Accounting : Basis Of Accounting

Section 360-10-35-17 of the Code states that an impairment loss shall be recognized if the carrying value of a fixed asset is not recoverable and exceeds its fair value. The carrying value of the fixed asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and disposal of the asset. An impairment loss shall be measured by the amount by which the carrying value exceeds the fair value.

The second way that Athina could have approached this issue is that Athina could have considered the write-off as an unusual or non-recurring item seeing as how the inventory-turned-obsolete was not something that happens regularly. In this case, by considering this event as unusual or non-recurring, there would have been no effect on the net income before unusual or non-recurring items.

* ASC 323-10-35: “A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by

ii. Reversing Entry that results in future deductible amounts and, therefore will usually give rise to a future income tax asset.

The concept of write-down inventory states that the value of inventory should appear in financial statements only if it has some value, which is equal to the difference between the current market replacement value and the original inventory cost. IAS 2 stipulates that loss on write down inventory if small should be reported as part of the cost of goods sold and if huge, it should be reported on a separate line on the income statement. It thus follows that exclusion of write-down inventory may lead to investor overestimation of earnings persistence thereby leading to ethical and financial implications. The ethical issues include loss of brand value and goodwill, concealment of fraud penalties, and loss of shareholder and investor confidence while financial implications may include excessive compensation of the management.

transferred under ITA 85 (1). However, the $18,500 loss would have to be treated as a capital

which they were incurred. During the carry-over period, the net capital losses can be deducted

cognizant of the fact that the choices he makes can affect the price a buyer pays

There are several differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (GAAP). The IFRS is considered more of a "principles based" accounting standard in contrast to U.S. GAAP which is considered more "rules based." By being more "principles based", IFRS, arguably, represents and captures the economics of a transaction better than U.S. GAAP. As a team me collaborated to answer the following seven questions.

If the costs on the leftover inventory have to be lowered, then the journal entry would need to show a “credit to the inventory account and a debit to the Decline in Cost Account” (Walther,

$8 mill needed to be deducted from net income on the income statement. They should have followed (Following) with disclosure notes to describe why this error occurred and how it impacted the statement and accounts that it touched. For instance, the notes would describe the presence of the correction on the current period of beginning inventory, and retainED earnings.

I would estimate the incremental cash flows over the economic life of the new machine, taking into consideration the after-tax salvage values of the old and new machine respectively. Changes in net working capital would be figured in as well. For the terminal year, we would assume that the net working capital is recovered and treat it as a cash inflow.

For asset impairment there are two major differences between IFRS and US GAAP. Under US GAAP there is a two-step approach applied when assessing for impairment. First, the carrying value of an asset is compared with the undiscounted value of the expected future cash flows that will be generated from the asset. Second, when the carrying value is higher the

Accrual basis accounting requires revenues to be reported when earned and expenses when incurred, regardless of the timing of cash receipts or payments. Accrual basis accounting is required under GAAP. Cash basis accounting reports revenues when cash is received and expenses when cash is paid. The cash basis accounting is not allowed under

* As we learned in class from reading Silic’s financial statements, 82.9% of the unrealized gains from revaluation will flow to the Revaluation Surplus account and 17.1% will flow to the Other Creditors account.