FAR 1

Question 1

What is Replacement Cost

Answer 1

Replacement cost is the amount of cash that would be paid currently to replace an asset

Question 2

What is Net Realizable Value

Answer 2

NRV is the selling cost minus cost of diposal of an asset

Question 3

What is Fair Value

Answer 3

FV is the price to sell and asset (NOT ACQUIRE)

Question 4

What is Historical Cost

Answer 4

Historical cost is the amount paid by a company to acquire an asset

Question 5

When do you book a financing arrangement?

Answer 5

When the repurchase price is greater than or equal too the original sales price and the expected market value

Question 6

Incremental Cost of obtaining a contract

Answer 6

cost incurred that would not have been incurred if the contract had not been obtained and are recognized as an asset capitalized and amortized

Question 7

Change in Accounting Estimate and describe treatment on IS

Answer 7

Dep exp, write down of inv, settlement of litigation, change in lives of fixed asset, change in year end accrual for salaries/bonuses. Changes in accountung estimate are treated prospectively which means it is implemented in the current period and future periods, DOES NOT AFFECT PAST PERIODS. Disclosure in Notes if it affects several future periods.

Question 8

Change in Accounting Principle and describe treatment on IS

Answer 8

Retrospective application where past financial statements are adjusted. Beginning RE is adjusted and the cumulative effect of the change is the difference in the retained earnings presented taking into account the tax rate.

Question 9

Correction of Error and treatment

Answer 9

Correction of an error in the financial statements of a company are accounted for by adjusting beginning RE (net of tax).

Question 10

Change in Accounting Entity

Answer 10

Occurs when the company has a changed composition like consolidated or combined financial statements. Retrospective application. Full disclosure of cause and nature of change necessary.

Question 11

Components of OCI

Answer 11

Pension adjustments (changes in funded status, net transition assets/obligations, & PSC), Unrealized gains/losses (available for sale securities), foreign currency items (translation adjustments & gains/losses on currency transactions), effective portion of cash flow hedge, instrument specific credit risk, and Revaluation surplus (IFRS ONLY)

Question 12

What is Comprehensive Income

Answer 12

Comprehensive income represents all the changes in stockholder’s equity from nonowner sources. It equals NI+OCI