CPA Excel Flashcards
1
Q
What is the role of the Financial Accounting Advisory Council (FASAC)?
A
The FASAC provides guidance on major policy issues, project priorities, and the formation of task forces.
2
Q
What topics does the Financial Accounting Standards Board (FASB) Accounting Standards Codification not include?
A
- Other comprehensive basis of accounting
- Cash basis
- Income tax basis
- Regulatory accounting principles
3
Q
How are assets presented on the balance sheet?
A
Assets are presented in order of decreasing liquidity. The most liquid assets (such as cash) are shown first, and less liquid assets are shown last (such as property, plant and equipment).
4
Q
What is the highest structure of the FASB Accounting Standards Codification?
A
The highest structure is areas.
5
Q
What is verifiability?
A
Information is verifiable if different knowledgeable and independent observers can reach similar conclusions.
6
Q
What does it mean to be free from material error?
A
Information is free from material error if it accurate and truthful.
7
Q
What is the concept of capital maintenance?
A
Capital is said to be maintained when the firm has positive earnings for the year, assuming no changes in price levels.
8
Q
What does the matching principal state?
A
Recognize expenses only when expenditures help to produce revenues.
9
Q
Define “cost effectiveness.”
A
This constraint on GAAP limits recognition and disclosure if the cost of providing the information exceeds its benefit.
10
Q
What is conservatism?
A
Conservatism (also called prudence) is the reporting of less optimistic amounts (lower income, net assets) under conditions of uncertainty or when GAAP provides a choice from among recognition or measurement methods.
11
Q
For purposes of the fair value definition, what are the assumed characteristics of market participants?
A
Buyers and sellers that are:
- Independent of the reporting entity
- Acting in their economic best interest
- Knowledgeable of the asset or liability and the transaction involved
- Able and willing, but not compelled, to transact for the asset or liability
12
Q
What are three valuation techniques (or approaches) that should be used in determining fair value for GAAP purposes?
A
- Market approach
- Income approach
- Cost approach
13
Q
List the situations where the entry price may not be the exit price.
A
- The transaction is between related parties.
- The transaction occurs when the seller is under duress.
- The unit of account included in the transaction price is different from the unit of account that would be used to measure at fair value.
- The market in which the transaction price occurred is different from the market in which the asset would be sold or the liability transferred.
14
Q
What are the three levels of fair value hierarchy and what does each consist of?
A
Level 1: Highest level - are adjusted quoted prices in active markets for assets and liabilities identical to those being valued.
Level 2: Are observable for assets or liabilities, either directly or indirectly, other than quoted prices described in level 1.
Level 3: Lowest level - are unobservable and used to determine fair value only if observable inputs are not available.
15
Q
Distinguish between assets and liabilities measured at fair value on a recurring basis and nonrecurring basis.
A
Assets and liabilities measured at fair value on a recurring basis are adjusted to fair value period after period. Assets and liabilities measured at fair value on a nonrecurring basis are adjusted to fair value only at the time of a particular event (such as a significant modification of debt).
16
Q
What significant fair value disclosures are required only in annual statements?
A
The estimates and significant assumptions used to estimate fair value.
17
Q
What is the third objective of the International Financial Reporting Standards (IFRS) Foundation?
A
To take into account the special needs of a range of sizes and types of entities in diverse economic settings
18
Q
Is IFRS more rules based or principle based?
A
Principle based
19
Q
True or False: Income may be realized or unrealized.
A
True
20
Q
Does the SEC have legal authority to prescribe accounting standards yo public companies?
A
Yes, it has that authority.
21
Q
Define “Financial Reporting Releases (FRR).”
A
Formal pronouncements that rank the highest in authority for public companies.
22
Q
Does the SOX act allow auditors to complete non-audit services for clients?
A
No, SOX does not allow this,
23
Q
How are current assets listed on the balance sheet?
A
Declining order or liquidity
24
Q
What are the steps of the accounting cycle?
A
- Analyze source documents.
- Post to ledger.
- Making adjusting entries.
- Prepare trial balance.
- Prepare income statements, BS & cash floe statement.
- Close temporary accounts.
25
What do control accounts report?
The aggregate balance of several subsidiary accounts
26
What is the order of an income statement presentation?
1. Income from Continuing Operations
2. Income from Discontinued Operations (net of Tax)
3. Extraordinary Items (net of tax)
4. Net Income
27
Define "gains."
Increases in equity or net assets from peripheral or incidental transactions
28
Are extraordinary items allowed in IFRS?
No
29
What is net income plus or minus other components of comprehensive income?
Comprehensive income
30
In the statement of cash flows, how are accounts listed in the vertical format?
They are listed in separate columns.
31
What is the indirect method on the statement of cash flows?
Reconciles net income to cash flows from operating activities
32
When is a statement of cash flows required?
For all business enterprises that report both financial position (BS) and results of operations (Income Statement) for a period.
33
Where are non-cash investing and financing activities reported?
They are reported on the face of the statement of Cash Flows or as a separate disclosure,
34
What is the category for principal payments on short-term and long-term loans (from financial institutions or dealers) made to acquire plant assets?
The category is Financing.
35
Using the indirect method for reporting cash flows from operations, should a decrease in inventory be added to or subtracted from accrual-based net income?
A decrease in inventory should be added.
36
Using the indirect method for reporting cash flows from operations, should a decrease in unearned revenue be added to or subtracted from accrual-based net income?
A decrease in unearned revenue should be subtracted.
37
What is a development stage enterprise?
An enterprise placing substantially all its efforts into the establishment of a new business.
38
What is financial statement ratio analysis?
The development of quantitative relationships between various elements of a firm's financial statements.
39
List the debt to equity ratio formula.
Total liabilities / Total Shareholders; Equity
40
List the common stock yield formula.
Dividend per Common Share / Market Price per Common Share
41
What are the mandatory exceptions for retrospective application of IFRS?
- Derecognition of financial assets and liabilities
- Hedge accounting
- Assets held for sale and discounted operations
- Certain aspects of accounting for non-controlling interest and use of certain estimates
42
When does the "first reporting date" happen?
The year-end date for the period for which International Financial Reporting Standards (IFRS) are first applied.
43
Describe a modified cash basis of accounting.
A modified cash basis of accounting results from adjustments made to cash basis accounting. Specifically, while most items continue to be accounted for using the cash basis, some items are accounted for using the accrual basis. As a consequence, the financial statements reflect accounts and amounts based on a combination of the cash basis and the accrual basis.
44
Identify some bases of accounting that are not an "other comprehensive basis of accounting."
1. Accounting based on US GAAP.
2. Accounting based on the unique provisions of a loan agreement.
3. Accounting based on the unique provisions of an acquisition agreement.
45
Describe special-puspose financial presentations that may be consistent or inconsistent with GAAP.
- Financial statements presented on a prescribed basis resulting in an incomplete presentation, but otherwise consistent with GAAP, or
- Financial statements prepared on a basis of accounting prescribed in an agreement, not in conformity with GAAP or other comprehensive basis of accounting.
46
Identify the statements included in a set of personal financial statements.
A set of personal financial statements would include:
1. A statement of financial condition (balance sheet)
2. A statement of changes in net worth
47
How should a significant interest in a separate business be shown in a personal statement of financial condition?
As a single line item at the estimated current fair value of the net assets, separate from other assets.
48
In what order should liabilities be shown in a personal statement of financial condition?
In the order of maturity, with no distinction as to current/non-current classifications.
49
What are the various types of generally accepted accounting principles which may be used by a US entity?
Depending on the entity, the following types of generally accepted accounting principles may be used:
1. US GAAP
2. US OCBOA
3. IFRS
4. IFRS for Small and Medium-sized Entities (SMEs)
50
Identify some of the possible advantages of using IFRS for small and medium-sized (SMEs), instead of US GAAP, by eligible entities.
1. More relevant standards
2. Less complicated and voluminous standards
3. Less costly standards to implement
4. Less frequent changes in standards
51
What other name is used for customer accounts receivable?
Trade receivable
52
What do we call the (1) maker and (2) holder of a note?
1. Maker is the buyer or borrower.
| 2. The holder is the seller or lender.
53
Describe a transaction without recourse.
Transferor is not responsible for nonpayment on the part of the maker of the receivable.
54
What is the accounting treatment when factoring with recourse, as accounted for a loan?
The transferor maintains the receivables on its books and records a loan and interest expense over the term of the agreement.
55
When does loan impairment occur?
When the creditor believes the loan payments actually to be received have a lower fair value than under the original agreement.
56
What merchandise is included in ending inventory?
All owned inventory, regardless of location.
57
List the weighted average cost per unit formula.
Cost of Goods Available for Sale / # of Units Available for Sale
58
What cost flow assumption is the same for both the periodic and perpetual systems?
First in First Out (FIFO)
59
What is the main reason for using LIFO in periods of rising cost?
Tax minimization
60
Why would an entity utilize Dollar Valued (DV) Last in First Out (LIFO)?
Reduces the effect of the LIFO liqidation
61
How is the cost of ending inventory determined?
Determined by applying one of the four cost flow assumptions.
62
List the Margin on Cost formula.
(Sales - COGS) / COGS
63
What are net markdowns?
A net decrease in the original selling price
64
What is in the cost/retail numerator?
Net purchases at cost
65
List the basic inventory equation.
Beg Inv + Net Purchases = End Inv + CGS
66
What is the required accounting for a potential loss on a purchase commitment when the commitment can be modified?
The loss is required to be footnoted as a contingent liability, but is not accrued in the accounts because the loss is not probable given that the contract can be revised.
67
Under IFRS, is inventory reported at lower of cost or market OR at lower of cost or net realizable value?
Lower of cost or net realizable value.
68
List the requirements for inclusion in plant assets.
- Currently used in operations
- Have a useful life extending beyond one year
- Have physical substance
69
List the general rules on costs to capitalize.
- Cash equivalent price
| - Get ready costs
70
How is the cash equivalent price in the issuance of securities determined?
In fair value of asset acquired or of securities issued, whichever can be most clearly determined.
71
When are unpaid construction input costs included in Average Accumulated Expenditures (AAE)?
Not until cash is paid.
72
If Average Accumulated Expenditures (AAE) > total interest-bearing debt, what is interest expense for the period?
All interest cost is capitalized and there is no reported interest expense for the period.
73
How do we calculate depreciation based on service hours?
- Depreciation rate x service hours used
| - Depreciation rate = (Cost - Salvage value) / estimated hours
74
What depreciation method does not use salvage value?
Double declining balance
75
What costs are included in the full costing method for exploration costs?
All costs of exploring for the resource are capitalized to the natural resources account.
76
What happens during the reset method?
Accumulated depreciation is reset to zero by closing it to the building account, and then the building is adjusted for the revaluation.
77
Identify the three possible levels of influence over an investee for accounting purposes.
1. Not significant
2. Significant influence, but not control
3. Control
78
At what cost are held to maturity securities carried and reported?
At amortized cost
79
How do we account for the transfer of an investment from held-for-trading to held-to-maturity or available-for-sale?
1. Credit trading at recorded fair value
2. Debit held -to maturity or available-for-sale at current fair value
3. Recognize unrealized holding gain/loss in net income
80
What are the categories of investments under IFRS No. 9?
1. Debt investments measured at amortized cost.
| 2. All other investments, including debt instruments not at amortized cost and all equity investments.
81
Identify the three major equity method items recognized each period by an investor.
1. Recognize investor's share of investee's net income/loss.
2. Recognize investor's share of investee's dividends declared.
3. Recognize adjustment to share of investee's net income/loss for "depreciation/amortization" of amount allocated to excess of fair value over book value.
82
List the JE for an investor to recognize proportionate share of investee income using the Equity Method.
Dr: Investment in
| Cr: Investment (equity) revenue
83
In what forms may a joint venture be established?
1. By agreement or contract alone
2. As a corporation
3. As a partnership
4. As an undivided interest entity
84
What are the acceptable methods (models) for measuring and reporting investment property?
The cost method (model) and the fair value method (model). An entity may use only one of these methods to measure and report all of its investment property.
85
List the types of intangibles.
- Marketing Related
- Customer Related
- Artistic Related
- Contract Related
- Technology Related
- Goodwill
86
Provide examples of the class of assets you can carry at fair market value under IFRS.
- Property, plant, and equipment
- Identifiable intangible assets
- Financial assets including investments and financial instruments
87
What do liabilities represent?
They represent outsider claims to a firm's assets or are enforceable claims for services to be rendered by the firm.
88
Define "sales taxes payable."
Account recognized for sales tax collected from customers.
89
How is the change in the deferred revenue account calculated for a period?
Cash received during the period less revenue earned for the period.
90
What amount of revenue is recognized for a period for an extended warranty when total warranty costs are estimable?
The total amount received for the extended warranty multiplied by the fraction: warranty costs incurred for the period divided by the total estimated warranty costs to be incurred.
91
Define "interest-bearing note payable."
A note in which the interest element is explicitly stated.
92
How is the total interest expense recognized on a non-interest-bearing note?
Total payments less amount borrowed.
93
What are bonds sold at a premium?
When stated rate > market rate.
94
What is the length of a bond term when bonds are issued between interest dates?
Period of time from issuance date to maturity date.
95
How is interest expenses on the current line of an effective interest bond amortization schedule computed?
Multiply one-half the yield at date of Issuance by the book value of the bond issue on the line above the current line.
96
What amount is allocated to owners' equity on issuance of convertible bonds that can be settled in cash?
Issuance price less the present value of the bonds using the prevailing rate on similar bonds.
97
What is the purpose of detachable stock warrants?
To increase marketability of bond issue.
98
How does an entity prove intent to refinance short-term obligations?
Must be proven, possibly in the form of board of directors' meeting minutes.
99
When is retirement of debt considered extraordinary?
When the "unusual and infrequent" criteria of Accounting Principles Board (APB) Opinion 30 apply.
100
How is the loss on the early retirement of bonds computed?
Cash paid less book value of bonds retired plus unamortized bond issue costs.
101
Define "debt covenant compliance."
Steps taken by debtor to meet the restriction and reporting such compliance.
102
List the items represented in Owner's Equity.
1. A record of past investment by owners.
| 2. A record of the amount of net income that has been distributed as dividends.
103
How is the # of shares outstanding?
The # of shares currently held by stockholders.
104
How is stock issued for nonmonetary consideration valued?
Fair value of stock or consideration, whichever is more reliable.
105
For what amount is Preferred Stock Additional Paid in Capital debited when called or redeemed?
Amount recorded from original issuance.
106
Define "scrip dividend."
A special form of note payable whereby a corporation commits to paying a dividend at some later date because the firm does not have the cash at the date of declaration to pay the dividend but wants to assure the shareholders that the dividend is forthcoming.
107
What dividends can owners of preferred stock receive?
Preferred stock owners may receive dividends in addition to the annual current dividend.
108
Define "restrictions on RE."
An external constraint placed on a certain portion of retained earnings by an external party.
109
What is the effect of a quasi-reorganization on total owners' equity?
Decrease in total owners' equity.
110
True or False: The installment sales basis is a version of the cash basis of accounting.
True
111
List the difference between the cost recovery and installment method.
No gross profit is recognized for cost recovery method until all costs have been recovered.
112
What is the effect of billing a customer on net assets?
There is no effect.
113
What is the percentage of completion of a project when an overall loss on the contract is expected?
Same as usual; total cost to date divided by total estimated project cost.
114
What basis of accounting is used for recognizing expense for compensated absences?
The basis is accrual.
115
List the conditions under which the accrual of a liability for post-employment benefits are necessary.
1. When the benefits meet the four criteria of "accounting for Compensated Absences," also
2. When the benefits do meet those four criteria, then "accounting for Contingencies" is followed.
116
What is the largest in magnitude in terms of post-retirement benefit costs?
Post-retirement healthcare coverage.
117
How is compensation expense determined after a change in estimated forfeitures?
Compensation expense in a period of change is the amount resulting in total compensation through the period of change that equals the fraction of service period elapsed multiplied by the new estimate of total compensation expense.
118
Describe the general approach to recognizing compensation expense for a performance option plan.
At the end of each period, recompute total compensation expense based on performance level expected to be achieved. Recognize compensation expense for the period in the amount that results in total compensation through the period equaling the fraction of service period elapsed multiplied by the new estimate of total compensation expense.
119
What type of account is credited when periodic compensation expense is recognized?
Liability
120
Define "income tax expense.'
The account reported in the income statement that measures the income tax cost for the year's transactions.
121
How are deferred tax accounts reported on the balance sheet?
Current assets and liabilities are netted. Noncurrent assets and liabilities are netted.
122
What percentage is used for determining realization of a deferred tax asset?
50%
123
What account is credited when a net operating loss is recognized?
Income tax benefit.
124
What effect does income tax benefit have on income for financial reporting?
The effect of income tax benefit is an increase.
125
True or False: The total of all deferred tax assets and deferred tax liabilities is not required to be disclosed.
False. Total of all differed tax assets and deferred tax liabilities is required to be disclosed.
126
List the three types of accounting changes.
1. Change in accounting principle
2. Change in accounting estimate
3. Change in reporting entity
127
What is the amount recorded for the change in deferred taxes for a change in accounting principle?
The pretax cumulative effect multiplied by the tax rate.
128
What is the rationale for applying the prospective method to estimate change?
The new information triggering the change is not applicable to prior years.
129
Define "counterbalancing error."
An error whose effect on REs automatically corrects itself after a number of years.
130
What amount does the assets retirement obligation increase to over time?
The final amount expected to be paid.
131
Define "parent company" as it relates to business combinations.
Designation of the investor in a business combination.
132
Define "measurement period."
The period after the acquisition date during which the acquirer may adjust any provisional amounts recorded at the acquisition date. It provides the acquirer reasonable time to obtain information needed to identify and measure accounts and amounts that existed as of the acquisition date. It ends when the acquirer obtains that information or determines that no additional information is available, but in no case should it exceed one year.
133
Identify at least three items acquired in a business combination for which the acquirer has to make a decision as to the classification or designation of the item.
1. Investments, as to whether held-to-maturity, held-for-trading, or available for sale.
2. Derivative instruments, as to whether used for hedging or speculation.
3. Embedded derivatives, as to whether they will be separated from the host instrument or not.
4. Long-term assets, as to whether they will be used or held for sale.
134
Under what conditions will a bargain purchase be recognized in a business combination?
A bargain purchase is recognized when the fair value of the total investment in an acquiree (both the investment of the acquirer and that of any noncontrolling interest) is less than the fair value of the acquiree's net assets.
135
What assets or liabilities recognized in a business combination require "specialized" post-combination accounting treatments?
1. Reacquired rights asset
2. Assets and liabilities arising from contingencies
3. Indemnification assets
4. Contingent consideration as asset or liability (or equity)
136
When provisional amounts for a business combination are reported in financial statements, what must be disclosed about those amounts?
1. Identification of the items (assets, liabilities, equity or consideration) for which accounting is not complete;
2. The reasons why the accounting is not finalized; and
3. The nature and amounts of any measurement period adjustments made to the professional amounts during the reporting period.
137
What method is used to record merger/consolidation?
Acquisition method
138
Under IFRS, are you required to disclose assumptions related to acquired contingencies?
Yes, you are required to disclose these assumptions.
139
List the methods a parent may use to carry investment in subsidiary to be consolidated.
1. Cost
2. Equity
3. Any other method it chooses
140
Where will a non-controlling interest account show in consolidated financial statements?
On Consolidated Balance Sheet as a separate item within Shareholders' Equity.
141
What are the possible methods a parent can use to carry on its books an investment in a subsidiary that will be consolidated?
The parent can use:
1. Cost Method
2. Equity method
3. Any other method it chooses. Whatever method it uses, the investment account will be eliminated on the consolidating worksheet. (Only the cost and equity methods have been used on prior exams.)
142
Under what conditions will a bargain purchase gain be recognized by a parent?
When, at acquisition, the fair value of subsidiary's identifiable net assets is greater than the investment value to acquire those net assets. Investment value is the parent's investment cost plus the fair value of any non-controlling interest in the subsidiary.
143
What are the only types of transactions recognized for consolidation?
Transactions with non-affiliates.
144
What are the accounts (on a consolidating worksheet) that may be affected by an inter-company inventory transaction?
1. Sales/Purchases
2. Net Income/Loss
3. Ending Inventory
4. Beg. Inventory
145
If not eliminated, what effect will the inter-company sale of a fixed asset at a gain have on the reported value of the fixed asset for consolidated statement purposes?
Unless the appropriate eliminating entry is made, the inter-company sale of a fixed asset at a gain will result in an overstatement of the value of the fixed asset on consolidated financial statements.
146
What determines the amount of any net gain or loss resulting from bonds becoming inter-company?
The sum or difference between the premium or discount on the bond investment (of the buying affiliate) and the premium or discount on the bonds payable (of the issuing affiliate.)
Gain would result from eliminating: 10 Premium on Bond Payable or 20 Discount on Investment.
Loss would result from eliminating: 10 Discount on Bond Payable or 20 Premium on Investment.
147
What are two objective differences between US GAAP and IFRS in determining control?
Under US GAAP only outstanding voting rights are used to measure control; under IFRS securities currently exercisable or convertible into voting rights are used in assessing control. Under US GAAP only if an entity has more than 50% voting ownership can it have control. Under IFRS an entity may have control even when it does not have more than 50% voting control.
148
What is the main difference in the preparation of financial statements between consolidating financial statements and combining financial statements?
In consolidating financial statements, the investment accounts of the parent company in the other companies being consolidated are eliminated against the parent's percentage ownership of the equity of those companies. In combining financial statements, any investment one combining company has in another combining company is eliminated against the owned company's equity in the amount of the investment, not in the amount of percentage ownership. Therefore, there can be no difference between the dollar amount of the investment and the dollar amount of equity eliminated.
149
Under IFRS, how is an impairment of a financial asset determined and reported?
Under IFRS, an impairment loss is determined as the difference between the carrying amount of the asset and its recoverable amount. The amount of any impairment loss is recognized in current income.
150
What must be disclosed about each significant concentration of credit risk?
1. The information about the common activity, region, or economic characteristic that identifies the concentration.
2. The maximum (gross) amount of loss due to the credit risk.
3. The entity's policy of requiring collateral or other security to support financial instruments subject to credit risk.
4. The entity's policy of entering into master netting arrangements to reduce the credit risk associated with financial instruments.
151
What are the three basic elements of a derivative?
1. One or more underlying and one or more notional amounts.
2. Requires no initial net investment.
3. Terms require or permit a net settlement.
152
List the four different possible uses of derivatives.
1. Derivatives not used as a hedge.
2. Fair Value hedges
3. Cash flow hedges
4. Foreign currency hedges
153
List the conditions under which an "unrecognized firm commitment" exists.
When an entity enters into a contract to buy or sell but has not yet booked the transaction.
154
Define a "forecasted transaction."
A planned or expected transaction for which there is not yet either a firm commitment or any rights or obligations established.
155
Define "foreign currency hedge."
The hedge of an exposure to changes in the dollar value of assets or liabilities (including certain investments) and planned transactions that are denominated (to be settled) in a foreign currency.
156
What should disclosures for derivatives designated as fair value hedges distinguish between?
Fair value hedges, cash flow hedges, hedges of investments in foreign operations, and other derivatives.
157
Which US GAAP characteristic of a derivative is not included in the definition of a derivative under IFRS?
Notional Amount
158
What are the three basic concepts that underlie accounting for transfers of assets and servicing of assets?
1. Control determination concept
2. Financial-components concept
3. Participating interest concept
159
What does the appropriate accounting for the transfer of a non-cash financial asset as collateral in a secured borrowing depend on?
1. Whether secured party has the right to sell or repledge the collateral
2. Whether debtor has defaulted
160
What condition results in a servicing asset?
Estimated revenues are expected to exceed estimated costs of servicing the assets, as reflected in fair value.
161
What are some major disclosure requirements for a transferor that transfers financial assets in a securitization treated as a sale?
For securitized financial assets accounted for as a sale, disclose information for each major type about:
1. Accounting policies
2. Characteristics of the securitizations and gain/loss on assets securitized.
3. Key assumption used in measuring fair value at securitization and sensitivity of those measures to changes in key assumptions.
162
When determining whether a debt extinguishment results in a gain or a loss, how is that calculated?
Gain/Loss = Reacquisition Price - Net Carrying AMount
163
How is surrender of control determined under IFRS?
Under IFRS, financial assets are derecognized when the entity loses control of the contractual benefits that comprise the financial asset. Loss of control focuses on the transfer of risks and rewards associated with the financial asset.
164
Describe the accounting treatment when a loss contingency is remote.
Can be disclosed in footnotes, but not required.
165
Describe the accounting treatment when a gain contingency is probable.
Disclose in footnote.
166
For a range of equally probable amounts for a provision, what amount is used for recognition under IFRS?
Midpoint of range.
167
How is basic EPS calculated?
(NI) / (Weighted Average Common Shares Outstanding).
168
When are contingent shares considered outstanding?
When their conditions have been met?
169
What is an antidilutive potential common stock?
One that increases EPS when added into basic EPS.
170
What are the EPS for extraordinary items in IFRS?
There are none; extraordinary items do not exist.
171
Under IFRS, how are discontinued operations identified?
A component with operations that are a separate major line of business or geographical area, part of a coordinated plan to sell or and subsidiaries acquired with the intent to resell.
172
List some examples of items that are always extraordinary by definition.
- Direct result of a major casualty.
- Expropriation of assets by a foreign government.
- Result of a new law that meets the two criteria.
173
Define "indirect exchange rate."
The foreign price of one domestic unit of currency.
174
Define "forward exchange rate."
Agreement to exchange units of currencies at a specified future date at an exchange rate set now.
175
What does a forward contract hedge against?
It hedges against possible loss in dollar value of foreign currency received in the future by selling that foreign currency now at a specified rate for delivery received in the future.
176
What purpose does hedging of unrecognized firm commitments serve?
It offsets the risk of exchange rate changes on firm commitments for a future purchase or sale to be denominated in a foreign currency.
177
What is the purpose of a hedge of a foreign-currency-denominated investment classified as available-for-sale?
It offsets the risk of exchange rate changes on a foreign-currency-denominated investment in securities classified as AFS.
178
Why might an entity need to translate financial statements expressed in a foreign currency?
Translation may be needed to:
1. Apply the equity method of accounting to an investee.
2. Prepare combined financial statements.
3. Prepare consolidated financial statements.
179
What exchange rate or rates should be used to translate (not remeasure) asset and liability accounts from one currency to another?
The spot exchange rate (closing rate) as of the balance sheet date.
180
What is the name of the method used when financial statements are remeasured?
Conversion Method Used to Convert Accounts from Foreign Currency Units to Dollars.
181
What is the recoverable amount under IFRS?
The higher of the fair value less the cost to sell or the assets value in use.
182
What is a cash generating unit?
The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets.
183
What are permanent declines in inventory?
Inventory declines that are not expected to reverse in the current year.
184
Describe the overall guideline for interim reporting under US accounting standards,
Integral view. Interim periods are an integral part of the annual period.
185
List the two classifications of capital leases for the lessor.
1. . Direct Financing
| 2. Sales-Type
186
How is the reported balance of lease receivables under the gross method computed?
Sum of remaining lease payments.
187
List the international lease capitalization criterion involving magnitude of PV of lease payments.
Capitalize if the PV of lease payments is substantially all of the asset's fair value.
188
What is the accounting treatment of contingent rentals?
Record as revenue (lessor) or expense (lessee) in the period of occurrence.
189
Is a lessee guarantee of residual included in the minimum lease payments of both parties?
Yes, it is included.
190
List the two ways of describing the amount of sales revenue recognized when the lessor capitalizes a sales-type lease with a bargain purchase option.
1. Sum of present value of lease payments and PV of BPO.
| 2. Fair value of asset sold.
191
What amount is capitalized by a lessee when the lessee guarantees residual value at the end of the term?
Sum of PV of lease payments and PV of guaranteed amount.
192
Describe the general rule regarding deferral of gain in a sale-leaseback for a capital lease.
The seller/lessee will record the gain as an asset valuation allowance account (contra to the leased asset), and amortize the deferred gain over the lease term by reducing the recorded depreciation expense.
193
How is an obligation to issue shares of a fixed dollar value valued?
The fixed dollar value agreed upon by the parties.
194
When do you use list price?
List price should not be used for fair value-list prices because they are notoriously inflated.
195
When gain is evident and cash received, what is the accounting treatment?
The gain is recognized in proportion to the amount of cash received,
196
Under IFRS, how are gains and losses recognized to barter transactions?
Gains or losses are determined by reference to a non-barter transaction.
197
What is the general rule regarding research and development (R&D) costs?
Expense costs as incurred.
198
Which terms should be included in disclosures about risk due to certain significant estimates?
1. Estimates affected
2. Nature of uncertainty
3. Effect of change in estimate on Financial Statements
199
Describe the identifiable asset test for operating segments.
The operating segment's identifiable assets are 10% or more of the combined assets of all reported operating segments.
200
Describe the straight-line method of accounting for software.
Book Value at Beginning of Year / Number of Years Remaining in Product Sales Life at Beginning of Year.
201
A subsequent event that did not exist at the BS date requires what kind of disclosure?
Footnote disclosure.
202
What authoritative body has jurisdiction over private not-for-profit organizations?
FASB
203
List the four broad categories of not-for-profit organizations.
1. Hospitals and other health care entities
2. Colleges and universities
3. Voluntary Health and welfare organizations
4. Other not-for-profit organizations
204
What is the net asset category where expenses are recognized?
Unrestricted net assets
205
List the two sub-classifications of expenditures for supporting services within a not-for-profit organization.
1. Management and general
| 2. Fundraising
206
List the two broad classifications for expenditures within a not-for-profit organization.
1. Program services
| 2. Supporting services
207
List the three categories of a not-for-profit organization's Net Assets.
1. Unrestricted
2. Temporarily restricted
3. Permanently restricted
208
List the three financial statements that are required for all private not-for-profit organizations.
1. Statement of Financial Position
2. Statement of Activity
3. Statement of Cash FLows
209
When is an implied time restriction recognized?
AN implied time restriction can be recognized on donated long-lived depreciable assets.
210
When are contribution of services recognized?
They are recognized if the services require special skills, the person providing the services possess those skills, and the services would have been purchased if not obtained by donation.
211
Define "endowments."
Contributions to the organization from third parties for which the principal (corpus) must "remain intact to perpetuity."
212
Define "term endowments."
Gifts and bequests from third parties which are to be retained and invested for a period of time or until a specific event occurs, but after the criterion has been met, the full amount can be spent.
213
List the three conditions that must be met in order for assets to be classified as a "collectible."
1. Held for public exhibition, education, or research rather than financial gain.
2. Protected, kept unencumbered, cared, for and preserved.
3. Subject to a policy that requires proceeds from sales of collection items to be used to acquire other items for collections.
214
How are special event revenue and direct costs reported?
Reported at their gross amounts. Costs to promote the event are reported as part of fundraising.
215
What value is used to record donated capital assets?
Fair market value at the date of donation.
216
What is the JE to record receipt of $100k in pledges when it is estimated that 20% of the pledges will be uncollectible?
DR: Pleadges Receivable $100k
CR: Est. Uncollectible pledges $20k
CR: Contribution (Revenue) $80k
217
Define "capitation fees."
Payments made to health care providers for comprehensive client coverage provided for a fixed fee; eg, HMOs
218
Define "patient service revenues."
Gross charges for direct patient care.
219
List the net asset categories for a not-for-profit hospital.
1. Unrestricted
2. Temporarily restricted
3. Permanently restricted
220
Is charity care recognized in the financial statements of a not-for-profit hospital?
It is not recognized as revenues, receivable, or bad debt in the financial statements of a not-for-profit hospital.
221
List the financial statements required by a not-for-profit hospital.
1. BS
2. Statement of Operations
3. Statement of Cash Flows
222
List the net asset categories used by a private university.
1. Unrestricted
2. Temporarily Restricted
3. Permanently Restircted
223
List the net asset categories used by a public university.
1. Unrestricted
2. Restricted
3. Invested in capital assets, net or related debt
224
How is tuition revenue reported?
Reported net of tuition discounts and scholarships in the operating statement.
225
Define "auxiliary enterprises."
Activities carried on by an educational institution that are not directly related to the delivery of instruction (i.e., residence halls, dining services, athletics).
226
What is the authoritative body for state and local government?
GASB
227
What is the authoritative body for not-for-profit organizations?
FASB
228
List the two types of proprietary funds.
1. Enterprise funds
| 2. Internal service funds
229
What is the measurement focus basis of accounting for proprietary fund types?
Accrual accounting: Flow of economic resources.
230
What is the measurement focus basis of accounting for governmental fund types?
Modified accrual: flow of current expendable financial resources.
231
Is the normal balance of estimated revenues account a credit or a debit?
It is a debit.
232
What budgetary account represents the estimated dollar value of outstanding purchase orders?
Encumbrances Account
233
True or False: Restricted, committed, or assigned fund balance amounts should report only positive amounts.
True. These fund balances should not report negative amounts.
234
Where do you find Positive Unassigned Fund Balance?
This balance is found only in the General Fund.
235
What funds are included in the Governmental Activities column on the Government-Wide Statements?
All Governmental Funds (General, Specific Revenue, Debt Service, Capital Project, and Permanent Funds) plus the Internal Service Funds.
236
What funds are included in the Business-Type Activities column on the Government-Wide Statements?
Enterprise funds.
237
What funds are reported in a separate column in the fund level financial statements for governmental fund types?
Major funds.
238
What criteria are used to determine a major fund?
10% of total assets, liabilities, revenues, or expenditures/ expenses of the total for all funds in that fund type and at least 5% for the same element for all governmental and enterprise funds combined.
239
What is the primary function of the debt service fund?
Payment on interest and principal on general long-term debt.
240
Describe the proprietary fund entry to record interfold sale of goods.
DR: Due from XXXX
| CR: Revenues (or Billings to Depts.)
241
What is the principal revenue of an internal Service Fund?
Fees charges to internal users.
242
When funds are used to account for any resource managed in trust by the governmental entity where the beneficiaries are outside of the governmental entity itself?
Private purpose trust funds.
243
What equity account is used by Pension Trust funds?
Net assets Held in Trust for Pension Benefits.
244
When should component units be blended with primary government?
If a component unit is, in substance, a part of the primary government (e.g., the principal beneficiary of the component units services is the primary government), it should be blended.
245
Define "component units."
Legally separate organizations:
1. Which are fiscally dependent on the primary government.
OR
2.For which the primary government appoints a voting majority of the component unit's governing board and either: (1) the primary government is financially accountable for the component unit; or (2) it would be misleading or incomplete to exclude the component unit from the primary government's financial statements.
246
What is the account name for long-term interfund receivables?
Advances to xxx
247
Under government accounting, what id the Modified Approach?
An alternative to depreciation of infrastructure assets based on maintaining the conduction of infrastructure assets.
248
How are pension expenditures in governmental fund financial statements recognized?
They are recognized on the modified accrual accounting basis of accounting and should be equal to the amount expected to be liquidated with expendable available financial resources.
249
True or False: Sales tax is an example of a derived tax revenue that is based on an underlying exchange.
True
250
List the three stages for internally generated software development.
1. Preliminary project stage
2. Application development stage
3. Post-implementation/operation stage
