ARR Journals and Rules

Credit Purchase for Resale Journal

Dr Purchases (expense) Cr Payables

Credit Purchase for Use Journal

Dr Asset Cr Payables

Cash Sale Journal

Dr Bank Cr Sales (income)

Credit Sale Journal

Dr Receivables (asset) Cr Sales (income)

NCA Purchase Journal

Dr NCA (asset) Cr Bank (asset)

Supplier Payment Journal

Dr Payables (liability) Cr Bank (asset)

Customer Payment (Receipt) Journal

Dr Bank (asset) Cr Receivables (asset)

PPE Purchase Credit Journal

Dr PPE Cr Payables

Irrecoverable Debt Journal

Dr IDE Cr Receivables

VAT on Credit Purchases Journal

Dr Purchases Dr VAT Cr Payables

PPE YE Formula

b/f + (additions + revaluations & impairments) - (disposals + AHfS)

IAS 16 PPE Initial Recognition Journal

Dr PPE Cr Provision

IAS 16 PPE Subsequent Measurement - Cost Model Journal

Dr Expense Cr PPE

IAS 16 PPE Subsequent Measurement - Revaluation Model Journal

FV > CA: Dr PPE Cr OCI (carring amount)

Impact of revaluation model (IAS 16 PPE)

Dep’n will increase as PPE CA is higher

IAS 16 PPE Revaluation Up Journal

Dr Cost (up to new valuation) Dr Acc. Dep’n (remove any dep’n to date) Cr Revaluation Surplus (FV - CA)

IAS 16 Revaluation Down Journal

Cr Cost (down to new valuation) Dr Acc. Dep’n (remove any dep’n to date) Cr Revaluation Surplus (FV - CA)

Difference between cost model and revaluation model

Cost model measures asset at cost, revaluation model measures assets at what they’re worth

IAS 36 Impairment Loss (Cost Model) Journal

Dr Impairment loss expense Cr PPE (Impairment amount)

IAS 36 Impairment Loss (Revaluation Model) Journal

Dr Revaluation Surplus (to cancel out previously recognised surplus) Dr Impairment loss (excess) Cr PPE (full impairment)

Reclassifying Asset as AHfS Steps (Cost Model)

1. Remeasure for impairment (selling value instead of value in use)

2. Remove asset from PPE, present as held for sale on BS

3. Stop depreciation

4. Record gain or loss on sale in P&L (Dr Bank Cr AHfS Dr/Cr Loss/Gain on disposal)

Reclassifying Asset as AHfS Steps (Revaluation Model)

1. Revalue asset and recognise expected selling costs (Dr P&L Cr PPE)

2. Remove asset from PPE, present as held for sale on BS

3. Stop depreciation

4. Record gain or loss on sale in P&L (Dr Bank Cr AHfS Dr/Cr Loss/Gain on disposal)

AHfS Permitted Text

IFRS 5 (for classifying conditions)

IAS 38 Intangible Assets Initial Recognition Journal

Dr IA (Purchase cost and directly attributable costs) Cr Bank/ Payables

IA Permitted Text

Para 57 pg. 163 (for recognising development costs as asset)

IAS 38 Subsequent Measurement

Always cost model (cost - acc. amortisation and impairment losses)

Depreciation/ Amortisation YE Formula

b/f + (CY dep’n + CY impairment) - (disposals dep’n + revaluation dep’n + AHfS dep’n)

IA YE Formula

b/f + (additions + revaluations) - (disposals + IAHfS)

IAS 2 Inventory Initial Recognition Journal

Dr Inventory (cost + cost to buy and make) Cr Bank/ Payables

IAS 2 Inventory Subsequent Measurement

Lower of cost (cost/ FIFO/ WAC) or NRV (selling price - selling costs)

WAC

Weighted average cost (avg. cost of all inventories held)

IAS 2 Inventory Journal if Cost > NRV

Dr Inventory expense (COS) Cr Inventory

IFRS 15 Revenue Recognition Model

5 Step Model

IFRS 15 Revenue 5 Step Model

1. Identify contract

2. Identify performance obligations

3. Determine price (future payments discounted to PV)

4. Allocate transaction price to performance obligations

5. Recognise revenue when performance obligations are met (point in time/ over time)

IFRS 15 Revenue Recognition Methods for Satisfied Over Time

Output method (inventory value transferred to date) Input method (cost of goods transferred to date)

Three Contract Categories

Contract asset (accrued income), contract liability (deferred income), trade receivable

IAS 37 Provisions Definition

A liability of uncertain timing or amount

IAS 37 Provisions Initial Recognition Journal

Dr Expense Cr Provision liability

IAS 37 Provision Amount (Single Payment)

Most likely amount

IAS 37 Provision Amount (Multiple Payments)

Weighted average of all possible amounts

IAS 37 Provisions Subsequent Measurement Journal (Provision Increase)

Dr Expense Cr Provision liability

IAS 37 Subsequent Recognition Journal (Provision Decrease)

Dr Provision liability Cr Expense

IAS 37 Provision Payment Journal

Dr Provision liability Cr Cash Dr/Cr Expense/Income (under or over provision)

IAS 12 Current Tax Provision Journal

Dr Tax expense Cr Tax liability (tax on CY profits)

IAS 12 Tax Payment Journal

Dr Tax liability Cr Cash Dr/Cr Expense (difference)

IAS 32 Financial Instruments Definition

A contract that gives rise to a financial asset for one entity and a financial liability or equity instrument to another

Financial Instruments Simple Definition

Umbrella term for ways money is invested, borrowed, or traded

Three Financial Instruments

Financial assets, financial liabilities, equity instruments

Financial Assets Simple Definition

Things the holder owns that will bring in future cash e.g. receivables

Financial Liabilities Simple Definition

Things an entity owes to someone else e.g. overdraft

Equity Instruments Simple Definition

Contracts showing ownership of a business e.g. shares

Debt Definition

A contractual obligation to make a payment

Equity Definition

Investor possessing a share of a company’s net assets

IFRS 9 Financial Instruments Initial Recognition

Fair value (invoice amount)

IFRS 9 Financial Instruments Subsequent Treatment

B/f → amortisation (interest) → cash → c/f

IFRS 9 Financial Instruments Amortisation (interest) Formula

b/f x EIR

IFRS 9 Financial Instruments Cash Formula

Nominal value x coupon rate (% of nominal)

Compound Instruments Definition

Holder has option to convert debt into equity

Compound Instrument Liabilities Recognition

Initially FV, subsequently amortised

Compound Instruments Equity Recognition

Difference between what lender has paid and PV of payments

IAS 21 FX Transactions Initial Recognition

Recorded at spot rate or average rate

IAS 21 FX Transactions Spot Rate

Rate at transaction date

IAS 21 FX Transactions Closing Rate

Rate at reporting date

IAS 24 Related Parties Criteria

People/ companies with control/ significance

IAS 24 Related Parties Key Note

Two companies are not related parties just because they have a director in common