ACCT 3221 Study Set Questions
and Answers
When to recognize AR - Answer- when the entity becomes a party to the contractual
provisions of the financial instrument
IFRS Terms for bad debt - Answer- credit losses allowance for expected credit losses
Percentage of receivables approach - Answer- past experience - aging schedule offset
is recorded to loss on impairment
Sources for resource allocation - Answer- -debt and equity markets
-financial institutions
Information asymmetry - Answer- when managers have access to more information
than other stakeholders
Two types of information asymmetry - Answer- - adverse selection - knowing that there
is information asymmetry
- moral hazard - concept that people will shirk responsibility if there is no accountability
Issues arising from asymmetry issues - Answer- management bias - aggressive
accounting (downplay negatives) , conservative accounting - (downplay the positives)
Canadian accounting standards board (AcSB) - Answer- The body responsible for
developing and establishing the accounting standards (GAAP) used by Canadian
companies
International accounting standards board (IASB) - Answer- dominant global standard -
setting body. tries to lessen the differences among countries standards
Financial accounting standards board (FASB) - Answer- major standard setting body in
the US but securities exchange commission has the final authority
securities commissions - Answer- provincial & ontario
provincial - oversee and monitor capital marketplace in their provinces
ontario - home to the toronto stock exchange, most large companies are registered for
it.
, Sustainability reporting - Answer- how businesses deal with the environmental, social
and governance issues.
principles vs rules - Answer- rules based approach usually has a larger body of
knowledge, principle based standards (IFRS ASPE) are more dependent on
professional jusgement
commercial substance - Answer- legitimate sale. exchanging similar assets would not
be considered a sale.
Concessionary terms - Answer- Terms negotiated by a party to the contract that are
more favourable than normal.
Constructive obligation - Answer- enforceable under the law, any enforceable promise
that results from a sale may create a performance obligation that needs to be
recognized
2 approaches to revenue recognition - Answer- asset-liability approach - IFRS
earnings approach - ASPE
asset - liability approach - Answer- accounts for revenue based on the asst or liability
arising from contracts with customers or changes to assets and laibilities
earnings approach - Answer- recognizes and measures revenue based on whether it
has been earned - satisfied when there is a change in control
Key concepts of revenue recognition - Answer- 1. identify the contract with customers
2. identify the separate performance obligations in the contract
3. determine the transaction price
4. allocate the transaction price to the separate performance obligations
5. recognize revenue when each performance obligation is satisfied.
recognizing the contract - Answer- agreement between two or more parties that creates
enforceable rights or obligations
Margo company enters into a contract to .....
1. a contract is an agreement between two parties that creates enforceable rights or
obligations. in this case margo company has a contract to deliver a product to soon
yoon
commercial substance, parties approved, rights are identified, payment terms, no
collection considerations
contract modifications - Answer- if a contract is being modified while ongoing it si
considered a new contract if
- goods or services are distinct
- the price increase is at least equal to the selling price of the items sold separately
and Answers
When to recognize AR - Answer- when the entity becomes a party to the contractual
provisions of the financial instrument
IFRS Terms for bad debt - Answer- credit losses allowance for expected credit losses
Percentage of receivables approach - Answer- past experience - aging schedule offset
is recorded to loss on impairment
Sources for resource allocation - Answer- -debt and equity markets
-financial institutions
Information asymmetry - Answer- when managers have access to more information
than other stakeholders
Two types of information asymmetry - Answer- - adverse selection - knowing that there
is information asymmetry
- moral hazard - concept that people will shirk responsibility if there is no accountability
Issues arising from asymmetry issues - Answer- management bias - aggressive
accounting (downplay negatives) , conservative accounting - (downplay the positives)
Canadian accounting standards board (AcSB) - Answer- The body responsible for
developing and establishing the accounting standards (GAAP) used by Canadian
companies
International accounting standards board (IASB) - Answer- dominant global standard -
setting body. tries to lessen the differences among countries standards
Financial accounting standards board (FASB) - Answer- major standard setting body in
the US but securities exchange commission has the final authority
securities commissions - Answer- provincial & ontario
provincial - oversee and monitor capital marketplace in their provinces
ontario - home to the toronto stock exchange, most large companies are registered for
it.
, Sustainability reporting - Answer- how businesses deal with the environmental, social
and governance issues.
principles vs rules - Answer- rules based approach usually has a larger body of
knowledge, principle based standards (IFRS ASPE) are more dependent on
professional jusgement
commercial substance - Answer- legitimate sale. exchanging similar assets would not
be considered a sale.
Concessionary terms - Answer- Terms negotiated by a party to the contract that are
more favourable than normal.
Constructive obligation - Answer- enforceable under the law, any enforceable promise
that results from a sale may create a performance obligation that needs to be
recognized
2 approaches to revenue recognition - Answer- asset-liability approach - IFRS
earnings approach - ASPE
asset - liability approach - Answer- accounts for revenue based on the asst or liability
arising from contracts with customers or changes to assets and laibilities
earnings approach - Answer- recognizes and measures revenue based on whether it
has been earned - satisfied when there is a change in control
Key concepts of revenue recognition - Answer- 1. identify the contract with customers
2. identify the separate performance obligations in the contract
3. determine the transaction price
4. allocate the transaction price to the separate performance obligations
5. recognize revenue when each performance obligation is satisfied.
recognizing the contract - Answer- agreement between two or more parties that creates
enforceable rights or obligations
Margo company enters into a contract to .....
1. a contract is an agreement between two parties that creates enforceable rights or
obligations. in this case margo company has a contract to deliver a product to soon
yoon
commercial substance, parties approved, rights are identified, payment terms, no
collection considerations
contract modifications - Answer- if a contract is being modified while ongoing it si
considered a new contract if
- goods or services are distinct
- the price increase is at least equal to the selling price of the items sold separately
