Far4 Flashcards
What would an entity most likely do to hedge an investment in a foreign operation?
Borrow from another foreign entity with the same foreign currency as the operation being hedged. Since borrowing is a liability, any changes in the foreign currency would offset the investment.
If intercompany fixed asset balances are NOT eliminated, will consolidated income or loss be overstated.
Both can be overstated.
When there is NOT commercial substance to an exchange, gains are recognized:
In proportion to the amount of cash received.
Under the cost method, is the Sub’s income or dividends recognized by the parent?
Dividends are recognized as income to the parent.
When transferring a receivable, the loss is the difference between the carrying value of the portion of the asset transferred and the cash received for the:
Transferred portion. Usually the total carrying value will be allocated between the portion of the asset surrendered and portion retained, based on relative fair values.
For estimating income taxes for personal financial statements, assets and liabilities measured at their tax bases should be compared to assets and liabilities measured at their:
Estimated current value and estimated current amount.
Before assets are distributed as a property dividend, the unrecognized holding gain or loss is:
Recognized. If a firm pays a property dividend of a stock it bought for 20,000 when its market value is 25,000, there is a debit to retained earnings for 25,000 and a gain on disposal of 5,000 is recognized.
Bond prices and interest rates are inversely related. When interest rates increase,
the market value of bonds decrease, because there are now better opportunities on the market.
Are fund-based statements or government wide statements included on a CAFR?
They both are. The gov-wide statements focus on the financial results and health of the gov while the fund based statements report how various revenues are derived and spent.
What are the 3 columns on the gov-wide statements?
Gov activities, business type activities, and total gov activities
Which funds are not included in the gov-wide financial statements?
Fiduciary funds.
How is an internal service fund reported on the gov wide statements if another gov agency is its main beneficiary?
As a gov fund instead of a business type fund.
What accounting basis is used to report the gov wide financial statements?
Full accrual accounting.
What statements are required for the gov wide statements?
The statement of net position and the statement of activities
How would 5 year bonds appear in the fund based statements and the gov wide statements?
They wont show up in the fund based statements because they aren’t a claim against current assets. They will show up as a long term liability in the gov wide statements.
Does a firm selling put options on its own stock affect liabilities or equity?
It increases liability by the fair value of the options.The liability will be extinguished when the option is exercised or when it expires.
When computing avg shares outstanding during the year, how are stock dividends treated?
Stock dividends are treated as outstanding for the entire year. It is when new stock is issued that it is multiplied by the portion of the year remaining.
Is additional compensation to former shareholders after a business combination considered additional costs of the business combination?
No.
Can a forecasted transaction be hedged?
Yes- in a cash flow hedge since it is forecasted and therefore subject to changes in related cash flow.
Is a finder’s fee for a lease expensed or allocated over the lease term?
The finder’s fee benefits the entire lease term and is therefore expensed evenly over the lease term.
What exchange rate is used to TRANSLATE a foreign sub’s income statement?
The average exchange rate.
If a company changes from FIFO to weighted avg inventory during 2005, how is the cumulative effect of the change measured?
The change is measured as of the beginning of the year of change.
Are the direct costs or the general expenses in a business combination deducted from the corp’s net income from the combination?
Both are expensed in the period incurred.
Does the recording of an asset retirement obligation for a natural resources development site increase the liability or the depletion base?
Both. It is a credit to a liability, and a debit to the natural resources account, which is the depletion base.
Under international accounting, the vested portion of prior service cost is immediately recognized in:
Pension expense. The unvested portion is gradually recognized under delayed recognition in pension expense.
If financial statements prepared on another basis besides GAAP are not appropriately titled, the auditor must:
Disclose any reservations in an explanatory paragraph and qualify the opinion for the inappropriate title of the statements.
Under IFRS for SMEs, which inventory valuation method is NOT allowed?
LIFO.
Personal financial statements should report assets and liabilities at:
Estimated current values(fair values) at the date of the financial statements.
What financial statements are included in a set of personal financial statements?
A statement of financial condition (balance sheet) is always included, and a statement of changes in net worth may be included, but is NOT required.
In a personal statement of financial condition, a life insurance policy should be reported at cash surrender value less any:
Loans outstanding against the policy.
In a cash flow hedge, the item being hedged is measured using:
The present value of expected cash inflows or outflows. The item being hedged could be associated with an asset, a liability, or a forecasted transaction.
