Roger Chapters 1-5 Flashcards
What are the 4 characteristics of hedges?
No net investments
Underlying = (what you multiply notional amount by)
Notional amount = # units
net Settlement = settled at a net amount
What is functional currency?
Currency that has the greatest economic impact
What are IFRS’s 5 key elements?
Assets Liabilities Equity Income Expenses
LT construction costs journal entry
- CIP
* cash
What rate does remeasurement use for monetary, non-monetary, and income statement items?
Monetary assets/liabilities = current rate
Non-monetary assets/liabilities = historical rate
Income statement = weighted average rate
Times interest earned
Income before interest expense and taxes / interest expense
LT construction Billings and collections journal entries
Billing
- construction receivable
* billings
Collections
- cash
* construction receivable
What are enhancing qualitative characteristics?
Comparability (consistency)
Understandability
Timeliness
Verifiability
CUT like a V
Defensive interval ratio
Cash, marketable securities, receivables / average daily expenditures
Rate of return in common stock equity (return on equity)
(Net income - preferred divs) / average common SE
Working capital
Current assets - current liabilities
What are the 5 key elements for IFRS?
Assets Liabilities Equity Income Expenses
What is transaction/local currency?
Currency of a particular country where books and records are kept.
Length of operating cycle
days’ sales average receivables + # days’ supply in average inventory
What are the levels for fair value measurement?
Level 1: Actual market in active market, identical assets
Level 2: Actual market but similar transaction or NON-ACTIVE market
Level 3: Unobservable data, mgmt judgement
Days payables outstanding
Ending accounts payable / (COGs/365)
Receivables turnover
Net credit sales/ avg trade receivables (net)
What makes something have faithful representation?
Free from error
Neutrality
Completeness
FENCe
Earnings per share
(Net income - preferred divs) / Weighted average shares outstanding
What do you do when a security goes from available for sale to held to maturity?
Reclass at FMV
Unrealized gain/loss to OCI then AOCI (amortize this over the remaining life of the security)
Dividend payout ratio
Cash dividends / net income
Debt to total assets
Total debt / total assets
What rate does translation use for assets/liabilities and income statement items?
Assets/liabilities = current rate
Income statement = weighted average rate
What do you call going from functional currency to reporting currency?
Translation
Put on the balance sheet under OCI
How do you recognize revenue for right to use vs access to property?
Right to use: Recognize once access given to customer (ex: giving access, unlimited uses)
Access to: Recognize over period of time (ex: obligation to maintain)
How do you reconcile from book to bank balance?
Book balance \+ amounts collected by bank - unrecorded bank charges \+/- errors made in the books —————————————————- Bank balance
% completion recognize profit journal entry
- CIP
- gross profit on CIP
- CIP
- construction expense
* construction receivable
What is the definition of FV price?
Price when SOLD or price PAID when transferred
What are monetary and non-monetary assets?
Monetary asset = asset that buys less is rising inflation (ex: cash)
Nonmonetary = asset that does NOT guarantee a fixed amount received (adjusted for inflation)
What is OCI is made up of?
Derivative cash flow hedges
Excess adjustment between PBO and FV
Net unrealized gain/loss from AFS securities
Translation foreign currency
% completion equation
Costs incurred to date / total construction costs = % complete
% complete x total profit = profit recognized to date
Profit recognized to date - profit previously recognized = profit recognized this period
days sales in average receivables
365/receivables turnover
Quick ratio
Cash, marketable securities, and receivables (net) / current liabilities
What do you when a security goes from held to maturity to available for sale?
Reclass at FMV
Unrealized gain/loss in OCI
days’ supply in average inventory
365/inventory turnover
Or
Average ending inventory / average daily COGs
What do you call going from transactional currency to functional currency?
Remeasurement
Put on the income statement
Price earnings ratio
Mkt price of stock / EPS
Current cash debt coverage ratio
Net cash from operating activities / average current liabilities
What is the difference between recognition and realization?
Recognition = booking in the financial statements
Realization = getting the cash (non-cash to cash)
What is reporting currency?
Currency financial statements are prepared in (USD $)
Asset turnover
Net sales / average total assets
What is risk based off of for PCD assets?
- Market risk makes up part (difference between stated and market rate)
- Credit risk is the other part (risk the person won’t pay)
What are GAAP’s 10 key elements?
Assets Liabilities Equity or net assets Investments by owners Distributions to owners Comprehensive income Revenue Expenses Gains Losses
Cash conversion cycle
Days sales A/R + Days in inventory - Days payable outstanding
Profit margin on sales
Net income / net sales
How do you reconcile from bank to book balance?
Bank balance \+ deposits in transit - outstanding checks \+/- errors made by bank ———————————————- Corrected book balance
Inventory turnover
COGs / average inventory
Debt to equity
Total debt / SE
Rate of return on assets
Net income / average total assets
Cash debt coverage ratio
Net cash provided by operating activities / average total liabilities
Put option vs call option
Put option = right to sell
Call option= right to buy
How does a principal recognize income vs an agent?
Principal: Recognize all revenues. Payment to agent is an expense
Agent: Recognize revenue as amount received from principal
What makes something relevant?
Predictive value
Confirmatory value
PC
What do you do when a security goes from trading to available for sale or vice versa?
Reclass at FMV
Put the difference as realized gain/loss on income statement
Eliminate any related valuation allowances
What makes information useful?
Relevance and faithful representation
Book value per share
Common SE / Outstanding shares
ON-TIDe-N-OC
Operating income Non-operating income Taxes Income from continuing operations Discontinued operations g/l Net income Other comprehensive income Comprehensive income
Current ratio
Current assets / current liabilities
