FAR random Flashcards
FAR Fact nuggets in no particular order
Under IFRS, when is advertising service revenue recognized in a barter transaction? (Non monetary exchange)
When there is a non barter transaction for similar advertising services that can be reliably measured with a different counterparty
How is a loan to customer impaired?
Reducing the net book value of receivable to PV of future cash inflows, discounted at the *original* rate in the receivable
DR: Bad Debt Expense
CR: Allowance on N/R
What is the difference between the interest method and cost recovery method for impaired Notes Receivables?
- Interest method - recognizes interest income due to passage of time
- Cost-recovery method - only recognizes interest income if future payments are received
How are brokerage fees recorded under Fair Value investments?
Added to initial investment
EX Bought 100 shares of XYZ $40 + $280 Brokerage fee
DR: Investment in XYZ $4,280
CR: Cash $4,280
What is included in R&D costs?
- R&D - new research, new technology, conceptual, prototypes, not useful for commercial production, purchased services of R&D
- Not R&D - start up of commercial production (quality control, engineering & troubleshooting) , routine refinement of existing products, legal work on patent applications
What type of overhead costs can be included in R&D?
Facility costs, personnel costs, indirect costs (not administrative)
What are the rules on inventory losses?
If decline is expected to recover, do not record.
If decline is expected NOT to recover, record a loss. Recoveries can be recognized as gains, but only up to the previous loss, do not mark up above original cost.
What are the quantitative tests for segment reporting?
- Revenue test - 10% of total revenues (including interco)
- Asset test - 10% of total assets
- Profit or loss test (absolute value) - combine all profitable segments, combine all loss segments. Whichever number is bigger - 10% of larger amount minimum reportable segments
- keep adding until at least 75% of consolidated revenue is captured. -
- operating profit - follow how it is reported to C.Suite when determining if to add overhead allocation.
- This is called the “Management Approach”
What financial instruments are not eligible for FV measurement?
- investment in a subsidiary or VIE
- obligation for pension or post retirement -leases
- Financial instruments classified by issuor as shareholder equity
Under ASC820 what types of transactions are subject to fair value measurement?
- Asset impairments
- Business combinations
- goodwill
What is the definition of fair value?
The price that that would be received to sell an asset or transfer a liability (exit price) in an orderly transaction between market participants at a measurement date
What are the adjustments to compensation expense for employee stock options?
- unexercised nonvested: estimate of compensation expense previously reported should be adjusted by decreasing comp expense in year of forfeiture
- expired options for vested employee: not reversed if vested employees option expires unexercised
- adjustment to comp expense: may be necessary in current period as new estimates determined
What is the order of proceeds from bankruptcy?
- Secured creditors are paid first - based on specific assets which they have liens.
- Then proceeds go against the liabilities with priority, then to unsecured creditors.
- If the claims of partially secured creditors exceed the proceeds from the sales of pledged assets, excess constitutes unsecured claim.
What are indicator’s that an entity is an agent?
a. Another party is primarily responsible for fulfilling the contract
b. The entity does not have inventory at risk
c. The entity does not have discretion in establishing prices for the other party’s good or services
d. The entity’s consideration is in form of commission
e. The entity does not have credit risk for receivables
What is Revaluation under IFRS
Revaluing PPE to fair value if it can be reliably measured. Adjustment is held in OCI (R in PUFIER) If applied, must revalue the entire class of assets, not just individual asset. If you revalue down, you can later reverse to the extent of loss sitting in OCI, cannot go above that
How should revenue be recognized when there is right of return which cannot be estimated?
Don’t recognize revenue until return window has expired
How do you calculate proceeds on a discounted note sold?
Maturity value - discount
MV = Face value + interest at maturity
Discount = MV x discount rate x period outstanding
How is a notes payable presented on the Financial Statements when there is no stated interest rate?
If a note payable has no stated rate, and was issued for services at less than fair value, then there is implied interest. The value of the note is determined using the Effective Interest Method.
DR: Expenses for Services
DR: Discount on N/P
CR: Notes Payable
What liability is recorded when dividends are declared?
When declared, dividends are reported as current liabilities. Cumulative preferred stock dividends in arrears must be disclosed, but not reported as liability.
What discount rate is used to calculate the projected benefit obligation?
Settlement rate
What is the FASB standard setting process?
1) project added to agenda
2) conduct research, issue discussion memorandum
3) public hearings
4) evaluate research and comments issue Exposure draft
5) additional comments, edit exposure draft
6) finalize guidance by majority vote (4 out of 7) issue new standard as Accounting Standard Update
What is the formula for COGS?
Beginning Inventory
+purchases
-ending inventory
=COGS
If ending inventory is over, COGS is under, and retained earnings is over too
What is the IFRS difference for interest and dividends for statement of cash flows?
Interest & dividends paid classified as operating or financing
Interest & dividends received classified as operating or investing
(Gaap interest = operating, dividends received = operating, dividends paid = financing)
What determines if a company is a primary beneficiary of a VIE?
1) ability of make decisions about the entity’s activities
2) obligation to absorb losses of the entity
3) the right to receive returns from the entity (which is compensation for taking the risk to absorb losses)
How are legal fees and issuance costs treated in a consolidation?
Costs to register and issue stock are netted against paid in capital Legal / consulting fees are expensed as incurred
What are the disclosure requirements for Going Concern?
If there is substantial doubt about entity’s ability to continue within one year of the issue date of financial statements.
- principal conditions that raised substantial doubt
- management evaluation of significance of those conditions in relation to the entity’s ability to meet its obligations If doubts are not alleviated, then there is a going concern issue
What major categories are presented on the Statement of Activities for a NFP?
1)Changes in net assets w/o donor restriction
- Revenues and gains
- Net assets released from restriction
- Expenses and losses
2) changes in net assets w/ donor restriction
3) changes in permanently restricted net assess
How is Statement if Cash Flows different for NFP?
Changes in net assets reported in operating.
Unrestricted cash transactions in operating Long term restricted cash is in financing
What are the required financial statements for a defined benefit pension plan?
1) statements of net assets available for benefits
2) statement of changes in net assets
3) info about actuarial present value of accumulated present value
4) information about the effects of certain factors affecting year to year change in accumulated plan benefits
What are the criteria to determine if transfer of receivables is a sale? If all 3 are met, sale. If not, loan.
1) transferred receivables are not accessible to company or creditors (control is given up)
2) transferee has right to sell or pledge receivables
3) no agreement to let company keep control of receivables
