FAR - Deck 2 Flashcards
What is an escrow liab
Liab a neutral third party has as it holds an asset on behalf of someone else until conditions are met
similar to a trust?
How is ST and LT debt recorded when amts are refinanced post B/S date?
***If support exists (shows intention) for refinancing
can report a ST loan as a LT loan if it refinanced prior to the issuance of F/S
Exception: any amt paid prior to refinancing but after B/S date can be recorded in CY as a current liability (CL)
In a deferred compensation arrangement, over what period should the cost of benefits be recognized?
Recognized over the period of required service
Steps to calculate CY sales tax payable
- calc end bal of sales taxes owed (=sales * tax %)
- calc CY taxes already remitted = total taxes remitted in CY less PY sales tax payable (from the beg of yr)
- Subtract step 2 from step 1 to det Sales Tax Payable
Exist and disposal activities include …
benefits related to involuntary employee termination
When does an asset retirement obligation (ARO) exist?
Liab exists when asset is constructed and the are legal requirements for removal-type costs at the end of useful life?
How are AROs reported?
reported liab is the PV of the future obligation (reported when placed in service)
increase value of asset (through capitalization) and then depr
no expense is initially recognized
When future service is required to receive a benefit, when is the liab recog?
Liab recog over the course of that period as incurred
What happens to a change in liab value once the property has been fully depreciated?
recognized as profit or loss on the I/S (not OCI)
recognized when the liab is reviewed and adjusted
Definition of accretion expense? Use risk free rate or credit adjusted risk free rate?
Periodic expense of a long term ARO
accretion exp = beg ARO X Risk adjusted rate
When are contingent liabs recognized? What happens if there is a range?
cont. liabs recognized when probable and estimable
recog @ lowest range amt assuming range is all equally likely
How is a reasonably possible loss reported?
Only as a footnote disclosure
Include full possible range and best est if possible
How are gain contingencies reported?
Only disclosed in notes unless the likelihood of the gain being realized is remote
What happens if a company signs a purch agreement @ a firm price and then the mrkt price of materials drops to less than firm price?
record estimated liab on purch commit = amt committed for purchase LESS new mrkt value at yr end
If value has declined from committed purch price, a liab must be recognized
In a biz combo, how is an investment valued?
@ FV of consideration given or received
Installment note receivable balance at any given time
P of remaining monthly pmts discount at a %
How are noninterest bearing notes payable reported?
@ PV of future CFs
How is a notes payable reported on the B/S
Face amt of note less discount
(this shows NP at its PV)
What happens when there is no (or an unreasonably low) rate on a NP?
Normally interest is imputed
Exception for receivables and payables arising from transactions w/ customers or suppliers in the normal course of biz when the trade terms do not exceed one yr
How are receivables and payables recorded when they come from transactions in the normal course of biz?
record @ face value if term is less than 1 yr and @ PV if greater than 1 yr
cost of an acquired asset
cost = PV of obligation + any cash paid
What happens if there is a current and noncurrent portion of the note payable?
Only consider the PV of future cash flows
How does int exp change over time on prem bonds? On disc bonds?
prem bonds: interest exp dec over time
disc bonds: interest exp inc over time
Serial bonds
Mature in installments
pre-numbered bonds that the issuer may call and redeem a portion by serial number
