FAR Deck - 2 Flashcards
Treatment and recognition of Current Expected Credit Loss (CECL) for Available-for-Sale securities
Per the current expected credit loss (CECL) model, the expected credit loss is equal to the difference between amortized cost ($1,000,000) and the present value of expect.ed cash flows ($978,000). Credit Loss to be recognized in this case will be $22,000.
If the fair value exceeds the Unamortized Cost no, credit loss to be recognized. The resulting gain will be reported in Other Comprehensive Income Statement as Unrealized Gain on AFS.
What is the effect of inventory overstated in the financial statements?
Understated COGS and Overstated Retained Earnings. Overstated Gross Margin.
TRUE or FALSE:
Under Operating Lease, variable payments does not impact on the lease expenses.
TRUE!
Under Operating Lease, lease payments including variable payments are recorded straight line basis. Variable payments are known at the inception of the lease hence included in PV of Lease. There is NO interest expense under Operating Lease.
What are Support Services expense of Not-for-Profit?
Support services summarize the functional expenses related to general and administrative costs, costs of membership development, and fundraising.
Fundraising contemplates inducing potential donors to contribute to the entity.
Membership activities involve seeking prospective members, ensuring current member satisfaction, etc. Membership activities mimic marketing activities (a general and administrative expense) in commercial settings
TRUE or FALSE:
Gains and Losses from treasury stock transactions affect retained earnings under Legal Method of treasury stock accounting.
FALSE!
Under the legal method, the additional paid-in capital account is debited for losses (or credited for gains) when the treasury stock is repurchased.
However when additional paid in capital does not have enough balance to absorb loss on transaction, retained earnings is further reduced (balance debit to RE).
TRUE or FALSE:
A primary difference between the cost method and legal method is the timing of the recognition of gains or losses on treasury stock transactions.
TRUE!
TRUE or FALSE:
Treasury stocks are recorded at their reacquisition price under the cost method.
TURE! Treasury stock shares are recorded and carried at their reacquisition cost under the cost method.
When a contribution revenue is recognized by a Not-for-Profit organization?
Cash contributions and unconditional pledges are recognized as contribution revenue
in the year in which the cash or pledge is received.
What is considered as Contribution to Not-for-Profit?
Contributions to Not-for-Profit include transactions that are unconditional (not requiring future event to occur),
non-reciprocal, voluntary and not of an ownership investment.
How contribution revenue is measured for Not-for-Profit?
The difference between the fair value of purchases and the amount transferred
is classified as Contribution revenue.
TRUE or FALSE:
Exchange transaction (like resources provided for research) increases Net Assets without donor restrictions.
TRUE!
TRUE or FALSE:
Charity care are recognized as revenue to Not-for-Profit and must be reported on the face of financial statements.
FALSE!
Charity care are those health care services provided but never expected to result in cash flows to the
hospital, are not recorded as receivable or as revenue.
Charity care is not recognized on the face of the financial statements but is disclosed.
How federal grants received are recognized by a Not-for-Profit?
Federal grant funding received, subject to conditions associated with eligible cost principles, would not be recognized as revenue until conditions are satisfied.
How debt securities and the equity securities are accounted by Not-for-Profit?
All debt securities and those equity securities that have readily determinable fair values
are measured at fair value in the statement of financial position.
Gains and losses on investments are reported in the statement of activities as net assets without restrictions.
When the funds received by Not-for-Profit are recorded as as liabilities on the statement of financial position?
When funds received by the recipients that do not have variance power (do not have any latitude
with regard to use of the funds received) would recognize the asset received as a liability to the beneficiary.
