Lecture 3 Non-Financial & Current Liabilities 代写
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Lecture 3
Non-Financial & Current Liabilities
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1 RSM 221 Intermediate Financial Accounting II: Winter 2016
Agenda
Introduction to Liabilities
Financial Liabilities
Non-Financial Liabilities
Contingencies
Presentation & Disclosure
2 RSM 221 Intermediate Financial Accounting II: Winter 2016
Introduction to Liabilities
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Definition of a Liability
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A liability is a present obligation that
results from past transactions or events and
usually involves giving up resources
embodying economic benefits
◦ An obligation is a duty or responsibility to act
or perform in a certain way
◦ The entity has little or no discretion to avoid
the obligation
◦ The transaction or event that obliges the entity
has already occurred
Proposed Definition (IFRS)
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A liability is a present obligation of the
entity to transfer an economic resource
as a result of past events
◦ The obligation exists at the present time
◦ An obligation must be capable of generating
outflows of economic benefits (can be uncertain)
◦ The entity must be the party that is bound by
the obligation
Financial Liabilities
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Financial Liabilities
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A liability is recognized as a financial
liability if it involves a contractual
obligation to:
◦ Deliver cash or other financial assets to
another entity
◦ Exchange financial assets or financial
liabilities with another entity that are
potentially unfavourable
Financial Liabilities
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Under IFRS, a liability is also considered to
be a financial liability for certain contracts
that will or may be settled using the entity’s
own equity instruments
Financial Liabilities
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Financial liabilities are initially measured at
fair value
◦ However, when liabilities are relatively short-
term in nature, they are usually measured at
maturity value
Most financial liabilities are subsequently
measured at amortized cost
Short-Term Debt
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Short-term debt includes:
◦ The maturing portion of long-term debt
◦ A liability that is due on demand or callable
◦ The total amount of long-term debt if the
agreement is violated as at the balance sheet
date
◦ Most debt that is in the process of being
refinanced at the balance sheet date
Short-Term Debt
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11
ASPE
◦ Allows violations of debt agreements to remain
as long-term as long as both of the following are
present:
The creditor waives the requirements or the violation
is cured within the grace period
It is likely that a violation will not happen again within a
year from the balance sheet date
◦ Allows debt that has been refinanced after the
balance sheet date to be shown as long-term
instead of current
Discussion Question
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Question 1: E13-8
Non-Financial Liabilities
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Non-Financial Liabilities
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Any liability that does not meet the
definition of a financial liability
◦ Therefore, they are usually not payable in cash
ASPE
◦ Measured in a variety of ways
IFRS
◦ Initially and subsequently measured at the best
estimate of what the entity would pay to settle
the obligation
Product Guarantees
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Expense Approach
◦ Measures the product guarantee at its cost
Recognized as an accrued liability
◦ IFRS uses the expected value versus the most likely
estimate that is used in ASPE
Revenue Approach
◦ Measures the product guarantee at its value
Recognized as a separate revenue stream (i.e. multiple
deliverables)
◦ IFRS defines an onerous contract to exist where the
costs exceed the unearned revenue
When an onerous contract exists, a loss and related liability are
recognized for any expected shortfall
Decommissioning & Restoration
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Obligations that are associated with the
eventual retirement of long-lived assets in
certain industries
◦ Also referred to as an asset retirement
obligation (ARO) or site restoration requirement
◦ Does not include the costs related to
environmental clean-up costs due to current
events
Decommissioning & Restoration
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IFRS
◦ Recognized when the obligation is incurred
◦ Considers legal and constructive obligations
◦ Capital asset cost only includes the costs related
to the acquisition of the asset
◦ The interest adjustment due to the passage of
time is recognized as a borrowing cost
Decommissioning & Restoration
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ASPE
◦ Recognized when the obligation can be
reasonably estimated
◦ Considers only legal obligations
◦ Capital asset cost includes the costs related to
the acquisition of the asset and the subsequent
use of the asset
◦ The interest adjustment due to the passage of
time is recognized as an operating cost
Discussion Question
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Question 2: WA13-1 (Part 3 only)
Contingencies
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Contingencies
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ASPE
◦ A contingent liability is based on one or more
future events that will confirm the existence or
the amount payable
◦ Contingent gains and assets are not recognized
until received but can be disclosed
◦ Contingent losses are recognized only if:
It is likely that a future event will confirm the loss
The loss amount can be reasonably estimated
Contingencies
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IFRS
◦ A contingent liability includes existing or possible
obligations that are not recognized in the
financial statements but are disclosed
◦ A contingent asset can only be recognized if the
realisation of income is virtually certain,
otherwise it is disclosed
Contingencies
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IFRS
◦ A provision is recognized when:
There is a present obligation as a result of a past
event
It is probable that the outflow of economic benefits
will be required
A reliable estimate can be made for the amount of
the obligation
Discussion Question
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Question 3: E13-24
Presentation & Disclosure
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Presentation & Disclosure
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A current liability meets one of the
following conditions:
◦ It is expected to be settled within the normal
operating cycle
◦ It is held primarily for trading
◦ It is due within 12 months of the end of the
reporting period
◦ The entity does not have an unconditional right
to defer its settlement for at least 12 months
after the balance sheet date
Presentation & Disclosure
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IFRS
◦ Either current or long-term assets may be
presented first in the statement of financial
position
◦ The current liabilities may be listed in the order
of either their maturity or their liquidity
ASPE
◦ Current liabilities are presented first in the
balance sheet
◦ The current liabilities are ordered by liquidity
Discussion Question
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Question 4: IC13-2
Coming up…
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Lecture 4
◦ Make sure to complete the required readings
and discussion questions before lecture
