Intermediate Accounting II - Liabilities and Equities Case Analysis

This case study analysis addresses key accounting issues related to liabilities and equities, specifically focusing on lease accounting, preferred shares, post-retirement benefits, long-term note receivable, and future tax liability. The analysis examines the changes introduced by IFRS 16 "Leases" and its impact on tenants and lessors. It explores the characteristics of preferred shares and their implications for income distribution. The document also covers the accounting treatment of post-retirement benefits, including income tax exemptions and severance pay. Furthermore, it delves into the accounting for long-term note receivables and their classification as non-mobile financial assets. Finally, the analysis addresses the accounting for future tax liability and the implications of discrepancies in company addresses during tax audits. The assignment adheres to the requirements outlined in the "BACK-IT-UP" case from the Canadian Financial Accounting Cases textbook, providing a detailed examination of each issue and appropriate recommendations.

Running head: INTERMEDIATE ACCOUNTING
1
Intermedeiate Managerial Accounting
Name:
Institution:
Date:

INTERMEDIATE ACCOUNTING
Accounting for lease
Accounting for leases” will need to be applied from the reporting for 2022. But there
are companies that are better off moving to a new order now. Let’s figure out what is
changing for tenants and lessors and how to simplify the transition period. Lease accounting
was developed on the basis of the International Standard for Financial Reporting, or IFRS 16
“Leases” .BIUC applies to commercial organizations that conclude contracts for the provision
/ receipt of property for temporary use for a fee. An exception is made for three objects of the
contract:subsoil plots for exploration, mining; results of intellectual activity, means of
individualization and their material carriers; objects of concession agreement. Public sector
organizations do not apply the standard: for them back in 2016 the “Rent” was developed
(Baker, 2019)..
What new concepts does the standard introduce?
The leased asset is granted for the period specified in the contract; the rental subject is
identified and under the terms of the contract the lessor cannot replace it before the end of the
rental period; the lessee has the right to use the leased item for profit; the lessee has the right
to determine how to use the accounting object in the framework of its technical
characteristics.If the tenant uses simplified accounting methods, then the initial amount can
be taken as the basis of the assessment, and the costs of future dismantling will be recognized
upon the fact - in the period when the dismantling happens. If the lease is long, lease
payments and interest rates can change, which means that you will have to adjust the amount
of assets and liabilities.
Accounting for preferred shares

INTERMEDIATE ACCOUNTING
Preferred shares are a special kind of equity securities, which, unlike ordinary shares,
have special rights, but also have a number of specific restrictions. Preferred shares - a
common financial instrument in the world.
It allows the owner to receive a guaranteed income based on the dividend rates
offered by the issuer of securities. Firstly, almost always the owner of preferred shares is
guaranteed a certain income. Namely, fixed income is accrued on preferred shares, in contrast
to ordinary shares, the dividends of which depend on the profit of the joint-stock company.
However, dividends are not paid if the company incurred losses during the reporting period.
Secondly, cash for dividends is allocated to holders of such securities as a matter of
priority(Frey,2017).
Accounting for post-retirement benefits
In particular, income in the form of a lump-sum cash payment and gifts are not a
remuneration of the employee for the performance of labor and other duties. Such incomes
are exempted from taxation if their amount, in combination with other social incomes from
the organization for the year, has not exceeded the established limit.
The severance pay paid to an employee upon dismissal due to retirement is exempt
from income tax within nine average monthly salaries of an employee. The exemption
provided for social income can also be applied to the sum of the excess of the severance pay
over this limit (Doliya,& Singh, 2016). If the established limits for exemptions are exceeded,
the amount of the excess is included in the tax base for calculating the income tax of the
month in which the excess occurred. Further income tax is calculated in the generally
established manner .

INTERMEDIATE ACCOUNTING
- upon payment of income in cash (one-time cash payments, severance pay) - withheld upon
actual payment of income, and transferred to the budget no later than the day of actual receipt
of cash in the bank to pay income and (or) the day it is transferred from the organization’s
account to to the bank account of the payer in the bank. When paying income from the
organization’s cash desk at the expense of the proceeds received, income tax is transferred to
the budget no later than the day following the payment day .
Accounting for Long-term Note Receivable
Non-mobile financial assets include the balance of current financial assets (after
deducting the mobile part from them) and all long-term financial assets. The balance of
current financial assets consists of receivables for settlements with customers, advances paid
on an advance payment basis, promissory notes receivable, term deposits. Long-term
financial assets include long-term loans granted, long-term financial investments - stocks,
bonds of other enterprises, shares in other enterprises, contributions to investment funds -
documentary and non-documentary (Franklin, Graybeal, & Cooper, 2018).
Under the article Promissory notes receivable , the debt on settlements with debtors,
secured by the received promissory notes, is recorded on account 62 Accounts payable and
receivable. A bill of exchange is a type of security representing an urgent written debt
obligation of a drawer to a drawer. Upon receipt of bills on shipped products (goods), work
performed and services rendered in the amount of these bills, an entry is made on the debit of
account 62.. Analytical accounting to account 62 should show data on the debt on settlements
with buyers and customers, secured by a) bills, the maturity of which did not come b) bills,
discounted (recorded) in banks c) bills, for which cash was not received on time.

INTERMEDIATE ACCOUNTING
Accounting for future tax liability
A limited liability company is engaged in investment activities - acquires securities.
Between the Company and its General Director, a civil law contract was concluded for the
management of the Company. At the time of the on-site tax audit of the company, the address
of the office of its general director, that is, the address of the actual location of the taxpayer,
does not coincide with the address indicated in the constituent documents of the Company
(Robinson, Stomberg, , & Towery, 2016).

INTERMEDIATE ACCOUNTING
Refrences
Baker, P. (2019). An Experiment Using Two Methods of Teaching Accounting for Leases in
Intermediate Accounting. Journal of Applied Business and Economics, 21(6).
Doliya, P., & Singh, J. P. (2016, March). THE CURIOUS CASE OF PENSION
ACCOUNTING. In Proceedings of the NIDA International Business Conference
2016− Sustainability in Business (p. 63).
Franklin, M., Graybeal, P., & Cooper, D. (2018). Explain How Notes Receivable and
Accounts Receivable Differ. Principles of Accounting, Volume 1: Financial
Accounting.
Frey, R., Pedroni, A., Mata, R., Rieskamp, J., & Hertwig, R. (2017). Risk preference shares
the psychometric structure of major psychological traits. Science advances, 3(10),
e1701381.
Robinson, L. A., Stomberg, B., & Towery, E. M. (2016). One size does not fit all: How the
uniform rules of FIN 48 affect the relevance of income tax accounting. The
Accounting Review, 91(4), 1195-1217.