CHAPTER 7-CASH AND RECIEVEABLES

if interest rate = market rat eaten fair value =

face value

effective rate

present value discount rate (IFRS)

face rate

stated interest rate

lump sum

multiple assets purchased together for one total price

A secured borrowing

Holder retains ownership of

receivables; the receivables are used as collateral

A sale of receivables

Holder transfers ownership of receivables in a sale

Securitization

interests in financial assets are sold to a third party

A note receivable is considered impaired when it is probable that the issuer will be unable to

collect all (principal and interest) amounts due according to contractual terms of the loan.

if control over receivables is not transferred to a third party, but the receivables are used as collateral in obtaining a loan, the transaction is recorded and disclosed as a

secured borrowin

The objective of a bank reconciliation is to explain

any differences between, and to identify any errors or omissions within, the bank's and the company's records of cash

Legally restricted deposits held at a bank as compensating bal- ances against long-term borrowing arrangements should be:

separately classified as non-current assets in either the Investments or Other Assets section of the statement of financial position.

Receivables Turnover Ratio

Net Sales Average Trade divided by Receivables (net)

financing company that normally buys accounts receivable of other companies without recourse. What has happened to the accounts receivable?

been factored

Why do companies ignore interest revenue related to accounts receivable?

the amount is usually not material in relation to the net income for the period

To determine whether a financial asset should be derecognized, IFRS considers the transfer of the

risks and rewards

Aspe considers

control

allowance for expected credit losses to have a debit (negative) balance?

more write offs then expected

The Accounts Receivable section of the statement of financial position would include which of the following?

trade receivables

What is the accounts receivable turnover ratio used to assess?

the quality of the receivables

How is the accounts receivable turnover ratio computed?

By dividing net sales by average net trade receivables.

Contingencies and provisions

Material events that have an uncertain outcome.

the value of the remaining performance obligations exceeds the value of the consideration received

contract liability

the value of the consideration received exceeds the value of the remaining performance obligations.

contract asset

factoring

normal sale no recourse and no risk and rewards

secured borrowing

risk and rewards, collateral

A contract asset (a right to receive consideration) should be reported

as a receivable if unconditional

Pensions, leases, and options are always described in

lengthy notes.

statement of financial position requires supplementary disclosure?

Contingencies, commitments, subsequent events and significant accounting policies all require notes.

Capitalization is only permitted if such charges are

directly related to and specified in the contract, and if they will be reimbursed by the customer.

Items paid from petty cash are

expenses that have not yet been recorded as such.