CMA -Part 1

Question 1

Off balance sheet accounts

Answer 1

Unconsolidated investments
Special Purpose Entities
Operating leases
Factoring receivables with recourse

Question 2

OCI components

Answer 2

Foreign currency translation
Derivative instruments
Unrealized gain/loss on AFS securities
Pension plans and benefit post retirement plans

All net of tax!

Presented on:
Income Statement OR
Separate Statement of Other Comprehensive Income

Question 3

Property Dividends

Answer 3

Remeasured to FMV at date of declaration

Gain/loss is recorded in income

Carrying amount of RE is decreased by FMV

Question 4

New shared issues

Answer 4

< 25% of previously outstanding shares, treated as stock dividend

> 25% of previously outstanding shares, treated as stock split

Question 5

Disclosure - significant accounting policies

Answer 5

o Method of depreciation
o Inventory valuation method
o Revenue recognition policies
o Securities classified as cash equivalents
o Basis of consolidation

Question 6

Disclosure - MD&A

Answer 6

o Risk management
o Investment and financing decisions
o Business results and outlook
o Strategy and growth opportunities

Question 7

Disclosure

Answer 7

o Key disclosures
o Supplemental schedules
o MD&A

Question 8

Trading securities

Answer 8

Income recorded at FMV
Change in value recorded as ordinary income
Balance Sheet value is market price

Question 9

Held to Maturity

Answer 9

Changes in value not recorded on BS

Record interest income only

Contra-asset account “Discount on Security” if purchased at less than par value

Question 10

Available for Sale (AFS)

Answer 10

Recorded on Balance Sheet at FMV

Market price changes recorded on BS

Unrealized gains/losses recorded in OCI (unless IFRS then report as “current earnings”)

Question 11

Equity shares < 20% ownership

Answer 11

Recorded at FMV

Fluctuations recorded on BS

Question 12

Equity shares > 20% < 50% ownership

Answer 12

Exerts “significant control”

• representative on BoD
• management transfers between investor & subsidiary
• Intercompany transactions
• use of investor’s technology
• investor’s ownership is greater than investee’s

Recorded at cost on BS

Dr. Equity investment
Dr. % of investee’s NI at cost
Cr. % of declared dividends at cost

Question 13

Statement of Cash Flows - Op Activities

Answer 13

Income taxes paid

Loss/gain on sale of equipment

Payments to employees

Cash from dividend interest

Question 14

Common & Preferred stock recorded at …

Answer 14

Par Value

Question 15

SEC’s 4 criteria for recognizing revenue

Answer 15

Revenue is earned

1. Verifiable evidence a customer arrangement exists
2. Delivery of good or services has been provided

Revenue is realizable

3. Sale price is fixed or determined
4. Collectibility of receivables is reasonably assured

Question 16

Setting unrealistic budget targets …

Answer 16

Production will be lower than target

Negative variance will be higher

Workers will not be able to meet their targets