Roger Chapters 15-20 Flashcards
What are the two methods that can be used to measure options expected to vest and become exercisable?
- Find # options expected to be forefeited before coming exercisable
- Account for forfeitures as they occur
How do you account for a change in accounting principle?
On a restrospective basis. Correct prior periods and adjust in beginning RE of earliest period presented.
What are the three characteristics of a segment?
- It is involved in business activities that may result in revenues and expenses (internal or external)
- Performance is evaluated for resource allocation
- There is financial info that is identifiable to the component
What is the equation for basic EPS?
(Total net income - preferred dividends) / Weighted average common stock outstanding
What does it mean if a share is convertible?
The preferred share can be converted to common shares at a specific rate
What is the criteria for non-accelerated filer? How many days does it have to file its 10-K and its 10-Q?
Market value under <75 mil OR 75-700 mil with under 100 mil annual revenues.
90 days after end of the financial year for 10-K. 45 days after the end of the financial quarter for 10-Q.
How do you account for a change in accounting estimate?
On a prospective basis.
What is the equation for diluted EPS?
(Net income - preferred dividends + bond interest (net of tax)) / (weighted average common stock outstanding + # shares common stock converted)
What is a liquidating dividend?
Dividend that is paid out of capital NOT earnings (reduces APIC)
What is the intrinsic method?
If FV share > exercise compensation, compensation is the difference x # of options
If FV share < exercise compensation, there is no compensation
What does it mean if a share is cumulative?
If dividends were missed in earlier years then they must be paid to cumulative shareholders before common shareholders
What does it mean if a share is callable?
The corporation that issued it has the option to repurchase at a specified price
How do you account for compensatory share based transactions?
Recognize compensation expense over time and measure at FMV of equity used
What is the journal entry for a partial liquidating dividend?
*RE
*APIC
*Cash
What does it mean if something is dilutive?
It means that it reduces EPS.
Within how many days do you have to file an 8-K?
Within 4 days of the event
How do you account for non-compensatory share based transactions?
Don’t recognized compensation expense over time. Only recognized when exercised.
*Cash
*C/S
*APIC
What is the journal entry for a property dividend?
*RE
*Asset
*Gain
What is the criteria for a large accelerated filer? How many days does it have to file its 10-K and its 10-Q?
Market value of 700 mil and up. 60 days after the end of the financial year for 10-K.
40 days after the end of the financial quarter for 10-Q.
What does it mean if a share is participating?
If common stocks get a higher rate on par than the stated rate on preferred dividends, participating dividends get that same higher rate
What are the two conditions that must be satisfied for a share based transaction to be non-compensatory?
- Terms are comparable (no more favorable) to terms offered to shareholders with same stock
- Any purchase discount below FMV isn’t > 5%
What are the three types of reportable segments and what tests do they need?
- Operations in different industries. Test all three tests (revenue, profit and loss, assets) and disclose all three
- Foreign operations. Test revenue and assets only but disclose all three tests.
- Major customer or export sales. Test revenue and disclose revenue only.
What is the criteria for an accelerated filer? How many days does it have to file its 10-K and its 10-Q?
Market value of 75-700 mil and annual revenues of 100 mil and up.
75 days after end of the financial year for 10-K. 40 days after the end of the financial quarter for 10-Q.
What are the steps to calculating dividends for fully participating cumulative stock?
- Pay dividends in arrears
- Pay preferred divs for the current year
- Pay common stock equivalent dividend % (common shares x common par x PREFERRED %)
- Allocate any excess dividends between preferred and common stock
How do you account for a correction of an error?
On a retroactive basis. Correct prior periods and adjust in beginning RE of earliest period presented.
What is a scrip dividend?
Dividend that gives the dividend but no money
What is the journal entry for a scrip dividend?
*RE
*Note payable
What is the journal entry for a stock dividend?
If small (< 20-25%), record at FMV
*RE
*CS
*APIC
If large (> 20-25%), record at par
*RE
*CS
What is a change in reporting entity? How is it accounted for?
Change in reporting entity is when the entities are changing in a consolidated financial statement. It is NOT due to changes in ownership. It is accounted for on a retrospective basis
What are the types of accounting changes?
- Change in accounting principle
- Change in accounting estimate
- Change in reporting entity Correction of an error is NOT an accounting change
