What is accelerated depreciation method?
i-ask! | Have a question? Ask Tutor! What is meant by accelerated depreciation method? When such method is used and how many types are there for this method? And what is the position of accounting standards on such depreciation method? As the name suggests, the accelerated depreciation method accelerates the the recognition of depreciation […]
What is the difference between Finance lease and Operating lease?
According to IAS 17 two types of leases are identified namely Finance lease and Operating lease. The distinction between the two primarily resulted from the implications of one of the important accounting concept Substance over form. Finance lease is a lease agreement in which substantially all the risks and rewards incidental to ownership of an […]
Can we capitalize Tax amounts?
According to IAS 16 the purchase price of the asset includes the amount of non-refundable taxes i.e. such taxes which cannot be claimed back are capitalized and are included in the cost of the asset at the time of purchase. For example, when the asset is purchased or imported then buyer/importer is required to pay […]
Why Training Costs are not capitalized as cost of the asset?
First of all not every directly attributable cost can amount to capitalization as cost of the asset. IAS 16 requires more than just a cost to be directly attributable before it qualifies for capitalization as cost of the asset or to be included in the carrying amount of the non-current asset or fixed asset. According […]
Why LIFO is not permissible under IFRS?
After the revision of IAS 2 Inventories in 2003, LIFO was explicitly prohibited to be used by the entities following International Accounting Standards to prepare and present financial statements. Before this revision LIFO was available as allowed alternative i.e. an option if company wishes to use the inventory valuation method other than the preferred method. […]
What is the difference between Faithful representation and Fair presentation?
IASB framework provides conceptual guidance regarding preparation and presentation of financial statements whereas IAS 1 sets out the principles and rules for preparation and presentation of financial statements. So the difference between these two documents must be clear as framework does not amount to standard and is separate from International Accounting Standards. The provisions stated […]
What is Grouping and Marshalling in financial statements?
While preparing financial statements, especially Statement of Financial Position (SoFP) also, known as balance sheet, two presentation concepts are applied which are termed as Grouping and Marshalling. Grouping means presenting similar items together as one figure i.e. by combining them at one place and presenting as a single item on the face of financial statement. […]
What is Common Size Income Statement?
Common size income statement is an income statement in which each item is reported as a percentage of revenue (also known as turnover or sales).This technique i.e. to express quantities as a percentage of a base figure is called common-size analysis. This technique i.e. common-size analysis is also known as vertical analysis. Common size income […]
What is Negative goodwill and its accounting treatment?
Goodwill has been defined under IFRS 3 as following: An asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised. On analysing the definition we can understand that goodwill is an asset but is not the asset which can individually be identified […]
What are the fundamental principles for the preparation and presentation of financial statements?
Although the accounting treatments and provisions regarding presentations of different important transactions in the financial statements is dealt separate accounting standards. However, in the absence of any specific guidance, provisions of IASB Framework and IAS 1 provides overall guidance for preparation and presentation of financial statements. Before we discuss both documents lets clear out few […]
