NOTES to FS (p.

360) [IAS 1, 8, 10, 24, 8] WA FIFO Change in accounting policies

20x0 20x1 20x1 Inventory 200k

Complete Set: SFP, SCI, SFP, SCE, Notes BI 100k 100k 1.2M RE (200k x .70) 140k
1. General information of company Purch 10M 1M 10M DTL (200k x .30) 60k
2. Statement of compliance AFS 10 .1M 10.1M 11.2M
3. Summary of accounting policies EI (1M) (1.2M) =200k (2.1M)
4. Schedule COGS 9.1M 8.9M 9.1M
5. Other disclosures NI Not
given
IAS 8 (p. 329) RE
1 Accounting policies (p330)- treated retrospectively
2 Changes in estimates (p333)- treated prospectively 1. 90k x 4/10 + 10k = 46 000
3 & errors CA= (46k-4k) x1/4 +4k = 49 000
2. From the date of acquisition 6 to 3 rem. UL
Change in depreciation method (prospective adjustment) 20x5 to 20x8 } 3 years
Ex. 1 1/01/20x1 Step 1: 264k x 5/8 = (165k-24k/3)= 47k
Straight-line method 1𝑀 − 100𝑘 𝑥 5 264k/8 x 3 = 99k
= 𝟐𝟐𝟓 𝟎𝟎𝟎
20
Historical cost 1,000,000 47k + 99k = 146 000
Salvage value 100,000 Step 2: 3.
Useful life 20 years HC-ADE= 1M – 225k = 775 000 WA 2015 2016
Alternative… 2014 FIFO WA FIFO WA
Dep’n cost x fraction of time + RV = 900k x 15/20 + 100k = 775 000 BI 100k 45k 54k 78k 78k
SYD- Sum-of-the-years ^use remaining UL always (PROSPECTIVE) Purch 1M 1M 1M 1M 1M
1/01/20x6 Residual value 50k Dep’n Expense= AFS 1.1M 1.045M 1054k 1078k 1071k
Carrying amount Remaining useful life 4 years (775k-50k) x 4/10= EI (45k) 54k (78k) (71k) (83k) (78k)
before the change 1 st
2 nd
3 rd
4 th 290 000
COGS 1.055M 1046k ↓ 967k 983k 995k 993k
4/10 3/10 2/10 1/10 By 9k↑ By 16k↓
NI By 2k ↑
By 9k↑ By 16k↓
RE
Historical cost = 1M 5 000= 9000 - 16000 + 2000
Useful life = 100 years 1M x 43/100 = 430 000
CA 57th year If EI↓, COGS↑, NI↓, RE↓
What is the CA of asset at the end of 20x8? If P/BI↓, COGS↓, NI↑, RE↑ only if EI is equal
20x6 X 4/10 = 290 000
20x7 (775k – 50k) X 3/10 = 217 500 2016 2017
20x8 X 2/10 = 145 000 BI 100k 100k
Dep’n for 3 yrs/ Total Dep’n expense 652 500 Purch 1M 1M
AFS 1.1M 1.050M
CA = 775 000 – 652 500 = 122 500 40k if OLD ← EI (50k) (40k)
COGS 1050k 1010k =2060k
Shortcut. . . 2016 2017
900k x 15/20 + 100k = 775 000 BI 100k 40k
725k* x 1/10 + 50k = 122 500 *775k-50k Purch 1M 1M
AFS 1.1M 1040k
EI (40k) (40k)
CHANGES IN PROVISION
COGS 1060k 1M =2060k
Liabilities w/ uncertain timing or amt (probable) i.e lawsuit
ERRORS
-clerical errors slide, transposition
20x1 Actual 20x2
-counterbalancing342-355, after 2yrs error will offset
Warranty expense 50k
65k i.e. inv, purchases, sales, prepayments, accruals, deferrals
Estimated warranty 50k
-non counterbalancingi.e. dep’n (needs correcting entry)
Probable lawsuit loss 100k
90k
Estimated liability 100k EFFECT Adjustments
*error if he knows @20X1 but still done P/BI↑ COGS↑ NI↓ RE↓ +
P/BI↓ COGS↓ NI↑ RE↑ -
POLICIES (p330)
FIFO vs. WA- the same in terms of # of units but not on cost per unit (retrospective application) EI↑ COGS↓ NI↑ RE↑ -
2000 units x P10 2 000 units x P9 EI↓ COGS↑ NI↓ RE↓ +
=20 000/unit = 18 000/unit ASSET↑ EXP↓ NI↑ RE↑ -
If impracticable, presented at earliest prior period (last yr’s ASSET↓ EXP↑ NI↓ RE↓ +
then comparative) LIABS↑ EXP↑ NI↓ RE↓ +
2018 2017 LIABS↓ EXP↓ NI↑ RE↑ -
xx xx (5) EXP↑ NI↓ RE↓ +
xx xx

WA FIFO
01/01 BI 1 000 000 1 200 000
12/31 EI 2 000 000 2 100 000
i. CE:  Segments w/ a profit- get total profit
Cash 50k  Segments w/ a loss- get total loss
Gain on sale 50k
Cost=AD} fully depreciated Reportable? ABCD

j. CE: Revenue 3M x 10% = 300k AB

Accum. Dep’n 7200 Asset 46.4M x 10% = 4.64M ABC
Retained Earnings 7200 Profit 390k x 10% = 39k
 X Loss 770k x 10% = 77k ABD
Dep’n Expense 100k 107200
Accum. Dep’n 100k 107200 (2) Limit on external revenue (75% Rule of External Rev.)

k. CE: External C or any as long as = 75% or more

Truck 90k Step 1: 2 300 000 x 75% = 1 725 000 T. Ext. Rev. = 2.3M
Exp/RE 90k A&B (1.2M + 400k) = 1 600 000 x
 X A B & C* (1.2M + 400k + 250k) = 1 850 000 √
Truck 90k Expense 90k *include other segments if necessary 
Cash 90k Cash 90k
(3) 10% MAJOR CUSTOMER RULE
Annual depn: 90k/5 = 18k -10% or more of the external revenue comes from the
customer
Depreciation Expense 18k
Retained Earnings 18k Ex. 50M x 10%= 5M GM JOLLIBEE pg 436
Accumulated Depreciation 36k

Pg. 407 #10

20x0 20x1 20x2
Unadjusted Profits 40 000 (15 000) 35 000
(a) Accrued (2 900) 2 900 -
expenses - (3 000) 3 000
(Liabs) - - (3 400)
(b) Prepaid 2 000 (2 000) -
expenses - 2 800 (2 800)
(Asset) - - 1 500
(c) Accrued 2 750 (2 750) -
revenue - 2 500 (2 500)
(Asset) - - 2 700
(d) Unearned (4 250) 4 250 -
revenue (4 500) 4 500
(Liabs) (4 100)
Adjusted profits 37 600 (15 200) 33 900

Pg. 371 OPERATING SEGMENTS

 Changed business activity, own revenue and
expense
 Operations are reviewed by CODM (chief operating
decision maker)  JESUITS in AdZU
 Discrete financial information

OPERATING SEGMENTS

Reportable (disclosed separately) Non- reportable

Qualitative Quantitative

Mgt Aggregate
Uses it for 2 or more
reporting segments pg.
(regularly 373
reviewed)

Any of the following: pg. 374

(1) 10% THRESHOLD TESTS
a. Revenue test- 10% or more of the total revenue
b. Asset test- 10% or more of total assets
c. Profit/Loss test- 10% or more of the greater in absolute amount