F1 Flashcards
How do you report a gain or loss from a discontinued operation?
You report it net of tax- the operating income or loss for the year (from discontinued operations) on the income stmt along with any impairment
What cumulative adjustment is needed for a change in accounting principle?
*Adj to beg Retained Earnings, net of tax.
OR
*None, if it is like a change in estimate. Only prospectively, as a component of income from continuing operations.
What kind of change is cash to accrual basis reporting and how is it treated?
Cash basis is not GAAP, it is the correction of an error and is reported as a prior period adjustment to Retained Earnings.
When are operating results included in discontinued operations?
When the component has been disposed of or is held for sale
What are examples of strategic shifts that have a major impact on operations and financial results?
Disposal of…
G-eographical area
E-quity method component
L-ine of biz
What are some changes in accounting principle?
- switching from FIFO to weighted-avg.
- *Requires an adj to beg retained earnings for the CUMULATIVE effect of the change
**changing from cash to accrual basis is CORRECTING AN ERROR, not a change in principle
how do you amortize capitalized software costs?
the greater of straight-line amortization or total sales revenue/total projected revenue
how do you amortize intangible assets?
using the lesser of legal life or economic life (patent)
How do you amortize an asset with an indefinite life?
(It may be renewed indefinitely) You don’t, you just report it at it’s carrying value.
How do you determine the impairment loss for an intangible asset under IFRS?
You compare it to the recoverable amount, which is the GREATER of the Fair value less costs to sell or the asset’s value in use.
How do you determine an impairment loss for goodwill under IFRS?
By cash generating unit-
You compare the carrying amount of the unit to recoverable amount (the greater of the FV- costs to sell or the PV of the future cash flows).
**any impairment is applied to goodwill 1st
What is the difference between net income and gross profit?
Gross profit is only net sales minus COGS, net income also includes other expenses.
how are completed contract and percentage of completion contracts similar?
Expected losses on contracts are recognized prior to completion (conservatism), but not gains for completed contract.
how do you figure the profit for percentage of completion contracts?
- figure the percentage of costs incurred to date / total costs expected
- figure the gross profit= contract price minus total expected cost and multiply by percentage completed to date from step 1
