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Mam, I would like to confirm that ”Allocation” is used in respect of receivable’s allowances and write-downs…
so I can only recommend this assertion is being tested when my procedure explicitly states that there’s an ALLOWANCE/WRITE DOWN necessary?
And how does Control account reconciliations with list of balances verify ”existence”, is it due to the fact that the balance exists in individual ledger a/c?
if so then we won’t verify existence with the same procedure when it comes to ”payables” as existence is not our key assertion there?
See page 84 of the notes “allocation” is part of the “accuracy, valuation and allocation” assertion that is relevant only to account balances and refers to “any resulting valuation or allocation adjustments are appropriately recorded”.
Points to appreciate:
– Allowance/write downs are a valuation adjustment.
– “accuracy, valuation and allocation” is a collective assertion and it is not necessary (or relevant) to break this down into three separate assertions for every account balance.
– The reference to allocation refers to matters such as the inclusion of appropriate overhead amounts into inventory valuation (see https://www.accaglobal.com/gb/en/student/exam-support-resources/fundamentals-exams-study-resources/f8/technical-articles/assertions)Another good example of allocation would be the capitalisation of interest for qualifying assets (IAS 23) though this wouldn’t be examined in AA because IAS 23 is an FR examinable doc – not an FA examinable doc
Thank you for the clarification,
I found this procedure in kaplan text where it was in the context of identifying and discussing slow moving receivables with management to assess if write down/allowance is necessary and this verifies allocation and valuation.So what i understand is maybe since it is given with valuation it is ok to add allocation here?
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