Review Flashcards
What are the following reports and who is required to file: 10-K 10-Q 8-K S-X
SEC Registrants (companies with assets of more than 10 million and 500 or more shareholders and securities that trade on a national securities exchange 10-K - Annual Report 10-Q - Quarterly Report 8-K - Material Disclosures S-X - Form & Content
What does/doesn’t the Fair Value Option (ASC 825) apply?
Does:
AFS, HTM, & Equity Method Securities
Certain Financial Liab.
Firm Commitments
Written Loan Commitments
Non-financial insurance settled by a third party
Warranty contracts settled by a third party
Host financial instrument that is an embedded nonfinancial dervative instrument separated from a nonfinancial hybrid instrument
Doesn't: Consolidations Pensions Leases Share-Based Payments Stock Options Postemployment Benefits Exit/Disposal Activities Financial Instruments that are a component of Equity
What accounting policies must be disclosed?
- Accounting principles used when alternatives exist
- Principles peculiar to a particular industry
- Unusual or innovative applications of accounting principles
Regarding ASC 820 and Fair Value Election, what is the difference between the Principal & Most Advantageous Market?
Principal = where the greatest volume & level of activity occurs
Most Advantageous = where the maximum price occurs
According to ASC 850, Related Party Disclosures, what should be disclosed on the FS?
Material transactions except: Compensation agreements Expense allowances Items in the ordinary course of business Transactions which are eliminated in the preparation of the consolidated/combined FS
Material Transaction Disclosures Include:
- Nature of relationship
- Description of transactions
- Dollar amounts of transactions
- Amount due to/from
Risks & Uncertainties must be disclosed in what four areas?
- Nature of Operations
Quantification not required - Use of Estimates in FS preparation
- Certain Significant Estimates
If possibility of change in near term would cause a material difference - Current vulnerability due to concentrations
Are losses due to Strike considered extraordinary?
No
How is COGM Computed?
Direct Method: Beg WIP \+ DM Used \+ DL \+ Factory OH - End WIP = COGM
Indirect Method Beg Finished Goods \+ COGM - End Finished Goods = Cost of Sales
Do Gains/Losses on Trading Securities require separate disclosure?
Yes
Foreign Currency Translation - Remeasurement vs Translation:
Remeasurement Method Functional does NOT equal Local Currency Gain/Loss recognized in Income Aggregate Gain/Loss disclosed either in FS or Notes Monetary A&L = Current Rate on BS Date Non-Monetary A&L = Historical SHE = Historical (except RE which is brought forward) Dividends = Historical on date of dec. R&E = WA of year except for allowcations
Current Rate Method Functional EQUALS Local Currency A&L = Current Rate on BS Date R&E = WA Rates for the year SHE = Historical Dividends = Historical rate on date of declaration
Other Comprehensive Income is composed of what?
- Unrealized G/L on AFS Securities
- FC Translation adjustments
- Minimum Pension Liability Adjustments
- Reclassification to avoid double counting
How is a transaction computed into constant dollars?
Use the To/From Ratio: Ex: Year 1 CPI = 180 Year 2 CPI = 200 Depreciation Exp is $200,000 a year
200/180*$200,000 = $222,222
What are examples of Exit Activities?
- Sale & termination of line of business
- Closure of business activities at a particular location
- Relocation of business activities
- Changes in Management Structure
- Fundamental reorganization of the business
Under IFRS, what items must be disclosed on the Income Statement?
- Income
- Finance Costs (Interest Expense)
- Share of Profits under Equity Method
- Tax Expense
- Discontinued Operations
- Profit or Loss
- Non-controlling interest in P/L
- Net P/L attributable to equity holders in the parent
Difference between Sales Type Lease & Direct Financing Lease?
Gross Profit is earned on a sales type lease at the inception of the lease
A Direct Financing Lease is when a Bank acts as a third party to purchase the asset in cash from the manufacturer or dealer and then leases to the company needing the equipment
A Sales Type Lease is when the company leases directly from the Manufacturer/Dealer
In financial reporting for segments of a business enterprise, segment data may be aggregated when?
Before performing the 10% tests if all of the aggregation criteria are met
When goods are sold with unlimited right of return and an obligation to pay based on sale of the goods, when is revenue recognized by the original seller?
When the buyer is obligated to pay the seller
What are the four types of foreign currency hedges?
- Unrecognized Firm Commitment
- AFS Securities
- Forecasted Transaction
- Net Investment in Foreign Operation
How is current year profit calculated in the percentage of completion contract method?
Current Year Profit = (Costs to Date/Total Expected Cost) x Expected Profit - Profit recognized in previous periods
Under IFRS, what is the approach used in segment reporting?
Management Approach
What two criteria are required for a derivative to be classified as a hedge?
- Sufficient documentation to identify (1) the objective and strategy of the hedge (2) the hedging instrument & hedged item (3) how the effectiveness of the hedge will be assessed on an ongoing basis
- The hedge must be highly effective throughout it’s entire life
Under the Periodic Inventory System, what is the difference between the Gross & Net Methods?
Under the Gross Method, Purchase Discounts are recorded when actually realized
Under the Net Method, Purchase Discounts are realized right off the bat and adjusted later if they are not met
Under the Percentage of Completion contract method, what are done with an expected loss in gross profit?
It should be expensed entirely in the current period instead of multiplying by the percentage of completion
What is included in the Construction in Progress account when using the Percentage of Completion Contract Method?
- Cost to Date
- Gross Profit Recognized (A loss would not be subtracted, but would be shown as a separate liability - Unearned Revenue)
How is the Gross Margin Method for Inventory used?
By taking the historical margins on sales to estimate the Cost of Inventory
This method is typically used for Interim Reporting because it is not accurate enough to use for year-end reporting
When there is a decline in market value below the contract price on a noncancelable purchase commitment, what must be done?
- An unrealized loss must be reported in the period of decline
- The nature of the contract should be disclosed in the FS.
Pension Asset/Liability is the result of what?
The cumulative amount of pension expense vs the funded pension amount
Under IFRS, where are gains/losses recorded?
OCI
When depreciating capital software, what methods are appropriate?
The greater of:
1. The SL Depreciation
- Ratio of Actual Yearly Sales to Total Expected Sales
The test for impairment for assets is?
UNDISCOUNTED future cash inflows less related cash outflows
May Development Costs be capitalized?
Yes in very restrictive conditions
Can Assets which have been written down and had a loss recorded before the asset was classified as for sale be written back up?
Yes, but only to the carrying amount before the write down.
What is a nonreciprocal asset transfer?
Donation of an asset at FMV
Gains/Losses are reported on the difference between the CV and the FMV
What is considered program revenue on the government-wide financial statements?
- Charges for Services
- Operating Grants & Contributions
- Capital Grants & Contributions
