Area I

Question 1

IFCO

Answer 1

• Gain on disposal of plant assets
• Effect of change in estimate of useful life for PPE
• Unrealized loss on investment in trading debt
securities
• Restructuring charge
• Realized gain on investment in debt securities AFS
• Loss from effect of a new regulation/law
• Estimated disposal loss on discontinued
component
• Dividends received on investment in debt
securities AFS
• Income tax expense

Question 2

2 components for discontinued operations

Answer 2

1. Operating income/loss from operations of
   discontinued operations
   a. Only ACTUAL operating income/loss is
   recognized
2. Disposal gain/loss
   a. Estimated losses are recognized
   b. Actual losses are recognized
   c. Estimated gains are not recognized

Question 3

OCI

Answer 3

• Unrealized gain/loss on investment in debt securities AFS
• Unrealized pension and postretirement benefit cost and gains
• Foreign currency translation adjustments
• Unrealized gain/losses from certain derivatives

Question 4

Revenue

Answer 4

• Included in income (not a IASB - IFRS element)
• Inflows of assets
• Settlements of liabilities
• 2 characteristics
o Arise from Co’s primary earning activities
o Are recurring or continuing in nature

Question 5

Income (Include Revenue and Expense)

Answer 5

Defined as increase in economic benefits during the accounting period in the form of
inflows or enhancements of assets
or
decreases of liabilities that result in increase in equity (other than those relating to equity participants)

Question 6

Objective of Using PV in Accounting Measurement

Answer 6

• To estimate FV when used at initial recognition
• Capture economic difference between sets of suture cash flows
• Capture the elements that taken together would compromise a market price of one existed

Question 7

Exit Activities as Defined by ASC 420

Answer 7

• Sale or termination of a line of business
• Closure of business locations in a country or region or relocation of business activities from one country or region to another
• Changes in management structure (ex. Elimination of a layer of management)
• Fundamental reorganizations that have a material affect on the nature and focus of the entity’s operations

Question 8

5 attributes used to measure A&L

Answer 8

• HC
• Current replacement cost
• Current MV
• NRV
• Presentation of future cash flows

Question 9

Monetary Items

Answer 9

• Fixed or determinable without reference t future prices
• Cost not restated (fixed by contracts in terms of dollars)
• Purchasing power gain/loss
• Ex. cash advances, allowance for doubtful, unamortized premiums, bonds, LT debt
• During inflation, there is a decrease in the value of money therefore there is again in a liability account

Question 10

Nonmonetary Items

Answer 10

• Cost restated to current price level using pricing index to/from
• No purchase power or gain
• Ex. Land, inventory

Question 11

Accrual Basis Income → Cash Basis Income

Cash Expenses → Accrual Expenses

Answer 11

o ▲Cash = ▲L + ▲E – ▲OA

o - ↑ A
o + ↓ A
o + ↑ L
o - ↓ L

Question 12

Cash Basis Income → Accrual Basis Income

Accrual Expenses → Cash Expenses

Answer 12

o ▲E = ▲A – ▲L

o + ↑ A
o - ↓ A
o - ↑ L
o + ↓ L

Question 13

Cash Basis Income → Accrual Basis Income

Accrual Expenses → Cash Expenses

Answer 13

o ▲E = ▲A – ▲L

o + ↑ A
o - ↓ A
o - ↑ L
o + ↓ L

Question 14

PPE

Answer 14

Beg Balance + Purchases - BV of disposal - Depreciation of disposal = End Balance

Question 15

Equity/Leverage Ratios

Answer 15

• Measures of relative sources of equity value
• Debt to equity
• Owner’s equity ratio
• Debt ratio
• BV per CS
• BV per PS