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Importance Of Separation Of Fixed And Variable Expenses

It is necessary for an organization to segregate and focus on its Fixed and Variable expenses. If this task or action is taken lightly then the organization has to suffer from many decision making problems like Break-even Analysis (Cost-Volume-Profit Analysis), Gross Margin Analysis or Contribution Margin Analysis. Although above three terms are interrelated, they have their different uses in different business decision making situations. But if Fixed and Variable expenses are not identified or separated in the organization, solution to these interrelated terms will be impossible. Do we know how …

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Information Of Profit Or Loss, Assets And Liabilities in Segments

An entity shall report ‘a measure’ of profit or loss and total assets and total liabilities for each reportable segment. Importantly a measure of total assets and total liabilities for each reportable segment is required to be reported only if such an amount is regularly reported to the CODM (Chief Operating Decision Maker). This measure is that which is reported to the CODM for the purposes of making decisions about allocating resources to the segment and assessing its performance. In other words, whatever the CODM uses to measure and assess …

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Acquisitions As Part Of A Business Combinations

Where assets are acquired as part of a business combination, IFRS 3 Business Combinations is applied.  In this section, a reference to a business combination indicates that the acquiring entity has acquired a group of assets rather than a single asset and one of the assets in that group is an intangible asset. The group of assets could be an operating division or a segment of another entity. The key issue is then how to account for the acquisition of an intangible asset when it is acquired as part of …

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4 Steps Of Identifying Operating Segments Under Matrix Structure

Identifying operating segments under ifrs 8 — matrix structure : Company Atlanta Inc. has a chief executive officer (CEO), a chief operating officer (COO) and an executive committee comprising the CEO, COO and the heads (general managers) of three business units organized according to the company’s main products — units Xenon, Yolk and Zebra. The company also operates in two distinct geographic regions — Oceania and North America. The heads of these geographic regions attend executive committee meetings, have input into decisions about the distribution of the company’s products into …

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4 Steps Of Identifying Operating Segments Under IFRS 8

An example of Identifying operating segments under IFRS 8 — Company A has a chief executive officer (CEO), a chief operating officer (COO) and an executive committee comprising the CEO, COO and the heads (general managers) of three business units — Xenon, Yellow and Zebra. Every month, financial information is presented to the executive committee for each of business units Xenon, Yellow and Zebra and for Company A as a whole in order to assess the performance of each business unit and of the company as a whole. Units Xenon, Yellow …

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IFRS 8 Controversy – Why IFRS 8 Is Controversial (Part-2)

It is also notable that two IASB board members dissented from the issuance of IFRS 8 (refer to the dissenting opinion in IFRS 8) because of the lack of definition of segment profit or loss and because IFRS 8 does not require consistent attribution of assets and profit or loss to segments. In addition, these board members also believed that the changes from IAS 14 were not justified by the need for convergence with US GAAP because IAS 14 is a disclosure standard and therefore does not affect the reconciliation …

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IFRS 8 Controversy – Reasons Why IFRS 8 Is Controversial

In Europe, the replacement of IAS 14 with IFRS 8 was highly controversial, mainly because of the management approach allowed by IFRS 8 compared with the more prescriptive approach previously required by IAS 14. The management approach in IFRS 8 requires segment information to be reported externally based on how information is reported internally to the company’s management. In contrast, IAS 14 had contained very prescriptive requirements as to what should be reported and how. The European Parliament is required to endorse all IASB standards and IFRIC interpretations in order …

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Variances Really Suck The Company’s Growth

We have learnt that favorable and unfavorale variances are adjusted to Cost Of Goods Sold to derive the Gross Profit in a business operation. Eventhough favorable variances have positive and unfavorable variances have negetive impacts on the Gross profit, ultimately no variance can influance the Net Profit of  business operation. Thus, no variance is desirable. In this article, I would emphasise on Materials Price Variance and it’s impacts on Gross Profit. In the later articles, I would discuss the impacts of other variances associated with business operations. A procurement manager …

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Free ERP Software Prextra And Its Modules

Do you think for affordable accounting software? Prextra is made for you, then. Prextra is a business management platform developed in Quebec, Canada. It is a cutting-edge information technology and can meet your accounting and other business needs also. It is affordable in price, quality and a good candidate for the best free accounting software. The software is a user friendly and integrated ERP System. A user or an SME who is in need of basic accounting will find everything in this small accounting software. The software is developed into …

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Difference Between IAS 14 And IFRS 8

IAS  14 Segment Reporting was replaced by IFRS 8 Operating Segments with effect from annual periods beginning on or after 1 January 2009. There are some theoretical differences between these two standards.  However, the main differences between IAS 14 and IFRS 8 are given in below under seven highlighted points. 1: Basis For Identification Of Segments       Segments are identified based on the predominant sources of risks and returns. This may result in either a business or geographic basis for segment identification. Where this does not coincide with the basis …

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