Asset recognition and measurement The following hypothetical tra

Asset recognition and measurement The following hypothetical transactions relate to Nestlé S.A., the Swiss chocolate manufactured Indicate whether each transaction immediately gives rise to an asset of the company under U.S. GAAP and separately under IFRS. If Nestlé recognizes an asset, state the account title, the amount, and the classification of the asset on the balance sheet as either a current asset or a noncurrent asset. Nestlé reports its results in millions of Swiss Francs (CHF).
a. Nestlé invests CHF800 million in a government bond. The bond has a maturity value of CHF1,000 million in five and Nestle intends to hold the bond to maturity.
Two months prior to its year-end. Nestle pays its insurer CHF240 million to cover annual premiums on its European plants.
c. Nestlé pays a developer in the Czech Republic CHF6 million for an option to purchase a tract of land on which it intends to build a warehouse to serve the eastern European markets. The price of the land is CHF450 million.
d. Nestlé signs a four-year employment agreement with its chief executive officer for a package valued at CHF17.4 million per year. Of this amount, CHF3.1 million is base salary; the rest is expected bonus and deferred compensation arrangements. The contract period begins next month.
e. Nestlé spends CHF80 million on research and development related to a new, low-calorie chocolate 60% of the total amount was spent on pure research, the rest on development. The R&D is successful, and the firm is able to acquire a patent on the new formula. The cost of filing the paperwork and other procedures to obtain the patent is CHF05 million.
f. Nestlé received notice that a cocoa supplier had shipped by freight cocoa beans invoiced at CHF700 million with payment due in 30 days. The supplier retains title to the cocoa beans until received by Nestlé.

Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...


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