B4 Flashcards
Do you impair Assets or Goodwill first?
When are gains/losses for speculative derivatives recognized?
On the IS in the current period when FV changes.
Quantitative Threshold for a Reportable Business Segment
10% of Assets, Revenue (IC included), or Profit/Loss
All Reportable Segments must meet 75% of External (IC excluded) Revenue, or the next biggest segment must be added until 75% is met.
ASC 606 - Revenue Recognition - Five Step Approach
I - Identify the Customer
S - Separate the Performance Obligations
T - Determine the Transaction Price
A - Allocate the $ to the Obligations
R - Recognize the Revenue as the each Obligation is satisfied.
Incremental Costs of Obtaining and Fulfilling a Contract
We capitalize costs needed to obtain the contract.
We expense anything that we would have paid for regardless of the sale.
Travel Costs - Expense
Legal Fees - Capitalize and Amortize
Commissions - Capitalize and Amortize
Costs incurred to fulfill a contract with a customer are recognized as an asset.
Additional workstation needed to fulfill performance of a contract - Asset
The salary of an employee partially assigned to the customer - Expense
Principal vs. Agent
Principle can recognize the gross amount
Agent cannot recognize the gross amount, only the profit (fee or commission)
A travel agent collects all travel expenses needed to book the flight and hotel stay, but only the commission for their services can be recognized as revenue
Forward Contract
Entity has the obligation to repurchase the asset
If repurchase price > original sale price & expected FV, then it’s a financing arrangement.
Privately Negotiated, so can be risky.
Call Option - Repurchase of Asset Sold
The seller has the right repurchase the asset
It will be recorded as a Liability if the
Repurchase Price > Sale Price and will recognize Interest Expense (diff btw Repurchase and Sale price)
This will reverse if the option goes unexercised
Put Option - Repurchase of Asset Sold
The seller has the obligation to repurchase the asset at the customer’s request
If repurchase price > expected FV, then the customer has a strong incentive to exercise the option (Seller will buy back at higher than FV, buyer makes a profit). This would be treated as a lease.
Bill and Hold
Must have a substantive reason for the arrangement (buyer doesn’t have space yet)
Product is segregated in from seller’s inventory and is identified as Buyer’s Property.
Product is ready to transfer to customer.
Seller cannot use the product or sell to another customer
Warranties
If the warranty can be purchase separately. then it is treated as a separate performance obligation and will have the purchase price allocated to it.
If not, there is not separate performance obligation.
Refund Liabilities and the Right to Return Goods
Revenue cannot be recognized for products the seller anticipates it will not receive, due to returns
A refund liability account is used
Stock Appreciation Rights (SARs)
The excess of the stock price over the exercise price X number of SARs.
Compensation Expense
Liability
Compensation Stock Options JEs
Entry on Grant Date - Spread out over the Vesting/Service Period
If the options are exercisable on the Grant Date, expense all in current period.
Compensation Expense - FV of Options Granted
APIC - Stock Options Outstanding - FV
Exercise Date
Cash - Exercise Price X # of Shares
APIC - Stock Options Outstanding - FV (clear out previous CR)
Common Stock - # of Shares X Par Value
APIC Common Stock - PLUG
Variable Interest Entities (VIEs)
A subsidiary with little voting power, but contributed most of the money.
Whoever is the primary beneficiaries of the gains/losses will need to consolidate.
Acquisition Method
Translation vs. Remeasurement Method
Translation - OCI
Uses Functional Currency (in Operations, not Reporting)
Remeasurement - IS
Doesn’t use Functional Currency
BS - Monetary Items - Cash, AR, AP
Nonmonetary - PPE, Inventory, Investments, Intangibles, Equity
Lessor Lease - Sales-Type Lease
O - Ownership transfers to lessee at end of contract
W - Lessee has written option to purchase, as is reasonable certain to exercise
N - NPV of all lease payments = 90% of FV
E - Lease takes up 75% of Economic Life
S - Specialized such that there is no alternative use at end of lease
Lessor Lease - Direct Financing Lease
P - PV of all lease payments, lessee guaranteed residual value not included, and any 3rd party guarantees residual value is equal to or substantially exceeds the FV
C - Collection is probable
Lessor Lease - Operating Lease
Regulation S-X
Regulation S-K
Defined Benefit vs Contribution Pension Required FS
