The
following items are to be reported on a balance sheet.
1.
Accrued vacation pay
2.
Income tax instalments paid in excess of the income tax liability on the year’s
income
3.
Service warranties on appliance sales
4.
A bank overdraft
5.
Employee payroll deductions unremitted
6.
Unpaid bonus to officers
7.
A deposit received from a customer to guarantee performance of a contract
8.
Sales taxes payable
9.
Gift certificates sold to customers but not yet redeemed
10.
Premium offers outstanding
11.
A royalty fee owing on units produced
12.
A personal injury claim pending
13.
Current maturities of long-term debts to be paid from current assets
14.
Cash dividends declared but unpaid
15.
Dividends in arrears on preferred shares
16.
Loans from officers
17.
GST collected on sales in excess of GST paid on purchases
18.
An asset retirement obligation
19.
The portion of a credit facility that has been used
Instructions
(a)
How would each of the above items be reported on the balance sheet according to
private enterprise GAAP? If you identify an item as a liability, indicate
whether or not it is a financial liability.
(b)
Would your classification of any of the above items change if the balance sheet
were prepared according to IFRS?
(a)
Classifications on balance sheet
prepared under PE GAAP:
|
1.
|
Current liability; financial liability.
|
|
2.
|
Current asset.
|
|
3.
|
Current liability
or long-term liability depending on term of warranty; not a financial
liability.
|
|
4.
|
Current liability;
financial liability.
|
|
5.
|
Current liability;
financial liability.
|
|
6.
|
Current liability;
financial liability.
|
|
7.
|
Current or
noncurrent liability depending upon the time involved; not a financial
liability (if deposit will be returned then it would be a financial liability).
|
|
8.
|
Current liability;
not a financial liability.
|
|
9.
|
Current liability;
not a financial liability.
|
|
10.
|
Current liability;
not a financial liability.
|
|
11.
|
Current liability;
financial liability.
|
|
12.
|
Footnote
disclosure if assume not likely and/or not reasonably estimable. If assume
likely and reasonably estimable then current or noncurrent liability
depending upon the time involved; financial liability.
|
|
13.
|
Current liability;
financial liability.
|
|
14.
|
Current liability;
financial liability.
|
|
15.
|
Footnote
disclosure; not a financial liability.
|
|
16.
|
Separate
presentation in either current or long-term liability section; financial
liability.
|
|
17.
|
Current liability;
not a financial liability.
|
|
18.
|
Current or
noncurrent liability depending upon the time involved; not a financial
liability since usually does not involve payment of cash or other financial
assets.
|
|
19.
|
Current liability;
financial liability.
|
(b) Changes if the balance sheet was prepared
under IFRS:
(12) Under
existing IAS37: Footnote disclosure if assume not probable (a less stringent
test than “likely” under PE GAAP) and/or not reasonably estimable. If assume
probable and reasonably estimable then current or noncurrent liability
depending upon the time involved; financial liability.
Under
proposed amendments to IAS37: It must first be determined whether the
obligation exists at the reporting date. Liabilities can arise only from
unconditional (or non-contingent) obligations. Uncertainty about the amounts
that might be payable in the future is taken into account in the measurement of
the liability, not its existence. If a liability is recognized, it is measured,
and it is the measurement that takes into account the uncertainties that exist.
