F10

Question 1

What are the three valuation techniques for measuring fair value?

Answer 1

Cost, income, market

Question 2

What are the three levels of inputs in the fair value hierarchy?

Answer 2

Level one: identical, level two: similar, level three: discounted cash flows

Question 3

What type of accounting change is a change in valuation technique to measure fair value?

Answer 3

Change in accounting estimate

Question 4

What is fair value?

Answer 4

Price that would be received to sell an asset or paid to transfer liability in an orderly transaction between market participants in principle market at the measurement date under market conditions

Question 5

Under the VIE model, what are the characteristics used to determine the primary beneficiary of a VIE?

Answer 5

Absorbs expected losses, receives expected profits, and has power to direct activities of VIE

Question 6

How are tangible assets recorded upon formation of a partnership?

Answer 6

Fair market value at date of investment

Question 7

When assets are transferred in a troubled debt restructuring, how are the assets treated?

Answer 7

Adjusted to fair value and record ordinary gain/loss

Question 8

How do we compute interest revenue?

Answer 8

Total cash to be received - present value of note

Question 9

How are discounts reported on the balance sheet?

Answer 9

Direct reduction from face of the note

Question 10

If the term of the note does not exceed one year, how is it recorded?

Answer 10

At face value

Question 11

For contingent liabilities under US GAAP and I FRS, what is the measurement amount for a range of values?

Answer 11

Lowest; average

Question 12

How do we treat different types of loss contingencies?

Answer 12

Probable in estimable: a crew and record journal entry with disclosure; reasonably possible: disclose; remote: ignore

Question 13

How to retrieve different types of gain contingencies?

Answer 13

Disclose if probable in estimable or reasonably possible; ignore if remote

Question 14

What do we do with subsequent events that provide additional information about conditions that existed at the balance sheet date and those that did not exist at the balance sheet date?

Answer 14

Record journal entry and disclose; disclose

Question 15

What do we do with guarantee type remote loss contingencies?

Answer 15

Disclose

Question 16

When are contingent gains recognized?

Answer 16

When settled and realized

Question 17

When are gain contingencies accrued in the financial statements?

Answer 17

Never

Question 18

What are the criteria to qualify a derivative as a fair value hedge?

Answer 18

Formal documentation of hedging relationship
Hedge expected to be highly effective
Hedged item is specifically identified
Hedged item presents exposure to changes in fair value that could affect income

Question 19

The liquidation basis of accounting, how are assets measured and presented?

Answer 19

Amount of expected cash proceeds from liquidation

Question 20

Under the liquidation basis of accounting, what five items must be disclosed?

Answer 20

Statement that financials are prepared using liquidation basis, plan for liquidation, significant assumptions, expected time frame, and costs and income accrued

Question 21

Which two locations may fair value of financial instruments be disclosed?

Answer 21

Body of financial statements or footnotes

Question 22

Under US GAAP, is disclosure required or encouraged for concentration of credit risk and market risk?

Answer 22

Required; encouraged

Question 23

What must be disclosed for most financial instruments?

Answer 23

Carrying value and fair value

Question 24

What three characteristics mustard and instruments have?

Answer 24

One or more underlyings and notational mounts
Requires no initial net investment
Terms require/permit net settlement

Question 25

Where do we report the effective and ineffective portions of cash flow hedges?

Answer 25

OCI; current income

Question 26

If not practicable to estimate the fair value of the financial instrument, what should be disclosed?

Answer 26

Reasons not practical to estimate fair value and pertinent information to estimating fair value of financial instrument

Question 27

What financial instruments should an entity disclose information about concentrations of credit risk

Answer 27

All financial instruments

Question 28

When do we disclose fair value of entities financial instruments?

Answer 28

When practicable to estimate those values and those values are of material amount

Question 29

What is the mnemonic for remembering types of derivatives?

Answer 29

OFFS: options, futures, forwards, swaps

Question 30

What is the result of a perfect hedge?

Answer 30

No possibility of future gain/loss

Question 31

Which types of hedged instruments are included in current earnings?

Answer 31

No hedge designation, fair value head, ineffective portion of cash flow hedge

Question 32

Which types of hedged instruments are included in OCI?

Answer 32

Effective portion of cash flow hedge, net investment hedge under IFRS

Question 33

How is income calculated under the fair value option?

Answer 33

Dividends received + appreciation for the year

Question 34

How was inventory reported under IFRS?

Answer 34

lower of cost for net realizable value

Question 35

What is market in GAAP inventory valuation

Answer 35

Middle of NRV, NRV - reasonable profit, or replacement cost

Question 36

When adopting IFRS, how are all adjustments recognized?

Answer 36

Directly in retain earnings or another equity category

Question 37

Which financials are included under IFRS when presenting comparative information and for a change in accounting principle?

Answer 37

3 balance sheets (end of current period, end of previous period, and beginning of previous period) 2 cash flows, 2 income statements, 2 statements of comprehensive income, 2 changes in equity and statement of IFRS compliance

Question 38

IFRS impairment loss calculated?

Answer 38

Carrying value - GREATER OF value-in-use (present value of future cash flows) or net realizable value (fair value minus cost to sell)

Question 39

When do we consolidate an SPE under IFRS?

Answer 39

When we control the SPE

Question 40

Under IFRS, what we do with key management compensation and loans to officers?

Answer 40

Disclosure required

Question 41

What segment info is not disclosed for entity's reportable segments under IFRS or GAAP?

Answer 41

Cash flow

Question 42

What type of depreciation does IFRS require?

Answer 42

Component

Question 43

What is investment property under IFRS?

Answer 43

Land and buildings held by an entity to earn rentals or for capital appreciation

Question 44

Under IFRS, how are fixed assets value?

Answer 44

Together as an asset class

Question 45

Where are foreign exchange gains and losses reported?

Answer 45

OCI; income statement

Question 46

Does GAAP or IFRS allow reversal of impairment losses?

Answer 46

IFRS allows. Reversal on income statement

Question 47

How is goodwill calculated under the partial goodwill method?

Answer 47

Acquisition cost - fair value of subsidiary's net assets acquired

Question 48

How is NCI calculated?

Answer 48

Fair value of subsidiary's net assets x NCI %

Question 49

Under IFRS, where are interest/dividends received reported on the statement of Cash Flows?

Answer 49

CFO/CFI

Question 50

Under IFRS where are interest/dividends paid reported in the statement of cash flows?

Answer 50

CFO/CFF

Question 51

Under IFRS, where are taxes paid reported in the statement of cash flow?

Answer 51

CFO/CFI/CFF

Question 52

What are the requirements under IFRS for a lease to be financing?

Answer 52

``` OWES FACS: ownership transfer written bargain purchase option significant portion of economic life substantially all a fair value fluctuation in fair value of residual ability to continue can cancel specialized nature ```

Question 53

What is NRV equal to?

Answer 53

Selling price - costs to complete and sell

Question 54

Under IFRS, what do we do with bond issue costs?

Answer 54

Deduct from carrying value of bond

Question 55

Which inventory method is not allowed under IFRS?

Answer 55

LIFO

Question 56

In an IFRS sale-leaseback finance lease, what amount is deferred and amortized over the lease term?

Answer 56

All profit

Question 57

What do we recognize for convertible debt under IFRS?

Answer 57

Equity component. Difference between proceeds received and fair value of bond liability

Question 58

When are gains deferred and amortized in a sale-leaseback transaction? When are they recognized immediately?

Answer 58

Deferred and amortized when classified as a finance lease or when accounting for as an operating lease with sales price above fair value; recognized immediately when accounted for as an operating lease with sales price below fair value or sales price equal to fair value

Question 59

How do we treat bond issue costs under IFRS vs. GAAP?

Answer 59

Amortize over life of bond using effective interest method; record as an asset and amortize using straight-line method

Question 60

How does IFRS report all deferred tax assets and deferred tax liabilities?

Answer 60

Noncurrent

Question 61

Under IFRS, what capitalized costs should be included in the patent asset?

Answer 61

Purchase price of patent, taxes, and legal costs to register

Question 62

Our research or development costs treated differently under GAAP vs. IFRS?

Answer 62

Under IFRS, development costs may be capitalized if certain criteria are met

Question 63

Under what level is goodwill tested under IFRS vs. GAAP?

Answer 63

Cash generating unit; reporting unit

Question 64

What are the five criteria for capitalization of IFRS development costs?

Answer 64

Technological feasibility established Intends to complete asset Ability to sell/use asset Sufficient resources to complete and sell/use Asset will generate future economic benefits

Question 65

When is a transaction considered to have commercial substance?

Answer 65

If future cash flows will change as a result of the transaction

Question 66

What is the initial net investment on the forward contract?

Answer 66

Zero, there is none

Question 67

What is the underlying in a derivatives contract?

Answer 67

Specified price, rate, or other variable

Question 68

What is the notional amount in a derivatives contract?

Answer 68

Specified unit of measure

Question 69

What is the settlement amount in a derivatives contract?

Answer 69

Notional amount x underlying

Question 70

How do we account for changes in fair value of a foreign exchange net investment hedge?

Answer 70

Include in OCI as cumulative translation adjustment

Question 71

How do we calculate total accretion expense?

Answer 71

Total estimated cost - total depreciation

Question 72

What is accretion expense?

Answer 72

Increase in asset retirement obligation (ARO) liability due to passage of time