Fair Value Framework Flashcards
Mastery
ASC 825 exception for fair Value Option is
ASC Topic 825 provides that the fair value option does not apply to leases, pensions ,pension liability ,share based payments
when does ASC 825 allow warranty to be measured at FV
if the warranty obligation can be settled by contracting with a third party, it can be valued using the fair value option.
Under Equity method of accounting how is net income for Parent and subsidiary calculated.
Under the “full” equity method of accounting, the acquirer’s net income equals consolidated net income
This amount can be proved as the acquirer’s income from independent operations plus its share of reported acquiree income.
The weighted-average for the year inventory cost flow method is applicable to which inventory systems?
The weighted-average method computes a weighted-average unit cost of inventory for the entire period and is used with periodic records.
Perpetual records use which inventory cost flow method
The moving-average method requires that a new unit of cost be computed each time new goods are purchased and is used with perpetual records.
A disadvantage of the periodic inventory system is ?
A disadvantage of the periodic inventory system is that the cost of goods sold amount used for financial reporting purposes includes both the cost of inventory sold and inventory shortages. periodic system does not record the cost of each item as it is sold; nor does it maintain a continuously current record of the inventory balance. Rather, cost of goods sold is the amount derived from the equation: Beginning inventory + Purchases = Ending inventory + Cost of goods sold. A count of ending inventory establishes the inventory remaining at the end of the period, but there is no recording of cost of goods sold during the period. Cost of goods sold is the amount that completes the equation. Thus, cost of goods sold is really the cost of inventory no longer with the firm at year-end - an amount that includes shrinkage.
What is inventory shrinkage ,can it be identified under periodic Inventory system?
Inventory shrinkage refers to breakage, waste, and theft. Shrinkage cannot be identified directly with a periodic inventory system.
In a noncancelable purchase commitment, the current market value of the inventory was less than the fixed purchase price, by a material amount. Which is the most appropriate accounting treatments ?
When a corporation enters into a noncancelable purchase commitment, and there is a decline in market value below the contract price, an unrealized loss should be recorded in the period of decline and reported in the income statement. The nature of the contract should also be disclosed in a note to the financial statements.
How is a net purchase method accounting done
Under the net purchase method, purchase discounts not taken are recorded in a Purchase Discounts Lost account. When this method is used, purchase discounts lost are considered a financial (i.e., “other”) expense, and are thus excluded from the cost of inventory.
Calculation of Investment value for Equity method
Carrying amount+Equity in Earnings -Dividend income
Calculation of Investment under Fair Value
carrying amount +Dividend Income+ FV adjustment (change in carrying value to FV).Note here no income declared by Investee is considered .
Are Intangible assets depreciated ?
No they are amortized .Remember to use amortization when doing a journal entry
How are deferred tax assets and liabilities reported?
All deferred tax assets and liabilities are reported as noncurrent.
What is FAS 43 criteria on vacation expenses
These criteria require accrual of the liability if the benefits accumulate or vest, the benefits are earned, and the payment is probable and estimable.
What is the meaning of rights to compensation accumulated over time or if the rights are vested?
When compensated absences either accumulate OR vest, then the liability should be accrued. Benefits accumulate if they can be carried over to future years.
For example, assume an employee earns four weeks’ vacation per year, but does not take a vacation for two years. If the employee can take an eight-week vacation in the third year, the benefits are said to accumulate (firms usually place restrictions on the total time that can be accumulated).
Benefits vest if they are no longer contingent on continued employment. This means that if an employee retires, he or she will receive their vested vacation pay.
