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FAR > F2Pt.1-Matching > Flashcards

F2Pt.1-Matching Flashcards

1
Q

Which Personal Financial Statements are required?

A

Statement of Financial Condition & Statement of Changes in Net Worth

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2
Q

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

A

Estimated current value

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3
Q

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?

A

Presented on Statement of Financial Condition between Liabilities and Net Worth

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4
Q

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

A

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

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5
Q

How is life insurance presented on a Personal Financial Statement?

A

Only shown if there is cash surrender value

It is shown net of loans against the policy

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6
Q

How are business interests shown on a Personal Financial Statement?

A

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

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7
Q

Contracts Revenue Recognition all 4 Criteria must be met:

US GAAP

A
  • Evidence of arrangement exists
  • Delivery has occurred or services rendered
  • Price is Fixed & Determinable
  • Collection is reasonably assured.
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8
Q

Revenue Recognition: Sale

A
  • 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.
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9
Q

Revenue Recognition: Sale of Goods

IFRS

A
  • Transaction can be measured reliably.
  • Economic Benefits from the transaction will flow to the ownership.
  • Entity does not retain managerial involvement.
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10
Q

Revenue Recognition: Rendering of Services

IFRS

A
  • 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.
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11
Q

Revenue Recognition: Interest, Royalties & Dividends

IFRS

A
  • Measured reliably

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

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12
Q

Continuing Franchise Fees should be reported by the Franchisor as?

A

Revenue when they are Earned.

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13
Q

Purchased Intangible Assets from other enterprises should be Recorded at?

A
  • At Cost.

- Legal & Registration Fees should also be capitalized.

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14
Q

Internally Developed Intangible Assets treated? Examples?

A
  • Be expensed against income when incurred.
    (GAAP prohibits Capitalization of R&D)
  • Ex: Trademarks, Goodwill from Advertising & maintaining goodwill.
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15
Q

Specially identifiable Internally Developed Intangible Assets can be Capitalized:

A
  • Legal Fees, defense of asset
  • Reg or Consulting Fees
  • Design Costs (TM)
  • Other direct costs to secure the asset
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16
Q

Amortization of Intangible Asset: Value & Cost?

A
  • 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.
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17
Q

Patent Amortization life?

A
  • Over the shorter of its estimated life or remaining legal life.
18
Q

Amortization Method used for Intangibles

A
  • Straight- Line method should be applied

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

19
Q

Goodwill Amortization, Req Approach?

[Impairment Method]

A
  • Amortization of purchased goodwill is not permitted.

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

20
Q

Intangible assets can be reported under either:

IFRS]

A
  • The cost method
    OR
  • The Revaluation Model
21
Q

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

A

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.

22
Q

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

A

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.

23
Q

Initial Franchise Fees: Amount paid & Amortized over?

A
  • 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)
24
Q

Reporting Continuing Franchise Fees?

A

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

25
Q

R&D Costs are directly charged to Expense EXCEPT FOR:

[US GAAP]

A
  • 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.
26
Q

Items NOT R&D

A
  • Routine periodic design changes to old products or troubleshooting in production stage
  • Marketing Research
  • Quality Control Testing
  • Reformulation of a chemical compound.
27
Q

Research Costs

[IFRS]

A

Must be expensed but development costs may be capitalized.

28
Q

Software Development Costs Expense costs until?

& Capitalize Costs when?

A
  • 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
29
Q

Amort. of Capitalized Software Costs

A

% 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)

30
Q

Software Development On B.S Reported at?

A
  • The LOWER of cost or market where market is Equal to net realizable value.
31
Q

Computer Development Internally; Expense costs incurred for?

A
  • The Preliminary Project State
    &
  • Costs incurred for training & maintenance.
32
Q

Internal Developed Software sold to Outsiders; Proceeds Received?

A
  • Should be applied first to the carrying amount of the software.
  • Then recognized as revenue (after carrying amount of the software has reached zero.)
33
Q

Intangible Assets with Finite Lives: 1st Step Impairment Test

A
  • 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.

34
Q

Reporting an Impairment Loss

A
  • Reported as a component of income from continuing operations before income tax.
35
Q

Evaluation of Goodwill Impairment: Step 1

A
  • 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
36
Q

What are the 2nd step for testing Goodwill Impairment?

A
  • 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.
37
Q

How are Research and Development costs recorded?

A

They are expensed in the period incurred and are not capitalized

38
Q

How are legal fees to defend a patent amortized?

A

If the patent is SUCCESSFULLY defended the legal fees are amortized over the patent’s economic life.

If unsuccessful they are expensed immediately

39
Q

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

A

Expenses prior to technological feasibility are expensed as R&D.

After technological feasibility but prior to production costs are capitalized

40
Q

Intangible Assets with Finite Lives: 2nd Step Impairment Test

A

Step 2:

  • If carrying amount exceeds the total UNDISCOUNTED future cash flows
  • Then an impairment loss equal to diff. betwn carrying amt. & its FV
41
Q

How are costs dealing with Expenses for Developing Software recorded?

A

Expenses incurred during production are charged to inventory.

Expenses incurred training on internal use software are expensed

42
Q

Computer Development Internally; Capitalize costs incurred?

A

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

FAR (24 decks)

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