FAR Deck 2 Flashcards
How is the amortization of a ROU in an operating lease calculated?
Annual payment minus interest expense equals amortization
Do grants to other organizations get recorded as expenses on the statement of activities for an NFP?
Yes
When are contribution revenues reported?
In the period they are unconditionally promised or received
What is a split interest trust?
When the trust provides that the organization must share resources with another beneficiary.
When are conditional promises to give recognized as revenue?
When all conditions are met.
What basis of accounting and measurement focus do governmental funds use?
Accrual basis and current financial resource measurement
What is economic value added?
EVA is the earnings above the cost of capital. This equals after-tax profits less the product of total assets times WACC.
When is the cash basis method of accounting an allowable method under GAAP?
Only when there is no material difference from the accrual method.
Should there be an additional reconciliation of net income to cash flows on the statement of cash flows?
No. The changes in operating activities already gives us this. There would be a requirement for this statement if using the DIRECT method.
What is working capital?
Current assets - current liabilities
What is the focus of financial statements for a not-for-profit entity
The entity as a whole
What is the formula for Times Interest Earned
EBIT divided by interest expense
What is the formula for Return on Equity
Net income / AVG shareholders equity
How do you calculate purchases
Ending inv + COGS - Beginning Inv = Purchases
How is the cash flow ratio computed?
Cash flow from operations / current liabilities
How do you calculate stock value
Stock value = dividend per share / (annual required rate of return - dividend growth rate)
When is an activity required to be reported as an enterprise fund?
Either when the activity is financed with debt secured by a pledge of net revenues, or laws require the cost of providing services be recovered with fees.
Capital maintenance concept
Recovery of costs - what is return ON capital and what is return OF capital
Financial capital concept
This is included in return ON capital. Applied to net income.
Are permanent tax differences required to be disclosed?
No
