FAR

Question 1

Relevance

Answer 1

1. Predictive value: does it help make predictions about future events.
2. Confirmatory value: Does it provide information about earlier expectations or predictions.
3. Material: Does the information matter to the user.

Question 2

Faithful Representation

Answer 2

1. Completeness: Are all necessary facts included in the information.
2. Neutral: The information is free from bias.
3. Free from error: Info doesn’t contain any material errors.

Question 3

Inventory value under IFRS

Answer 3

lower of cost or net realizable value to be used to value inventory

Question 4

When there is a change in the reporting entity, how should the change be reported in the financial statements?

Answer 4

Retrospectively, including note disclosures, and application to all prior period financial statements presented. Similar to changes in accounting principle.

Question 5

Depreciation under IFRS

Answer 5

If the major components of an asset have significantly different patterns of consumption or economic benefits, the entity must allocate the costs to the major components and depreciate them separately.

Question 6

Under Statements of Financial Accounting Concepts, comprehensive income consists of?

Answer 6

Comprehensive income consists not only of revenues, expenses, gains, and losses, but also various intermediate components or measures that result from combining the basic components. Examples of intermediate components or measures are gross margin, contribution margin, income from continuing operations, and operating income.

Question 7

When can you recognize revenue from a Franchise agreement?

Answer 7

ASC Topic 952 provides that the initial franchise fee be recognized as revenue by the franchiser only upon substantial performance of their initial service obligation. The amount and timing of revenue recognized depends upon whether the contract contains bargain purchase agreements, tangible property, and whether the continuing franchise fees are reasonable in relation to future service obligations. Direct franchise costs are deferred until the related revenue is recognized.

Question 8

What are four enhancing characteristics?

Answer 8

Comparability: Can the info be used to compare to other companies in the same industry.
Verifiability: Independent observers would reach the same conclusion.
Timeliness: The info is recent enough to make a decision with
Understandability: A user with a reasonable understanding of business can understand and draw conclusions from the information.

Question 9

Installment sales

Answer 9

Revenue is recognized as cash is collected. Thus, revenue recognition takes place at the point of cash collection rather than the point of sale. Installment sales accounting can only be used where “collection of the sale price is not reasonably assured” (ASC Topic 605)