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FAR -Random Flashcards

1
Q

Software Costs

A

It is between production and technological feasibility. Cost includes coding and testing after TF and product master.
It is amortized at larger of SL or revenue calculation

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2
Q

Technological Feasibility

A

Includes program, design, coding and testing
Equip for R and D = expense
Equip for current & future = Amortize and depreciate
Material and labor= R and D

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3
Q

Cash Flow Hedge

A

Against forecasted transactions that are expected to take place in the future
Changes are reported in OCI in DENT until transactions occur.

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4
Q

Fair Value Hedge

A

Against a recognized asset and liability on the BS

Changes are reported in income from continuing

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5
Q

Reporting Unit

A

Group of assets, liabilities, and activities for separate book and records are maintained to facilitate internal decision making and reporting

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6
Q

Franchise Revenue

A

Revenue is recognized when franchiser performed all material service and conditions

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7
Q

Trading securities

A

Not held at cost, but at FV
Realized gains = price - FV
Reported on the income statement

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8
Q

Available for sale securities

A

Does not have FV election:
Held at cost, marked at OCI
Realized gain/loss = Price - cost

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9
Q

Excluded from Cash

A 
Compensating balance
Postdated checks or NSF
Overdraft protection
Restricted cash
Postage stamps

These items should be disclosed

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10
Q

Amortized cost under IFRS

A

Business model is to hold the asset to collect future CF
CF are payments of principal and interest
All other should be measured at FV

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11
Q

Serial bonds

A

Bonds in which the principal upon maturity in installment

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12
Q

Term Bonds

A

Pay entire principal upon maturity at the end of the term

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13
Q

Bond Issue Costs

A

Amortize along with discount and premium

Includes - printing and engraving, legal and acct fees, underwriter commission, and promotion costs

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14
Q

Cost approach

A

Used to measure Fair Value

Cost incurred to replace the benefits derived from the assets

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15
Q

10 key elements under GAAP

A

Assets, liabilities, equity, investment by owner, distribution to owner, comprehensive income, revenue, expense, gain, loss

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16
Q

Significant influence under IFRS Equity investment

A

Having power to participate in the decision of the investees

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17
Q

Appropriate valuation technique (FV measurement)

A

MIC

Market approach, income approach, cost approach

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18
Q

Market approach

A

Used to measure FV

Involve identical or comparable asset/liability

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19
Q

Input for valuation

A

Level 1: used of observable data
Level 2: directly/indirectly input of observable data
Level 3: unobservable data and largely based on management’s judgment

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20
Q

Where will non-controlling interest appears on BS

A

Non-controlling interest in a subsidiary is considered as SE
Reported in SE Section

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21
Q

Goodwill transaction

A

Only recognized on the BS through the purchase
Maintained at purchase value unless it is impaired
Costs to maintain/develop GW are an expense - not capitalized
Reporting unit can be operating segment or 1 level below

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22
Q

Recognition

A

Process of reporting an item on the financial statement

Meet the definition of an element of financial statement

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23
Q

Realization

A

The conversion of an item or service into cash or a claim to cash

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24
Q

Order of authority

A
  1. FASB Statement of Fin Acct Std
  2. FASB Interpretation
  3. AICPA Acct Principles Board Opinion
  4. AICPA Acct Resarch Bulletins
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25
Q

Methods to recognize expense

A
  • Causes and Effect
  • Systematic and rational allocation
  • immediate recognition
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26
Q

Monetary Unit Assumption

A

Events and transactions are quantitatively measured in terms of the equivalent amount of money
Common denominator of economic activity and provides acct measurement and analysis

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27
Q

Matching

A

Process of recognizing an expense in the same period in which a related benefit is recognized

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28
Q

5 key elements under IFRS

A

Asset, liability, equity, income, expense

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29
Q

IFRS recognition & measurement

A

Probability of occurrence

reliable measurement

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30
Q

Income Approach

A

Used to measure FV and it involves future amount in the forms of revenues, cost savings, and earnings

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31
Q

Net realized value

A

Amount expected to be collected

32
Q

Pledging

A

Pledge receivables as collateral for a loan

Must be disclosed in footnote

33
Q

Inventory turnover ratio

A

= COGS/Inventory

FIFO produce lower inv ratio as it has higher ending inv at rising prices (inflationary economy)

34
Q

Indefinite Life Intangibles

A

Not amortized, must be tested for impairment each year

2 step process - 1. FV< CV 2. FV net asset vs FV of reporting

35
Q

Exchange assets w/commercial substance (assume all)

A

Either 1, 2, or 3 - Amt use to record new asset

  1. FMV given up + cash paid (-received)
  2. FMV of asset received
  3. BV given up + cash paid (-received)
36
Q

Exchange asset lack commercial substance

A

Lower of 3 - amt use to record new asset

  1. FMV given up + cash paid (-received)
  2. FMV of asset received
  3. BV given up + cash paid (-received)
37
Q

Intangible Impairment

A
  1. CV > FV

2. FV is determined based on market price, income - expected amount, and costs -replacement value

38
Q

Copyrights

A

Protection of artistic work
Period of creators’ life + 70 years
Amortize over useful life

39
Q

Patent

A

Capitalize cost of obtaining legal
Do not include R and D
Max 20 years or shorter of useful life

40
Q

Factor’s hold back

A

Amount which provides a margin of protection against sales discount, returns, allowance and disputed accounts

41
Q

Factoring receivables

A

Convert AR into cash by assigning it with or without recourse
W/o Recourse = buyer assume risk
w/ recourse - buyer retains collecting rights

42
Q

Assigning AR

A

Client borrows cash and agree to use receivables to pay

43
Q

Intangible assets are amortized

A

Over the shorter of legal life or useful life

44
Q

Statement of financial accounting concepts

A

Intended to create a conceptual framework for accounting

It establishes objective and concepts on accounting and reporting are base on .

45
Q

Fair Value (for asset/liability)

A

FV is the exit price of an asset/liability

Amount received when disposing of an asset and the amount required to be paid to transfer liability.

46
Q

Allocation

A

Process if spreading a cost over more than one period

47
Q

Asset Valuation accounts

A

Separate item that reduces or increases the carrying amount of an asset

48
Q

Accounting Standard updates

A

Due-process activities of FASB

to amend the FASB Accounting standard of codification

49
Q

What is the core principle of revenue recognition?

A

(1) revenue is to be recognized upon the transfer of promised goods and service
(2) the amount of revenue recognized represents the consideration the entity expects to receive in exchange for those goods and services

50
Q

Patent

A

Capitalize cost of obtaining legal protection

Max 20 years life - use shorter of useful life or legal life

51
Q

Copyright

A

Protection of artistic work
Period is for the life of the creator +70 years
Amortize over useful life

52
Q

Trademark

A

Exclusive use of an identifying name for a product or process
Renewal is 10 years

53
Q

Franchise

A

Operation of a business unit under a contractual arrangement with another party

54
Q

5 steps process in revenue recognition

A
  1. identify contracts with customers
  2. identify all separate performance obligation within each contract
  3. Determine the total consideration for the contract
  4. Allocate total consideration amount obligation
  5. Recognize revenue either delivered/performed
55
Q

Market risk in investment

A

risk of interest rate will change

56
Q

Performance risk

A

Debtor not perform - payments are missed/late

57
Q

Nonrefundable lease bonus paid by leasee

A

Recognize over the life of the lease - treated as part of lease payments.

58
Q

Valuation Account

A

Contra-account to reduce the value of the paired account indirectly.
Must be paired with another account

59
Q

How does IFRS report inventory ending balance

A

Lower cost or NRV

60
Q

Impairment for Goodwill and PPE

A

Assets should be tested for impairment loss before goodwill

61
Q

Measuring monetary unit

A 
Historical cost
Replacement cost
Fair market value
Net realized value 
Present value
62
Q

FASB amends the accounting standard codification through…

A

The Issuance of Accounting Standard Updates

63
Q

Statement of Financial Acct Concepts intended to establish…

A

The Objective and concept for use in developing standards of financial acct and reporting

64
Q

Monetary Unit

A

Measure in terms on the equivalent amount of money they represent

65
Q

Comprehensive Income

A

Measure performance by calculating on entity’s changes in equity from non-owner transactions and events

66
Q

Stock Dividend

A

Stock dividend increases the number of share outstanding. It has no monetary effect on SE

67
Q

Treasury stock methods under IFRS

A

Cost method
par value method
Constructive retirement method

68
Q

Constructive method in treasury stock

A

Similar to par value method.

This method is used when the company does not intend to reissue the shares

69
Q

Accumulated benefit obligation

A

The present value of all future retirement payments that the employees already entitled to based on services rendered

70
Q

Projected benefit obligation

A

Amount that will owed to the employee assuming the employee will continue to work until retire age

71
Q

Disclosures for defined benefits pension plan

A

Description of the plan
Amount of pension expense by components
The weighted average discount rate
The estimated future contribution for the next fiscal year

72
Q

Actuarial technique used in IFRS to account for defined benefit pension plan

A

Projected unit credit method

73
Q

The if-converted method of computing eps in convertible securities as of the….

A

As of the beginning of the earliest period reported (or at time of issuance, if later)

74
Q

Permanent difference in income taxes

A 
Municipal bonds
Dividend received deduction
Life insurance
Fines/penalties
50% meals and entertainment 
Federal income tax payment
75
Q

Reporting a change from cash to accrual

A

Considered as correction of an error.

Similar to change in accounting principle, it needs to go back and change prior year adjustment (net of tax)

76
Q

Prospective financial statement should include….

A

Summary of significant accounting policies

Summary of significant assumptions

FAR (7 decks)

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