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FAR 2.0 Flashcards

1
Q

What are the qualitative characteristics most useful to investors or potential investors?

A

Relevance and
Faithful Representation

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2
Q

To be Relevant and Faithfully Represented, the information the financial information must have/be:

A
  1. Predictive, Confirmatory, Material Values (Relevant)
  2. Complete, Neutral and Free From Material Error
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3
Q

What is the five step approach to revenue recognition?

A

I: Identify Contract With Customer
S: Determine the Separate Performance Obligations
T: Determine the Transaction Price
A: Allocate the Transaction Price to Difference Performance Obligations
R: Recognize Revenue

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4
Q

What is the Formula to Calculate Revenue Using the Percentage of Completion Method?

A

Step 1: Calculate GP

Contract Price - Estmt’d Total Cost

Step 2: Calculate %

Total Cost to Date/Total Estimate Cost of Contract

Step 3: Compute Profit To Date

Step 1 x Step 2

Step 4: Compute Profit Earned for CY:

CY GP - PY GP

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5
Q

What are the Steps in Calculating Gain/Loss From Discontinued Operations?

A

Step 1: Calculate Impairment G/L

SP or NRV < BV

*Only Reported in the Year the Segment is Held for Sale

Step 2: Calculate Operating G/L

*ALL G/L for the CY

Step 3: G/L From Disposal

SP or NRV < than BV

*Only Reported in the Year the Segment is Sold

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6
Q

What are the Components of OCI

A

PUFI

P: ENSION ADJUSTMENTS
U: NREALIZED GAINS OR LOSSES FROM AFS SECURITIES (OR CLASSIFICTION FROM HTM TO AF)
F: FOREGIN CURRENCY TRANSLATION
I: INSTRUMENT SPECIFIC CREDIT-RISK

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7
Q

What are the Criteria to Calculate the 10% size test for Revenue, P/L, and Assets?

A
  1. Revenue: The segments revenue (external and internal) must be >= to combined segment revenue (external and internal)
  2. P/L: Revenues - Directly Traceable Costs - Reasonable Allocated Costs
  3. Assets: 10% or more of Total Identifiable Assets
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8
Q

What are the Major Forms That are Required to be Filed With the SEC by an Issuer?

A

*Forms 3, 4, & 5
*Form 6K
*Form 8K
*Form 10K
*Form 10Q
*Form 11K
*Form 20F
*Form 40F

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9
Q

What are the Type of Ratio Classes?

A

C - Coverage Ratios: Measure security or Protection for LT Creditors/Investors

P - Profitability Ratios: Measure Success or Failure for a given time period

A - Activity Ratios: Measure how effective the assets are being used

L - Liquidity Ratios: Measures ST ability to pay maturing obligations

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10
Q

What are the three Type of Methods Used to Factor in New Investors and how are they calculated?

A

G - Goodwill Method

Goodwill = Amount (Invested x amount of interest) - Sum of total investments including the incoming one

B - Bonus Method

Bonus = (Sum of total investments including the incoming one x amount of interest) - the amount being invested

E- Exact Method

= (Sum of total investments including the incoming one / (denominator of interest - 1)

***REMEMBER THAT ASSETS CONTRIBUTED IN ARE VALUED AT FAIR VALUE AT THE DATE OF CONTRITBUTION LESS ANY ASSOCIATED LIABILITIES

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11
Q

What are the three generic fund types, how are they reported and what is the purpose of the reporting framework?

A
  1. Government Funds (Modified Accrual Basis of Accounting; Current Economic Resources)
  2. Proprietary Funds (Accrual Basis of Accounting; Economic Resources)
  3. Fiduciary Funds (Accrual Basis of Accounting; Economic Resources)
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12
Q

What are the reconciling items from the Governmental Fund to the Government-wide financial statements (both balance sheet and income statement)

A

Balance sheet:
+ (C)apital Assets
- (A)ccumulated
Depreciation
- (N)on-current
liabilities
+ Internal (s)ervice
fund net position

Income Statement:
+ (C)apital outlay
+ (P)rincipal payments
on non-current debt
- (A)sset disposals NBV
- (S)ources - other than
financing
+(R)evenue
- (I)nterest Expense
-(D)epreciation
(E)xpense
+ (I)nternal service
fund revenue

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13
Q

What is included in the cost of Land, Buildings, and Fixed Assets Constructed by the Company?

A

Land - any costs incurred to get it ready for use (general rule) up to excavation of new building.

  • Title and recording & Legal
    fees
  • Existing obligations including mortgages and back taxes.
  • LESS proceeds from sales of existing buildings.

Building -

  • Repair charges neglected from previous owner
  • Alterations or improvements
  • Architect fees

Const. By the Comp. -

  • Overhead, Direct materials and Labor
  • R&M expenses that add value
  • Construction Period Interest
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14
Q

How should we treat Improvements/Replacements

A

1) If the carrying value of the old asset is known, remove it an recognize gain or loss - capitalize the cost to the asset account.

2) If the carrying value of the old asset is unknown, and the assets life is extended, debit accumulate depreciation and credit cash/AP for the cost.

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15
Q

What are the formulas to calculate depreciation for each depreciation method?

A

1) Straight Line - YOU KNOW THIS ONE

2) SYD= (Cost - Salvage Value) x Remaining Life of Asset/SYD*

*SYD= N x (N+1)/2                     
     N=Useful life

3) Units of Production=
(Cost - Salvage value)/Estmd
units or hrs= Rate per unit or hr

    Rate per unit x Number of Units 
   Produced= Depreciation expense

4) Double-Declining Method = Straight Line method x 2 (exclude salvage value)

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16
Q

What are the components of Accounts Receivable or Allowance for Doubtful Accounts roll forward?

A

BASE

Beginning Balance
Add:
1) Uncollectible
Accounts
Expense (BDE)
2) Recovery of previous
write-offs
Subtract: Accounts Written Off
Ending Balance

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17
Q

How to calculate Gain or Loss on a nonmonetary transaction that lacks commercial substance

A

Scenario #1: No cash is received = No gain

Scenario #2: Cash is paid = No gain

Scenario #3: Cash is Received = Recognize Proportional Gain if cash is less than 25% of total consideration given up (cash + FV)

Scenario #4: Cash is received and is greater than 25% of total consideration = Treat as monetary exchange

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18
Q

What are the $ thresholds to be considered a largely accelerated or accelerated filer types

A

Largely Accelerated: OS Common Equity >$700M

Accelerated: $700M> OS Common Equity >$75M

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19
Q

What are the filing deadlines for 10-k and 10-Q for Largely Accelerated, Accelerated, and other type filers?

A

10-k:

-Largely Accelerated filers: 60 days
-Accelerated filers: 75 days
-Others: 90 days

10-q:

-Largely Accelerated filers: 40 days
-Accelerated filers: 40 days
-Others: 90 days

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20
Q

What is the definition of a principal and most advantageous markets. Further, how is the advantageous market determined?

A

Principal Market: Market with the greatest volume or level of activity for the asset or liability

Most Advantageous Market (EXISTS WHEN THERE IS NO PRINCIPAL MARKET): Market with the best price for the asset or liability after consideration of transaction costs

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21
Q

How to calculate impairment of intangible assets (other than goodwill) and PP&E

A

Intangible Assets other than goodwill:

-Intangible assets with Finite Life:

Step 1: Is the Undiscounted future net cash flows LESS than the CV? Yes = Impaired

Step 2:

Assets Held for Use: FV (or DCF) - Net CV = Impairment Loss

Assets Held for disposal: FV (or DCF) - Net CV = Impairment Loss + Cost of Disposal = Total impairment loss

***For PP&E the process is the same only that DCF is is replaced with PV of future net cash flows in the calculation of Assets Held for Use/Disposal

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22
Q

What are the major components of the multi-step income statement?

A

1: Gross Margin

#2: Income (loss) from operations
#3: Income before income tax
#4: Income from continuing operations
#5: Net Income

***After Income from Continuing operations remember that you have discontinued operations (net of tax)

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23
Q

How to treat the Financial statements when reporting changes in Accounting Principle and Errors

A

Accounting Principle - should be recognized by adjusting beginning retained earnings in the earliest period presented & if comparative financial statements are presented, they should be restated.

Error Correction -

  1) Comparative FSs are presented: 
        - If the year in which the error is presented, correct the error in those financial statements

        -If the year is not presented, adjust the opening retained earnings of the earlies year presented

2) If Comparative FSs are not presented: the correction should be reported as an adjustment to the opening balance of retained earnings

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24
Q

What is the formula to calculate Comprehensive Income?

A

Net Income + OCI

OCI = PUFI

***REMEMBER THAT THE COMPONENTS OF OCI ARE NET OF TAX

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25
What are the journal entries recorded during 1) Construction Period and 2) When construction is completed using the percentage of completion method and the completed contract method?
During Construction Period: -Percentage of Completion Method: CIP Materials, cash,etc.. (to record costs incurred) AR Progress Billing (to record billings on contract) Cash AR (to record payments received) Cost of LT construction contracts CIP Revenue -Complete Contract Method: CIP Materials, cash,etc.. (to record costs incurred) AR Progress Billing (to record billings on contract) Cash AR (to record payments received) When construction is complete: -Percentage of Completion Method: Progress Billings CIP (to close construction accounts) -Complete Contract Method: Progress Billings Revenue (to close billings to revenue) Cost of LT Construction Contracts CIP (to close CIP to expense)
26
How to convert cash-basis FS to accrual FS
Treat the changes the OPPOSITE as you would when preparing the operating section of the statement of CF prepared using the accrual basis of accounting
27
What are the types of classifications of debt securities and how must those classifications be valued?
H - Held to maturity securities (valued at amortized cost/carrying value) A - Available for sale securities (valued at fair value)*** T - Trading securities (valued at fair value) ***THIS CLASSIFICATION IS A CATCH ALL FOR ALL OTHER SECURITIES THAT DO NOT CLASSIFY AS TRADING OR HTM SECURITIES
28
What are the ins and outs to calculate the carrying value under the equity method?
Beginning Balance Add: Investor's share of earnings Subtract: Investor's share of investee's dividends Ending Balance
29
What are the two distinct characteristics of accounting using the acquisition method
1) 100% of the Net Assets acquired are recorded at fair value with any excess being recorded as goodwill 2) When the companies are consolidated, the subsidiaries' entire equity is eliminated
30
What is the JE to record the acquisition of a subsidiary by issuing common stock?
Investment in Subsidiary $XX Common Stock Issued $XX APIC $XX
31
What is the eliminating JE when consolidating a subsidiary
CAR IN BIG C - Common Stock - Subsidiary A - Additional Paid-In Capital - Subsidiary R - Retained Earnings - Subsidiary I - Investment in Subsidiary N- Noncontrolling interest (if not 100% owned) B - Balance Sheet adjustments to FV I - Identifiable intangible Assets to FV G - Goodwill
32
What is the order of presentation of line items on a proprietary Income Statement
INCASE T Income Nonoperating Capital Contributions Additions to Endowments Special Items Extraordinary Items Transfers
32
What is the criteria to use blended presentation?
1) Is the board of the primary government the same as the component unit? 2) Does the component unit serve the primary government exclusively? 3) Does the organization not qualify as a legal entity? ***Yes to any of these answers would trigger blended presentation, otherwise discrete presentation will be applied
32
Remember this when identifying where proceeds should be recorded in a internal service fund
Even though billings and collection services are between funds, they are not interfund transfers because they are an exchange transaction
32
What is the Formula for retained earnings
32
What are the components of the Basic Financial Statements section of the ACFR?
1) MD&A 2) Government Wide FSs 3) Fund FSs (all funds types 4) Notes to FSs ***Integrated Approach must be applied between parts 1 - 3 meaning that there must be a reconciliation between all parts.
32
In the Statement of Net Position and Statement of Activities remember
Aside from a column of Governmental Activities, there is also a column for Business Type activates (Enterprise Funds)
32
What is the Net Position of Proprietary Funds comprised of?
Restricted for debt services Unrestricted Net Investment in Capital Assets
32
What are the Proprietary Fund Types and what do they track?
Internal Service Fund - tracks goods and services provided to other governmental units Enterprise Fund -track acquisition and operations of facilities and services that are intended to be primarily self-supported by user charges (thing utilities)
32
When assessing impairment related to goodwill what should you remember?
That the impairment loss will only be as large as the goodwill already recorded in the books.
32
What are the criteria to recognize in-kind for contributed services
- Specialized Skill is required -Otherwise be needed -Measurable -Easily
32
What are the columns that occupy most of the Statement of Activity of the Government Wide FSs and what are their components?
1) Program Revenues -Charges for Service -Operating Grants and Contributions - Capital Grants and Contributions 2) Net (Expenses) Revenues -Governmental Activities -Business Type of actives
32
What is the formula to calculate Book Value per Common Share
Common Stock Holder's Equity/Common Shares Outstanding
32
What are the entries to record the re-purchase of treasury stock under the cost method
Original Issue: Cash Common Stock APIC Repurchase of Treasury Stock: Treasury Stock Cash Reissue above cost: Cash Treasury Stock APIC Reissue below cost: Cash APIC Retained Earnings*** Treasury Stock ***Plug-in
33
What is the eliminating intercompany entry when inventory sales are made between parent/subsidiary
Sales Revenue COGS - Parent COGS - Sub Inventory - Sub AP AR
33
What are Program and Support Services?
Program - activities for which the organization is chartered Support Services - 1) Fundraising 2) Management and General 3) Membership Development
33
Which Fund Types Require a Statement of CF?
Proprietary Funds
33
What should be disclosed when an endowment is considered to be "underwater"
- FV -Endowment's original amount -Deficiency
33
Non-compensatory and Compensatory stock options
Non-compensatory - Compensation Expense is not recognized at all Compensatory - Compensation Expense is allocated over the service/vesting period
33
What are the Governmental Fund Types and what do they track?
General Fund - tracks ordinary operation financed by taxes and other general revenues. Is also a "Catch all" Debt Service Fund - tracks the accumulate of resources and the payment of interest and principal on all "general obligation debt". Resources are RESTRICTED Permanent Fund - tracks resources that are legally restricted to the extent that income, not principal, may be used to support government's program Special Revenue Fund - tracks revenues from specific taxes or earmarked sources Capital Projects Fund - tracks resources committed to acquire or construct major capital assets that are not already financed by an enterprise fund
33
What are the categories of a HCO's Income Statemen
-Patient Service Revenue -Other Operating Revenue -Nonoperating Revenue
33
What are the Fiduciary Fund Types and what do they track?
Investment Trust Funds - external investment pools Custodial Funds - tracks funds held for others Private Purpose Trust Funds - Catch all for activities not fitting into Investment or pension funds Pension Trust Funds - tracks pensions DCP, DFB, etc...
33
What is the definition of authorized, issued, and outstanding capital stock
Authorized - the amount of each class of stock that a company may legally issue Issued - When part or all of the authorized capital stock is issued Outstanding - the amount of issued capital stock that is in the hands of the shareholders
34
What are the two governmental type funds that do not record encumbrances
Debt and Permanent Funds
34
What are the financial statements produced by each category of fund?
Government FSs: 1) Balance Sheet 2) Statement of Revenues, Expenditures, and changes in fund balance Proprietary FSs: 1) Statement of Net Position 2) Statement of Revenues, Expenses, and changes in fund net position 3) Statement of Cash Flows Fiduciary FSs: 1) Statement of Fiduciary Net Position 2) Statements of changes in fund balance
34
What are the components of the Annual Comprehensive Financial Report (ACFR)
- Introductory Section (Unaudited) -Basic Financial Statements and Required Supplementary Information (Audited) -Statistical Section (Unaudited)
35
In general, what are the components of the of the Operating, Investing, and Financing sections of the statement of CF under the indirect method
Operating - Cash Receipts and Disbursements from transactions reported in the operating section of the income statement and Current Assets and Current Liabilities Investments - Cash Receipts and Disbursements from transactions related to non-current assets Financing - Cash Receipts and Disbursements from transactions related to debt and equity
35
What is the difference between an ordinary annuity and an annuity due?
WILL BE UPDATED
35
What are the criteria that defines a major fund?
A major fund must meet the 10% criteria within its category and also meet the 5% criteria associated with both categories
35
Remember this when identifying where proceeds should be recorded in a capital project fund
1) Bond Issue proceeds and Transfers from other funds should be recorded under "Other Financing Sources"
36
What is the criteria to be considered a primary government?
Primary government reports by itSELF Separately Elected Governing Body Legally Separate Fiscally Independent ***Must meet all 3 otherwise it is considered a component unit
37
What are the entries for an Asset Retirement Obligation (ARO)?
1) To initially record the ARO: Asset Retirement Cost (ARC) Asset Retirement Obligation 2) To record the Accretion Expense: Accretion Expense ARO 3) Depreciation Expense Accumulated Depreciation ***Entries 1 & 2 income statement accounts should add up to the total ARO
38
How do we treat bond issuance costs and how do we determine what they are?
39
What are the entries to record bond issuances issued at a premium and discount included interest expense
40
What is the criteria to determine whether a lease is a finances lease
OWNES
41
How should amortization of leasehold improvements be factored into a lease
Should be over the life of the improvement or the remaining life of the lease, which ever is shorter
42
What is the denominator in calculating depreciation expense under an operating and finance lease
43
How should purchase options be factored into a lease
44
How to calculate the lease liability at inception regardless of whether it is a finance lease or not
45
What methods are used to translate Assets/Liabilities and Revenues

Mnemonics (10 decks)

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