Acco 320 Notes (Book)

Chapter 13 – Non-Financial and Current Liabilities  It is important for businesses to properly account for liabilities because it useful for cash flow management IFRS and ASPE currently define a liability as:  An obligation of an enterprise  Arising from past transactions or events  The settlement of which may result in the transfer or use of assets or provision of services, or other yielding of economic benefits in the future Constructive Obligation: An organization acknowledging potential economic burden stemming from past or present practices Financial liability: Cash or other Financial Assets (Fair Value) Non-Financial Liability: Goods or Services (Present Value under IFRS, ASPE has no specific measurement) Current Liability: (either) 1. Expected to be settled within normal operating cycle 2. Held primarily for trading 3. Due within 12 months from end of reporting period (Dec 31, 2017) 4. No right to defer settlement for at least 12 months Types of CL: 1. Line of Credit: Amount Borrowed reported on Balance Sheet 2. Accounts Payable: Recorded when title has passed (purchase) 3. Notes Payable: Interest expense accrued regardless of type of note a. Zero Interest Bearing Notes: Difference between PV and FV represents the interest (interest expense recorded over life of the note) JE: Cash XX (at PV) Notes Payable XX (at PV) Interest Expense XX Notes Payable XX Notes Payable XX (Maturity Value) Cash XX (Maturity Value) **PV is borrowed for FV, Difference is Interest 4. Current Maturities of LT Debt: Portion of LT Debt maturing within 12 months a. Should not be recorded as CL if settled with a LT Asset 5. Short Term Debt Expected to be Refinanced: a. IFRS: Debt Due in 12 months classified at CL, Unless company has intent and right to refinance b. ASPE: Based on evidence 6. Dividends Payable: a. Cash Dividend: Becomes a current liability on Declaration Date b. Preferred Dividends in Arrears and Stock Dividends are not Liabilities 7. Rents and Royalties Payable: Contractual Agreement – Payments are conditional on the amount of revenue or production (Franchisee to Franchisor). 8. Customer Deposits: Classified as current, unless one has the right to lengthen repayment 9. Taxes Payable: a. Sales Tax: Business collect provincial sales tax from customers. Taxes are then remitted to the tax authority. The Sales Tax Payable account reflects the amount collected from customers that has not yet been remitted. b. GST/HST/QST: Business pay GST and charge GST to customers. i. GST Payable: Amount collected on eligible sales (sell) ii. GST Recoverable: GST paid on eligible purchases (purchases) iii. Net Amount of the GST Payable and GST Recoverable is remitted to CRA iv. Shown on the Balance Sheet as either CL or CA. depending on net amount 10. Income Tax: *Trevor Notes 11.Payroll Related Liabilities: *Trevor Notes 12. Short-Term Compensated Liabilities: a. Accumulating: Expense and liability recognized as earned by employees. b. Non-Accumulating: Expense and liability recognized at time of obligating event