F10 Flashcards
What are the three valuation techniques for measuring fair value?
Cost, income, market
What are the three levels of inputs in the fair value hierarchy?
Level one: identical, level two: similar, level three: discounted cash flows
What type of accounting change is a change in valuation technique to measure fair value?
Change in accounting estimate
What is fair value?
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
Under the VIE model, what are the characteristics used to determine the primary beneficiary of a VIE?
Absorbs expected losses, receives expected profits, and has power to direct activities of VIE
How are tangible assets recorded upon formation of a partnership?
Fair market value at date of investment
When assets are transferred in a troubled debt restructuring, how are the assets treated?
Adjusted to fair value and record ordinary gain/loss
How do we compute interest revenue?
Total cash to be received - present value of note
How are discounts reported on the balance sheet?
Direct reduction from face of the note
If the term of the note does not exceed one year, how is it recorded?
At face value
For contingent liabilities under US GAAP and I FRS, what is the measurement amount for a range of values?
Lowest; average
How do we treat different types of loss contingencies?
Probable in estimable: a crew and record journal entry with disclosure; reasonably possible: disclose; remote: ignore
How to retrieve different types of gain contingencies?
Disclose if probable in estimable or reasonably possible; ignore if remote
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?
Record journal entry and disclose; disclose
What do we do with guarantee type remote loss contingencies?
Disclose
When are contingent gains recognized?
When settled and realized
When are gain contingencies accrued in the financial statements?
Never
What are the criteria to qualify a derivative as a fair value hedge?
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
The liquidation basis of accounting, how are assets measured and presented?
Amount of expected cash proceeds from liquidation
Under the liquidation basis of accounting, what five items must be disclosed?
Statement that financials are prepared using liquidation basis, plan for liquidation, significant assumptions, expected time frame, and costs and income accrued
Which two locations may fair value of financial instruments be disclosed?
Body of financial statements or footnotes
Under US GAAP, is disclosure required or encouraged for concentration of credit risk and market risk?
Required; encouraged
What must be disclosed for most financial instruments?
Carrying value and fair value
What three characteristics mustard and instruments have?
One or more underlyings and notational mounts
Requires no initial net investment
Terms require/permit net settlement
Where do we report the effective and ineffective portions of cash flow hedges?
OCI; current income
If not practicable to estimate the fair value of the financial instrument, what should be disclosed?
Reasons not practical to estimate fair value and pertinent information to estimating fair value of financial instrument
What financial instruments should an entity disclose information about concentrations of credit risk
All financial instruments
When do we disclose fair value of entities financial instruments?
When practicable to estimate those values and those values are of material amount
What is the mnemonic for remembering types of derivatives?
OFFS: options, futures, forwards, swaps
What is the result of a perfect hedge?
No possibility of future gain/loss
Which types of hedged instruments are included in current earnings?
No hedge designation, fair value head, ineffective portion of cash flow hedge
Which types of hedged instruments are included in OCI?
Effective portion of cash flow hedge, net investment hedge under IFRS
How is income calculated under the fair value option?
Dividends received + appreciation for the year
How was inventory reported under IFRS?
lower of cost for net realizable value
What is market in GAAP inventory valuation
Middle of NRV, NRV - reasonable profit, or replacement cost
When adopting IFRS, how are all adjustments recognized?
Directly in retain earnings or another equity category
Which financials are included under IFRS when presenting comparative information and for a change in accounting principle?
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
IFRS impairment loss calculated?
Carrying value - GREATER OF value-in-use (present value of future cash flows) or net realizable value (fair value minus cost to sell)
When do we consolidate an SPE under IFRS?
When we control the SPE
Under IFRS, what we do with key management compensation and loans to officers?
Disclosure required
What segment info is not disclosed for entity’s reportable segments under IFRS or GAAP?
Cash flow
What type of depreciation does IFRS require?
Component
What is investment property under IFRS?
Land and buildings held by an entity to earn rentals or for capital appreciation
Under IFRS, how are fixed assets value?
Together as an asset class
Where are foreign exchange gains and losses reported?
OCI; income statement
Does GAAP or IFRS allow reversal of impairment losses?
IFRS allows. Reversal on income statement
How is goodwill calculated under the partial goodwill method?
Acquisition cost - fair value of subsidiary’s net assets acquired
How is NCI calculated?
Fair value of subsidiary’s net assets x NCI %
Under IFRS, where are interest/dividends received reported on the statement of Cash Flows?
CFO/CFI
Under IFRS where are interest/dividends paid reported in the statement of cash flows?
CFO/CFF
Under IFRS, where are taxes paid reported in the statement of cash flow?
CFO/CFI/CFF
What are the requirements under IFRS for a lease to be financing?
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
What is NRV equal to?
Selling price - costs to complete and sell
Under IFRS, what do we do with bond issue costs?
Deduct from carrying value of bond
Which inventory method is not allowed under IFRS?
LIFO
In an IFRS sale-leaseback finance lease, what amount is deferred and amortized over the lease term?
All profit
What do we recognize for convertible debt under IFRS?
Equity component. Difference between proceeds received and fair value of bond liability
When are gains deferred and amortized in a sale-leaseback transaction? When are they recognized immediately?
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
How do we treat bond issue costs under IFRS vs. GAAP?
Amortize over life of bond using effective interest method; record as an asset and amortize using straight-line method
How does IFRS report all deferred tax assets and deferred tax liabilities?
Noncurrent
Under IFRS, what capitalized costs should be included in the patent asset?
Purchase price of patent, taxes, and legal costs to register
Our research or development costs treated differently under GAAP vs. IFRS?
Under IFRS, development costs may be capitalized if certain criteria are met
Under what level is goodwill tested under IFRS vs. GAAP?
Cash generating unit; reporting unit
What are the five criteria for capitalization of IFRS development costs?
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
When is a transaction considered to have commercial substance?
If future cash flows will change as a result of the transaction
What is the initial net investment on the forward contract?
Zero, there is none
What is the underlying in a derivatives contract?
Specified price, rate, or other variable
What is the notional amount in a derivatives contract?
Specified unit of measure
What is the settlement amount in a derivatives contract?
Notional amount x underlying
How do we account for changes in fair value of a foreign exchange net investment hedge?
Include in OCI as cumulative translation adjustment
How do we calculate total accretion expense?
Total estimated cost - total depreciation
What is accretion expense?
Increase in asset retirement obligation (ARO) liability due to passage of time
