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Friday, June 17, 2016

Accounting for Share-Based Payment

Photo owned by www.ifrsbox.com


Definition

A share-based payment is a transaction in which the entity receives or acquires goods or services either as consideration for its equity instruments or by incurring liabilities for amounts based on the price of the entity's shares or other equity instruments of the entity.

Types of share-based payment transactions

(a) equity-settled share-based payment transactions, in which the entity receives goods or services as consideration for equity instruments of the entity (including shares or share options)
(b) cash-settled share-based payment transactions, in which the entity acquires goods or services by incurring liabilities to the supplier of those goods or services for amounts that are based on the price (or value) of the entity's shares or other equity instruments of the entity, and
(c) cash or equity settled share-based payment transactions, in which the entity receives or acquires goods or services and the terms of the arrangement provide either the entity or the supplier of those goods or services with a choice of whether the entity settles the transactions in cash (or other assets) or by issuing equity instruments.

Recognition and Measurement

The issuance of shares or rights to shares requires an increase in a component of equity. PFRS 2 requires the offsetting debit entry to be expensed when the payment for goods or services are consumed. For example, the issuance of shares or rights to shares to purchase inventory would be presented as an increase in inventory and would be expensed only once the inventory is sold or impaired.

The issuance of fully-vested shares, or rights to shares, is presumed to relate to past service, requiring the full amount of the grant date fair value to be expensed immediately. The issuance of shares to employees with, say, a three-year vesting period is considered to relate to services over the vesting period. Therefore, the fair value of the share-based payment, determined at the grant date, should be expensed over the vesting period.

As a general principle, the total expense related to equity-settled share-based payments will equal the multiple of the total instruments that vest and the grant-date fair value of those instruments. In short, there is truing up to reflect what happens during the vesting period. However, if the equity-settled share-based payment has a market related performance feature, the expense would still be recognized if all other vesting features are met.

Monday, June 13, 2016

UK-based start-up Company Bank4You enters the Philippines


A new player in the financial services industry enters the Philippine market – it is the UK-based start-up Bank4You. The company was recently established in London on the year 2014. Though B4U is a new player in the financial services sector, it has already proved itself as the innovative and ambitious company through its various activities and developments. B4U takes part, on an ongoing basis, in various European exhibitions and conferences dedicated to the digital banking and other financial solutions. To highlight, B4U TaxFree solution won the award at the upscale fintech conference, "FinNext".

Bank4You has prepared for the Philippine market, a specialized solution for the students, called B4U Student Card. This product is a prepaid VISA card, issued by the “Royal Bank of Scotland”, with special rates and fees, and unique conditions of obtaining a card. The B4U card can be ordered online within only 3 minutes, and you will get it within 10 days upon completing payment. You don’t have to be a UK citizen, and this fact makes it very interesting for the students from Philippines, who plan on getting education in Europe.

According to Adam Lane, CEO of the B4U Card Solution (start-up), the Company is reliant on the Southeast Asian market, and the Philippines in particular. As Mr. Lane remarked: “Youth at the Philippines is notable for its ambitions and sense of purpose, and the Bank4You solutions are developed for exactly such people.”

Copyright @philcpareview

Thursday, May 19, 2016

Audit of Liabilities: Internal Control Measures and Substantive Audit Procedures


Internal Control Measures for Liabilities

Current Liabilities

Accounts payable
1. A proper system of requisitioning, purchase order placement and approval, receiving, invoice approval, and approval for payment should be well-defined and established.
2. Subsidiary accounts payable records or unpaid vouchers should be reconciled with controlling account at frequent intervals.
3. Check mathematical accuracy of suppliers' invoices prior to recording.
4. Adjustments to accounts payable should be properly approved.
5. Debit balances in accounts payable should be reviewed and resolved.

Notes payable
1. Borrowings on notes payable should be properly authorized. Specify the institutions from which money may be borrowed and designate the officers authorized to sign notes.
2. Unissued notes should be properly safeguarded.
3. Subsidiary notes payable records should be reconciled with controlling account at frequent intervals.
4. Subsidiary notes payable records should be reconciled with controlling account at frequent intervals.
5. Paid notes should be properly cancelled and preserved.

Long-Term Liabilities
1. Long-term obligation should be properly authorized by the board of directors or by a required majority of the shareholders.
2. There should be proper control over issued and unissued obligations as in bonds, by an independent bond trustee or transfer agent.
3. Redeemed bonds should be cancelled, property mutilated and retained for audit in order to prevent unauthorized issuance.
4. Bond ledger should be used in which details of bond issued, cancelled and outstanding are shown. A subsidiary bondholder's ledger should also be maintained by the issuing corporation or the bond trustee for bonds registered, as to principal and interest.
5. Proper control should be exercised over the payment of interest on long-term liabilities. Payment may be done by an independently engaged interest-paying agent.

Saturday, May 7, 2016

Philippine Accounting Standards (PAS) Series: PAS41 - Agriculture

Objective of PAS 41

The objective of PAS 41 is to establish standards of accounting for agricultural activity-- the management of the biological transformation of biological assets (living plants and animals) into agricultural produce (harvested product of the enterprise's biological assets).

Key Definitions:
1. Agricultural activity is the management by an entity of the biological transformation of biological assets for sale, into agricultural produce, or into additional biological assets.
2. Agricultural produce is the harvested product of the entity’s biological assets.
3. A biological asset is a living animal or plant.  
4. Biological transformation comprises the processes of growth, degeneration, production, and procreation that cause qualitative or quantitative changes in a biological asset.
5. A group of biological assets is an aggregation of similar living animals or plants.
6. Harvest is the detachment of produce from a biological asset or the cessation of a biological asset’s life processes.

Initial Recognition
An enterprise should recognize a biological asset or agriculture produce only when:
1. The enterprise controls the asset as a result of part events
2. It is probable that future economic benefits will flow to the enterprise
3. The fair value or cost of the asset can be measured reliably

Measurement
Biological assets should be measured on initial recognition and at subsequent reporting dates at fair value less estimated point-of-sale costs, unless fair value cannot be reliably measured. 

Agricultural produce should be measured at fair value less estimated point-of-sale costs at the point of harvest. Because harvested produce is a marketable commodity, there is no 'measurement reliability' exception for produce. 

The gain on initial recognition of biological assets at fair value, and changes in fair value of biological assets during a period, are reported in net profit or loss.

A gain on initial recognition of agricultural produce at fair value should be included in net profit or loss for the period in which it arises.

All costs related to biological assets that are measured at fair value are recognized as expenses when incurred, other than costs to purchase biological assets. 

PAS 41 presumes that fair value can be reliably measured for most biological assets. However, that presumption can be rebutted for a biological asset that, at the time it is initially recognized in financial statements, does not have a quoted market price in an active market and for which other methods of reasonably estimating fair value are determined to be clearly inappropriate or unworkable. In such a case, the asset is measured at cost less accumulated depreciation and impairment losses. But the enterprise must still measure all of its other biological assets at fair value. If circumstances change and fair value becomes reliably measurable, a switch to fair value less point-of-sale costs is required. 

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