect
the receivables. Hibernia Bank assesses a finance charge of 2% of the accounts
receivable, and interest on the loan is 10% (a realistic rate of interest for a note
of this type). Instructions:
a) Prepare the April 1, 2022, journal entry for Prince Company.
b) Prepare the journal entry for Prince’s collection of $350,000 of the accounts
receivable during the period from April 1, 2022, through June 30, 2022.
c) On July 1, 2022, Prince paid Hibernia all that was due from the loan it secured
on April 1, 2022.
Secured Borrowing Problem

Solution
Instructions:
a) Prepare the April 1, 2022, journal entry for Prince Company.
b) Prepare the journal entry for Prince’s collection of $350,000.
c) On July 1, 2022, Prince paid Hibernia all that was due from the loan it
secured on April 1, 2022.
a) Cash 290,00
Finance Charge ($500,000) × 2% 10,000
Note Payable 300,000
b) Cash 350,000
c) Notes Payable 300,000
Interest Expense (10% × $300,00 × 3/12) 7,500
Cash 307,500
34
3/26/2024
Summary of Transfers
Accounting for Transfers of Receivables
ILLUSTRATION 7.18
Presentation and Analysis

General rules in classifying receivables are:
1. Segregate and report carrying amounts of different categories of receivables.
2. Indicate receivables classified as current and non-current in the statement of
financial position.
3. Appropriately offset the valuation accounts for receivables that are impaired,
including a discussion of individual and collectively determined impairments.
4. Disclose the fair value of receivables in such a way that permits them to be
compared with their carrying amount.
5. Disclose information to assess the credit risk inherent in the receivables.
6. Disclose any receivables pledged as collateral.
7. Disclose all significant concentrations of credit risk arising from receivables.
35
3/26/2024
•
Accounts Receivable Turnover
•
This ratio used to:
Assess the liquidity of the receivables.
Measure the number of times, on average, a company
collects receivables during the period.
Analysis of Receivables
Computation of Accounts Receivable Turnover
Analysis of Receivables
Illustration: Louis Vuitton (LVMH Group) (FRA) reported net sales of
€35,664 million. Its beginning and ending (net) accounts receivable
balances were €2,274 million an €2,521 million, respectively. The
computation of its accounts receivable turnover is as follows.
ILLUSTRATION 7.20
36
3/26/2024
Explain common techniques employed to
control cash.
Cash Controls
Management faces two problems in accounting for cash
transactions:
1. Establish proper controls to prevent any unauthorized
transactions by officers or employees.
2. Provide information necessary to properly manage cash on
hand and cash transactions.
37
3/26/2024
Using Bank Accounts

To obtain desired control objectives, a company can vary the
number and location of banks and the types of accounts.
• General checking account
• Collection float
• Lockbox accounts
• Imprest bank accounts
The Imprest Petty Cash System

Steps 1 and 2
Used to pay small amounts for miscellaneous expenses.
Steps:
1. Record the transfer of $300 to petty cash:
Petty Cash 300
Cash 300
2. Petty cash custodian obtains signed receipts from each

individual to whom he or she pays cash.
38
3/26/2024

Step 3
Steps:
3. Custodian receives a company check to replenish the fund
when the fund runs low.
Supplies Expense 42
Postage Expense 53
Miscellaneous Expense 76
Cash Over and Short 2
Cash 173

Step 4
Steps:
4. If the company decides that the amount of cash in the
petty cash fund is excessive by $50, it lowers the fund
balance as follows.
Cash 50
Petty Cash 50
39
3/26/2024
Physical Protection of Cash Balances

Company should
• Minimize the cash on hand.
• Only have on hand petty cash and current day’s receipts.
• Keep funds in a vault, safe, or locked cash drawer.
• Transmit each day’s receipts to the bank as soon as
practicable.
• Periodically prove the balance shown in the general ledger.
Reconciliation of Bank Balances

Schedule explaining any differences between the bank’s and the
company’s records of cash.
40
3/26/2024
Bank Reconciliation Form and Content
ILLUSTRATION 7A.1
Reconciliation of Bank Balances Example

To illustrate, Nugget Mining Company’s books show a cash balance at the Denver National Bank on November 30,
2022, of $20,502. The bank statement covering the month of November shows an ending balance of $22,190. An
examination of Nugget’s accounting records and November bank statement identified the following reconciling items.
1. A deposit of $3,680 that Nugget mailed November 30 does not appear on the bank statement.
2. Checks written in November but not charged to the November bank statement are:
Check #7327 $. 150

#7348 4,820
#7349 31
3. Nugget has not yet recorded the $600 of interest collected by the bank November 20 on Sequoia Co. bonds held
by the bank for Nugget.
4. Bank service charges of $18 are not yet recorded on Nugget’s books.
5. The bank returned one of Nugget’s customer’s checks for $220 with the bank statement, marked “NSF.” The bank
treated this bad check as a disbursement.
6. Nugget discovered that it incorrectly recorded check #7322, written in November for $131 in payment of an
account payable, as $311.
7. A check for Nugent Oil Co. in the amount of $175 that the bank incorrectly charged to Nugget accompanied the
statement.
41
3/26/2024
Sample Bank Reconciliation
ILLUSTRATION 7A.2
Journal Entries Required to Adjust and

Correct Books
The required adjusting entries to adjust and correct Nugget’s books in early
December 2022 are taken from the items in the “Balance per books” section
and are as follows.
Cash
Interest Revenue
(To record interest on Sequoia Co. bonds, collected by bank)
Cash
Accounts Payable
(To correct error in recording amount of check #7322)
Office Expense (bank charges)
Cash
(To record bank service charges for November)
Accounts Receivable
Cash
(To record customer’s check returned NSF)
42
3/26/2024
Compare the accounting procedures for
cash and receivables under IFRS and
U.S. GAAP.
Global Accounting Insights

The basic accounting and reporting issues related to recognition
and measurement of cash and receivables are similar between
U.S. GAAP and IFRS. For example, the definition of cash and
cash equivalents as well as the use of allowance accounts, how
to record discounts, use of the allowance method to account for
bad debts, and factoring are similar for both IFRS and U.S.
GAAP. In the wake of the international credit crisis, the Boards
worked together to improve the accounting for loan impairments
and securitizations.
43
3/26/2024

Similarities
• The accounting and reporting related to cash is essentially the same under both
U.S. GAAP and IFRS. In addition, the definition used for cash equivalents is
the same.
• As with IFRS, cash and receivables are generally reported in the current assets
section of the statement of financial position (balance sheet) under U.S. GAAP.
• As with IFRS, for trade and other accounts receivable without a significant
financing component, an allowance for uncollectible accounts should be
recorded to result in receivables reported at cash (net) realizable value. The
estimation approach used is similar to that under IFRS.
• Similar to U.S. GAAP, IFRS requires that loans and receivables be accounted
for at amortized cost, adjusted for allowances for doubtful accounts.

Differences
• Under IFRS, companies may report cash and receivables as
the last items in current assets under IFRS. Under U.S.
GAAP, these items are reported in order of liquidity.
• While IFRS implies that receivables with different
characteristics should be reported separately, there is no
standard that mandates this segregation. U.S. GAAP has
explicit guidance in the area.
44
3/26/2024

More Differences
• IFRS differs from U.S. GAAP in its approach to estimating uncollectible
accounts on receivables with a significant financing component (e.g., notes
receivable). For long-term receivables that have not experienced a
deterioration in credit quality after origination, uncollectible accounts are
estimated based on expected losses over the next 12 months. For long-term
receivables that experience a credit quality decline, uncollectible accounts are
estimated based on lifetime expected losses (which is the model used under
U.S. GAAP for all receivables).
• Under IFRS, bank overdrafts are generally reported as cash. Under U.S.
GAAP , such balances are reported as liabilities.
• IFRS and U.S. GAAP differ in the criteria used to account for transfers of
receivables. IFRS is a combination of an approach focused on risks and
rewards and loss of control. U.S. GAAP uses loss of control as the primary
criterion. In addition, IFRS generally permits partial transfers; U.S. GAAP
does not.

About the Numbers
45
3/26/2024

On the Horizon
Both the IASB and the FASB have indicated that they believe that
financial statements would be more transparent and understandable
if companies recorded and reported all financial instruments at fair
value. With the recently issued guidance on impairments by both
boards, IFRS and U.S. GAAP are now more closely aligned with
earlier recognition of impairments. Most believe that both Boards’
approaches to estimating uncollectible accounts represent
improvements and address the weakness in previous bad debt
accounting that was highlighted by the 20072008 financial crisis.
Time will tell if one model or the other provides more useful
information to investors and creditors.
Copyright
Copyright © 2020 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this work beyond that permitted in Section
117 of the 1976 United States Copyright Act without the express written permission of the
copyright owner is unlawful. Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies
for his/her own use only and not for distribution or resale. The Publisher assumes no
responsibility for errors, omissions, or damages, caused by the use of these programs or from
the use of the information contained herein.
46

SV_ch06_Cash and Receivables_Kieso_IFRS4_PPT

Uploaded by

Copyright:

Available Formats

You might also like

SV_ch06_Cash and Receivables_Kieso_IFRS4_PPT

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

SV_ch06_Cash and Receivables_Kieso_IFRS4_PPT

Uploaded by

Copyright:

Available Formats

3/26/2024

Copyright ©2020 John Wiley & Sons, Inc. 2

Copyright ©2020 John Wiley & Sons, Inc. 3

LO 1 Copyright ©2020 John Wiley & Sons, Inc. 4

LO 1 Copyright ©2020 John Wiley & Sons, Inc. 5

Cash Equivalents (Tương đương tiền)

LO 1 Copyright ©2020 John Wiley & Sons, Inc. 6

LO 1 Copyright ©2020 John Wiley & Sons, Inc. 7

LO 1 Copyright ©2020 John Wiley & Sons, Inc. 8

Classification of Cash-Related Items

I.O.U tôi nợ bạn

Bank Overdrafts hối phiếu

Số dư tối thiểu ở tài khoản

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 10

Accounts Receivable and Notes Receivable

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 11

Receivables Statement of Financial

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 13

Recognition of Accounts Receivables

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 14

Recognition of Accounts Receivables

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 15

Key Indicators of Change in Control

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 16

Measurement of the Transaction Price

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 17

• Offered to induce prompt

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 19

Cash Discounts (Sales Discounts)

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 21

Sales Returns and Allowances Example (1 of 2)

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 22

Sales Returns and Allowances Example (2 of 2)

Max reports net sales revenue on the income statement of $4,600. In

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 23

LO 2 Copyright ©2020 John Wiley & Sons, Inc. 24

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 25

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 26

Direct Write-Off Method vs. Allowance

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 27

Direct Write-Off Method for

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 28

Allowance Method for Uncollectible

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 29

Recording Estimated Uncollectibles

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 30

Presentation of Allowance for Doubtful

The amount of £140,000 represents the cash realizable value of the

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 31

Recording the Write-Off of an

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 32

Write-Off of an Uncollectible Account

Allowance for Doubtful Accounts 1.000

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 33

Recovery of an Uncollectible Account

Accounts Receivable 1,000

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 34

Estimating the Allowance

LO 3 Copyright ©2020 John Wiley & Sons, Inc. 35