FAR 32 Flashcards
How do you determine cost of sales (COGS)
one way is Net purchases minus any increase in inventory
net purchases: 700
Jan inventory: 100
Dec inventory: 300
300-100 = 100
700 - 200 = 500 cost of sales
What is the best F/S to use if you want to determine if a co obtained financing during a year by issuing debt or equity?
The statement of cash flows because they show inflows from financing activities by source
What makes an enterprise fund and enterprise fund
- partially or whole supported by voluntary payments ( fees)
- They report operating revenues ( net income)
- user charges cover the cost of general public services
- REPORT Net Income
Can you capitalize the costs of obtaining a patent and successfully defending a patent
yes to both
- legal costs - 40
- successful patent defense - 50
capitalize 90
What is the equity method of accounting for IFRS used for joint operations
proportionate consolidation
Are the fair values of HTM investments accounted for under the amortized cost method required to be disclosed on the notes to the F/S
Yes - they are initially recored at cost
- differences between face and carrying value is amortized.
differences between Cv and FV are amortized as an adjustment to interest income
Dr. Cash 100
cr. Interest income 80 cr. premium 20
or discount
dr. cash 80
dr discount 20
credit interest income 100
What is the effect of a premium on Interest expense
It reduces interest expense
Dr. Interest expense 10
Dr. Premium 5
Cr. Cash 15
Cash you pay 15 but the interest expense is only 10. So the premium reduces interest expense
What is the effect if your do NOT amortize premium and discount on a bond
The premium reduces Interest expense
Dr. Interest expense 10
Dr. Premium 5
Cr. Cash 15
If No discount or premium:
Dr. Interest expense 15
Cr Cash 15
So the result with a premium: Is that Interest expense will be OVERSTATED. Which will REDUCE Net Income (UNDERSTATED) which will be closed out to RE (UNDERSTATED) and stockholders equity will be UNDERSTATED
The discount increases interest expense
Dr. Interest Expense 15
Cr. Discount 5
Cr. Cash 10
If No discount or premium:
Dr. Interest Expense 10
cr. cash 10
So the result with a discount is that Interest Expense will be UNDERSTATED. Net Income will be OVERSTATED, closed out to RE will be OVERSTATED and Stockholders equity will be OVERSTATED
What are the 2 core revenue recognition principles
1 - the revenue is recognized when you transfer the goods
2- the amount of revenue recognized is the amount that you expect to get on exchange for the goods and services
What does regulation SX contain
these are the F/S Presentation and Disclosure requirements for the SEC
What does Regulation S-K contain
These are the requirements for the content of non financial data
What is a concentration of credit risk
Credit Risk is when your customers share a common characteristic such that an event or circumstance will adversely affect their ability to pay
- this is a concentration of credit risk - Trade Account receivables are with companies that all operated in the same industry
How does IFRS report errors on there financial statements (Same as GAAP)
They do it retrospectively
- Year one will record loss for year 1 only
Year 2 will record their own losses
What must an income statement prepared under IFRS present
- Revenue or income
- G &L from financial assets reported at amortized cost
- inane costs
- Equity investment - profit and losses
- G/L for fair value investments
- tax expense
- disco items
What does Comprehensive income really show
It shows changes in stock holder’s equity from events NOT reported in income:
DENT:
- Unrealized Gain loss - AFS
- Difference between PBO and FV of Plan assets
- unrealized gain loss on derivative cash flow hedges
- Foreign currency translation gains or losses
