FAR Deck 1 Flashcards
What criterion must be true for an asset to be classified as held for sale?
-Must be ready for immediate sale
-Must be actively marketed
-Management must have committed to a plan to
sell
-Sale of the asset must be probable and must
be completed within one year
-An active program to sell the asset has been
initiated
-And it is unlikely that the plan to sell will be
withdrawn.
What is the primary way of communicating financial information to people outside of an entity?
Financial statements
What are initial direct costs (IDC)?
Those costs that the entity would not have incurred if the lease had not been entered into (i.e. commissions and payments made to current tenants to obtain the lease).
How are IDC handled
They are capitalized into the lease asset
When is the gain on disposal of a discontinued segment recognized?
A gain on disposal is recognized when sale actually happens.
What amount gets disclosed for operating leases?
The undiscounted cash flows on an annual basis for each of the first 5 years and the total amounts for the remaining years.
In an operating lease is the amortization component the same every year?
No. The amortization is the difference between the lease expense and the interest expense. Since interest decreases every year, the amortization will increase every year.
What is the capital maintenance concept?
This is the recovery of costs and is a separation of return ON capital from return OF capital
What is the financial capital concept?
The effects of price changes on assets and liabilities are recognized as holding gains and losses and are included in return ON capital
What is the physical capital concept?
The effect of price changes are recognized as a capital maintenance adjustment as part of equity. This is not included in return ON capital.
What is the purpose of comprehensive income?
To summarize all changes in equity from NONowner sources.
What financial statement is OCI reported in?
Statement of financial position
How are unconditional promises to give to an NFP reported?
They are reported as a current liability at PV and the income is recognized in the year promised.
What funds use the full accrual method of accounting?
Proprietary funds (enterprise funds and internal service funds) and fiduciary funds
When should the cost of termination benefits be recorded?
The cost of on-time termination benefits should be recorded on the communication date.
What gets reported as supplemental disclosures on the statement of cash flows?
Income taxes paid and net interest payments
What is the value of the lease asset in a finance lease?
PV of payments plus the PV of purchase option
How are operating lease payments reported?
As rent expense (no separate interest component)
Should cash flow per share be reported on financial statements
No
How is a lease modification accounted for
It is considered a new lease if the lease grants the lessee an additional right of use prices at its standalone market price
What qualifies as initial direct costs?
Only incremental costs
How is a change in reporting entity reported on the financial statements
Retrospective
How are retained earnings of a business combination reported on the consolidated financial statements?
Only the parent company’s retained earnings are shown.
