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FAR > F4 > Flashcards

F4 Flashcards

1
Q

Concentration of Credit Risk - Disclosure

A

Disclose in the note to the FS

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2
Q

Marketable debt securities classified as TRADING

A

Reported at FV, w/ holding gains and losses included in earnings

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3
Q

Unrealized G/L - AFS Debt Securities

A
  • Recognized in OCI

- No unrealized holding gains/losses included in earnings

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4
Q

Held-to-Maturity Securities - Valuation

A

Valued at amortized costs

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5
Q

Reclassification - Transfers of Securities from one group to another

A

Accounts for at FV

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6
Q

Reclassification - From Trading Category - Gains/Losses

A
  • unrealized gains/losses are already recognized in earnings and should not be reversed
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7
Q

Reclassification - To Trading Category - G/L

A
  • unrealized gains/loss at the date of the transfer is recognized in earnings immediately
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8
Q

Dividend Revenue - FV Method

A

Revenue recognized to the extent of the cumulative earnings since acquisition and return of capital beyond that point

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9
Q

Reclassification - HTM Transferred to AFS - Gains/Losses

A
  • unrealized holding gains/loss at the date of the transfer is reported in OCI
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10
Q

Reclassification - AFS to HTM

A
  • unrealized holding gains/loss is already reported in OCI

- Gain/loss amortized over the remaining life of the security

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11
Q

Disclosures - Market Risk & Concentration of Credit Risk

A

Market Risk - encouraged but not required

Credit Risk - disclosure required

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12
Q

Leases - FV Method

A

Not eligible for FV method

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13
Q

Dividend Income - Formula - FV Method

A

of shares x Dividend per share

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14
Q

Financial Instruments - Dividends

A

Both carrying amount and FV are required to be disclosed

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15
Q

CECL Model - AFS Debt Securities

A

IF AFS debt security has a FV below amortized costs the asset is written down to the lower FV and recorded on the IS

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16
Q

Trading Debt Securities - Reporting

A

Reported at FV w/ unrealized gains/losses included in earnings

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17
Q

AFS - Unrealized gains/losses - Reporting

A
  • Reported in OCI net of income

- NOT on income statement

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18
Q

Brokerage Commissions and Taxes

A
  • Included in gain/loss calculation
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19
Q

FV Option Calculation

A 
Purchase price
(FV)
= Gain/loss
\+ Dividends received
= Income/loss
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20
Q

CECL Model - HTM Debt Securities - Losses

A

Losses are recorded when the amortized cost is more than PV

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21
Q

Equity Method

A
  • used to account for investments if significant influence can be exercised by the investor or the investee
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22
Q

Significant Influence

A
  • exercised by a company that owns 20% to 50% of voting stock of another investee company
    have significant influence over the operating and financial policies of the investee
    use equity method when presenting the investment in the investee
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23
Q

Equity Method Not Used

A
  • bankruptcy - sub
  • temporary investment
  • lawsuit is filed
  • standstill agreement
  • another small group has majority ownership
  • investor can’t get proper fin. info
  • investor can’t get representation
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24
Q

Equity Method - Initial Recording

A
  • Investment is originally recorded at the price paid to acquire the investment
  • Income increased investment acct.
  • Dividend decreases investment acct.
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25
Q

JE to record investment at cost - Equity Method

A

Investment in Investee $XXX

Cash $XXX

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26
Q

JE to record increase in the investment by the investor’s share of earnings of the investee

A

Investment in investee $XXX

Equity in earning/Investment Income $XXX

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27
Q

JE to record decrease in the investment by the investor’s share of cash dividends from the investee

A

Cash $XXX

Investment in Investee $XXX

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28
Q

Investment in Investee CS and PS

A

IF investee owns both CS and PS significant influence test is usually met by the amt of CS owned

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29
Q

Equity Method Impairment

A

Impairment loss is recognized when two conditions occur:

  1. FV < CV of the investment
  2. Decline is not permanent
30
Q

Ownership % below 20% but significant influence exists

A

use equity method

31
Q

Significant Influence

A

cannot be exercised by non-voting stock
Ex. company owns 40% non voting stock
*they would use FV method & not equity method

32
Q

Consolidate Exceptions

A
  • sub is in legal reorganization

- bankruptcy

33
Q

Goodwill created in investment account - Equity Method

A
  • NOT tested for impairment or amortized
34
Q

Acquisition Price Exceeds FV of net assets acquired

A

Assets & liabilities. presented at FV

35
Q

Liquidating Dividends - Equity Method & FV Method

A

Decrease the carrying amount of the investment acct.

36
Q

Dividends Received - Equity Method

A

Decrease investments on the BS

37
Q

Voting Interest Model

A

consolidatedFS are prepared when a parent-sub relationship has formed

38
Q

Parent Status

A

Control is established or 50% ownership of voting stock

39
Q

Controlling Interest

A

parent prepares and will consolidate all over 50% subsidiaries

40
Q

Noncontrolling Interest

A
  • may have stand-alone FS

- report in consolidated equity

41
Q

Variable Interest Entities (VIEs)

A

does not have equity investors w/ voting rights

42
Q

Primary Beneficiary

A

required to consolidate VIE

43
Q

Economic Entity

A

Accounting concept used to prepare consolidated FS when a parent sub relationship exists

44
Q

Costs to complete a business combination - expenses NOT amortized

A
  • Legal fees

- Due diligence costs

45
Q

Acquisition costs

A
  • expenses as incurred in the current period
46
Q

CAR Formula

A

Assets - liabilities = Equity
Asset - liabilities = NBV
Assets - liabilities = CAR

47
Q

NCI Calculation - BS

A

FV of sub x NCI %

48
Q

NCI Calculation - IS

A

subsidiary net income
x Controlling int. %
= NCI net income

49
Q

Identifiable Intangible Assets - Amortized

A
  1. Finite useful life

2. Infinite useful life

50
Q

Finite Useful Life

A
  • amortized to residual value over expected useful life

- two - step impairment test

51
Q

Indefinite useful life

A
  • do not amortize

- one-step impairment test

52
Q

FV of sub

A

Acquisition cost + NCI @ FV

53
Q

Acquisition Accounting - CARINBIG JE

A 
C - Dr. CS - sub
A - Dr. APIC - sub
R - Dr. RE - sub
I - Cr. Investment in sun
N - Cr. Non-controlling Interest
B - Dr. BS adjustments to FV
I - Dr. Identifiable intangible assets to FV
G - Dr. Goodwill
54
Q

Bargain Purchase - Recognition - Acquisition

A

Recognized as a gain in earnings @ acquisition date

55
Q

Effect of Paying dividends on RE & NCI

A
  • No effect dividends

- Decreases NCI

56
Q

Inter-company Transactions - BS

A
  • Eliminate all intercompnay transactions on the BS
57
Q

Intercompany WP elimination entry - Inventory

A 
Dr. Re
Dr. Intercompany sales
Cr. Intercompany COGS
Cr. COGS 
Cr. Ending Inventory
58
Q

Intercompany WP Elimination JE - Bonds

A

Dr. Bonds payable
Dr. Premium (or Cr. discount)
Cr. Investment in affiliate bonds
Cr. Gain on extinguishment (or Dr. Loss)

59
Q

Intercompany WP Elimination JE - land

A

Dr. Intercompany gain on sale of land

Cr. Land

60
Q

Intercompany WP Elimination JE - Depreciable Assets

A

Dr. Intercompnay gain on sale of machinery
Cr. Machinery
Cr. Acc. Dep.

61
Q

Intercompany transactions - consolidation

A

All intracompany transactions should be eliminated upon consolidation

62
Q

Consolidated Cash Flow for NP

A

Beg. parent NP
Acquisition date sub. NP
(Ending consolidate NP)
= Cash outflow

63
Q

Acquisition Method - RE

A
  • 100% of the sub. equity accounts are eliminated at consolidation
64
Q

Acquisition Method - SE

A

100% of the sub. shareholder’s equity (including CS) as of the date of acquisition is eliminated in consolidation

65
Q

Net Income of Newly acquired sub.

A

only included in consolidated net income from the date of acquisition

66
Q

Liabilities - Consolidated FS

A

Parent company reported sub. liabilities on consolidated FS, if parent owns 50% or more of sub

67
Q

Subsidiary Assets - Acquisition Method

A

100% of the FV of the subsidiaries assets are recognized adding them to the BV of the parent’s assets

68
Q

Goodwill impairment Testing

A

goodwill should be tested for impairment at the reporting unit level

69
Q

Goodwill impairment Testing - Timing

A

Tested for impairment at least annually at the same time each year

70
Q

Goodwill impairment test

A

CV of entity
(FV of entity)
= Impairment loss

*impairment loss cannot exceed amount of goodwill already reported

FAR (3 decks)

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