FAR Flashcards
TF: Completeness is an ingredient of relevance
False; faithful representation; others include neutrality and freedom of error
_____ and gains are realized when assets are exchanged for cash or claims to cash
Revenues
What are the enhancing qualitative characteristics?
Timeliness, understandability, comparability, and verifiability
TF: Managerial accounting need not follow generally accepted accounting principles (GAAP) while financial accounting must follow them.
True
To be relevant, information should have ____ value and/or ____ value and be material
predictive; confirming
What are the fundamental qualitative characteristics?
Relevance and faithful representation
Going concern and ____ ____ are the two underlying assumptions of financial statement preparation and presentation
accrual accounting
TF: Changing from cash basis accounting to accrual accounting results in prior period adjustment resulting from the correction of an error
True; cash basis accounting is not a generally accepted accounting basis
TF: Benefits related to voluntary employee termination is an exit and disposal activity
False; costs to relocate employees is
TF: A change from direct recognition to the installment method is a change in accounting principle ONLY
False; it’s a change in accounting principle INSEPARABLE FROM A CHANGE IN ACCOUNTING ESTIMATE
_____ _____ does not include all changes in equity resulting from investments by owners and distributions to owners
comprehensive income
____ ____ ____ _____ is a balance sheet account and is reported in the statement of financial position
accumulated other comprehensive income (AOCI)
TF: Information presented in notes to the financial statements have the purpose of providing disclosures required by generally accepted accounting principles
True
Under ____, loans to officers and key management compensation would require disclosure
IFRS; under GAAP only loans to officers require disclosure
TF: Segment cash flow is reported under IFRS (or U.S. GAAP).
NOT reported
TF: On the opening IFRS balance sheet, inventory must be reported at the lower of cost or net realizable value
True; do NOT use FV
TF: MD&A is required to be presented in an exhibit prepared using XBRL when submitting Form 10-K
False
TF: The franchisor should not report revenue from initial franchise fees when all material conditions of the sale have been “substantially performed.”
False; they SHOULD
TF: Under U.S. GAAP, subsequent reversal of intangible asset impairment losses is prohibited unless the intangible asset is held for sale.
True
TF: Goodwill is recognized in the balance sheet when it has been created from a business acquisition.
True
TF: Equipment used in research and development activities that has alternative future uses is capitalized and depreciated over the term of the R&D project.
False; capitalized and depreciated over its useful life.
What is the equation for gross profit?
Sale - COGS
What is the gross profit % equation?
GP/Sales price
What is the earned GP equation?
Cash collections*gross profit percentage
Deferred gross profit equals
installment receivable* gross profit percentage
TF: Deferred GP is a contra asset
True
TF: Under IFRS, unrealized G/L on foreign exchange debt securities are included in OCI
False; NOT included; ONLY for equity securities
TF: You should report an increase in the investment account under the cost method or the equity method of accounting when receiving a cash dividend
False; dividend is recorded as income under the cost method; dividend is a decrease in the investment account under the equity method
____ _____ is the difference between total assets and total liabilities after deducting estimated income taxes on the difference between the estimated values of assets and liabilities and their tax bases
Net worth
TF: Treasury bills are considered an outflow in the financing activities
False; T-bills are a cash equivalent in the operating activities; other examples include: commercial paper, money market funds, and federal funds sold (for an enterprise with banking operations).
TF: Incidental transactions result in gains and losses
True
EQ for rate of return on assets:
Net Income/ Average Assets
EPS:
Net Income- Div. on CUMULATIVE Preferred Stock/ Weighted Avg. number of common shares
TF: When a bargain purchase option exists or ownership of the leased asset reverts to the lessee, depreciation should be computed over the lease life of the assets using estimated salvage value at the end of that life
False; useful life
TF: Income statement items use the current rate to convert US dollars to year end
False; weighted average
Unrestricted contributions are reported as _____activities while contributions restricted for long-term purposes (i.e., plant acquisitions) are reported as ______ activities.
operating; financing
______ contributions are recognized as revenue when received or promised
restricted
Primary government criteria:
1: It has a separately elected governing body. 2: It is legally separate. 3: It is fiscally independent of other state and local governments.
TF: Governments are not required to present a statement of cash flows for proprietary funds using the direct method of presenting cash flows from operating activities.
False; they SHOULD
TF: Membership dues are an expense for not for profit entities
False
What are the subcategories of the supporting services category?
Management and general activities, fundraising activities, and membership development activities
TF: Expenses decrease unrestricted assets
True
What are the F/S required for a not for profit entity?
statement of financial position (like a balance sheet), statement of activities, statement of cash flows, and for voluntary health and welfare entities, a statement of functional expenses.
TF: Contribution revenues and assets or expenses should be reported for donated services ONLY if:
special skills are required to perform the service, and
the individual providing the service has those special skills, and
False; include on more: the organization would have to buy the services if they were not donated
TF: Under IFRS, you estimate a liability from a lawsuit as the smallest number in the range given
False; use the best number in the range; the chosen amount must always be discounted to present value.
Supporting services include management and general expenses, membership development expenses, and ____ ____
fundraising expenses
Unrestricted contributions are reported as ______ activities
operating
Cash contributions of $200,000 to be restricted to acquisition of property are considered ____ activities
financing
TF: Non controlling interest appears in the liability section on the BS
False; it’s in the equity section
TF: When a corporation own less than 100% of another corporation, add the noncontrolling interest of the subsidiary’s total SE to the parent’s total SE
True
TF: Costs incurred to develop software for internal use are expensed after the application development stage is reached
False; capitalized over the benefit period (economic useful life)
TF: Technological feasibility is established on completion of a detailed program design or completion of a working model.
True
F/S for not for profits are statement of activities, stmt of financial position, and stmt of ____
cash flows
Amortization is recorded with a debit to _____ _____ and a credit to ____ _____
accretion expense; ARO liability
3 characteristics from faithful representation:
complete, neutral, free from error
Net Income + ______= CI
Other Comprehensive Income
G/L on a forward contract uses the ___ rate at the B/S date and the end of the year
spot
3 exceptions to record nonmonetary exchange at book value NOT FV: FV is not determinable, exchange transaction to facilitate sales to customers, and _____
exchange transactions LACKS commercial substance
TF: Commercial substances means when the receiver feels as if his/her future cash flows will not significantly change
False; WILL significantly change
Revenues, expenses, gains, and losses use the ____ exchange rate
weighted average
Assets and liabilities use the ___ rate
spot
ROA: _____/ Average Assets
Net Income!
Quick ratio: Cash+ marketable equity securities+______ divided by CL
Accounts Receivable; INVENTORY NOT INCLUDED IN CALCULATION
Stated interest rate exceeds market rate leads to a ___ on bonds
premium
Market rate exceeds stated interest rate leads to a ___ on bonds
discount
TF: Under the par value method, when the stock is reacquired, the credits to common stock and additional paid-in capital must be credited to undo the original issuance.
Falser; DEBITED; undo the original JE which usually looks like –> DR Cash CR CS CR APIC; if APIC cannot cover the remaining balance use R/E
TF: A permanent decline in the value of an AFS security results in a write down included in earnings
True
Annual lease payment: ____/ PV factor
FV
Total lease amount collected: Annual lease payments * _____
years
Interest revenue: Lease amount collected - _____
FV
TF: Discrete information must be available for an operating segment
True
The intrinsic method for call options is the market price over the _____ price
exercise
Accumulated benefit obligation is based upon _____ compensation. Project benefit obligation is based on ______ compensation.
prior; future
Stock dividends are accounted for by reclassifying a portion of retained earnings as ____ ______
contributed capital
TF: Indefinite live assets are amortized
False; only finite lives
Book value per share: Total equity - ________ / # of shares outstanding
liquidation value to preferred
Preferred value: Par+Premiums+_______
dividends in arrears
TF: Freight out is a cost of goods sold item
False; it is NOT
Gross profit %: GP/_____
Sales
TF: Registration and issuance costs reduce Additional Paid-in Capita
True
TF: Leasehold improvements need to be amortized over the remaining term of the lease at the time of the improvement or the improvement’s own useful life, whichever is shorter
True
TF: A nonpublic entity must disclose permanent differences
False
The types and tax effects of temporary differences and carryforwards must be disclosed by a nonpublic entity
False; the tax affect is not required to be disclosed
Which cost flow method does IFRS disallow?
LIFO
The noncontrolling interest appears in the ____ section on the balance sheet
owner’s equity
Current income tax expense: ______ * tax rate
taxable income
Gains from cash flow hedges go into the _______
other comprehensive income
Gains from fair value hedges are recorded in _____
income
As cash surrender value increases, insurance expense ________.
decreases
The excess of expenses and losses over revenues would be shown as a reduction in _______ net assets.
unrestricted
Actual return on plan assets: FV of plan assets at ____ - (FV of plan assets at ____ + Employer contributions - Benefits paid)
EOY; BOY
The increase in the cash surrender value of an insurance policy is the difference between the annual premiums and the _____ _____
insurance expense; if the company is the beneficiary then the value is an asset to the company
Billings for transportation services from the internal service fund to other funds are recorded as ____ ____
operating revenues
General and fiduciary funds have the _______ as their measurement focus
change in current financial resources
TF: Subsequent reversal of a previously recognized impairment loss of goodwill or other intangible assets is allowed
False; prohibited
TF: Use the risk free interest rate when calculating the accretion expense
False; use the credit adjusted risk free rate
Organizations having the power to enact and enforce a tax levy are considered ______
governments
TF: Prepaid assets are included in the quick ratio equation
False; NOT included along with inventory
Governments should present a statement of cash flows for _______ funds using the direct method of presenting cash flows from operating activities
proprietary
TF: The SEC issues its own rules for publicly traded companies
False; the SEC delegates power to FASB to issue rules
