Notes in my own words SFCPA Flashcards
The income tax basis of accounting
Revenues expenses assets and liabilities are recognized according to the tax laws and regulations. May differ slightly from GAAP.
Liquidity ratios
Current ratio
Quick Ratio
Solvency ratios
Debt-equity ratios
interest coverage ratio(interest times)
Profitability ratios
Net profit margin
Return on assets
Return on equity
efficiency ratios
Asset turnover ratio
inventory turnover ratio
Market value ratios
earnings per share
Price-to-earnings ratio: Market Price per share/ earnings per share
Cash flow ratios
operating cash flow ratio= operating cash flow/ total debts
Free cash flow to equity=cash from operations-capital expenditures-debt payments+new debt issued.
LCNRV Lower of cost net realizable value (IFRS)
compare each inventory item (or group) to the net realizable value. if the items acquisition cost exceeds the NRV, then record it at the lesser the NRV.
LCM Lower of cost or market
compare the cost of inventory to the market value if the cost exceeds the market value reduce the inventory to market value.
CECL model and AFS debt securities
this model is used to show a company’s leases, loans, and debt instruments’ total credit losses.
Equity method investments
this method is applied to investments with certain circumstances, normally when an investor gains significant influence over the investee, but does not have control.
Significant influence
joint control or lack of some control
Asset retirement obligation
Troubled debt restructuring TDR
When a borrower’s payback on debt is less likely. A lender can grant a change to their loan that would not be considered if the circumstances were normal.
Effective interest method determining the debt issuance costs on a bond.
Present value of an annuity future interest payments
calculating future payments based on market interest rate
Present value of future cash flows
If a bond is issued below face value there is what?
a discount on the bond
If there is a yields percentage on the bond then… using the effective interest method to amortize a bond.
you add to the discounted rate the bond is issued at until it reaches the face value.
how to determine what is due to bonds payable using the effective interest method of amortizing bond discount.
find the annual interest payment
find the effective interest expense year 1
find the difference between the annual interest payment and the effective interest payment for year 1= the amortization of the bond discount. Be careful read whether it is for a full year or 1/2 year.
Annual interest payment on a bond
= face value * % issued at
effective interest expense year 1
= amount the bond is issued at (the discount amount) * the yields percentage
What kind of bonds will not all mature on the same date?
Serial bonds
Present value of bond issuance
period amortization
(premium/discount and bond issuance)/ number of periods the bond is outstanding.
SEC reporting!
transaction Vs translation
Translation is when converting a whole set of financial statements rather than one transaction.
