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1
Q

Define ARO

A

The obligation (liability) associated with the retirement of a tangible long-lived asset. Record at Present value of future obligation.

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2
Q

What is the Asset Retirement Cost for AROs?

A

The amount capitalized (asset) that increases the carrying amount of the long-lived asset when a liability for an ARO is recognized.

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3
Q

What is an ARO called under IFRS?

A

Decommissioning Liability.

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4
Q

What is the JE for recording an ARO?

A

Debit: Asset retirement cost (asset) Credit: Asset Retirement Obligation (Liability) **Record both at Present Value

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5
Q

How do you account for an ARO after the initial investment?

A

the ARO Liability is adjusted for Accretion Expense due to passage of time and the ARC asset is depreciated.

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6
Q

JE for Accretion Expense

A

Debit: Accretion Expense Credit: ARO (Liability) **Note: Liability increases

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7
Q

What is accretion expense?

A

The ARO is recorded ata discounted amount. Accretion expense is the growth of the liability over time so that at the time the liability is satisfied, it is reported at it’s total non-discounted value.

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8
Q

JE for Depreciation Expense for an ARO?

A

Debit: Depreciation Expense Credit: Accum. Depreciation (Asset Retirement Cost)

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9
Q

Who consolidates a VIE?

A

Primary beneficiary consolidates a VIE. It is a primary beneficiary if 1. it has the power to direct activities of the VIE AND 2. the company absorbs the expected VIE losses OR 3. Receives the expected VIE residual returns (profits).

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10
Q

What is a redemption of bonds payable?

A

The repurchase of bonds by the issuer of the bonds.

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11
Q

List some disclosure requirements for Comprehensive Income.

A
  1. tax effects of each OCI component 2. changes in balances of OCI components 3. total AOCI 4. Reclassification adjustments between OCI and Net Income
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12
Q

Describe the related party disclosures under U.S. GAAP and IFRS

A
  1. Material related party transactions 2. related party notes/accounts receivable 3. control relationships *Note: IFRS requires disclosure of key mgmt compensation, while U.S. GAAP does not.
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13
Q

DTL examples

A

ICE: F/S Income first, then Taxable Income: 1. Installment Sales 2. Contractor’s Accounting 3. Equity Method (undistributed Dividends); PAD: Tax Deductible first, then F/S Expense: 1. Prepaid Expenses 2. Amortization of Franchise 3. Depreciation Expense

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14
Q

DTA Examples

A

SUE B: Taxable Income, then F/S Income 1. Unearned Revenue; F/S Expense, then Tax Expense: 1. Bad Debt expense 2. Estimated Liability/Warranty Expense 3. Startup Expenses

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15
Q

restating F/S from the functional currency to the reporting currency

A

When do you use the translation method for foreign currency?

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16
Q

restating F/S from the foreign currency to functional currency

A

When do you use the remeasurement method for foreign currency?

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17
Q

Define Functional Currency

A

the currency of the primary economic environment in which the entity operates

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18
Q

Which method (remeasurement or translation) do you use when the sub’s functional currency is not the same as its local currency?

A

Remeasurement

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19
Q

Which method (remeasurement or translation) do you use when the sub operates in a highly inflationary economy?

A

Remeasurement

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20
Q

Which method (remeasurement or translation) do you use when a Chinese company is using the Euro?

A

Remeasurement

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21
Q

Which method (remeasurement or translation) do you use when the foreign sub is highly integrated with the parent and day to day sales depend on the reporting currency?

A

Remeasurement

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22
Q

Which method (remeasurement or translation) do you use when the foreign sub is independent of the parent and operates primarily in local markets? The day to day operations of the sub do not depend on the reporting currency.

A

Translation

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23
Q

Nonmonetary Items

A

I C U P In A Icky PortaPotty. 1. C/S 2. P/S 3. Inventory 4. Investment in sub 5. PP&E 6. A/D 7. Intangible Assets 8. Unearned Revenue

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24
Q

Remeasurement Method: What rates are used for the Balance Sheet?

A
  1. Monetary Items = Current/Year end rate 2. Nonmonetary Items = Historical Rate
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25
Q

Remeasurement Method: What rates are used for the Income Statement?

A
  1. Non-B/S Related items = weighted average rate 2. B/S related items = historical rate (COGS, Deprecation, Amortization)
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26
Q

Where is the G/L reported when using the Remeasurement Method?

A

On the I/S

27
Q

Where is the G/L reported when using the Translation Method?

A

OCI

28
Q

Translation Method: What rates are used for the Balance Sheet?

A
  1. Assets & Liabilities = Current/Year end rate 2. C/S and APIC = Historical rate 3. RE = Roll forward
29
Q

Translation Method: What rates are used for the Income Statement?

A

All income statement items = weighted average rate, then transfer Net Income to RE

30
Q

What should be disclosed for operating leases having remaining lease terms > 1 year?

A

The future minimum rental payments required in the aggregate & for each of the next 5 succeeding years

31
Q

What is the amount of capitalzied interest costs for construction?

A

the LOWER of: 1. actual interest cost incurred 2. computed capitalized interest

32
Q

The allowance method of estimating uncollectible accounts that emphasizes asset valuation over I/S is?

A

Aging the receivables *Note: focuses on the B/S, emphasizes valuation of assets, and it results in good matching of revenue and expense

33
Q

How many of each financial should be presented for: 1) Interim Reporting: GAAP & IFRS 2) Transition to IFRS

A
  1. Interim Reporting: US GAAP: 2 B/S, 3 of all others; IFRS: 2 of everything 2. Transition to IFRS: 3 B/S, 2 of all others
34
Q

What are the common modifications used to prepare modified cash basis F/S?

A
  1. capitalzing and depreciating FAs 2. accrual of income taxes 3. recording liabilities for long term and short term borrowing & related interest expense 4. capitalizing inventory 5. reporting investments at fair value & recognizing unrealized gains and losses
35
Q

IFRS: You may capitalize development costs for intangible assets if what criteria are met?

A
  1. technological feasibility 2. intends to complete 3. ability to use or sell 4. generate future economic benefits 5. resources are available to complete
36
Q

How do we account for subsequent increases in the fair value of a discontinued operation?

A

a gain is recognized for the subsequent increase in fair value minus costs to sell (but not in excess of the previously recognized cumulative loss). The gain is reported in the period of increase.

37
Q

Name 4 required disclosures for segments

A
  1. operating segments 2. products and services 3. geographic areas 4. major customers
38
Q

What are the disclosure requriements for reportable operating segments?

A
  1. identifying factors 2. products or services 3. profit or loss details 4. asset details 5. liability details (IFRS only) 6. measurement criteria 7. reconciliations
39
Q

When to disclose a major customer

A

If the customer has 10% or more of revenue of the TOTAL revenue, then disclose segment the major customer is under, but do not have to disclose name of major customer

40
Q

If Ending Inventory is understated, how are COGS and NI affected?

A

COGs are overstated, NI is understated

41
Q

When to capitalize a lease?

A
  1. Ownership transfers at end of lease 2. written option for bargain purchase 3. 90% of leased property FV < or = PV of lease payments 4. 75% or more of asset life is being committed in lease term
42
Q

What amount do you capitalized a lease at?

A

the lesser of: 1) FV of asset 2) cost = PV of minimum lease payments

43
Q

What term do you use to depreciate a capitalzied lease?

A

Depreciation by asset life if 1. ownership transfers or 2. written option for bargain purchase; Depreciate over lease life if 1. 90% of leased property FV < or = PV of lease payments or 2. 75% or more of asset life is being committed in lease term

44
Q

How are As & Ls valued for personal financial statements?

A

at fair value Note: presentation of As & Ls is made in order of liquidty and maturity, with no current and noncurrent classifications.

45
Q

NFP: How to account for donated services

A

record at fair value. Recognized “SOME” of the time: Specialized skills, Otherwise needed by the org, Measurable, Easily. Or if they create or enhance a nonfinancial asset.

46
Q

NFP: JE for donated services that qualify under the SOME test

A

Debit: Expense (at fair value) Credt: Contribution Revenue (at fair value)

47
Q

NFP: How to account for donor restricted contributions?

A

reported as temporarily restricted revenue until reclassified & expended

48
Q

Stmt of Cash Flows: When the indirect method is used, what supplemental disclosures are required?

A
  1. cash paid for interest 2. income taxes
49
Q

IFRS: Give the formula for impairment testing for intangibles assets and fixed assets

A

Recoverable Amount - Carrying amount = If negative, Impairment loss *Note: Recoverable amoutn is the greater of: 1. value in use (PCvFCF) 2. NRV = FV - costs to sell

50
Q

Listed items that are not considered R&D

A
  1. design changes 2. trouble shooting 3. marketing research 4. quality control testing 5. reformulation of a chemical compound
51
Q

How to account for R&D costs?

A

Expense except for 1. tangible assets that have an alternative future use 2. R&D costs undertaken on behalf of others

52
Q

How to account for R&D costs under IFRS?

A

Expense, but development costs may be capitalzied if certain criteria are met

53
Q

List monetary items

A
  1. cash 2. All receivables and payables 3. bonds 4. ADA 5. accrued expenses (ex: accrued salaries payable)
54
Q

What is the formula for net period pension cost?

A

SIRAGE: Current Service cost + Interest Cost - Return on Plan Assets + Amort. Of Prior Service Cost - Gains + Losses + Amort. Of Existing Net Obligation/Asset

55
Q

What pensions items are in OCI?

A

“AGE” in SIR AGE: the unamortized portion of Prior service cost, Gains and Losses, and the unamortized portion of existing net obligation/asset

56
Q

What is the formula for the actual return on plan assets?

A

Beg FV of Plan assets + Contributions + Actual return on Plan assets - Benefits Paid to Retirees = Ending FV of Plan Assets

57
Q

The actual return on plan assets affects income how?

A

increases earnings volatility

58
Q

The expected return on plan assets affects income how?

A

smooths earnings

59
Q

Cash and Cash Equivalents have a maturity of?

A

ORIGINAL maturity of 90 days or less

60
Q

Double Declining Balance Formula

A

(1/useful life) x 2

61
Q

Sum of Years Digits Formula

A

Depreciation Expense = (Cost - Salvage Value) x (Remaining life of asset/Sum of the years digits); Sum of years digits = [n(n+1)]/2

62
Q

What is the revaluation model for intangible assets and fixed assets under IFRS?

A

Revaluation Losses: Reported on I/S, Revalution Gains: Reported in OCI, Impairment: Decrease OCI to zero, then loss on IS

63
Q

What are the criteria to be met for the Lessor to Classify a lease as a sales type or direct financing?

A

LUC 1. Lessee “owns” the leased property 2. Uncertainties do not exist regarding any reimbursable costs to be incurred by the lessor 3. Collectibility of the lease payments is reasonably predictabl

FAR Flashcards 2 (9 decks)

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