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Assurance Special Reports – Section 8500 – Review of Financial Information Other than Financial Statements

Review of Financial Information Other than Financial Statements (Section 8500)
Last Updated: November 4, 2013

You can find a printer-friendly study sheet in PDF format by clicking here!


Review of Financial Information Other than Financial Statements (Section 8500)

Important to remember that a review level of assurance is lower than an audit level of assurance.

A review can consist of inquiry, analytical procedures and discussions with management or employees with respect to financial information.

 

Examples of Financial Information other than Financial Statements:

  • Specific financial statement items such as revenue for a particular region
  • Grant application data
  • Supplementary information accompanying financial statements

This list can obviously be very broad.

Examples of when this section does not apply:

  • Reporting on results of applying audit procedures
  • Compilation of financial information (without the review)
  • Review of future-oriented financial information

 

Detailed Considerations:

  • When financial information is prepared in accordance with specific agreements or regulation and significant interpretations were made related to these, the auditor should disclosed the interpretations.
  • Materiality should be determined in the context of the financial information being reported.
  • If financial statement items are interrelated (i.e. sales and receivables) it may be necessary to look at other financial information that could materially affect the information on which the auditor is reporting. Consider scope.
  • Auditor needs to consider whether there is adequate disclosure in the information they are reviewing.

The Handbook can be useful

I was a huge fan of using the Handbook during my case writing. As I’ve mentioned before, I’m not that big on memorizing long criteria or rules so instead I learned how the Handbook worked and just went in there every time I needed specific criteria.

This was in a time when we could use FolioViews in the UFE. That’s changed and now it’s some sort of PDF viewer which I understand may not be as search friendly. You may have to therefore rely a little more on knowing the Handbook sections.

On the bright side, I believe you’re able to Copy-Paste now directly from the handbook. That was not something I could do and boy would it have been a time saver. We had to go back and forth between the two at the risk of crashing your computer at any moment.

All this to say, I find myself a little surprised when people tell me they don’t use the Handbook at all. If you’ve got all the rules and criteria memorized, then kudos to you but if you don’t, give it a shot, you might be surprised how useful you find it.

Be confident in Assurance and PMR – Part 2

PMR will make up 20-30% of the exam marks. It should go without saying that you should have some strength in this indicator in order to stay competitive and make the rest of the exam easier on yourself.

By now, you have probably encountered the majority of the types of situations you may encounter on your final and you’ll have some idea where you stand.

Within the PMR competency, here are some ways you might be able to stand out:

  • Quantify issues whenever possible – This doesn’t mean just in the quant questions but anywhere you get the numbers to work with is an opportunity to add some depth by giving numeric behind your qualitative response.
  • Ranking – Understand that material issues and numbers are more important while other more minor issues can be left behind when time is scarce. The real easy stuff is often in there to take up your time and doesn’t add a lot of value.
  • Using case facts to backup your discussion – By far, something that a lot of candidates struggle with at this point is not enough case facts. Whenever writing an issue, always do it in terms of the case fact. In PMR, I always wrote the criteria supported by the case fact in one sentence or bullet point.
  • Don’t be afraid to use that handbook – It’s an open-book test! I used the handbook like crazy for SOA and UFE. What an unbelievable source of technical. For specific issues, the technical is often already there.

What other PMR tips do you want to share?

IFRS 5 – Non-current assets held for sale and discontinued operations UFE Study Guide

Non-current assets held for sale and discontinued operations (IFRS 5)
Last Updated: November 5, 2012 (Level A)

You can find a printer-friendly study sheet in PDF format by clicking here!


This IFRS applies to assets or asset disposal groups which are held for sale and with the presentation and disclosure of discontinued operations.

Individual assets must be non-current assets. Asset disposal groups are groups of assets, possibly with directly associated liabilities in a single transaction. This may be a group of cash-generating units, a single cash-generating unit or part of a cash-generating unit. The asset disposal group may include any assets and liabilities including current ones and must be measured by this IFRS.

Classification of non-current assets as held for sale or held for distribution to owners

The conditions below should be met before the end of reporting period, if it’s after the reporting period but before the authorization date then disclosure is only necessary. A non-current asset or disposal group shall be classified as held for sale (or distribution to owners) if:

  • Its carrying amount will be recovered through the sale
    • Must be available for immediate sale in current condition and the sale must be highly probable
      • Management must have a plan to sell
      • Active program to locate a buyer with the plan having been initiated
      • Asset must be actively marketed for sale at a reasonable price
      • The sale should be expected to qualify for recognition as a completed sale within one year from the date of classification
        • Certain events which occur out of the entities control may prolong this
  • When an asset or disposal group is acquired exclusively for disposal the entity must classify it as an asset held for sale as long as the one-year condition above is met.

Measurement of assets held for sale

Measured at the lower of:

  • Carrying amount
  • Fair value less costs to sell (or distribute to owners)

Cost to sell = The incremental costs directly attributable to the disposal of an asset excluding financing and income tax expense.

When the sale is expected to occur beyond a year, the present value must be calculated with the operations impact going to financing cost.

Recognition of impairment losses and reversals:

  • Recognize impairment loss for any initial or subsequent write-down to fair value less costs to sell
  • Recognize gain for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss that has been recognized.
  • Do not amortize assets held for sale. Interest and other expenses related to the liabilities shall continue to be recognized.

Changes to a plan of sale

If the entity had previously classified the asset or disposal group as held for sale but the criteria are no longer met then it should cease classifying the asset as held for sale.

The asset shall be re-measured as the lower of:

  • Carrying amount before the asset or disposal group was classified as held for sale, adjusted for any amortization or revaluations that would have been recognized if the asset had not been classified held for sale originally. And
  • Recoverable amount at the date of the subsequent decision not to sell.

Presentation and Disclosure

A component of an entity is a distinct set of operations and cash flows that can be clearly measured separately from the rest of the entity for financial reporting purposes.

A discontinued operation is a component of an entity that has either been disposed of or is held for sale and meets the following conditions:

  • Represents a separate major business line or geographic area, or
  • Part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or
  • A subsidiary acquired solely with a view of resale.

Disclose:

  • Single amount on the Statement of Comprehensive Income which is:
    • Post tax profit or loss of discontinued operations
    • Post tax gain or loss recognized on the measurement to fair value less cost to sell or on the disposal of the assets or disposal groups constituting the discontinued operation.
  • A breakdown of the single amount into:
    • Revenue, expenses and pre-tax profit or loss of discontinued operations
    • Related income tax expenses (IAS 12)
    • Gain or loss recognized on the measurement to fair value less costs to sell or on the disposal of the assets or disposal groups constituting the discontinued operations.
    • Any related tax expenses as required by IAS 12.
  • Adjustments in the current period to amounts previously presented in discontinued operations that are directly related to the disposal of a discontinued operation in a prior period shall be classified separately in discontinued operations.
  • When reclassifying from held for sale to not held for sale, the amounts previously recorded in discontinued operations shall be reclassified and included in income from continuing operations for all periods presented.
  • The entity shall show separately assets/liabilities of a disposal group or assets held for sale on the Balance Sheet and should not be presented as offsetting each other.

IFRS 1 – First-time adoption of IFRS UFE Study Guide

First-time adoption of IFRS (IFRS 1)
Last Updated: October 16, 2012

You can find a printer-friendly study sheet in PDF format by clicking here!


IFRS 1 applies to entities which are adopting IFRS for the first time.

The objective of IFRS 1 is to provide users high quality information which is:

  • transparent;
  • comparable across periods presented;
  • a suitable starting point for accounting in accordance with IFRS; and
  • can be generated at a cost which does not exceed its benefits.

Scope

When an entity is presenting its financial statements, for the first time, using IFRS it must be clearly stated with a statement in the financial statements. There are numerous disclosure requirements and exceptions available in this standard which is likely too specific to be tested on the UFE so focus on the big picture.

Recognition and Measurement

When an entity transitions to IFRS for the first time it must:

  • present an opening IFRS Statement of Financial Position;
  • comply with all IFRS accounting policies in its opening IFRS Statement of Financial Position and throughout all periods presented (retroactive restatements);
  • not apply different versions of IFRSs which are outdated; and
  • recognize adjustments from previous GAAP that result in changes in the IFRS statements directly into retained earnings. These transactions must occur prior to the IFRS adoption date.
  • Remain consistent at the date of transition with estimates made for the same date in accordance with previous GAAP after adjustments to reflect any difference in accounting policies unless the estimate was an error.
  • Information received after the transition date should be treated as a non-adjusting event in accordance with IAS 10 (Events after the Reporting Period) and should be reflected in profit or loss or other comprehensive income.

Presentation and Disclosure

Numerous requirements, notably including:

  • Comparative information for all statements
  • Previous GAAP information should be labelled clearly as such
  • How the transition from previous GAAP to IFRS impacted the financial statements including reconciliations

Use that Handbook! – Why Folioviews is great

Important Update: The 2012 UFE has stopped using Folioviews. See my update here.

One of the best things about writing the UFE in 2010 was that The Handbook was only allowed in electronic form which was not the case in previous years. I had to learn and use the electronic copy which turned out to be amazingly useful. One of my weaknesses is memorizing long rules and for this, the electronic Handbook is extremely useful. You’ll likely encounter some accounting issue in the UFE for which you can’t remember the exact criteria. Now a days it’s as easy jumping into the Handbook for a few minutes, doing a quick keyword search and finding the criteria. Even better, I understand that you can even copy and paste straight into your case which wasn’t possible when I wrote. How can anybody not be doing this all the time? Yet I still find some people prefer to try to cram the whole Handbook into their heads. It’s an open book exam – no need to memorize the book!

When to use Folioviews?

My advice: Get to know that beautiful electronic Handbook during your study period if you haven’t already and use it often! Why risk memory lapses or digging through Handbook sections for the first time during the UFE? It’s also often faster to find the exact criteria in the Handbook and copy it into your case and fill in the case facts as they apply and then conclude. You don’t want to be fiddling around with Folioviews for the first time during the UFE so I’ll say it again, get to know it during your study period and use it often.

When not to use Folioviews?

While the electronic CICA Handbook available is a beautiful thing, unfortunately the Income Tax Act version of it is not. Unless you are very sure that a specific issue is addressed in the ITA and you know where it is or the exact keyword then I have almost never found it useful. Because of the legislative way that the ITA is written, it’s unlikely you’ll find what you need during UFE time to tackle the issue without wasting a lot of time. You are better off trying to address the issue from memory. Sorry, no shortcuts here!

As always, there are some exceptions and in 2010 I was lucky enough to get one of these when LPP (Listed Personal Property) was an issue. This is one of those where having that keyword available to search can be of some use. Another is specific CCA rates so I would not memorize that list. As I’ve mentioned before, it looks like the CICA might be hinting that you should use this more often so it’s worth fiddling around a little if you haven’t before.

How often have you been using Folioviews? Do you foresee any issues that might arise by using it during the UFE?

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