Summary Financial Reporting Technical Notes for CPA Exam
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Course
CPA
Institution
CPA
CPA Canada CFE Exam Prep Notes for Financial Reporting
Topics Including:
Financial Reporting
Cash Based Accounting vs. ASPE or IFRS (First-time Adoption)
Cash Basis Accounting vs. ASPE or IFRS and (ASPE 1500 / IFRS - First Time Adoption)
Revenue Recognition
ASPE 3400- Revenue Recognitio...
, Warranty..................................................................................................................................................112
IFRS 15 / IAS 37 / ASPE 3400 / ASPE 1000 – Warranty.........................................................................112
Agriculture...............................................................................................................................................115
IAS 41- Agriculture (ASPE has no guidance).........................................................................................115
Joint Arrangement...................................................................................................................................118
Foreign Operations..................................................................................................................................118
Borrowing Costs.......................................................................................................................................118
Subsequent Events..................................................................................................................................118
ASPE 3820 / IAS 10- Subsequent Events..............................................................................................118
MD&A......................................................................................................................................................121
National Instrument 51-102 Continuous Disclosure Obligations, developed by the Canadian Securities
Administrators (No Guidance In IFRS and not required by ASPE)........................................................121
Earnings Per Share...................................................................................................................................123
IAS 33- Earnings Per Share (Only for Public Companies- No ASPE Guidance)......................................123
Cash Based Accounting vs. ASPE or IFRS (First-time
Adoption)
Cash Basis Accounting vs. ASPE or IFRS and (ASPE 1500 / IFRS 1- First
Time Adoption)
Identify Identify the issue
Step 1 Cash Based Accounting Characteristics
Step 2 Accrual Based Accounting (IFRS and ASPE)
Step 3 First-time Adoption- ASPE
Step 4 First-time Adoption- IFRS
Conclude and advise Conclude based on analysis, provide journal entry and affect on FS
Identify the Issue: Company wants on advice on if to adopt ASPE or IFRS
Step 1: Cash Based Accounting Characteristics
- Revenue recorded when collected and expenses are recorded when paid
- Very easy to implement
, - Used by small businesses
- Low costs
- Simple
- Provides picture of bank accounts
**Businesses that use cash accounting on a day-to-day basis must update their financial statements
at period end for accruals in order to comply with either ASPE or IFRS.
Step 2: Accrual Based Accounting
- Transactions are recorded when events occur rather than cash flows
- More complicated
- Required by Canadian GAAP
- Provides more reasonable picture of economic reality of a business
- Used by IFRS (Public) and ASPE (Private)
- More expensive
Step 3: First-time Adoption- ASPE
First-time adoption arises when the company prepares its first set of financial statements using the
new GAAP. In the year of adoption, comparative statements must also be restated and reported under
the new GAAP.
04 An entity prepares and presents an opening balance sheet at the date of transition to
accounting standards for private enterprises. This opening balance sheet is the starting point for the
entity's accounting under accounting standards for private enterprises.
Accounting policies
.05 An entity shall use the same accounting policies in its opening balance sheet and throughout all
periods presented in its first financial statements prepared using accounting standards for private
enterprises. Those accounting policies shall comply with the accounting policies effective at the end of
the year the entity adopts accounting standards for private enterprises, except as otherwise specified
in this Section.
.06 Except as noted in paragraphs 1500.09 and 1500.26 an entity, in its opening balance sheet
prepared using accounting standards for private enterprises:
(a) recognizes all assets and liabilities whose recognition is required by the standards;
(b) does not recognize items as assets or liabilities if the standards do not permit such recognition;
(c) reclassifies items that it recognized previously as one type of asset, liability or component of
equity, but are recognized as a different type of asset, liability or component of equity under the
standards; and
(d) applies the standards in measuring all recognized assets and liabilities.
.07 The accounting policies that an entity uses in its opening balance sheet prepared in accordance
with accounting standards for private enterprises may differ from those that it used for the same date
under its previous accounting policies. For example, an entity may have previously reported other
comprehensive income, whereas there is no such concept in accounting standards for private
enterprises. Any resulting adjustments arise from events and transactions before the date of transition
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