FAR 2

Question 1

When should you capitalize Research and Development Costs?

Answer 1

if materials are to be used for an alternative use or if they are undertaken on behalf of someone else.

Question 2

When should royalties paid be reported?

Answer 2

They should be reported in the period incurred

Question 3

When is an impairment loss recognized in IFRS?

Answer 3

the extent that the carrying value of CGU exceeds the recoverable amount of CGU (carrying amount - CGU)

Question 4

When would a cash basis understate accounting?

Answer 4

It would be understated in Accrued expenses.

Question 5

When can you capitalize Goodwill?

Answer 5

Goodwill is capitalized only when incurred in the purchase of another entity. (not for maintaining or developing).

Question 6

What is the cost of trademarks usually amortized over?

Answer 6

Economic life

Question 7

When do you expense costs in computer software usage?

Answer 7

before technological feasibility is established

Question 8

What costs can be capitalized with intangible assets?

Answer 8

Legal fees, consulting fees and registration costs, fees in a successful defense, and design costs

Question 9

when does a franchiser recognize revenue?

Answer 9

When the services have been substantially performed.

Question 10

What is the matching principal?

Answer 10

matching expenses against revenue in the same accounting period.

Question 11

What costs are expensed under IFRS?

Answer 11

Research expenditures, staff training, and administrative salaries must be expensed.

legal costs, patent purchase price, and taxes are capitalized

Question 12

Under IFRS how do you chose to use the fair value or value in use?

Answer 12

Whichever is the greater amount.

Question 13

How to account for a cash to accrual change?

Answer 13

add increase in current asset
subtract a decrease in current asset
add decrease in current liability
subtract an increase in current liability

Question 14

Under IFRS when can the development costs be expensed?

Answer 14

if technical feasibility has been established, the company intends to complete the asset, the company has the ability to see or use the asset, sufficient resources are available, and the asset will generate future economic benefit.

Question 15

what is deferred revenue?

Answer 15

Income collected in advance (cash received before it is earned)
it is a liability until the service has been performed.

Question 16

When is Goodwill recognized in your balance sheet?

Answer 16

When it has been created from a business acquisition

Question 17

If a non monetary exchange has commercial substance h ow is a G/L treated?

Answer 17

the Gain and loss is recognized immediately

Question 18

What is the functional currency of a foreign subsidiary?

Answer 18

Its the currency of the environment in which the subsidiary primarily generates and expends cash.

Question 19

How are translation adjustments included in determining net income for the period?

Answer 19

They are not included in net income but are disclosed and accumulated as a component of OCI in consolidated equity until disposed.

Question 20

How are foreign exchange translation loss accounted?

Answer 20

should be reported as a component of accumulated OCI. It is a contra account to stockholders equity.

Question 21

What happens when there is no foreign exchange transaction gain or loss?

Answer 21

the transaction could have been denominated in US dollars.

Question 22

When is a transaction first journalized?

Answer 22

when title transfers to the buyer

Question 23

What uses historical rates in translation method?

Answer 23

common stock and APIC, and capital accounts

Question 24

what is the difference between income tax basis FS and GAAP?

Answer 24

they recognize revenues and expenses in different reporting periods.

Question 25

How to account for a transaction that has commercial substance?

Answer 25

the transaction is accounted for using the FV of the asset surrendered or received