Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

CPA > FAR10 > Flashcards

FAR10 Flashcards

1
Q

Fair Value Measurement

A

The price received to:

sell an asset OR paid to transfer a liability

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

FV transaction costs vs. transportation costs

A

Transactions costs not included,

Transportation costs are included

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Principal Market (1st option)

A

The market with the greatest volume or level of activity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Most advantageous market (2nd option)

A

The market with the best price for the asset or liability, after considering the “transaction costs” but transactions costs not included in the final fair value measurement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Valuation Techniques

A

Accounted for a change in accounting estimate (prospectively)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Market Approach

A

Uses prices and other relevant info from market transactions involving identical or comparable assets or liabilities to measure FV

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Income Approach

A

Converts future amounts, including cash flows or earnings, to a single discounted amount to measure FV

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Cost Approach

A

Uses current replacement cost to measure FV

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Hiearchy of Inputs

A

Level I inputs are most reliable FV measurement and Level III inputs are least reliable (if multiple levels used then FV is based on “lowest level”)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Level 1 Inputs “identical”

A

Are quoted prices in active markets for identical assets or liabilities (measurement date)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Level 2 Inputs “similar”

A

Quoted prices for similar assets or liabilities in active markets OR Quoted prices for identical or similar assets in markets that are not active

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Level 3 Inputs “discounted cash flows”

A

Are unobservable inputs for asset or liability (reflect assumptions on best available info)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Partnership GAAP vs. Tax Rules

A

GAAP Rule = FV of assets contributed

Tax Rule = NBV of assets contributed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Partnership Exact Method

A

Determine the exact amount a new partner will have to pay to get his capital account in the exact proportional interest to the new net assets of the partnership “finger math”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Partnership Bonus Method

A

To either existing partners if new partner pays more than receives OR to new partner if new partner receives more than pays “balance in total capital accounts”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Partnership Goodwill Method

A

Recognized based upon the total value of the partnership implied by the new partner’s contribution (to old partners) “going in investment”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Profit and Loss Distribution

A

All interest, salaries, and bonuses are deducted from total profit to arrive at amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Withdrawal of a Partner

A

Bonus Method - allocated among remaining partners’ with their remaining profit and loss ratios
Goodwill Method - allocated to ALL with their profit and loss ratios

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Liquidation of a Partnership

A

First creditors, including partners who are creditors, then second partners’ capital (losses must be provided for before distributions)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Liquidation of a Partnership (capital deficiency)

A

Remaining partners must absorb the deficiency to their remaining profit and loss ratios (“poor partners do not have any money to repay their shortage, so the “rich” partners are paid first)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Formation of a partnership, tangible assets (inventory and real estate) would be recorded at…

A

fair market value at the date of the investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Variable Interest Entities (VIEs)

A

Consolidation required if met:

  1. Variable Interest (has financial stake)
  2. Variable Interest Entities (VIEs) - equity characteristics are strange
  3. Primary Beneficiary (power) - absorbs losses and receives profits
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

The entity’s equity investment at risk is less than the equity investment at risk of similar non-VIE entities

A

indicate that an entity has an insufficient level of equity investment at risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

IFRS, a sponsoring company must consolidate a special purpose entity (SPE)

A

“Control” exists when the sponsoring company is benefitted by the SPE’s activities, has decision making powers that allow it to benefit from the SPE, absorbs the risks and rewards of the SPE, and has a residual interest in the SPE

25
Asset Retirement Obligations (ARO)
Is the obligation (liability) associated with the retirement of a tangible long-lived asset (valued at PV): Accretion increases
26
Asset Retirement Cost (ARC)
The amount is capitalized (asset) that increases the carrying amount of the long-lived asset when a liability for an ARO is recognized (valued at PV): Depreciation reduces
27
Troubled Debt Restructuring (Debtor)
Recognize ordinary gain/loss: FV - NBV asset transferred = "Ordinary gain/loss" Recognize ordinary gain on: CV of payable - FV asset/equity transferred = Gain (amount of debt discharged)
28
Creditor may measure impairment based on
(1) a loan's observable market price, or (2) the fair value of the collateral if the loan is collateral dependent. If foreclosure of a loan is probable, impairment measured on FV of the collateral
29
Trade A/P Gross Method
Records the purchase without regard to the discount, if paid within the discount period then purchase discount is credited
30
Trade A/P Net Method
Purchases and A/P are recorded net of discount (if made within discount period then no adjustment necessary), if payment made after the discount period, a purchase discount loss account is debited
31
Common Debt Covenants
Limitations on issuing additional debt, Restrictions on the payment of dividends, Limitations on the disposal of certain assets, Minimum working capital requirements, Collateral requirements, Limitations on how the borrowed money can be used, Maintenance of specific financial ratios
32
Imputed interest on non-interest bearing note
reported as interest expense
33
Total Estimated Coupon Redemptions
Total # coupons issued X Estimated redemption rate
34
Accrued Liabilities - Bonuses
1) Bonus = % (income - taxes) | 2) Taxes = % (income - bonus)
35
Net payroll and employer FICA
Gross wages X FICA rate (1 + rate)
36
Recognize warranty costs
At the date of sale, the warranty costs are probable and estimable and must be recognized
37
Contingencies
Probable - record JE Reasonably Possible - disclose Remote - Ignore *Gain contingencies only disclose (conservatism)
38
Subsequent Events
Recognized: Record JE and disclose Nonrecognized: Disclose
39
Contingencies Amount Range
GAAP: use minimum point in range (unless best estimate is given) IFRS: use midpoint in range
40
Current liabilities
include only those liabilities which are due within the next operating cycle (normally the next year
41
Derivative may be designated and qualify as a fair value hedge
1. There is formal documentation of the hedging relationship between the derivative and the hedged item. 2. The hedge must be expected to be highly effective in offsetting changes in the fair value of the hedged item and the effectiveness is assessed at least every 3 months. 3. The hedged item is specifically identified. 4. The hedged item presents exposure to changes in fair value that could affect income.
42
Disclosures of Financial Instruments
GAAP: required to disclose credit and liquidity risk but encouraged to disclose market risk IFRS: required to disclose credit risk, liquidity risk, and market risk
43
Call option
Gives the holder the right to buy from the option writer at a specified price (hoping price goes up)
44
Put option
Gives the holder the right to sell to the option writer at a specified price (hoping price goes down)
45
Futures Contract (publicly traded)
Long position (buyer) profits if goes up and Short position (seller) profits if goes down Hedge on inventory = goes to P/L
46
Derivations B/S
"winner" = asset (receives $ that protects you) "loser" = liability (pays $ that hurts you) Measured at FV
47
No hedging designation and Fair Value Hedge
Recognized G/L in I/S (earnings) | *same with foreign currency Fair Value Hedge
48
Cash Flow Hedge
Ineffective = goes to I/S Effective = goes to OCI then I/S later *same with foreign currency Cash Flow Hedge
49
Foreign Currency Net Investment Hedge
Reported in OCI as part of the cumulative translation adjustment
50
If financial instruments have both liabilities and equity
Then classified as liability
51
IFRS 9: Financial Asset
Recognized at FV (either amortized cost or FV) Debt Instruments: Amortized cost measurement (held-to-maturity) and Fair value measurement (AFS goes to OCI or trading-do not contain cash flows so goes to P/L) Reclassifications = prospectively
52
IFRS 9: Financial Liabilities
Fair Value measurement at FV on P/L | - Reclassifications not allowed
53
IFRS 9: Impairment
Does not apply to financial assets = P/L Applies to financial assets = OCI *if credit risk increases significantly then full lifetime expected credit losses are recognized
54
IFRS 9: Hedge Accounting
Fair Value Hedge = goes to P/L unless elected in OCI Cash Flow Hedge = in OCI (effective) Net Investment in a foreign operations = Effective in OCI and ineffective in P/L
55
Derivatives include
options, futures, forwards, and swaps "OFFS" Contract settlement value tied to underlying notional amount
56
Liquidation
Imminent and applied prospectively (bankruptcy, benefit plans terminated, or limited-life entities)
57
Criteria for Imminent Liquidation
Intent of ceasing its activities: likelihood of the entity returning from liquidation is remote AND either a liquidation plan is approved by individuals with authority OR a liquidation plan is imposed by other forces (i.e. involuntary bankruptcy)
58
Liquidation Disclosures (Statement of Net Assets in Liquidation and Statement of Changes in Net Assets in Liquidation)
Statement that the F/S prepared using the liquidation basis, Plan for liquidation, Significant assumptions/methods used to measure assets and liabilities, Expected time frame, and Type and amount of costs and income accrued
59
IFRS Impairment loss
Fair value less costs to sell - Carrying value

CPA (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions