FAR 1A2 P&L Flashcards
How are interest payments typically reported in the statement of cash flows for both not-for-profit and for-profit entities using the indirect method?
✅ They are reported as a supplemental disclosure of cash flow information 📝
When should one-time termination benefits be recognized and measured?
✅ On the communication date 📅
✅ At fair value ⚖️
Should gains or losses on the sale of assets be included in revenue?
❌ No, they are excluded from revenue 🚫
✅ They are reported separately on the income statement
How are operating expenses and loss on disposal recorded for a held-for-sale entity?
📦 Operating expenses are recorded in the period they occur 📊
📉 Loss on disposal is recorded when the formal plan is set
Where should a gain or loss recognized on disposal be disclosed?
✅ On the face of the income statement 🏛️ or
✅ In the notes to the financial statements 📄
How should discontinued operations be reported on the income statement?
✅ The results of discontinued operations are shown separately
✅ Reported net of applicable income taxes (benefit) 💰
When should the results of operations of a held-for-sale component be reported in discontinued operations?
✅ In the period(s) in which they occur 🔄
What is a key requirement for a business unit to be classified as a discontinued operation?
✅ It must have separate and identifiable cash flows 💰
What qualifies as a strategic shift for a sale to be classified as a discontinued operation?
✅ It must represent a strategic shift in business
✅ Example: 15% or more of total entity revenue 📉
How should the gain or loss from discontinued operations be reported?
✅ Reported net of applicable taxes 💵
Where are prior-period adjustments recorded?
✅ Made to beginning retained earnings 🔄
❌ Not included in net income
What are some examples of discontinued operations?
✅ If the operation represents:
1️⃣ Product line > 15% of total revenue 🏭
2️⃣ Geographical segment > 20% of total revenue 🌍
3️⃣ 30-40% of historical net income, and > 15% now 📊
4️⃣ Sale of an equity method investment > 20% of total assets 💰
How is the amortization of bond discount classified in financial statements?
📉 Recorded as interest expense
📊 Added to cash provided by operating activities in SOCF
📉 Unamortized bond premium is subtracted from net income
When are discontinued operations classified as held for sale?
✅ When management commits to a plan to sell 🔄
✅ Meets held-for-sale criteria 📑