Star'd Flashcards
ENHANCING qualitative characteristics:
-Comparability
(company-company)
*consistency = period-period
-Verifiability
(faithfully rep’d)
-Understandability
(concise)
-Timeliness
SFAC 5:
recognition and measurement of FS
fundamental assumptions and principles:
- entity = separate corp/division
- GC = entity will continue to operate in future
- monetary unit = measure economic activity
- periodicity = economic activity can be divided into meaningful time periods
5 elements of PV measurement:
- Est FCF
- Expectations about timing variations of FCF
- TVM (risk-free rate of interest)
- Price for bearing uncertainty (Cr risk)
- Other factors (liquidity issues + mkt imperfection)
COPAS price allocation:
- if client can use machine without the other obligation, there will be 2 obligations
- if client buys 2 obligations from 2 different competitors, they are 2 separate obligations (even if they need each other to perform)
satisfied over time:
[examples]:
- annual services
- output method = newspapers produced/delivered
- input method = CPA firm hours put into job
satisfied at point in time:
[department store example]:
- control generally requires:
- right to pmt to pay for asset
- legal title to asset
- physical possession of asset
- customer accepted the asset
Rev Recognition; Principal vs Agent:
Principal = gross rev Agent = net rev
repurch agreements:
is a borrowing (gave collateral), not a sale
bill-and-hold arrangements:
GR: not a sale (buyers request)
consignment:
not a sale
warranties:
treated as separate performance obligations if:
- warranty is not req’d by law
- coverage period is lengthy and
-no specific tasks required regarding compliance assurance
sale with ROR:
when expected to receive, a refund liability and asset related to subsequent product recovery is recorded
% completion method (contracts):
cost incurred:
Dr CIP
Cr Cash
billings:
Dr A/R
Cr Progress Billings
Pmt’s received:
Dr Cash
Cr A/R
est’d GP:
Dr cost of LT contract
Dr CIP
Cr Revenue from LT contract
construction completed:
Dr Progress Billings
Cr CIP
calculation for current GP for % completion method: [MEMORIZE THIS]
Step 1 [total GP]:
Contract Price
- total est and actual cost
= GP
Step 2 [%completed]:
Cost to date/total est cost = %
Step 3 [GP earned to date]:
GP* % completed
Step 4 [current GP]:
GP earned to date
(-) GP earned PY
= current GP
1st IFRS FS’s must present:
3 BS, 2 all others (and related notes)
disclosure of risks and uncertainties (GAAP):
- nature of op’s (usually 1st note)
- description of entity’s major P/S and its principal market including locations
- use of estimates
- certain significant estimates
- current vuln due to certain concentrations:
- vuln due to conc’s arising when entity is exposed to ROL that could be mitigated thru diversification
- disclosure req’s:
- *conc exists at FS date
- *conc makes entity vuln to near-term impact
- *reas poss that events could cause severe impact in near term
for GC basis (mitigation):
mitigation should be evaluated based on if it is effectively implemented and if plans will be successful
subsequent evaluation periods:
*public:
files w/ SEC and must evaluate thru date FS is issued (longer than private)
*private:
all other filers eval thru date FS is available to be issued
creation of new P’ interest with investment of additional capital (3 ways):
- Exact method:
- use finger math
(1/4 = 4-1; divide total capital accounts by 3 = new P’ interest contribution) - Bonus Method:
- bonus to existing partners when new partner pays more
- bonus to new partner when new pays less (take out of existing accounts proportionately)
[example of bonus]:
A+B+C = 75k/3 = 25k
new paid 35k; 10k bonus for old partners proportionately
- GW Method:
- only given to old partners
- calculation:
* *make agreed % investment to 100%
* * new investment - BV = GW
* *GW allocated prop’ly to capital accounts
BDE; direct WO method:
*subseq collection of AR WO:
Dr BDE
Cr AR
*uncoll accounts recovered:
Dr Cash
Cr Uncoll accounts recovered (rev)
BDE; allowance method:
*restore:
Dr AR
Cr Allowance
*cash collection:
Dr Cash
Cr AR
computer software dvp costs: [to be sold, leased, licensed]
- exp costs for planning, design, coding, testing incurred until TFE (tech feas estab)
- capitalize costs for coding, testing, producing production masters incurred AFTER TFE up to point product is released for sale
[TFE is established upon completion of a detailed program design or working model]
amortization of cap’d software costs (similar to % completion):
annual amortization is GREATER OF:
- % of rev OR
- SL amortization
Debt Securities are:
- corp bonds
- redeemable PS (has maturity date)
- gov sec’s
- convertible debt
- commercial paper (notes/drafts)
[NOT options/futures/forwards contracts, lease contracts, AR or NR]
consolidation of 50%+ owned sub is not required when:
[GAAP vs IFRS]
[GAAP]
- sub is in legal reorg
- bankruptcy and/or sub operates under severe foreign restrictions
[IFRS]:
- P itself is a wholly owned sub
- P is not publicly traded
- P company produces consol’d FS’s in compliance with IFRS
financial lease criteria: (sales-type for lessor)
[capital lease]
[OWNES]
- O = Title Transfer (ownership)
- W = BPO (written option)
- N = ~90% NPV of asset’s FV
- E = lease life is ~75% econ life of asset
- S = specialized asset and will not have an expected alt use to lessor when lease term ends
Operating lease class’n (capital lease):
- if OWNES not met
- if “PC” is met, it will be direct financing lease for lessor; if 1 or less met it will be op lease
- P = PV is ~90% FV
- C = collection of lease pmt and RV is probable
“REPORT N GO”
[lessee lease pmt items]:
- R = Required contractual fixed payment
- E = Exercised option (BPO)
- P = PP at end of lease
- O = Only indexed/rated variable payments
- R = RV guarantees likely to be owed
- T = Termination penalties (reas assured)
*N = Nonlease components
- G = guarantees of lessor debt by lessee
- O = Other variable lease pmt’s
JE for operating leases: [lessee]
initial JE:
Dr ROU asset
Cr Lease L
subseq JE:
Dr Lease Exp
Cr Cash
Cr Lease L
Dr Lease L
Cr AD-ROU asset
*for AD, use amortization table (lease pmt - amort)
JE for operating leases: [lessor]
*initial JE:
Dr L/R (calculate) (?)
Cr U/R
*1st lease pmt: Dr U/R (?) Cr Cash ----------------------------------------- (most important) Dr Cash Cr rental income
Dr DE [BV/UL]
Cr AD
JE for financing lease: [lessee]
*initial:
Dr ROU asset
Cr Lease L
*subseq:
Dr Int exp
Dr Lease L
Cr Cash/payable
Dr AE
Cr AD-ROU asset
depreciable life for leases will be:
*meet [OW] test = asset life
(less DE)
*meet [NES] test = SHORTER of asset life or lease life (bigger DE)
major diff b/w 2 CFO methods (direct and indirect) is:
the 2 starting points in the calculation:
[direct]:
uses NS as starting point
[indirect]:
uses NI as starting point
MSWLF expenses should include:
- cost of Equip expected to be installed and facilities expected to be constructed near/after the date that the landfill stops accepting solid waste and during the postclosure period. This equip should be limited to items that, once installed/constructed, will be exclusively used for the MSWLF. This may include gas monitoring and collection systems.
- cost of final cover (capping) expected to be applied near/after date that landfill stops accepting solid waste
enterprise fund criterias [primarily >50% self-supported by user charges]:
- Activity is financed w/ debt that is secured solely by pledge of net rev from fees and charges
- laws and regulations require cost of providing services to be recovered thru fees
- pricing policies of the activity establish fees and charges designed to recover its costs
as a GR for EBP:
employees should disclose employer and employee obligations to contribution to the plan, a brief statement about the plan, and employee eligibility requirements
categories of program revenues: [SOC]
- S = Service Charges
- O = Operating grants and contributions
- C = Capital grants and contributions
CFF (capital) includes:
acquiring and disposing of cap assets and any related debt
CFF (non-cap) includes:
- borrowing money for other than cap expend’s (TANs)
- proceeds/pmt related to borrowing not attributable to acq, constr, improvement of cap assets
- CR’s/CD’s related to grants or subsidies (support) not attributable to cap purposes
- prop taxes not designated for cap purposes
- cash paid to other funds (other than int svc)
- operating transfer outs
reconciliation for gov-wide FS at YE:
[CPAS RIDE or SIT]
*C = Cap Outlay (purchase of gen cap asset)
*P = Principal pmt on debt
*(A) = Asset disposals (NBV)
*(S) = OFS (loan proceeds)
*R = Revenue (accrual basis)
*(I) = IntEx (accrual)
* (DE)
*S = Service (int svc) NI
= change in NP of gov act’s (IS)
*IT = Interfund Transfer
reconciliation for gov –> gov-wide (BS): [CAN SIT]
- C = Cap Assets
- (A) = AD
- (N) = Non-CL
- S = Svc (int svc NP)
- IT = Interfund Transfer
RSI for pension funds:
NPL = TPL - FNP
