FAR 31

Question 1

What information are public co required to provide about certain major customers ( 3 things)

Answer 1

• If a single amount is 10% or more - disclose this
• ALSO the amount of revenue from each customer
• names of the segments reporting the revenue

No need to disclose the name of the customer or the amount of revenue from that customer specifically

Question 2

Under the revaluation model for IFRS - how are intangibles assets handled?

Answer 2

• they are periodically revalued and adjusted to their fair values
• they are also amortized between revaluation dates

Question 3

what do you do when you are in a contract to buy inventory and the current value of the inventory is less than the fixed purchase price - end of acct period

Answer 3

• You describe the nature of the contract in a note

– recognize a loss on the income statement

• recognize a liability for the accrued loss

The corporation should recognize a loss in its income statement and a liability for the accrued loss on its balance sheet immediately. The corporation should also describe the nature of the loss in a note to its financial statements.

Question 4

When you write off an A/R - using the allowance method - what is the impact on net income or total assets

Answer 4

• no effect on net income or total assets

Question 5

What is included in disco operations

Answer 5

• regardless of when you declare the disc operations - the results of the whole year are reported - net of tax + impairment loss

1,400 loss from operations
300 impairment
1,700 - total loss * 30% tax - 510
1,190 Is the reported net loss

Question 6

What if Disco items carrying values exceed fair value

Answer 6

• you recognize the impairment loss

- these are also included in the disc operations

Question 7

What if you have anticipated losses for the following year

Answer 7

• the anticipated losses will occur in the period in which they occur - not before

Question 8

A reporting segments operating profit is reduced by what

Answer 8

• reduce by:

1) traceable operating expenses
2) allocation of INDIRECT operating Expenses

NOT general corporate expenses

Segment C:

sales: 12,000
Traceable operating expenses: 7,000
12-7 = 3000

Indirect operating expenses: 7,200 * 25% ( segment c’s percent of total sales) 1800

Total: 3000 - 1800 = 3200 - Segment C operating profit

Question 9

What are the three tests to determine if a segment is reportable

Answer 9

10%of total of all segments for 1 or more of:

• revenues,
• assets
• profit

Question 10

How is an operating segment;s income calculated

Answer 10

Sales to customers
\+ sales to other segments
- cost of sales
- % of G and A
= segment's operating income

NOT including corporate level expenses
Not including disco items
Not include income tax expense for reporting purpose

Question 11

What info do you need to disclose about a reporting segment

Answer 11

• info about profit and loss
• and info on total assets for each reporting unit
• Separately disclose amount of sales to customer and inter segment sales by geographic area

Question 12

IFRS is exactly the same as GAAP for segment reporting. What are the three tests to determine if a segment is a reporting segment -

Answer 12

• Revenue Test
• Asset Test
• Profit or loss test

Question 13

Who must and must not report operating segments

Answer 13

public co - YES

specifically EXCLUDES - nonpublic and non profit enterprises

Question 14

What is a purchase power loss or gain

Answer 14

It is incurred during a period of rising prices - inflation-

• It occurs on monetary ASSETS - like refundable deposits. This means that your assets which may be valued on your books at $100 are actually worth less because prices are going up. Example: refundable deposit - you owe these back, but it will cost you “more” to pay them back - so a purchase power loss
• A purchase power gain happens on LIABILITIES during inflation. This means that what you though you may owe $100, the value of the $100 is less so there is a purchase power gain. wages payable is an example - because you owe the same amount, but it wont cost you as much to settle the debt

Things that are not monetary - like warranty obligations and investments - do not result in purchase power gain or loss

Question 15

What is current cost accounting

Answer 15

This is when you adjust your historical cost income statement by current price indexes.

The result is that you adjust COGS and depreciation expense - therefore adjusting your income statement to the current cost

Question 16

In current cost accounting how are holding gains for goods sold and holding gains on inventory reported?

Answer 16

Yes for both
COGS - you take the units sold and multiply by the average current cost in the period - then you compare this to what you have recored in COGS. Any difference is a holding gain or loss

Inventory - in current cost account ing inventory is reported at replacement cost. You compare this amount to whats in your records and report any differences as a holding gain or loss

Question 17

What info is a co required to report about changing prices

Answer 17

• they AREN’T required to report changing prices

so if they decide to report it is included in supplementary information - NOT Notes or MD&A or in the F/S

Question 18

What is a monetary asset or liability when you are computing purchase power gains or losses

Answer 18

Monetary items are those that are fixed in nature - and do not vary in their dollar

Examples:
ADA - whether prices go up or down the amount in ADA and A/R stay the same - its just valued more or less - this makes it monetary

If you give advances to a subsidiary - this is a fixed amount - therefore its monetary

Unamortized premium or discount - these are fixed and subject to price fluctuations - monetary

Accum Depreciation - equipment value will change with price fluctuations - ACC De as well - so therefore non- monetary

Question 19

what is the difference between nominal and constant dollars

Answer 19

nominal - includes inflation
constant - current cost of inventory - no inflation

to see what the inflation amount is you subtract nominal from constant - this is the amount that you report as the inflation component of the increase in inventories