FAR 4

Question 1

How equity (RE+APIC+Stock) is reported on Consolidated FS on acquisition method

Answer 1

only parent’s equity is reported and subsidiaries equity is eliminated. for example parent’s is 600k and sub has 400k retained earnings only 600k is reported.

Question 2

How nonreciprocal transfers is booked under internal service fund?

Answer 2

As a “Transfers”

Question 3

How expense is recorded on business combination.

Answer 3

finder and consultant’s fees expensed and
Registration fees reduce APIC (NOT EXPENSED)

Question 4

How should the acquirer purchase bargain purchase in a business combination?

Answer 4

Assets and liabilities are valued at FV and if the fair value of the net asset acquired is more than the consideration exchanged the difference is booked as gain on income statement.

Question 5

How Stock Split works?

Answer 5

Prior year EPS needs to be adjusted for Stock Split occure in current year. for example outstanding share in year 1 is 1000 and year 2 was 2000 and stock split happens in year 2 then stock split also applies to Year 1 and year 2 both so recalculate year 1 EPS with 2000 shares (after stock split) and year to shares would be 4000.

Question 6

How entity disclose concentrations of credit risk on financial instruments?

Answer 6

An entity should disclose all significant concentrations of credit risk arising from all financial instruments.
> Financial instruments with off-balance-sheet market risk only.
> Financial instruments with off-balance-sheet risk of accounting loss only.
>Financial instruments with off-balance-sheet credit risk only.