FAR - Deck 3 Flashcards
What does Revenue ‘for’ represent?
Revenue for would be treated as a reduction in revenue and act as an expense when calculating total revenue.
What are the two categories of Net Assets for Not-for-Profits?
1 - Net assets with donor restrictions
2 - Net assets without donor restrictions
Three qualifications to record donated services
1 - Special skills are required to perform the service,
2 - The individual providing the service has those special skills, and
3 - The organization would have to buy the services if they were not donated.
What is an endowment Fund?
An endowment fund is an established fund of cash, securities, or other assets to provide income for the maintenance of a not-for-profit entity (NFP).
What is the Statement of Financial Position?
The statement of financial position is the term for the balance sheet reported by not-for-profit (NFP) entities.
When would works of art, historical treasures, or similar items not be considered contributions?
1 - They are held for public exhibition rather than financial gain.
2 - They are cared for and preserved.
3 - They are subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections.
When would Historical Cost be used?
Historical cost is used to value acquisitions of property, plant, and equipment
Discounted Expected Future Cash Flows
Are required to value financial assets for which there is no market that can provide fair value information
How are Unconditional Promises accounted for?
1 - NFPs may use the fair value at the date a promise to give securities was initially recognized even if the contribution will not take place for several years
2 - When promises to give cash are initially recognized, the amount recorded could be based on the present value of estimated future cash flows.
3 - When promises to give cash are initially recognized, the amount recognized should exclude amounts expected to be uncollectible.
The financial statements of a NFR entity focus on?
Shall focus on the not-for-profit entity as a whole and shall report the amounts of its total assets, liabilities, net assets, total net assets with donor restrictions, and total net assets without donor restrictions.
Define Lower of Cost or Market
Lower of cost or market (LCM) is a cost principle necessitated when the benefit to be derived from the asset has declined below cost (i.e., disposal value of the asset) in the ordinary course of business. It is applied primarily to inventory. It is usually due to damage, obsolescence, spoilage, changes in price levels, or other causes. **NOT Used as the method of accounting for investment in marketable equity securities.
Time Interest Earned Ratio
EBIT / Interest Exp
Calculation for Additional Pension Liabilitity
Benefit Obligation
(Plan Assets @ FV)
Difference between (Pension Cost & Employer Contribution)
If underfunded there is an additional pension liability
Return on Plan Assets
Calculate the portion that is unexplained. Use the facts and determine the remaining amount
First In, First Out (FIFO)
First in, first out (FIFO) is a cost flow assumption that matches the oldest costs to current sales revenues. It is based on the assumption that the oldest units are sold before units subsequently received (or produced) and thus are the first units used to determine cost of goods sold. As a result, the units left in ending inventory are the newest, or most recently received (produced), units.
Periodic Inventory System
The periodic inventory system is a method of measuring the physical quantities in inventory under which the units (and costs) are determined at the end of the accounting period based on a physical count.
Periodic Inventory COGS
Cost of goods sold = Beginning inventory + Purchases - Ending inventory
Perpetual Inventory System
The perpetual inventory system is a method of measuring the physical quantities in inventory under which the units received (manufactured) and issued (sold) are recorded continuously during the accounting period.
Inventory Cost Flow Assumptions
1 - LIFO (last-in, first-out): - Unit cost LIFO - Dollar-value LIFO 2 - FIFO (first-in, first-out) 3 - Average cost: - Weighted average - Moving average 4 - Specific identification
Carrying Amount
The carrying amount or book value is the net amount at which an item is reported in the financial statements of the enterprise.
