F1

Question 1

Fundamental Qualitative characteristics of useful information

Answer 1

Faithful Representation and Relevance

Question 2

Faithful Representation consists of

Answer 2

completeness, neutral, free from error

Question 3

Relevance consists of

Answer 3

Predictive value, conformity, material

Question 4

Characteristics that enhance usefulness of information that is relevant and faithfully represented
CUTV

Answer 4

Timeliness, understandably, comparability, and verifiability

Question 5

What is the appropriate measurement basis for equipment when a company ends its operation and quickly dispose assets within (3) month?

Answer 5

Net realizable value

Question 6

Historical cost is appropriate

Answer 6

If operations were continuing

Question 7

Current reproduction cost is appropriate

Answer 7

In optional supplemental price level financial

Question 8

Four enhancing characteristics

Answer 8

comparability, verifiability, timeliness, understandability

Question 9

The earliest period that a component of an entity can be reported in discontinued operations is when the component meets the following “held for sale” criteria:

Answer 9

Management commits to a plan to sell the component.
The component is available for immediate sale in its present condition.
An active program to locate a buyer has been initiated.
The sale of the component is probable and the sale is expected to be completed within one year.
The sale of the component is being actively marketed.
It is unlikely that significant change to the plan to sell will be made or that the plan will be withdrawn.

Question 10

A change from a non-GAAP/IFRS method to a GAAP/IFRS method

Answer 10

Is an error correction that is accounted for by adjusting beginning retained earnings.

Question 11

A liability is only recognized when all of the following criteria are met

Answer 11

An obligating event has occurred.
The event results in a present obligation to transfer assets or to provide services in the future.
The entity has little or no discretion to avoid the future transfer of assets or providing of services.

Question 12

How is a change from cash basis to accrual basis is reported

Answer 12

A change from the cash basis to the accrual basis cannot be reported as a change in accounting principle because it is a change from a non-GAAP method of accounting to a GAAP method of accounting. A change in accounting principle must be a change from one acceptable GAAP method to another acceptable GAAP method. Additionally, when a change in accounting principle is recorded, beginning retained earnings is adjusted for the cumulative effect of the change. Net income is no longer adjusted for the cumulative effect of a change in accounting principle.

Question 13

A change from cash basis to accrual basis is an example of what? How are they accounted for?

Answer 13

A change from the cash basis to the accrual basis is a prior-period adjustment. Prior-period adjustments are accounted using retroactive restatement. Prior-period adjustments are never accounted for prospectively

Question 14

Where are prior period adjustments NOT reported?

Answer 14

A change from the cash basis to the accrual basis is a prior-period adjustment. Prior-period adjustments are not reported in income from continuing operations.

Question 15

How is a change in accounting estimate accounted for?

Answer 15

A change in accounting estimate is accounted for prospectively, in current and future periods.

Question 16

Under U.S. GAAP, where are items that are both unusual and infrequent reported?

Answer 16

Under U.S. GAAP, items that are both unusual and infrequent are reported as a separate component of income from continuing operations

Question 17

What is IFRS policy on reporting of gains/losses?

Answer 17

IFRS prohibits the reporting of gains/losses as extraordinary. Therefore, none of the infrequent items are extraordinary under IFRS:

Question 18

Under IFRS, how does an entity records a change in accounting principle?

Answer 18

Under IFRS, when an entity records a change in accounting principle, the entity must (at a minimum) present three balance sheets (end of current period, end of prior period, and beginning of prior period) and two of each other financial statement (current period and prior period). The cumulative effect adjustment is shown as an adjustment to beginning retained earnings on the balance sheet for the beginning of the prior period.

Question 19

Under IFRS, how is the cumulative effect of change reported?

Answer 19

The cumulative effect of the change is not reported as an adjustment to beginning retained earnings as of the date the decision is made, nor at the end of the period in which the decision is made.

Question 20

What are the items included in a single-step income statement total revenue?

Answer 20

The single-step income statement will include in total revenues all sales of goods, services, and rentals. Purchase discounts are not included in revenue, but instead reduce cost of goods sold. The recovery of accounts written off does not hit the revenue account. It affect AR and Cash.

Question 21

what qualifies as a discontinued operation

Answer 21

The planned and approved sale of a segment qualifies as a discontinued operation because a segment is a component of the entity. Segments may be functional in nature, like a major product category or service division, or they can be geographical as well. Additionally, to qualify as a discontinued operation, the sale must represent a strategic shift and must have a significant effect on its operations and financial results. A discontinued operation can also be a group of components, a business or a nonprofit activity.

Question 22

The four main components of other comprehensive income include

Answer 22

Pension changes in funded status: due to gains/losses, prior service costs, and net transition assets or obligations.

Unrealized gains and losses: unrealized holding gains/losses on available for sale securities and unrealized holding gains and losses on debt securities transferred from the held to maturity to available for sale classification.

Foreign currency items, including translation adjustments.

The effective portion of cash flow hedges

Question 23

what is excluded from comprehensive income

Answer 23

Comprehensive income includes all changes in equity during a period except those resulting from owner investments and distributions to owners.

Question 24

Comprehensive income

Answer 24

Comprehensive income = Net income + Other comprehensive income

Question 25

related party disclosures under IFRS

Answer 25

Under IFRS, loans to officers and key management compensation would require disclosure

Question 26

What is the difference between IFRS and GAAP regarding accounting for liquidation

Answer 26

IFRS does not offer guidance on the basis of accounting to use in case of imminent liquidation. U.S. GAAP provides specific guidance about preparing financial statements and necessary disclosures when liquidation is imminent (liquidation basis of accounting)

Question 27

Operating Rule for Segment reporting

Answer 27

Operating profit by segments is based on the measure of profit reported to the “Chief Operating Decision Maker.”

Interest expense, income taxes, and general corporate expenses are not allocated to the divisions solely for the purposes of segment disclosures; they may be allocated if that is how the segments report to the “Chief Operating Decision Maker.”

Question 28

When there is an unlimited right of return, nothing should be recorded as sales revenue unless four conditions are satisfied. They are:-

Answer 28

The sales price is substantially fixed
The buyer assumes all risk of loss
The buyer has paid some form of consideration
The amount of returns can be reasonably estimated

Question 29

Goodwill should be tested for value impairment at which of the following levels under U.S. GAAP

Answer 29

Each reporting unit.

Question 30

The evaluation of goodwill impairment involves two major steps.

Answer 30

Step 1: Identify potential impairment by comparing the fair value of each reporting unit with its carrying amount, including goodwill.

Assign assets acquired and liabilities assumed to the various reporting units. Assign goodwill to the reporting units.

Determine the fair values of the reporting units and of the assets and liabilities of those reporting units.

If the fair value of a reporting unit is less than its carrying amount, there is potential goodwill impairment. The impairment is assumed to be due to the reporting unit’s goodwill since any impairment in the other assets of the reporting unit will already have been determined and adjusted for (other impairments are evaluated before goodwill).

If the fair value of a reporting unit is more than its carrying amount, there is no goodwill impairment and Step 2 is not necessary.

Step 2: Measure the amount of goodwill impairment loss by comparing the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill.

Allocate the fair value of the reporting unit to all assets and liabilities of the unit. Any fair value that cannot be assigned to specific assets and liabilities is the implied goodwill of the reporting unit.

Compare the implied fair value of the goodwill to the carrying value of the goodwill. If the implied fair value of the goodwill is less than its carrying amount, recognize a goodwill impairment loss. Once the goodwill impairment loss has been fully recognized, it cannot be reversed.

Question 31

What is impairment recoverability test under U S GAAP?

Answer 31

Under U.S. GAAP, impairment analysis begins with a test for recoverability in which the net carrying value of the asset is compared to the undiscounted cash flows expected from the asset. If the net carrying value exceeds the undiscounted cash flows, then an impairment loss is recorded equal to the difference between the carrying value and fair value of the asset. In this problem, the carrying value of $500,000 is less than the undiscounted future cash flows of $515,000, so no impairment loss is recorded.