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Fair value measurement, Deferred taxes, Dilutive Securities and Earning…
Fair value measurement
Main objective MFRS 13
- To define fair value
- To establish a framework for measuring fair value
- To require disclosures about fair value measurement
Applies to:
- non-financial assets
- Liabilities and an entity's own equity instruments
Definition: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Market participants criteria:
- Must be independent from each other
- Must be knowledgeable about the asset or liability
- Must have the ability to enter into the transaction
- Must not be forced or compelled
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Fair value hierarchy
Level 1 inputs: quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Included within this definition are:
- Quoted prices for similar assets in active markets
- Quoted prices for identical items in inactive markets
- Inputs other than quoted prices that are observable
- Inputs that are derived from or corroborated by observable market data
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Deferred taxes
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Revenues
(TTD)
- Interest receivable
- Unrealized gain from change in FV for FA held for trading
(DTD)
- Rental income collected in advance
- Subscription collected in advance
Expenses
(DTD)
- estimated expenses and losses : Provision for warranties
- Unrealized loss from change in FV for FA held for trading
(TTD)
- Capital allowances in tax return
- Prepaid expenses
Tax base of assets = Carrying amount - future taxable amounts + Future deductible amounts
Tax base of liabilities = Carrying amount + Future taxable amounts - Future deductible amounts
Tax base of income received in advance
= Carrying amount - amount that will not be taxed in future
- Effective income tax rate = (Income tax expense / Pretax financial income) x 100%
Taxable income = Pretax financial income - excess of tax depreciation + Rent received in advance + Non deductible fines
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Business combination
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Amalgamation
Takes place when two or more companies (similar size) combine their businesses by selling their businesses to a newly formed company.
Takeovers
A company (investor) acquires control in another company (investee) by acquiring the majority of the voting shares of the acquired company.
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