F2Pt.1-Matching

Question 1

Which Personal Financial Statements are required?

Answer 1

Statement of Financial Condition & Statement of Changes in Net Worth

Question 2

How are assets and liabilities valued in a Personal Financial Statement?

Answer 2

Estimated current value

Question 3

How are estimated taxes that would be paid if all assets were converted into cash and all liabilities paid presented on a Personal Financial Statement?

Answer 3

Presented on Statement of Financial Condition between Liabilities and Net Worth

Question 4

What is the general presentation on a statement of financial condition?

Answer 4

Assets
- Liabilities
- Estimated taxes on assets sold
: Net Worth

Question 5

How is life insurance presented on a Personal Financial Statement?

Answer 5

Only shown if there is cash surrender value

It is shown net of loans against the policy

Question 6

How are business interests shown on a Personal Financial Statement?

Answer 6

Business Interests that constitute a large percentage of total assets should be separated from other investments

Question 7

Contracts Revenue Recognition all 4 Criteria must be met:

US GAAP

Answer 7

• Evidence of arrangement exists
• Delivery has occurred or services rendered
• Price is Fixed & Determinable
• Collection is reasonably assured.

Question 8

Revenue Recognition: Sale

Answer 8

• Delivery of Goods or setting aside goods
• Transfer of legal titles [FOB Shipping point]
• Allowing others to use entity’s assets; when assets are used (time passes)
• Performance of Services:
  ~Recognized in the period services have been rendered & billed.

Question 9

Revenue Recognition: Sale of Goods

IFRS

Answer 9

• Transaction can be measured reliably.
• Economic Benefits from the transaction will flow to the ownership.
• Entity does not retain managerial involvement.

Question 10

Revenue Recognition: Rendering of Services

IFRS

Answer 10

• Transactions can be measured reliably
• Economic benefits from the transaction will flow to entity.
• Stage of completion of transaction at end of reporting period can be measured reliably.

Question 11

Revenue Recognition: Interest, Royalties & Dividends

IFRS

Answer 11

• Measured reliably

- Economic Benefits from the transaction will flow to the entity.

Question 12

Continuing Franchise Fees should be reported by the Franchisor as?

Answer 12

Revenue when they are Earned.

Question 13

Purchased Intangible Assets from other enterprises should be Recorded at?

Answer 13

• At Cost.

- Legal & Registration Fees should also be capitalized.

Question 14

Internally Developed Intangible Assets treated? Examples?

Answer 14

• Be expensed against income when incurred.
  (GAAP prohibits Capitalization of R&D)
• Ex: Trademarks, Goodwill from Advertising & maintaining goodwill.

Question 15

Specially identifiable Internally Developed Intangible Assets can be Capitalized:

Answer 15

• Legal Fees, defense of asset
• Reg or Consulting Fees
• Design Costs (TM)
• Other direct costs to secure the asset

Question 16

Amortization of Intangible Asset: Value & Cost?

Answer 16

• Value of intangible assets eventually disappears.
• Cost of each type of intangible asset amortized by systematic charges to income over the period estimated to be benefited.

Question 17

Patent Amortization life?

Answer 17

• Over the shorter of its estimated life or remaining legal life.

Question 18

Amortization Method used for Intangibles

Answer 18

• Straight- Line method should be applied

- Unless company demonstrates that another systemic method is more appropriate.

Question 19

Goodwill Amortization, Req Approach?

[Impairment Method]

Answer 19

• Amortization of purchased goodwill is not permitted.

- Required approach is to test goodwill for impairment at least annually.

Question 20

Intangible assets can be reported under either:

IFRS]

Answer 20

• The cost method
  OR
• The Revaluation Model

Question 21

Which F/S is the Revaluation Model for LOSSES Reported in?

Answer 21

Reported on the I/S:
- UNLESS the loss reverses a previously recognized revaluation Gain.

Recognized in OCI:
- & reduces the revaluation surplus in Accumulated other Comp. inc.

Question 22

Which F/S is the Revaluation Model for GAINS Reported in?

Answer 22

Reported in other Comp. Income & Accumulated in equity as Revaluation Surplus:
- UNLESS the gain reverses previously recognized loss.

Reported on I/S :
- To extent that they reverse a previously recognized revaluation loss.

Question 23

Initial Franchise Fees: Amount paid & Amortized over?

Answer 23

• PV of the amount paid (or to be paid) by the franchisee is recorded as an intangible asset on the B/S
• Amortized over the expected period of the benefit of the franchise. (expected life of franchise)

Question 24

Reporting Continuing Franchise Fees?

Answer 24

-Fees should be reported by the franchisee as an expense and as revenue by the franchisor, in the period incurred.

Question 25

R&D Costs are directly charged to Expense EXCEPT FOR: | [US GAAP]

Answer 25

- Materials, equipment, facilities (Tangible Assets): - R&D costs of any nature undertaken on behalf of others understand a Contractual agreement. ~ Purchaser will expense as R&D amount paid & provider will expense the costs incurred as cost of sales.

Question 26

Items NOT R&D

Answer 26

- Routine periodic design changes to old products or troubleshooting in production stage - Marketing Research - Quality Control Testing - Reformulation of a chemical compound.

Question 27

Research Costs | [IFRS]

Answer 27

Must be expensed but development costs may be capitalized.

Question 28

Software Development Costs Expense costs until? | & Capitalize Costs when?

Answer 28

- Tech. feasibility has been established for the product. - Capitalize costs incurred After Tech. Feasibility has been established up to the point that the product is released for sale

Question 29

Amort. of Capitalized Software Costs

Answer 29

% of Rev = Total Cap. Amt X (Current gross Rev. for Period/Total projected Gross Rev. for Product) OR Straight Line= Total Cap. Amt X (1/ Estimate of Econ. Life)

Question 30

Software Development On B.S Reported at?

Answer 30

- The LOWER of cost or market where market is Equal to net realizable value.

Question 31

Computer Development Internally; Expense costs incurred for?

Answer 31

- The Preliminary Project State & - Costs incurred for training & maintenance.

Question 32

Internal Developed Software sold to Outsiders; Proceeds Received?

Answer 32

- Should be applied first to the carrying amount of the software. - Then recognized as revenue (after carrying amount of the software has reached zero.)

Question 33

Intangible Assets with Finite Lives: 1st Step Impairment Test

Answer 33

- Fixed Assets treated the same Step 1: - Carrying Amount of the asset is compared to the sum of the UNDISCOUNTED cash flows expected to result from the use of the asset & eventual disposition.

Question 34

Reporting an Impairment Loss

Answer 34

- Reported as a component of income from continuing operations before income tax.

Question 35

Evaluation of Goodwill Impairment: Step 1

Answer 35

- Identify potential impairment by comparing the FV of each reporting unit with its carrying amount, including GW. - If FV is greater than CV: No Impairment exists

Question 36

What are the 2nd step for testing Goodwill Impairment?

Answer 36

- If impairment appears to exist: - The assets and liabilities should be compared to the total value of the reporting unit. - The difference is Goodwill. - Compare this amount to the CV of the Goodwill and write it down accordingly.

Question 37

How are Research and Development costs recorded?

Answer 37

They are expensed in the period incurred and are not capitalized

Question 38

How are legal fees to defend a patent amortized?

Answer 38

If the patent is SUCCESSFULLY defended the legal fees are amortized over the patent's economic life. If unsuccessful they are expensed immediately

Question 39

How are costs dealing with Technological Feasibility for Developing Software recorded?

Answer 39

Expenses prior to technological feasibility are expensed as R&D. After technological feasibility but prior to production costs are capitalized

Question 40

Intangible Assets with Finite Lives: 2nd Step Impairment Test

Answer 40

Step 2: - If carrying amount exceeds the total UNDISCOUNTED future cash flows - Then an impairment loss equal to diff. betwn carrying amt. & its FV

Question 41

How are costs dealing with Expenses for Developing Software recorded?

Answer 41

Expenses incurred during production are charged to inventory. Expenses incurred training on internal use software are expensed

Question 42

Computer Development Internally; Capitalize costs incurred?

Answer 42

After the PRELIMINARY project state; ~For upgrades ~Enhancements ~Amortized on a straight line basis