Far 1 Flashcards
Memorize
Fixed asset sold for gain. In income statement this operation should be reported
Net concept (proceeds less carting amount). Showing total gain as part of continuing operation, Not net of tax
Which is true regarding other comprehensive income disclosure?
Changes in accumulated balances by component may be shown in statement or in the notes of FS
Under US GAAP, material transaction that is infrequent but not unusual in nature should be presented as a separate component of income from continuing operation when transaction result in
Gain- Yes
Loss-Yes
How different bank accounts would be reported:
Segregated account used to pay current maturity of long term bond sinking fund debt -Non current asset. Not cash.
Overdraft bank account- current liability
All items component of income from continuing operations
Gain on debt extinguishment- usual and recurring
Hurricane- unusual and infrequent
Income from continuing operations:
Gain on requisition and retirement of bonds-Continuing
Loss of the abandoned equipment- treated like a sale- Continuing
Gain on disposal of component of a business-discontunied
The cumulative effect of a change in Accounting principles for inventory
No change if it’s change for LIFO. NOT PRACTICAL
Change if it’s change From Lifo to e.g. weighted everage.
Company contracted to dispose of an industry segment in November year 1. How much of operating loses should be included in loss from discontinued operations Year 1
The whole year l. The date when decision was made doesn’t matter.
Unusual and infrequent items reported as
Separate component of income from continuing operations. Pretax, not net of tax
Change from cash basis to accrual basis during the current year should be reported in current year FS
As prior period adjustment resulting from correction of an error
Discontinued operations are reported
NET of tax. Operating losses for a year + loss from disposal total * tax
Prior period adjustment net of tax:
Amount which belongs to next year e.g $60,000 prepaid insurance*2/3 which belongs to next perior *70% net of tax if tax rate 30%
Output method-Milestone achieved
Input method - Resources consumption, labor hours expended, cost incurred to total cost
Persentage of completion method
Annual GP = actual total cost incurred/total expected cost * total expected GP - GP previously recognized
Old building being actively marketed for sale will be valued at
Lower of it’s book value or net realizable value (fair value minus cost to sell)
Which statement is correct regarding reporting comprehensive income?
Accumulated other comprehensive income is reported in stockholders equity section of the balance sheet
Pension in comprehensive income:
- Prior service cost not recognized in net periodic pension cost (minus) -
- Prior service cost recognized (plus) +
- Amortization of actuarial loss on pension plan assets (plus) +
- Prior service cost in the year that it was amortized to net periodioc service cost
- Actual return on pension plan assets (NOT part of accumulated comprehensive income
Prior service costs recognized in the year of adjustment should be recorded to PBO and other comprehensive income (or loss), which then becomes part of accumulated other comprehensive income (or loss). The unrecognized prior service cost in accumulated other comprehensive income (or loss) is amortized to pension expense over the plan participant’s remaining years of service.
extinguishment of debt (paid face value of s security)
Included in net income NOT in other comprehensive income
How should the effect of a change in Accounting principle that us inseparable from effect of a change in Accounting estimate be reported.
As a component of income from continuing operations. It is treated as change in estimate. If error and change in Accounting principles all present periods should be redtated
Components of comprehensive income:
- Loss from discontinued operations included in Net income which is a component of comprehensive income
- Prior period error correction change in stock holders equity, not resulting from owners investments and distribution to owners and so included in comprehensive income
- Unrealized loss on investments in non current marketable equity securities
Which it in other comprehensive income can not have negative (debit) balance?
Fixed assets revaluation because it can be only gain, credit. Loss debit goes to current net income
Change in Accounting estimate
Affects only current and subsequent periods.
Change in Accounting principle
Cumulative effect of a change. Retained earnings
What amount of current asset for interest for note receivable dated June 30 company should recognize at year end
The interest to be received within one year. Remaining balance* %
Pair of fundamental qualitative characteristics of useful info with one of its components:
Relevance and materiality
Characteristics which enhance the usefulness of RELEVANT AND FAITHFULLY PRESENTED information; timeliness, verifiability,
In income statement line item displayed before considering income tax effec is:
Income /loss from operations
Part of discontinued operations
Gain/loss on the disposal of component of business even company has similar operations in another location
Part of continuing operations:
Shown on pretax
Hurricane damage
Gain on debt extinguishment
Gain on requisition and retirement of bonds
Loss of the abandoned equipment
The effect of new estimate of warranty cost is a change in estimate and reported in Income from continuing operations
Accounting change of principle is shown net of tax on the retained earnings statement
Revenue recognition formula current asset:
Accumulated cost + GP - billing = current asset
Transaction will be booked as a financing arrangement if
Repurchase price is equal or greater than original sales price and expected market value. E.g. Original price $50, Repurchase price $60 Expected market value $58
What line item displayed in income statement before considering tax
Income/loss from operations before Tax
I income/loss from continuing operations-Net of tax
Net income-Net of tax
Unusual and infrequent items should be reported as
Income from continuing operations pretax basis. It’s a component of net income.
Criteria NOT LEADS to treatment of each service as distinct obligation:
Service similar in nature and provided in the same manner. It means this service can be combined into single performance obligation.
Company recognize revenue ONLY then order delivered to the customer and performance obligations satisfied even if
Customer asked to wait and don’t send product
INCOME STATEMENT:
Net sales -COGS ---------- GP -------- -SG&A incl depreciation --------- Operating income
Other income and expenses:
Interest expense
Other gains and losses: Loss on sale of equipment Gain on extinguishment of debt Loss due to earthquake damage Unrealized gain on equity securities -------------------------------------------------------- Income before income tax
Income tax expense Income from continuing operations Income/loss from discontinued operations ----------------------------------------------------------- Net income
Characteristic which enhances relevance and faithful representation
Timeliness
Loss from discontinued operations:
1 year. Should include operating losses and and IMPAREMENT loss on the year then when component classified as held for sale.
2 year. Operating losses for year 2 and if real sell fair value even less than fair value etimated in 1 year, recognize additional loss LOSS ON DISPOSAL
Change in Accounting principle:
If balance sheet item, e.g. inventory take effect only of of last year before change
If Cost of good sold when take effect of all years
Reflect in beginning of retained earnings
Substantial doubt about entity ability to continue as a going concern exists when relevant conditions and the events:
Probable that the entity won’t be able to meet it’s obligations as they come due within one year from the date THE financial statements are ISSUED
Which is true regarding Other Comprehensive Income:
Must be shown on the face of income statement- NO
Related tax expense for components must be disclosed-YES
If you need to recalculate depreciation expense, don’t recalculate prior periods
Start at the date when decision about changing useful life was maid, calculate remaining PPE balance
Cost of inventory
FOB Shipping point - shipping is a cost of buyer
FOB Destination - packaging, shipping, handling cost of seller
Which is true regarding disclosure of OCI
Changes in accumulated balances by components shown in FS or in the notes
For interim financial reporting for tax purposes the effective tax rate should reflect anticipated :
Foreign Tax Rate
Available Tax planning alternatives
How to calculate note discount:
- Calculate maturity amount, e.g. 6 month 10% note = 6/12*10%
- Discontinued to the bank for cash at 12% after 2 months=Maturity $* 4/12 *12%. Amount of cash received by entity is difference
The cumulative effect of change in Accounting estimate should
Not be shown anywhere. It Handel’s prospectively
3 years comparative FS. Error discovered in 1 year. How it should be reflected in FS
FS of to year 1 and 2 should be restated. Cumulative effect of change in year 1 and 2 should be reflected in carting amount of assets and liabilities at the beginning of year 3.
What is not accurate feature of $ value LIFO method
$ value LIFO ending inventory must be greater than ending inventory at base year cost
The correction of the failure to accrue warranty costs is treated as
a correction of an error and thus as a prior period adjustment.
Operating Cash Flow Ratio
Cash from operations/Current liability
XBRL requires all filings except
Forms 3.4.5. Not company but individual files
10K,6K, 20F required
Convert from cash to accrual basis
+AR - Collections - Any accrued Expenses
Company must report segment information about a company’s major customers if
if that customer provides 10% or more of COMBINED revenue, internal and external, of all operating segments
Book transaction as financing arrangement
if repurchase price is equal or more than original sales price and expected market value
Which disclosure required by IFRS, but not by GAAP
Statement of compliance with applicable Accounting principles
Disclosure of judgements made in preparation of FS
Which is true regarding disclosure of other comprehensive income?
Changes in accumulated balances by component maybe shown in FS or notes in FS
Where gain and loses from remwsurement and translation foreign statement reported?
Remsurement -Net income
Translation-Other Comprehensive income
INCORRECT STATEMENT ABOUT FASB
It allowed to build robust internal control
Going concern ability evaluation
Occur each annual and interim period
Separate disclosure of EPS required only for
Discontinued operations
FASB due process for setting accounting
FASB seeks info by holding public forums
