F1 (IS+BS, IS discont op, Acct change+error correction, AJE)

Question 1

reporting in RE for changes in entity, estimate, and error (AP change)

Answer 1

Change in est = prospective

Change in entity = restate

Error = PPA (restate)

Question 2

Notes to FS disclosures (relevant to decision makers and integral part of FS)

Answer 2

• change in SE
• contingency
• off BS contracted obligations
• pension plan
• post BS but before FS issued
• related party
• significant est/risk
• products, customers’ geography

Question 3

What is included in total revenues and total expenses and losses?

Answer 3

Total revenue = R + G

Total expenses + losses =
expenses, losses, and ITE

Question 4

HFS criteria:

Answer 4

• Mgt commits to a plan to sell component
• available for immediate sale in its present condition
• active program to locate buyer is initiated
• sale of component is probable and sale is expected to be completed in 1 year
• sale of component is actively marketed

Question 5

When a component is classified as HFS:

Answer 5

• an impairment analysis of the component must be conducted
• is considered discont’d op’s, also discont’d if it has been disposed of
• once class’d as HFS, it is measured at LC-NRV

Question 6

disposal of component/group is reported as discont’d op’s if:

Answer 6

represents strategic shift or will have major effect on entity’s operations and financial results

• strategic shift examples:
• disposal of a major geographic area
• disposal of major equity method investment
• disposal of major line of business

Question 7

Comparative vs. Noncomparative FS for change in AP:

Answer 7

• Comparative: diff b/w BB RE and RE if retro’ly applied to all prior affected periods
• Noncomparative: diff b/w BB RE in first period presented and RE if retro’ly applied to all prior periods

Question 8

change in AP (net tax) GR:

Answer 8

One acceptable method of acct (GAAP to GAAP or IFRS to IFRS)
Because new method presents the fin info more fairly than old method
Exception: change in dep to LIFO (inseparable from change in est)

• change in est = prospective
• change in entity = restate BB RE
• error correction = PPA and restate BB RE

Question 9

Selling Expenses:

Answer 9

• freight out
• sales salaries and commissions
• advertising

Question 10

G+A expenses:

Answer 10

• general OH
• officer’s salaries
• accounting and legal fees
• insurance

Question 11

non-op expenses: [separate line items]

Answer 11

• auxilliary activities (non-related)
• interest exp
• gains and losses

Question 12

change in estimate:

Answer 12

• depreciation method
• UL of depreciable asset
• residual value
• BD %
• loss accruals

Question 13

neither a change in AP or estimate: [prospective]

Answer 13

• change from FV method to equity method (due to increase in ownership)
• adopt new equity method as of date investment qualifies as equity method
• retro adj not req’d (cost of acq’ing add’l int in investee is added to CV of prev’ly held investment)
• if investment was prev’ly accounted for as AFS, recognize the “un” G/L from AOCI
• adopting pension plan for all employees

Question 14

rules for AJE:

Answer 14

• never involves cash

* all AJE will hit 1 IS account and 1 BS account