NINJA 3 Flashcards
Business combination - GW
Price pd
\+ FV assets
(Liab)
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Acq price
> FV = GW
< FV = extraord gainCalculate ARO liab
Beg bal
+ undiscounted CF new ARO
+ accretion exp
(Pmts)
Accretion exp= FV ARO liab * credit adj rf rate
Business combination - extraord gain
Cost of invest
FV + consideration
(FV net assets)
How to account for contingencies
Gain - probable –> disclose
Loss - probable –> accrue & disclose
Reasonably possible –> discl
Remote –> nothing
Dilutive securities
Decrease EPS
If mkt > exercise
Formula to determine if bonds are dilutive
[(face*SR) + disc am - tax]/# sh bonds are convertible to
How are unusual OR infrequent items reported?
Income from cont ops, NOT net tax
Included: g/l from lawsuit settlement
note: unusual AND infrequent = Extraordinary items, net tax
Items that are NOT extraordinary
Currency revaluation Adj on LT contracts Increased prod costs Disposal of segment (discon't ops) G/l in troubled debt restructuring Strike
Definition of fair value
Price recd to sell asset or transfer liab in orderly trans in principal mkt
Where is remeasurement g/l reported?
NI
with separate disclosure in face or notes
Where is translation g/l reported?
Comp inc
What rate is used for FS translation
Preferred = current (for all elements of FS)
Can use weighted avg bc of numerous dates in which a transaction occurred
Historical rate
Inventory @ cost
Exception to current rate rule
Functional currency
Currency of primary Econ where operates
changes in rate for contracts
Seller - rate increases from date of sale –> gain
Buyer - rate increases from date of sale –> loss
Rates to use & when on purchase contracts
PurchasED - spot rate
ENTER into contract TO purchase - forward rates
Where is Remeasurement g/l reported?
NI (on IS)
With separate disclosure in face or notes
Where is translation g/l reported?
Comprehensive income
What rate should be used to translate FS?
- current for all elements of FS
- but, can use weighted avg when there are numerous dates that the trans occurs
- inventory at cost issues historical rate
How to determine g/l on FX transactions
Seller
Rate increases from date of sale = gain
Buyer
Rate increases from date of sale = loss
When to use spot rate vs. forward rate
PurchasED - spot
Forward contract TO purchase - fwd
GAAP impairment loss
- Is CV > FCF
yes - loss = CV-FV
no - no loss
Impairment loss - IFRS
- Recoverable amount
higher of
1. PV disc FCF
2. NRV - Recoverable amt > NRV
Yes - loss = CV-recoverable amt
No - no loss
Recognition for no monetary transactions
- Is there commercial substance? (FCF are significantly different)
Yes - use FV recd
Gain = FV given-CV given
No - use BV + cash pd
Partial gain (cash recd:FV consideration recd)
Characteristics of reportable segment
- max 10
- NO separate legal standing req’d
- report to segment mgr & COO
How to determine reportable segment
- Revenue - 10% combined rev of all op segment
- Profitability
10% combined profit for segment w profit
10% combined loss for segment w loss - Assets - 10% combined assets
Recognition of R&D costs
Expense as R&D
1. Technological feasibility
Capitalize
2. Production - inventory
- Internal training - expense
R&D costs
- R&D performed by others for you
(NOT vice versa) - uncertainty of future events = exp
- patent costs = exp
- patent registration = cap & am over Econ life
- equip with alternate (future) use = dep over useful life
- if benefits now, include c.y. dep
