Miscellaneous Flashcards
Why would options to purchase common stock be excluded from the computation of diluted EPS?
Their exercise price is greater than the average market price.
This creates a dilutive effect.
What are the ways an investor has the ability to exercise significant influence over the operating and financial policies of an investee?
- representation on the investee’s board of directors
- participation in the investee’s policy-making processes
- material intercompany transactions with the investee
- interchange of managerial personnel
- technological dependency of the investee on the investor
What does an increase in a/r mean?
Sales revenue has been included in net income but not yet received
What does a decrease in a/p mean?
Cash has been paid for expenses but the cash payments have been deducted in arriving at net income
What are the primary operations of the financial statements?
Revenues & Expenses
What are the incidental transactions of the financial statements?
Gains & Losses
What could an entity’s revenue result from?
A decrease in liability from primary operations
Example: Decrease in unearned revenue, Increases revenue
What are suitable estimation methods for an entity if standalone selling price is not directly observable?
- adjusted market assessment approach
- expected cost plus a margin approach
- residual approach
What is the standalone selling price?
Price at which an entity would sell a promised good or service separately to a customer
What is the transaction price?
The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.
What should an entity do if selling price is not directly observable?
Estimate and consider all reasonably available information like current market conditions, entity-specific factors, and information about the customer
What is form 10-Q and its requirements?
SEC quarterly report
Must include a quarterly and PY FYE balance sheet
If subject to seasonal fluctuations, balance sheet from corresponding PY quarterly required
How are stock options accounted for and reported on?
They are required to be accounted and reported under the fair value at the grant date.
The expense is amortized and recognized over the vesting period.
When should one time termination benefits be recognized and measured?
On the communication date
What came from the 1933 Securities Act?
The accounting and disclosure requirements for the initial offering of stocks or bonds
What came from the 1934 Securities Act?
Created the SEC as well as provided requirements for secondary market offerings
How are gain contingencies accounted for and reported on?
They are only disclosed if receipt is probable
How are loss contingencies accounted for and reported on?
Ranges - probable, reasonably possible, and remote
If probable, accrue and disclose. If amount cannot be estimated, disclose only
Reasonably possible - disclose the nature of contingency and estimate loss or range of loss
Remote - none
What should the transaction price include?
What should the transaction price not include?
- include amounts the entity has rights to under contract
- exclude estimates of consideration from the futrue exercise of options
What is the intrinsic value definition?
The excess of the market price over the exercise price
How is the cost to file a patent and defending a patent recorded?
The legal cost to apply for a patent and to defend the rights in court is capitalized. (any legal costs are)
Development costs are expensed as incurred.
What does SFAC 8 state that could include as an additional disclosure for an asset?
- the nature, quality, and location of an asset
- future cash flows
- relation to other line items
- significant contractual, statutory, regulatory, or judicial restrictions
What does SFAC 8 state that could include as an additional disclosure for an assets and liabilities from financial instruments or other contracts?
- contractual or legal terms
- degree of credit or nonperformance risk
- potential effect related to inability to pay or perform
- method used to determine the cash flows
What does SFAC 8 state that could include as an additional disclosure as other disclosures?
could include
- equity instrument terms or conditions
- potential effects of changing accounting methods
- breakdown of aggregated line items
- alternative measurements
- the line item’s relation to other line items
What is interperiod equity?
Financial reporting should provide information to determine whether current year revenues were sufficient to pay for current year services
What is intraperiod tax allocation?
The distribution of the tax expense for the period to the various categories of income as presented in the income state or occasionally, adjustments to retained earnings.
Examples:
discontinued operations
prior-period adjustments
direct adjustment to capital accounts
What represents a strategic shift for the sale of a portion of an entity to qualify for discontinued operations?
The product line sold represents 15%or more of the entity’s total revenues
