FAR

Question 1

How is the purchase of an asset determined when an exchange price is not provided?

Answer 1

The purchase of an asset without an exchange price is based on the fair value of the consideration given.

Question 2

What concepts of capital are followed under the FASB Conceptual Framework?

Answer 2

Financial and Physical

• The Financial Concept results in a return on capital when the net assets at the end of the period is more than at the beginning of the period.
• The Physical Concept occurs only when physical product capacity (i.e. inventories, PP&E) are measured by their current costs. The Physical Concept results in a return when the current costs at the end of the year is more than the costs were at the beginning of the year.

Question 3

How are intercompany eliminations calculated?

Answer 3

I/C Profit: Total Profit

I/C Sales: Revenue

I/C Payable: Accounts Receivable

Question 4

How are Balance Sheet and Income Statements translated during Remeasurement?

Answer 4

sSpot Rate: Monetary and current value items, Debt/Note and Equity Securities reported at FV

Historical Rate: Non-monetary balance sheet items and related revenues and expenses. Long-Term Assets/Liabilities, Income Statement Items (Except for Sales, Operating Expenses and Taxes)

Average Rate: Sales, Allowance for Credit Losses, Operating Expenses, and Taxes

Exact Date: Dividends are translated using the exchange rate on the date of declaration.

Question 5

How are Balance Sheet and Income Statements translated during Translation?

Answer 5

Spot Rate: Assets and Liabilities

Historical Rate: Equity, Common Stock and APIC

Average Rate: Income Statement Items

Question 6

What is included in calculating net income for a newly formed business combination

Answer 6

• Indirect costs: Costs that relate to the acquisition are expenses (i.e. finder’s fees, G&A and Consultants fees)
• Direct issue costs (i.e. underwriting, legal fees) are debited to APIC
• Issue costs of debt are directly deducted from the carrying amount of the debt and amortized.

Question 7

How is a gain/(loss) on a restructuring payable calculated?

Answer 7

The gain/(loss) on a restructured payable is the difference between the carrying amount of the liability and the fair value of liability that is transferred.

Question 8

What is the impact on the financial statements if a previously deferred expense is not made?

Answer 8

Understated: Expenses

Overstated: Current assets, net income and retained earnings

Question 9

In a combined statement, how is total equity calculated?

Answer 9

Equity for a combined statement equals the

Retained earnings of all companies
(Any reciprocal ownership)
(Related portion of equity)

Total Equity

Question 10

How are equity-based investments reported on the statement of cash flows?

Answer 10

Equity-based investments are treated as a non-cash revenue.

• Increase in Investment = Subtract
• Decrease in Investment = Add