Miscellaneous Flashcards
Development Stage Enterprise: Recording
presented in conformity with generally accepted accounting principles that apply to established operating enterprises.
Organization Costs
(1) accounting services incidental to organization, (2) legal services for drafting the corporate charter and bylaws, (3) state incorporation filing fees, and (4) costs of temporary directors and of organizational meetings. Start-up activities, including organization costs, should be expensed as incurred.
R & D Performed for Others
not expensed as R&D costs.
Organization Costs: Amortization
Amortization is a component of the tax treatment for organization costs; it is not an option for financial accounting purposes
Costs Capitalized
The costs of producing product masters incurred subsequent to establishing technological feasibility
Capitalized software production costs are reported at the lower of unamortized cost or net realizable value.
Costs Expensed as Inventory
Costs incurred for (A) duplicating the computer software and training materials from product masters and (B) physically packaging the product for distribution
Assets with Alternate Future Uses
amortized over their useful lives by periodic charges to R&D expense.
Criteria for Cost Capitalization
Capitalization of costs should begin when both of the following occur: (1) the preliminary project stage is completed, and (2) management implicitly or explicitly authorizes and commits to funding a computer software project and it is probable that the software will be used to perform the function intended.
Costs Incurred Internally in Creating a Computer Software Product
charged to expense when incurred, as research and development until technological feasibility has been established for the product.
Costs of producing product masters incurred subsequent to establishing technological feasibility are capitalized.
Subsequent Events
An entity shall recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements.
Asset Fair Value Measurement
The highest and best use of an asset establishes the valuation premise used to measure the fair value of an asset. The highest and best use of the asset is applied considering the use of the asset that is physically possible, legally permissible, and financially feasible at the measurement date.
Fair Value Hierarchy
- Level 1: Use quoted price from active markets for an identical asset
- Level 2: In the absence of an identical asset, use directly or unobservable inputs like a quoted price from active markets for a similar asset
- Level 3: In absence of both levels 1 and 2, use unobservable inputs. This includes the entity’s own assumptions about the market like financial forecasts or a cash flow model using internal present value.
Fair Value Disclosure
the fair value of financial instruments for which it is practicable to estimate that value and the method(s) and significant assumptions used to estimate the fair value of financial instruments.
If Principal Market Not Identified
the most advantageous market should be used when determining the fair value of a financial asset.
Most Advantageous Market
the one which generates the highest net price, after subtracting transaction costs.
