FAR_SECTION 6

Question 1

GAAP classifies contingencies as

Answer 1

Probable- likely to occur
Reasonably possible- More than remote, but less than likely
Remote-slight chance of occuring

Question 2

Under IFRS, probable is defined as

Answer 2

more likely than NOT to occur(50%)

Question 3

Under IFRS, possible is defined as

Answer 3

may but probably will NOT occurt

Question 4

Provision for a loss contingency s/b accrued by a charge to income if

Answer 4

it is probable

The amount of loss can be reasonably estimated

Question 5

in the event that a range of probable losses is given, GAAP requires that the best estimate of

Answer 5

the loss be accrued

Question 6

If NOT amount in the range is a better estimate that any other amount within the range

Answer 6

the minimum amount in the range s/b accrued

Question 7

Loss is Reasonably Possible =

Answer 7

Disclosure is required

Question 8

Loss is Remote

Answer 8

Ignore

Question 9

Disclosure s/b made for “guarantee type” remote loss contingencies such as

Answer 9

D.O.G

1. Debt of others guaranteed
2. Obligations of commercial banks under standby letter of credit
3. Guarantees to repurchase recievables(or related property) that have been sold or assigned

Question 10

Gain contingencies =

Answer 10

Wait

Question 11

Adequate disclosure shall be mand of contingencies that might result in

Answer 11

Gains

Question 12

Contingencies that might result in gains usually are not reflected in the accounts because

Answer 12

to do so may cause recognition of revenue prior to its realization

Question 13

Loss is Probable and Can be Reasonably Estimated =

Answer 13

Record JE

Question 14

An agreement in which the employer provides employees with defined or estimated retirement benefits in exchange for current or past services

Answer 14

Pension Plan

Question 15

Concerned with how the sponsor company

Answer 15

accounts for the plan

Question 16

Refers to the sponsor company making contributions to the pension plan

Answer 16

Funding

Question 17

Pay-As-You-Go and Terminal Funding are

Answer 17

Cash basis methods and NOT GAAP

Question 18

Factors considered when calculating contributions to the plan include

Answer 18

1. Employees’ length of service

2. Compensation amounts

Question 19

Defined Contribution Plan and Defined Benefit Plan are

Answer 19

GAAP methods

Question 20

Actuarial PV of benefits attributed by a formula based on current and past compensation levels

Answer 20

Accumulated Benefit Obligation(ABO)

Question 21

Income tax expense-current is found by determining the amount of income that is

Answer 21

actually taxable this year

Question 22

expense cannot be deducted for income tax purposes until -

Answer 22

actually incurred

Question 23

Secnario:Baxter collected 5 percent of the cash this year ($100,000 out of $2 million). Thus, only 5 percent of the profit is

Answer 23

taxable in the current year.

Question 24

SENARIO:Baxter collected 5 percent of the cash this year ($100,000 out of $2 million). What percentage will be collected in the future

Answer 24

The other 95 percent will not be taxable until the cash is eventually collected in the future (Deferred Income Tax liability)

Question 25

A deferred income tax asset means that a company has a

Answer 25

tax benefit in the future.

Question 26

Depreciation expense and the installment sales method usually create

Answer 26

deferred income tax liabilities

Question 27

Bad debt expense and warranty expense are both temporary differences but both normally create

Answer 27

deferred income tax assets

Question 28

Bad debt expense and warranty expense are both temporary differences

Answer 28

the expense is recognized immediately for financial reporting purposes but is deferred in connection with the company’s income taxes

Question 29

Installment sales method, revenues are recognized immediately for financial reporting purposes but the tax impact is

Answer 29

delayed until cash is collected -

Question 30

Some level of uncertainty of the sustainability of a particular tax position taken by a company

Answer 30

Uncertain Tax positions

Question 31

Who requires a more-likely than-not level of confidence before reflecting a tax benefit in an entity’s financial statements

Answer 31

GAAP

Question 32

A filing position that an enterprise has taken or expects to take on its tax return

Answer 32

Tax position

Question 33

What are the two step approach in Uncertain Tax positions

Answer 33

1. Recognition of the Tax benefit

2. Measurement of the Tax benefit

Question 34

Uncertain Tax positions,

Recognition of the Tax Benefit is based on

Answer 34

the expected outcome in the court of last resort

Question 35

Uncertain Tax positions, Measurement of the Tax Benefit is based on

Answer 35

the expected outcome in a settlement with the taxing authority