F3 Flashcards
Components of a Simple Book reconciliation
+ Bank collections
- Bank service charges
- Non-sufficient funds checks
+ Interest Income
Cash equivalents
Money market funds Deposits that are not legally restricted Bank checks and Bank drafts Treasury bills Certificates of deposits with original maturities of 90 days or less
Pledging
Company uses existing A/R as consignment for a loan. Still retains ownership as long as they comply with loan.
Requires disclosure only, no change to A/R
Factoring A/R
Selling A/R without recourse for less money than they are worth- risk of not collecting all A/R
With Recourse
Buyer has option to sell any uncollectible accounts back to the seller- similar to collateral
Discounting notes receivable calculation
Discount= Maturity value (principal + interest) x Buyer’s rate x Remaining time until maturity
Amount to be paid by buyer = Maturity value - discount
Factoring without recourse journal entry
DR: Cash, Due from Factor, Loss on sale of receivable
CR: Accounts receivable
Factoring with recourse criteria
Seller’s obligation for uncollectible accounts can be estimated
Seller surrenders control to the buyer
Seller can only be required to replace uncollected receivables with other assets
When to use LCNRV
IFRS- always
US GAAP- when using FIFO or weighted average cost
When to use LCM
US GAAP- When using LIFO or retail
IFRS- Never
Periodic vs Perpetual Inventory
Periodic: Determine inventory by physical count, Record one JE at time of sale
Perpetual: Update inventory for each purchase, 2 JE at time of sale (for revenue and for inventory)
COGS calculation Periodic Inventory
Beg. Inventory \+ Purchases = Cost of Goods Available for Sale - Ending Inventory = COGS
LIFO conformity rule
If LIFO is used for tax purposes, it must also be used in the financial statements
Purchase commitment
A legally enforceable agreement to purchase a specified amount of goods at some point in the future
Forward contract, must be disclosed
Costs included in cost of land
Broker’s commissions
Title and recording fees
Legal fees
Renovation costs getting it ready for use
Subtract proceeds from sale of existing material
NOT: Debt issuance costs
Costs included in Building
Costs of excavation (digging up for land)
Repair charges and building improvements
Architect’s fees
Construction period interest
Costs included in Equipment
Freight in and insurance while in transit Installation charges Testing and preparation for use Sales taxes Construction period interest
Costs included in Land Improvements (depreciable)
Fences Water systems Sidewalks Paving Landscaping Lighting
Sum of the years digits depreciation
(Cost - Salvage) x Remaining life/(total useful life)!
Depletion Base
Cost to purchase property
+Development costs on land
+ Estimated restoration costs
- Residual value of land (after extractions)
Unit depletion rate
Depletion base/
Estimated recoverable units
Lacking commercial substance
An exchange where projected cash flows are not expected to change significantly following the exchange
Gains on exchanges without commercial substance
If no boot is received, no gain is recognized.
If boot paid is less than 25% of total value, no gain is recognized.
If boot is received but less than 25% of total value, proportion of the gain is recognized
If boot received or paid is greater than 25% of total value, both sides recognize the total gain
Costs to capitalize
Purchased intangible assets
Initial franchise fees
R&D material and building costs that can be used alternatively in the future
Contractual R&D costs (projects taken for others)
Computer software producing after technological feasability
Costs to expense
Internally developed intangible assets Continuing franchise fees Start up costs R&D costs Computer software design, planning, testing Organization costs
US GAAP computer hardware and software R&D
Computer hardware- No R&D costs can be capitalized
Computer software- R&D costs can be capitalized after technological feasability
IFRS computer hardware and software R&D
Capitalize hardware and software R&D costs after technological feasability
Recoverability test
Tests if the sum of undiscounted expected cash flows from the asset exceeds its carrying value.
(If it doesn’t, asset is impaired)
Only used under US GAAP
Only used for finite lived assets
IFRS Impairment process
- Determine recoverable amount: Greater of fair value less costs to sell or value in use (PV of future cash flows)
- Impairment loss = Carrying value - Recoverable amount
