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
