FAR 2 Flashcards
Installment Sales
Delay profit recognition until cash is received
GP is recognized in income in proportion to the cash collection
Use when there is no reasonable basis to estimate the degree of collectibility (i.e. ultimate collectibility cannot be estimated)
Cost Recovery
Appropriate when there is doubt that amount due will be collected
IFRS Method for L/T construction contract
Cost Recovery Method and Percentage of completion
GAAP Method for L/T construction contract
Complete Method and Percentage of completion
Non-monetary Exchange
Treatment of gain with
Commercial Substance
Gain/loss recognize immediately
Gain = FV asset given up > BV asset given up
Loss =FV asset given up
Non-monetary Exchange
Treatment of gain with
Lack commercial Substance
- No boot received = no gain is recognized
- Boot is paid = no gain is recognized
[report at historical cost + cash] - Boot is received = recognize proportional gain (
Non-monetary exchanges
IFRS - dissimilar asset
Similar treatment to exchange with commercial substance
Exchange that generates revenue
All gain/loss recognized
Non-monetary exchanges
IFRS - similar asset
No gains are recognized
Exchange that generate revenue
Other Comprehensive Income
Include all changes in equity from non-owner transactions
Exclude investments by owners and distribution to owners
Other Comprehensive Income
PUFER
P - ension Cost U - unrealized gain/loss from avaible for sale securities F - foreign currency translation E - effective portion of net cash flows R - Revaluation gain (IFRS ONLY)
Presentation of OCI
May be shown on
1. statement of comprehensive income
2. in I/S under NI
3. statement of equity
Must show tax effectsComprehensive Income
Net Income + Other Comprehensive Income
Research and development cost
‘Expense’
- R&D performed by another company
- Equipment with no alternate use
- Testing for new products
- Laboratory research
- Depreciation expense of capitalized asset
- All costs related to unsuccessful defend of patent (e.g price, acquisition cost, legal cost)
Research and development cost
‘Capitalize’
- R&D to be reimbursed by third party
- Equipment, materials, facilities with alternate use
- All costs related to unsuccessful defend of patent (e.g price, acquisition cost, legal cost)
Involuntarily exchange
Loss = net book value + costs associated with the transaction
Gain/loss = proceed from sale - carrying amount of FA
Goodwill is amortize when
It is purchases externally
Goodwill is expenses when
It is developed internally.
Maintaining and developing goodwill costs are expensed as R&D
When there is unlimited right of return, nothing should be recorded as…
Sales unless the following conditions are met:
- sles price is substantially fixed
- buyer assumes all risk of loss
- buyer has paid some form of consideration
- amount of returns can be reasonably estimated
Under GAAP, for software developed internally, cost incurred IN/BEFORE the preliminary project stage should be
Expensed
Under GAAP, for software developed internally, cost incurred AFTER the preliminary project stage should be
Capitalized and depreciated over the economic life of the product
Under GAAP, Start-up cost is immediately
Expense
Intangible that has been permanently impaired should..
Record loss equal to its carrying amount
Under U.S GAAP, Goodwill should be test for value impairment at which level?
Reporting unit
Under IFRS, Goodwill should be test for value impairment at which level?
Cash generating unit level
Under U.S GAAP, reversal of impairment loss is
PROHIBITED
Converting NI cash to Accrual
Increase in A/R - Add
Increase in A/P - SUBTRACT
06929
The treatment of research and development for an internally developed intangible asset under IFRS
Research is expensed
Development is capitalized
Revaluation model for intangible asset under IFRS
Revaluation losses - Income Statement
Revaluation gain - OCI
Impairment of intangible assets other than goodwill under U.S GAAP
Step 1: Carrying amount vs. undiscounted CF
Impaired if: carrying amount > undiscounted CF
Step 2: Recognize amount of impairment
FV - carrying amount
Impairment of intangible assets other than goodwill under U.S IFRS
Compare FV to recoverable amount of intangible asset
FV - recoverable amount (the GREATER OF FV - cost to sell or PV of the intangible asset)
Goodwill impairment under GAAP
Step 1: Impaired if FV
Quality control during commercial production including routine testing is NOT
R&D expense
Translation Method
‘Current rate method’
- Income Statement - weighted average rate
- Balance sheet
- Asset/Liabilities - current/ year-end date
- Common stock/APIC - historical rate
Remeasurement Gain/Loss is reported in
Income Statement
Translation gain/loss is reported in
Other comprehensive income
Remeasurement Method
‘Temporary Method’
- Balance sheet
- Monetary items - current year rate
- Nonmentary items - historical rate
- Monetary items - current year rate
- Income Statement
- non-balance sheet related - weighted average rate
- balance sheet related - historical rate
e. g. depreciation/PP&E, COGS, Amortization
Calculate NCI under IFRS partial goodwill
FV of net assets x NCI %
