Non-monetary Exchange

Question 1

When transaction lacks of commercial substance, the FV of assets received is

Answer 1

Value of the assets in this case = old bet cv of the assets + any cash given up (more reliable)

or FV of new asset - any gain recognized (less reliable if there is no gains)

Question 2

Is it lack of commercial substance transaction or has commercial substance use the ratios to recognize transactions gains?

Answer 2

When lack of commercial substance

Question 3

What is research and development cost?

Answer 3

Research: the attempt to discover new knowledge aimed to develop a new product, service, process, tech, or significant improvement of an existing product.

Development: the translation of research funding knowledge into a plan or design new product or significant improvement in an existing product or process either for sale or use. Costs including design, testing of product alternative, construction of prototype and operating of pilot plants

R&D key words:

Laboratory research
Formulation and design product or alternative
Modification the formula
Design,construct, testing tools and model
Design a pilot plant

Common excluded :

Routine testing
Legal works
Software development cost
Quality control

Question 4

Assets acquired for R&D,
1. what is the accounting for FA used in several projects?

2. Only used in temporary R&D project?
3. Use in only one project?

Answer 4

1. As normal depreciable assets

Dr. Dep expense CR. AD

2. Only the portion for timeframe of the R&D is expensed in annual R&D cost
3. Entire cost of the assets is expensed immediately.

Question 5

What is the treatment for legal fees and other costs associated with registration of the patent?

Answer 5

Capitalize it

Question 6

Required risk and uncertainty disclosure

Answer 6

1. Nature of operation (product and service,geo locations, principal market that risk can be identified)
2. Use of estimates (general and certain significant estimate) (FS, approximate amt and estimates assumed for future events)
3. Current vulnerable due to significant concentration in certain aspects of operations
4. Ability to going concern
   (Current financial condition, conditional and unconditional obligations, funds ready to maintain operations, and other conditions)

Apply to complete interim and annual reports

Question 7

Purpose of segment reporting and what kind of value segment reporting contains?

Who the segment data report to?

What are the three common Threshold that segment reporting uses?

Answer 7

Purpose: asset financial stmt users to understand the entity performance

Quantitative quality: predictive value and conformance value

Report to chief operating officer

10% of revenue, income and assets

Question 8

What characteristics of the operating segments and what are the segment reporting tests?

Answer 8

Characteristics: segment ha involved in revenue and expense from activities

Operating results are reported to the main decision maker in regular basis

There is discrete financial info available for the segment

Test: 1. segment revenue from all source (internal and external) is >=10% of the combined revenue of ALL reported company segments

2. The segment operating profit and loss is >10% of the greater of 1) combined profit if all segment didn’t report a loss or 2) the combined loss of all segment that did report a loss

Question 9

If there are more than one segment in one area and all meet the reporting segment criterion, how to report the segment for that area?

Answer 9

Combine all segments together to eliminate excessive reporting

Question 10

What is the overall % the external revenue from the reportable segment should have account towards the company’s consolidated revenue? If less than that, what should the company do?

Answer 10

75% of segment revenue out of 100% total revenue

If less than that, the company must report more segment, even if the reporting criteria didn’t meet

Usually when the reporting segments reaches 10, the company has to consider the cost of adding additional

Question 11

The requirement for reportable segment disclosures

Answer 11

Factors used to ID segments
Products and service about the segment
Intently and external revenue, measure of P/L and total assets
Interest revenue / expense
All depletion, amortization and depreciation expense

Question 12

GAAP and IFRS differences

Answer 12

Mostly the same except the IFRS required disclosure of total liability if the info is provided to the decision maker

Liabilities also included in the reconciliation of segment info with total firm data

Question 13

How to present revenue from foreign operating in segment reporting?

Answer 13

Disclose separately the amount of sale to unaffiliated customer and the amount of interco sales between geo areas.

Question 14

There are two methods to amortize capitalized computer software costs, what are they and their calculations? Which amortization cost to recognize?

Answer 14

Revenue method and SL method

Revenue method
BV of capitalized software * (CR / (CR + future estimated revenue)

SL method
BV / yrs remaining for product sales

Recognize the larger of the amortization cost from the two methods

Question 15

After amortizing this software cost, the CV is compared with the NRV (future benefit -operating cost).

If the ending cv is > NRV, the new CV is the NRV, no write up is allowed

Answer 15

What is the ending balance for amortizable CV?

Question 16

IFRS and GAAP difference

Answer 16

Under IFRS, research cost is expensed

Development cost is capitalized

Question 17

What is the first thing to consider when dealing with cloud computing?

Why is the reason to consider if having software license or not?

Answer 17

Consider if the software license is part of the arrangement

Consider software license exist if 1) the customer has contractual rights to take possession at time during the hosting period W/O significant penalty

2) customer can run the software on its own hardware or contract with third party

To consider if have software license or not is for treating the purchase as acquired intangible license agreement that will be capitalized and amortized

Question 18

What is Subsequent event also called?

What date is referred as SE? Examples?

Answer 18

Post balance sheet event

Date: after the date is FS, but before the statement is issued or available to be issued

Examples:
Lawsuits, change in operating structure, issuance of debt and security, major acquisitions, and significant G/L

Question 19

What are the SE conditions and their treatments ?

Answer 19

Condition 1: the condition lead to SE existed on the BS date

Treatment: recognize and disclose

2: condition exist after the BS date

Footnote disclose only for events have material effect on FS

Disc ribs nature of event, and estimates made and if no estimates can be made explain why

Question 20

What kind of stmts need to report SE

Answer 20

Annual reports and interim reports

Question 21

IFRS for SE

Answer 21

Stock split or reverse split need to be adjusted only if it’s before the FS are issued

Question 22

When issue stock for service at fixed shares, JE?

When issue stock at fixed value. JE?

Answer 22

At fixed shares, the share value record at FV at time of derive contract, ignore the price increase in the future.

Record as. Dr. Service expense. At FV
CR. CS. At par
CR. PIC. At the difference

Record service value is fixed
Dr. Service expense at new FV
CR. CS =fixed value /new share value * par
CR. PIC. The rest

** shares changed from 1000 shares to 800 shares due to price change