FAR 8 Flashcards
when a loss is “reasonably possible” and there is an insurance deductible with a larger estimated amount in that range and the property damage occurs before the F/S are issued but after Year End how is this contingency treated?
The non-recognized subsequent event that happened after year end but before F/S are reported would be treated a footnote disclosure with the lower amount of the insurance deductible.
Companies do not recognize subsequent events that did not exist on the F/S date at year end. But if the event occurs s before the issuance of the F/S than footnote disclosure is required.
For Operating Segments that report losses as well as Segments that did not report components losses for the year what is the rule for deciding which segments need to be reported?
Only look at component Income when separating component income or component losses.*
For operating segments that had + income add those amounts up and for the operating segments that had operating losses add those amounts up and use the greater total amount.
Take the greater amount of of operating income or operating loss from those segments, multiply by 10% and only report segments that meet the absolute value of the 10% threshold amount for those segments.
What do OCBOA F/S look like and what can they not have in their F/S titles?
Do not use accrual basis F/S titles.
Ex: Statement of cash and equity, Statement of Income - Income tax basis, Statement of assets and liabilities arising from cash transactions
How are income tax-basis F/S different than GAAP F/S when being prepared?
-Do not recognize certain revenues and expenses in different reporting periods, (do not record accruals)
Recognize events when taxable income or deductible expenses are recognized on the company’s tax return.
Non-taxable income and non-deductible expenses are shown on the F/S and included in the determination of income (become M-1 adjustments to arrive at taxable income)
What is required for a filer when they submit their 10-K to the SEC using XBRL?
Balance sheet, statement of comprehensive income and summary of significant accounting policies
What is not required: managements discussion and analysis
What are examples of accounting details and not accounting disclosures?
Depreciation expense, composition of sales by segment, future minimum lease payments in the aggregate and for each of the five succeeding fiscal years.
During a reporting period when comparing cash basis to accrual basis of accounting, when would cash basis understate income when A/R decreases and Accrued expenses payable decrease?
Cash basis would understate net income when accrued expenses decrease because when accrued expense payable decreases more cash was paid to reduce the payable than accrued.
Cash basis: Dr Accrued Expense
Cr Cash
When A/R decreases this means more cash was received then accrued since they received payment on the A/R which would increase income.
Dr Cash
Cr A/R
A change from cost approach to market approach when measuring fair value would be treated as what kind of accounting change?
This is a change in valuation technique, Change in accounting estimate
PER SFAS No. 157
When should a company disclose information on its annual F/S about customers?
When a concentration in the volume of business of certain customers that individually make up in total a high percentage of the total companies sale for the year.
Report the amount of the entity’s revenue from each of the customers. Ex: one customer = 43% of sale and the other customer = 40% of sales
What are examples of inventory for software? R&D costs that would be expenses?
Inventory: duplication of computer software and training materials from product masters (1000 units), packaging products (500 units)
R&D: Completion of detail program design, costs incurred for coding and testing to establish technological feasibility
When a gain lacks commercial substance and boot is received with the asset how much of the gain is reported?
To calculate gain: Total consideration - CV of Asset given up
Take cash received and divide it by the total consideration which is the FV of asset + Boot. Take that % and multiply it by the gain. That amount is what should be recognized.
Only used when cash is given, if cash (boot) was paid $0 would be recognize.
What is a condition that needs to exist in order for an impairment loss to be recognized under U.S. GAAP? What is the next step after a company has identified a division with the lowest level of identifiable cash flows?
Impairment if the CV > Fair Value, Carrying amount of long-lived asset may not be not recoverable
Perform a recover-ability test on the carrying amount of the divisions assets. Compare CV to future cash flows, if CV < Future cash flows, reduce CV by FV
What is the only depreciation method that does not use salvage value?
Double Declining Balance
What is a cost that would not be included in R&D costs? What are costs that would be included?
Not Included: Administrative costs.
Included: Personnel costs, Facility costs, indirect costs
What kind of inventory can a company capitalize interest on?
Can capitalize interest on special order goods on hand for sale to customers
