FAR F2-F3

Question 1

Foreign Financial Translation - what are the two methods?

Answer 1

Remeasurerment & translation method

Question 2

Remeasurement method is…

Answer 2

F/S of foreign sub are NOT in the sub’s functional currency…

Balance sheet first - -
Monetary items - CY end rate
nonmonetary items - Historical rate

plug currency gain/loss to balance B/S.

Question 3

Translation method is

Answer 3

F/S of foreign sub are in the sub’s functional currency…

Income statement first..use WEIGHTED AVG RATE

plug “translation adjustment” to other comprehensive income.

Question 4

Goodwill under GAAP

Answer 4

Fair Value of sub - FV of sub net assets

Question 5

Goodwill under IFRS

Answer 5

Acquisition Cost - FV of sub net assets ACQUIRED!!!

calculated by using a one-step test at the cash generating unit level in which the cv of the cash generating unit is compared to the cash generating unit’s recoverable amount.

an impairment loss is then recognized to the extent that the cv of the cash generating unit > recoverable amount - - first is allocated to goodwill

Question 6

Fees of finders and consultants vs Registration Fees for equity securities issued

Answer 6

Fees of finders and consultants are expensed

Registration fees are to reduce APIC

Question 7

Types of accounting changes and how to treat

Answer 7

Changes in accounting estimate - prospective
Changes in accounting principle - retrospective
Changes in accounting entity - retrospective

Question 8

ChangeS in accounting principle

Answer 8

• Change only if required by GAAP/IFRS
• Adjusting beginning retained earnings and if there’s prior period f/s - the should be restated.
• RETROSPECTIVELY, UNLESS IT’S IMPRACTICAL TO ACCURATELY CALCULATE THIS CUMULATIVE EFFECT ADJUSTMENT

Question 9

ERROR CORRECTION

Answer 9

Prior period adjustment

• correct the information if the year is presented if not,
• adjusted beginning r/e of the earliest year
• GAAP same as IFRS. need to correct it retrospectively.

Question 10

Equity method

Answer 10

must disclose the company’s accounting policy for the investment

Question 11

Employee’s benefit pension plan should be reported at

Answer 11

fair value

Question 12

whenever you cant determine between a change in accounting estimate or a change in accounting principle has occured

Answer 12

the change should be considered a change in estimate which is treated prospectively

Question 13

Goodwill should be recognized on the balance sheet when..

Answer 13

Goodwill has been created in the purchase of a busines

Question 14

Goodwill - acquisition method

Answer 14

Goodwill is a representation of an acquired company’s fair value over the fair value of the entity’s net assets

Question 15

Cost of equipment used in research and development with alternative future uses

Answer 15

still have to capitalized and depreciated over its estimated useful life.

Question 16

Transactions that have commercial substance

Answer 16

gain is recognized in a nonmonetary exchange = difference between the fv of asset given up and bv of asset given up.

Question 17

How to recognize a bargain purchase in a business acquisition

Answer 17

assets and liabilities acquired in a business combination must be valued at the fv. difference is recognized as a gain by the acquirer at the time of the acquisition.

Question 18

Old building is being actively marketed for sale

Answer 18

it will be reclassified as an asset held for sale, current asset and will no longer be depreciated… it will also be valued at the lower of its book value or nrv (fv-cost)

Question 19

Revaluation under IFRS

Answer 19

The reversal of a revaluation is recognized in profit or loss..
the increase in fv should be credited to other comprehensive income.

Question 20

Transaction lacking commercial substance

Answer 20

no boot -»> NO GAIN&raquo_space;> book at book value
boot is paid -»> NO GAIN RECOGNIZED
***boot is received -»»> if&raquo_space;»»»»»» if >25% recognized all gain

Question 21

IMPAIRMENT securities

Answer 21

held to maturity — no unrealized
trading ————–income statement
available for sale –OCI
———————–be careful with accumulated OCI
———————–is it asking for one year info or accumulated amount???

Question 22

Capitalized cost

Answer 22

O - ownership transfer
W - written bargain
N - 90% FV < PV of cash flow
S - 75% life Lease term/economic life

Question 23

SP < FV < NBV

Answer 23

SP < FV - deferred

FV < NBV - recognized

Question 24

goodwill for the impairment

Answer 24

compare between fair value of all assets and carrying value.

Question 25

Function currency is the same as local currency…

Answer 25

assets are measure by current exchange rate as of the balance sheet date

revenue & expenses - weighted avg exchange rate

Question 26

Functional currency is the same as REPORTING CURRENCY

Answer 26

use weighted avg

Question 27

historical exchange rate is used to translate…–>

Answer 27

inventory, prepaid assets, property & plant

Question 28

if indirect method of cash flow is used. it’s required to disclose……

Answer 28

report the amount of interest paid and the amount of income taxes paid during the period

Question 29

Valuation under U.S. GAAP - INTANGIBLE

Answer 29

FINITE LIFE - COST LESS AMORTIZATION AND IMPAIRMENT

INDEFINITE LIFE - COST LESS IMPAIRMENT

Question 30

Valuation under IFRS - INTANGIBLE - 2 Methods?

Answer 30

Cost model - same as IFRS

Revaluation model - Fair Value on revaluation date - subsequent amortization - subsequent impairment

Question 31

Amortization of capitalized software costs

Answer 31

Greater of

1) percentage of revenue = total capitalized amount x current gross revenue/total projected gross revenue for product
2) straight line = total capitalized amount x 1/estimate of economic life

Question 32

percentage of completion

Answer 32

need to do both year of 4 steps

1) calc total gross profit - with estimated cost of contract
2) calc percentage of completion
3) calc gp earned to date
4) calc current year gross profit sbtract with previously recognized gp

Question 33

involuntary conversions

Answer 33

entire gain or loss is recognized for book purposes

for tax purposes, the gain is deferred.

Question 34

Impairment loss under IFRS

Answer 34

greater of

1) recoverable - FMV - costs
2) value in use

then subtract with carrying value

Question 35

To determine capitalized interest

Answer 35

need to AVG the accumulated expenditures…
note: In any period the total capitalized interest shall not exceed the total amount of interest cost incurred by the enterprise