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FAR > F2 Flashcards > Flashcards

F2 Flashcards

1
Q

On personal financial statements, how are all items are reported?

A

At their fair market value

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2
Q

Personal financial statements usually include which statements?

A

Statement of Financial Condition (B/S) and Statement of Changes in Net Worth (I/S)

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3
Q

When does the completed contract method recognize revenue and expense?

A

recognized when contract is complete, recognized immediately in their entirety

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4
Q

How is total gross profit/loss recognized?

A

(contract price - total costs to complete project) * % complete

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5
Q

Under the percentage of completion method, how is annual gross profit calculated?

A

(total costs incurred to date/total expected costs * total expected gross profit) _ total gross profit previously recognized

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6
Q

What happens to monetary assets during periods of inflation where the amount in the asset account remains constant?

A

we lose purchasing power loss

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7
Q

Purchasing power gains and losses are associated with what type of assets and liabilities?

A

Monetary

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8
Q

Where are translation adjustments and foreign currency remeasurement gains/losses included?

A

Foreign Currency Translation Adjustments (PUFER) included in OCI, gains/losses from remeasuring the foreign subsidiary_s financial statements from local currency to functional currency included in income from continuing operations

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9
Q

What is a foreign subsidiary_s functional currency?

A

the currency of the environment in which the subsidiary primarily generates and expends cash

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10
Q

When the re-measurement method is used, we take historical rates only for what accounts?

A

balance sheet accounts carried at cost

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11
Q

What is the current rate?

A

rate used to translate all assets and liabilities from the functional to reporting currency

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12
Q

If a non-monetary exchange has commercial substance, how is the transaction accounted for?

A

the transaction is accounted for using the fair value of the asset surrendered or received, which ever is more evident

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13
Q

When cash is received in a nonmonetary transaction < 10% of the total consideration, how do we treat this transaction?

A

a proportional amount of the gain is recognized

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14
Q

When a non-monetary transaction has commercial substance, how are gains and losses recognized?

A

fair value - book value (of the asset given up)

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15
Q

What is a restriction of asset value?

A

Assets should not be valued at more than fair value, so if BV>FV, the asset should be recorded at the lower FV

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16
Q

Under IFRS, how are changes of dissimilar assets treated?

A

regarded as exchanges that generate revenue, all gains and losses are recognized

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17
Q

When are gains and losses recognized in exchanges containing commercial substance?

A

gains and losses recognized immediately

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18
Q

When a transaction involving non-monetary exchange lacks commercial substance, what amount is used to record the newly acquired assets?

A

the reported amount of the non-monetary assets surrendered

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19
Q

Exceptions to valuing the transaction at fair value include:

A

if the exchange was made solely to facilitate the sale to a third-party that is not a party to the exchange lack of commercial substance

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20
Q

What 2 requirements are there in order to have commercial substance?

A

Risk, timing, and amount of the expected future cash flows from the asset transfer different significantly from the risk, timing, and amount of the expected future cash flow_s from the asset received OR the entity specific value of the asset differs significantly from the asset transferred

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21
Q

If a nonmonetary exchange lacks commercial substance and a boot is paid, how is this accounted for?

A

no gain is recognized

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22
Q

When can revenue be recognized under the installment method?

A

Revenue cannot be recognized prior to the completion of the long-term project

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23
Q

Under the installment method, what do we do with total gross profit and how is realized gross profit calculated?

A

total gross profit is deferred until cash payments are received realized gross profit = gross profit % on the sale * (cash collected + installment amount)

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24
Q

Under the cost recovery method, when is revenue recognized?

A

revenue is recognized after cash equaling the cost of the item has been collected

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25
Q

Under the installment method, how is deferred gross profit calculated?

A

installment receivable * gross profit %

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26
Q

When do we use installment sales?

A

When impossible to establish a reasonable bad debt percentage and probable some amount will be collected, but this amount cannot be projected

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27
Q

What is required for revenue recognition under GAAP?

A

a signed contract, transfer of risks and rewards, price is fixed and determinable, and collection is reasonably assured

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28
Q

How is amortization of capitalized software costs calculated?

A

GREATER of: straight-line amortization OR (sales revenue from software / total projected sale)

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29
Q

Before technological feasibility is established, how are computer software development costs treated?

A

Expensed as R&D

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30
Q

How should royalties paid be accounted for?

A

expense in period incurred

31
Q

When does an impairment loss exist?

A

When carrying value > recoverable amount

32
Q

When is goodwill capitalized?

A

only when incurred in the purchase of another entity

33
Q

How do we treat costs incurred for maintaining or developing goodwill?

A

Expense

34
Q

__________ all costs first successfully defended patents, _____________ all costs for unsuccessfully defended patents

A

Capitalize, Expense

35
Q

When there is unlimited right of return, nothing should be recorded as revenue unless all of the following are met:

A

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

36
Q

When are revenues recognized?

A

In the period they are realized or realizable

37
Q

Is goodwill amortized?

A

No, Goodwill is not amortized, but periodically monitored for impairment

38
Q

When are start-up costs required to be expensed?

A

when incurred

39
Q

US GAAP requires goodwill to be tested for impairment at what level?

A

reporting unit level

40
Q

How does US GAAP handle subsequent reversal of intangible asset impairment losses unless the intangible asset is held for sale

A

US GAAP prohibits

41
Q

Decrease in A/R will be larger under which basis of accounting?

A

Cash (cash is being paid to us)

42
Q

Increase in A/P represents expenses incurred but not yet paid, resulting in a higher income for which basis of accounting?

A

Cash (we have not yet paid, so we have more cash)

43
Q

Test for recoverability

A

if undiscounted cash flow_s > carrying amount, no impairment if undiscounted cash flows < carrying amount, impairment = the carrying amount - fair value

44
Q

Under IFRS, how is goodwill impairment is analyzed?

A

at the cash generating level

45
Q

IFRS goodwill impairment process (one-step process)

A

Carrying value of the cash generating unit - the GREATER of (cash generating unit’s FV - cost to sell) or value in use (present value of future cash flows)

46
Q

How is GAAP impairment loss calculated?

A

goodwill implied fair value - goodwill book value

47
Q

When converting from cash basis to accrual basis, what are the primary rules to consider?

A

add increase in current assets subtract decreases in current assets add decreases in current liabilities subtract increases in current liabilities

48
Q

Initial payment that can be applied against future payments should be recognized as a _____________ (as a liability)

A

deferred revenue

49
Q

Research costs associated with on internally developed asset are always _________

A

Expensed

50
Q

IFRS development costs may be capitalized if the following criteria are met:

A

Technical feasibility established, Company intends to complete the asset, company has ability to sell or use asset, sufficient resources available to complete, and asset will generate future economic benefits

51
Q

When is goodwill recognized in the balance sheet?

A

recognized in the balance sheet when created from a business acquisition

52
Q

When does the franchisor report revenue from initial franchise fees?

A

When all material conditions of the sale have been substantially performed

53
Q

How to we treat finite life intangibles?

A

Amortize over the period benefited

54
Q

What is the time period over which Intangibles are amortized?

A

the lesser of their legal or economic life

55
Q

What is the IFRS recoverable amount equal to?

A

the GREATER of (fair value - costs to sell) or value in use (present value of future cash flows)

56
Q

What is true about all non-monetary transactions?

A

Fair value given equals the fair value received and we recognize losses in full

57
Q

What a fixed asset is sold, gain or loss is recognized as ______________________ and the amount of the gain or loss equals ___________________.

A

Income from continuing operations, the proceeds from the sale minus the caring amount of the fixed asset

58
Q

When is gain on non-monetary transactions recorded?

A

if we receive cash or boot

59
Q

When do transactions lack commercial substance?

A

if the assets exchanged have a similar productive use and the amount of cash exchanged is insignificant

60
Q

How are direct costs of doing contracted R&D work treated?

A

Capitalized

61
Q

How is R&D equipment treated based on whether is has alternative future use or can only be used on the current project?

A

Capitalize with alternative future use and expense immediately if the equipment can only be used on the current project

62
Q

How are patent costs treated?

A

Always capitalized

63
Q

R&D costs are expensed as incurred under US GAAP except for:

A

cost to be reimbursed by another company costs for a long lived tangible asset with alternative future use

64
Q

A cash deposit received from a customer for future services is a _______ until the sale takes place

A

Liability

65
Q

Where should the amount of deferred gross profit relating to installment A/R collections 12 months beyond the balance sheet date be reported?

A

Current assets as a contra account

66
Q

How is installment sales gross profit calculated?

A

Total installment sales * (proportion of collections on installment sales / cost of installment sales)

67
Q

We __________ costs between the idea phase and technological feasibility phase, __________ costs between the technological feasibility and release for sale phases, and once the product is released for sale, we _________ costs

A

Expense, Capitalize, Amortize

68
Q

If the entity_s books are not maintained in it_s functional currency, what is required and where do gains or losses go?

A

Re-measurement into functional currency is required and any gain or loss is part of continuing operations

69
Q

Where are translation gains/losses recorded?

A

OCI under Shareholder’s Equity

70
Q

Where should a company that wishes to disclose information about the effect of changing prices should report this information?

A

Supplementary information to the financial statements

71
Q

Holding net monetary assets during inflation will result in a ______ of purchasing power while holding net monetary liabilities will result in a ______.

A

Loss, Gain

72
Q

R&D work a company does for a client is an __________ but R&D done work for the company by another company is an ___________.

A

Operating Expense, R&D Expense

73
Q

If computer software is to be used internally, how do we treat development costs?

A

Amortized on straight-line basis using GAAP

FAR (10 decks)

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