FAR Concepts Miscellaneous Flashcards
Underlying vs Notional
Underlying = Specific Price / Rate
Notional = Specific Unit of Measure
Moving Average Method
- New WA computed after each purchase
- Total Cost/Units
- 2800/1600 = 1.75 unit cost
Cash Flows
Operating: IS transactions and current A/L
Investing: Noncurrent Assets, Loans and Collection of Loans
Financing: Cash flows from debt and equity
*Direct method of cash flows depreciation not included in add back
- Useful Life
- FIFO —> LIFO
- FIFO —> WA
- Depreciation
- LIFO —> FIFO
- Construction Contract —> % of Completion
*Direct rec –> Installment method
- Estimate/Principal — Prospect (Current)
- Principal — Prospect (Not Normal)
- Principal — Retro (RE)
- Estimate/Principal — Prospect (Current) (Reported IS)
- Error — Restate
- Principal — Retro
*Estimate — Prospective
Income Statement Multi / single state
Comprehensive Income 2 state / 1 state
IS
- Multi: Opp rev and exp separate from non opp rev and exp and other G/L
- Single: Total opp exp subtracted from total rev of CONTINUING OPPS
Comp Income
- NI (RE –>BS) + OCI (AOCI –>BS)
- 2 state comp income as sep state
- 1 state OCI individual and total below NI
Stockholders Equity Rules
- Stock Dividends Issued
- Contingent Shares
- Participating Pref
Pref div or Pre Stock converted
Convertible bonds –> Dilutive EPS
SHARES
* Stock Dividends Issued –> Occur beg of year (affects all WA shares) and retro to last year PAY CLOSE ATT TO SHARES B/F DIV NOT AFTER
- Contingent Shares –> If dilutive included in EPS
- Participating Pref –> % same for common stock initially, Preferred subtracted from NI for EPS
- Pref div or Pre Stock converted don’t subtract from NI, treat as though occurred a beginning
BONDS
* Convertible bonds –> Dilutive EPS only, add back interest expense (X - (1-tax rate)) to NI
Inventory Methods
- FIFO Cost Retail
- LIFO Cost Retail
- Conventional Retail
- FIFO Cost Retail = Beg inventory not used until % calculated (mark ups/downs used prior to %)
- LIFO Cost Retail = Beg inventory used at beg (mark ups/downs used prior to %)
- Conventional Retail = mark downs used after %
Unrealized profit to be eliminated from Inventory
Intercompany Profit (Gross Profit) x (Inventory Remaining/Total Inventory Purchased)
Inventory over / under statement
Beg Inventory Understated = COGS understated
End Inventory Overstated = COGS understated
PENSIONS
Amortization of Prior Service Cost JE
Gain JE
Amortization of Prior Service Cost
Dr Net period pension cost
Cr OCI
Dr Def Tax Benefit - OCI
Cr Def Tax Benefit - IS
Gain
Dr Pension Benefit Asset
Cr OCI
Dr Def Tax Exp -OCI
Cr Def Tax Liability
Bonus Calculations
Bonus = Percentage of NI (NI - Taxes)
Taxes = Tax Rate (NI -B)
Equity vs Cost Method
Equity
- Add investor earnings to investment
- Subtract dividends from investment account (CS)
- Subtract Amortization of FV differences
Cost
- Investment not adjusted
- Investment in investee is adjusted to FV
- Cash dividend reported as income by investor
- Since Pref Stock does not allow influence use cost method
- Stock dividends not recognized by investor
Rising Prices LIFO vs FIFO has what effect
LIFO - End inventory Lower - NI Lower - Current tax liability Lower - Cost of good sold Higher -
Comprehensive Income
Changes in equity (net assets) resulting from
- Revenues
- Gains
- Losses
- Other equity
NOT
INVESTMENTS / DISTRIBUTIONS BY OWERS
Dollar Value LIFO
- Get Layers
- Current year cost / price index - Get difference between years
- 250 to 265 after layer = 15
- 265 to 325 = 60 - Use Price index
- 15 * 1.05 = 15.750
- 60 *1.12 = 67.00 - Add from original
- 250+15.75+67 =32950
Alternative Method of Accounting Variable Interest Entities(Common Control Lease Agreements)
Does not have to have to consolidate if
- lessee and lessor under common control
- lessee has leasing arrangement w/lessor
- All activities are related activities
- Collateralizes any obligation principal amount cannot exceed value of asset leased
Alternative Method Interest Rate Swaps
Apply hedge accounting to its receive variable, interest rate swaps using if the following occur
- Cash flow hedge has no ineffectiveness
- Rec interest rate swap at settlement value instead of fair value
- Complete hedge documentation by first date financial statments are available
