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CPA- FAR > F3 > Flashcards

F3 Flashcards

1
Q

What is a Trading Security?

A

A Current Asset. Debt & Equity held for sale

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2
Q

What is an Available for Sale (AFS) Security?

A

GR: Non-Current Asset. Debt & Equity that is not Trading or HTM

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3
Q

What is a Held to Maturity (HTM) Security/

A

GR: Non-Current Asset. Debt ONLY with intent and ability to hold to maturity

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4
Q

What are the 3 classifications of securities under IFRS?

A

Financial Assets at FV through P/L, AFS, HTM

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5
Q

Under IFRS, what are Financial Assets at FV through P/L Securities?

A

Held for Trading (like GAAP) or Assets designated as investment at FV through P/L using FV option

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6
Q

How are Trading Securities valued?

A

at FV. Record Unreal G/L in IDEA

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7
Q

How are AFS Securities valued?

A

at FV. Record Unreal G/L in OCI: PUFE

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8
Q

How are AFS Securities valued in IFRS?

A

AFS to OCI except foreign exchange G/L for debt securities to IDEA

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9
Q

How are HTM Securities valued?

A

at amortized cost

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10
Q

What is the difference between GAAP (P/L) and Tax Return (nontaxable until sold)?

A

deferred taxes

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11
Q

When reclassifying Securities FROM TRADING, how do you adjust unreal G/L?

A

no adjustment

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12
Q

When reclassifying Securities TO TRADING, how do you adjust unreal G/L?

A

Recognize unreal G/L in earnings

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13
Q

When reclassifying Securities FROM HTM TO AFS, how do you adjust unreal G/L?

A

record in OCI

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14
Q

When reclassifying Securities FROM AFS TO HTM, how do you adjust unreal G/L?

A

Amort G/L from OCI to I/S

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15
Q

With an impairment loss, if the FV decrease is permanent, where do you record the write down?

A

I/S

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16
Q

Under IFRS, what is the difference with Securities impairment losses?

A

may be reversed

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17
Q

Where is the sale of a security reported?

A

on I/S

18
Q

What are the income tax effects of sale of a security?

A

mark to market

19
Q

What are consolidated financial statements?

A

an economic truth, but a legal fiction

20
Q

What are the criteria for when to/not to consolidate?

A

consolidate ALL majority owned subs to have one management and one economic entity. DO NOT consolidate when control is not with owners. Can consolidate companies with different year ends

21
Q

Compare GAAP vs. IFRS for consolidating companies with different year ends.

A

GAAP (DISCLOSE significant txns during gap period) IFRS(adj sub F/S for significant txns during gap period)

22
Q

What are the different degrees of control and what methods are used in external reporting for consolidations?

A

COST (50%, control)

23
Q

What are the key points about the cost method?

A

investment is not adjusted for earnings, is adjusted to FV, dividends < RE are income

24
Q

What constitutes significant influence?

A

majority of board, or largest S/H

25
Q

What are the key points about the equity method?

A

like a bank account. BASE. Cost + earnings – dividends = end

26
Q

What are stock dividends?

A

memo entries only

27
Q

In the equity method, how is goodwill calculated?

A

Purchase Price – NBV – FV (amort, service charge) = excess (Goodwill)

28
Q

What method do joint ventures use?

A

equity method for GAAP & IFRS

29
Q

How do you record Cost to Equity method change?

A

recalculate last year % by using “what-if” equity method (GAAP only)

30
Q

What are the exceptions under GAAP for required consolidation for >50% ownership?

A

not required with reorganization or bankruptcy

31
Q

What are the exceptions under IFRS for required consolidation for >50% ownership?

A

not required if parent is a sub, parent is not public, AND the parent’s parent produced consolidated IFRS statements

32
Q

What are the fundamental principles of the acquisition method?

A

recognition principle (recognize everything) measurement principle (at 100% FV)

33
Q

What is the journal entry accounts for the acquisition method?

A

CAR IN BIG!

34
Q

What is CAR?

A

C/S, APIC, R/E. (sub’s old books eliminated, NBV)

35
Q

What is IN?

A

Inv in Sub & NCI

36
Q

What is BIG?

A

BS to FV, Identifiable Intangible A @ FV, and Goodwill (gain) plugged

37
Q

How is the acquisition journal entry recorded?

A

CAR (DR) + BIG (DR) = IN (CR)

38
Q

If control % changes, how is non control to control reported?

A

previous C/S to FV & recog in I/S

39
Q

If control % changes, how is change in control reported?

A

equity txn, record in APIC (like treasury stock)

40
Q

If control % changes, how is control to non control reported?

A

Sale G/L and adj remaining C/S to FV (record both on I/S)

41
Q

Which intercompany transactions are eliminated for external reporting

A

ALL

CPA- FAR (9 decks)

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