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FAR2 Flashcards

1
Q

Define fair value measurement

A 
Its an orderly transaction between market participants 
Not forced transaction
Not between related parties
Its an exit Price
Highest and Best use for PPE
Ignore transaction cost

Not to be implemented or used with LEASES and SHARE-Based Payment

Highest and best use doesn’t apply on financial assets or liabilities

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2
Q

Define Principal Market

A

Its the Market with highest volume or level of activity

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3
Q

Define Most advantageous market

A

Its the market with the highest price for the asset after considering transaction cost ( use transaction cost only to determine the most advantageous market but exclude from the fair value price )

TO BE USED IF THERE IS NO PRINCIPAL MARKET FOR THE ASSET

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4
Q

What are valuation techniques for fair value

A

MIC

Market approach = Quoted Market price= Most reliable
Income approach = PVFCF
Cost approach = Replacement Cost

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5
Q

Hierarchy Of inputs used to calculate fair value

A

Level 1 = Quoted market price for same or identical asset

Level2= Quoted market price for similar asset in an active market or identical asset in an inactive market

Level3 = Future cash flow

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6
Q

What items to be reported in segment reporting in both US GAAP and IFRS

A

US GAAP = Profit or loss + Segment asset

IFRS = Profit or loss + Segment asset + Liabilities

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7
Q

What is 10% test for reportable segments ?

A

if one segment is more than 90% no segment reporting is required

10% of the following and the segment is a reportable segment

Revenues = Both internal and external from both internal and external

Assets = of all combined assets

Profit or Loss

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8
Q

What is 75% rule for reporting sufficiency rule ofr segment reporting

A

REVENUES REVENUES REVENUES

At least an entity should report 75% segment

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9
Q

What are deadline to file with SEC ?

Filing deadlines

A

Large Accelerated 60Days
Accelerated 75 Days
The rest 90 Days

Large accelerated = 700M or more
Accelerated = 75 M or more but less than 700M

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10
Q

Form 10 K

A

Filled annually with SEC it includes Financial statements and audited prepared under US GAAP it also includes management discussion and analysis

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11
Q

Form 10 Q

A

is filled quarterly deadlines are
Large Accelerated 40 Days
Accelerated 40 Days
The rest 45 Days

Unaudited financial statements

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12
Q

For 11K

A

Annual report for employees benefits plan

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13
Q

Form 20F and 40F 6K

A

20F non US SEC registrants
40F Canadian specific companies
6K Semiannual ( similar to 10Q ) unaudited financials

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14
Q

Forms 3 , 4 , 5

A

To be filled by owners over 10 of equity of a registered company

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15
Q

What is regulation S-X

A

in this regulation SEC identify required financial data for filling for both interim and annual reports for its registrants

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16
Q

What does form 8-K includes ?

A

it include major events like corporate assets acquisition or disposal , changes to accountants or financial statements , or management change.

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17
Q

can an SEC filler file a condensed balance sheet

A

in quarterly and interim forms

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18
Q

what is SEC required financial statements number for a registrant for annual reporting

A

2 years of Balance sheets
3 years Income statement
3 Years cash flow statement

IFRS 2 of Each

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19
Q

What is XBRL

A

Royalty free language used to file with SEC its an advanced language more than HTML it tells the computer how to interpret the information

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20
Q

What are OCBOA ?

A 
Other comprehensive Basis of accounting :
Cash Basis
Income tax basis
CPI price changes
Other regulatory basis

TITLES MUST BE DIFFERENT DONT USE GAAP TERMS SO PEOPLE NOT FOOLED

CASHFLOW STATEMENT IS NOT REQUIRED .. ITS ALREADY CASH

DISCLOSURES SHOULD BE SIMILAR TO GAAP DISCLOSURES

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21
Q

WHAT IS MODIFIED CASH BASIS OF ACCOUNTING ?

A

ITS AN HYBRID VERSION BETWEEN CASH AND ACCRUAL BASIS OF ACCOUNTING AND IT REPORT FOLLOWING ITEMS IN THE FINANCIAL STATEMENTS

1-INVENTORY'
2-CAPITALIZE FIXED ASSETS AND DEPRECIATE IT
3-RECOGNIZE PREPAID EXPENSES
4-ACCRUAL FOR TAXES
5-RECOGNIZING LIABILITIES
6-REPORTING INVESTMENTS AT FAIR VALUE

REVENUE AND EXPENSES WILL STILL BE RECOGNIZED UNDER CASH BASIS

STILL NO ACCOUNTS PAYABLE OR ACCOUNTS RECEOIVABLES !

FINANCIAL STATEMENTS
1-STATEMENT OF ASSETS AND LIABILITIES

22
Q

WHAT IS INCOME TAXE FINANCIAL STATEMENTS ?

A

its financial statements that are prepared following IRS rules for revenues and expenses

NONTAXABLE INCOME AND EXPENSES ARE REPORTED AS ADDITION OR DEDUCTIONS FROM NET INCOME

IT FACILITATE INCOME TAX REPORTING

23
Q

HOW TO CONVER CASH RECEIVED FROM CUSTOMERS TO SALES (ACCRUAL)

A 
CASH RECIEVED FROM CUSTOMERS
\+INCREASE IN A/R
-DECREASE IN AR
\+DECREASE IN UNEARNED REVENUES
-INCREASE IN UNEARNED REVENUE
=SALES
CASH RECIEVED FROM CUSTOMERS
\+ ENDING AR
- BEGINING  AR
- ENDING UNEARNED REVENUE
\+ BEGINING UNEARNED REVENUE
=SALES
24
Q

HOW TO CONVER CASH PAID FOR PURCHASES TO COGS ?

A 
CASH PAID FOR PURCHASES
\+INCREASE IN ACCOUNTS PAYABLE
-DECREASE IN ACCOUNTS PAYABLES
-INCREASE IN INVENTORY
\+DECREASE OF INVENTORY
=COGS
25
Q

HOW TO CONVERT CASH OPERATING EXPENSES PAID TO ACCRUAL OPERATIG EXPENSES

A 
CASH PAID FOR OPERATING EXPENSES
\+INCREASE IN ACCRUED EXPENSES
-DECREASE IN ACCRUED EXPENSES
-INCREASE OF PREPAID EXPENSES
\+DECREASE IN PREPAID EXPENSES
=ACCRUAL OPERATING EXPENSES
26
Q

WHAT ARE THE MAJOR TYPES OR RATIOS

A

1-LIQUIDITY RATIOS
2-PROFITABILITY RATIOS
3- ACTIVITY RATIOS

27
Q

WHAT ARE RATIOS USED FOR ?

A

TRENDS

IT DISTILL RELEVANT INFORMATION OF THE BUSINESS ENTITY TO INDICATE TRENDS BY COMPARING THE RATIOS OF THE ENTITY FOR THE CURRENT PERIOD FOR PREVIOUS PERIODS OR BY COMPARING TO INDUSTRY RATIOS OR COMPETITORS RATIOS

QUICKLY IDENTIFY RED FLAGS

28
Q

CURRENT RATIO

A

=CURRENT ASSETS/CURRENT LIABIITIES

29
Q

Quick ratio

A

Cash +A R + marketable securities / current liabilities

30
Q

Activity ratio

A

= Turnover ratio

IS
____
BS = Average

31
Q

Accounts receivables Turnover

A

Sales(net) / Average AR ( Beg.+End /2)

The higher means the entity is performing well in collecting the money

32
Q

Days in Accounts receivable ratio

A

=Ending inventory / (Sales/365)

The lower the better how many days our money stay uncollected

33
Q

Inventory turnover ratio

A

COGS / average inventory

The higher means the entity can quickly turn its inventory into revenues

34
Q

Inventory in days

A

Ending inventory / ( COGS /365)

IF too high means means slow moving cant sell your inventory

if too high could be a fire sale

35
Q

Accounts payable Turnover

A

COGS / Average Accounts payable

36
Q

Cash conversion cycle

A

How long it takes to generate cash from your core business

=Days in AR + Days in inventory - Days in accounts payable

37
Q

Assets Turnover

A

SALES (NET) / Average total assets

How much your assets be turned over into sales

It indicates if you have adequate amount of assets relative to your sales
it determines management efficiency how, are they using their assets effectively

38
Q

Profit Margin

A

Net Income / Sales ( Net )

39
Q

Return on Assets

A

Net income / Average total assets

40
Q

Dupont Return on Assets

A

Profit Margin X Asset turnover

41
Q

Return On equity

A

Net Income / Average total equity

42
Q

Return on sale

A

EBIT / Sales(net)

43
Q

what are the method to admit a new partner to a partnership?

A
  • Exact
  • Bonus ( To old or new partners as agreed)
  • Goodwill
44
Q

How to calculate the Bonus in a partnership admission?

A

Divide the balance after admission by the number of partners then compare it to the amount paid by the new partner
If He paid More the Bonus goes for the existing partners
If he paid less the Bonus goes to him

45
Q

How to calculate a new partner Bonus ?

A

Dr.Cash
Dr.Old partner account ( using thier PL distribution ratio)
Cr. New partner

46
Q

How to recognize Goodwill when admitting a new partner ?

A

Goodwill = Going In Investment
goes to Old partners
“Implied value of dollars going in” = the paid money is the new fair value of the partnership

47
Q

How to calculate Bonus to old or new partners when using Bonus Method in partnerships?

A

BONUS=BALANCE

Compute using the Balance of total capital accounts is what determine the bonus amount

When new partner Pays More The Bonus goes to old partners
When New partner pays less the Bonus goes to the New partner

The extra or less amounts goes to capital accounts of the partners whether old or new

Allocation of Bous is based on how they share profit and loss

48
Q

Calculate Cash flow ration

A

Operating cashflow / Current liabilities

49
Q

Calculate Times interest earned

A

Income before interest and tax expenses / Interest expense

50
Q

Total debt ration

A

Total debs/ Total Assets

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