FAR 6 Flashcards
Which type of intangible asset is subject to the recoverability test when testing for impairment?
Definite-life intangible assets
What software costs are capitalized?
Cost to develop the software after technological feasibility is reached.
Annual amortization of development of software costs is:
Greater of the percentage of expected total revenues earned during the period multiplied by total capitalized amount OR straight-line amortization based on useful life.
Under IFRS, an entity that acquires an intangible asset may use the revaluation model for subsequent measurement only if:
An active market exists for the intangible asset.
In the conceptual framework, the successful efforts method matches the definition of:
Asset. These efforts yield a probable future benefit.
Which method of depleting natural resources will factor in extraction costs?
Successful efforts method.
Under IFRS, the 3 conditions required to exclude a subsidiary from consolidation:
- It is wholly or partially owned and its other owners do not object to nonconsolidation, 2. It does not have any debt or equity instruments publicly traded, 3. Its parent prepares consolidated financial statements that comply with IFRS.
Combined statements can be used when…
It is not appropriate to use consolidated statements. It can show aggregate results for unconsolidated subsidiaries, companies under common management, and commonly controlled companies.
Of merger, acquisition, or consolidation, which will require consolidated financial statements after it happens?
Acquisition, because more than one firm will remain afterwards. Only one firm will remain after a merger or a consolidation, so no need to consolidate financial statements.
Under IFRS, redeemable preferred stock is treated as…
A liability because it can be redeemed (repurchased) by a corporation at its discretion.
Under the equity method, the amount of an investment eliminating entry is…
The balance of the investment account as of the beginning of the period being consolidated.
Does dollar-value LIFO retail use beginning inventory in the calculation?
No. As it uses FIFO cost-to-retail ratio, the layers added only reflect the cost and retail amounts pertaining to that period.
What is the maximum amount of recovery of inventory lost in a purchase commitment contract?
The amount that is limited to the losses recognized previously from the contract amount.
How to calculate depreciation when purchasing and/or selling depreciable assets:
Beginning net depreciable assets (DA) + DA purchases - book value of DA sold - depreciation = Ending net DA
How to treat salvage value in accelerated depreciation methods:
Do NOT factor salvage value into calculations of double-declining or multiple-declining methods (but do not depreciate assets below the salvage value), but do factor it into calculations involving sum-of-the-years method.
