NINJA 3

Question 0

Business combination - GW

Answer 0

Price pd
\+ FV assets
(Liab)
-------------
Acq price
     > FV = GW
     < FV = extraord gain

Question 1

Calculate ARO liab

Answer 1

Beg bal
+ undiscounted CF new ARO
+ accretion exp
(Pmts)

Accretion exp= FV ARO liab * credit adj rf rate

Question 2

Business combination - extraord gain

Answer 2

Cost of invest
FV + consideration
(FV net assets)

Question 3

How to account for contingencies

Answer 3

Gain - probable –> disclose

Loss - probable –> accrue & disclose
Reasonably possible –> discl
Remote –> nothing

Question 4

Dilutive securities

Answer 4

Decrease EPS

If mkt > exercise

Question 5

Formula to determine if bonds are dilutive

Answer 5

[(face*SR) + disc am - tax]/# sh bonds are convertible to

Question 6

How are unusual OR infrequent items reported?

Answer 6

Income from cont ops, NOT net tax

Included: g/l from lawsuit settlement

note: unusual AND infrequent = Extraordinary items, net tax

Question 7

Items that are NOT extraordinary

Answer 7

Currency revaluation
Adj on LT contracts
Increased prod costs
Disposal of segment (discon't ops)
G/l in troubled debt restructuring 
Strike

Question 8

Definition of fair value

Answer 8

Price recd to sell asset or transfer liab in orderly trans in principal mkt

Question 9

Where is remeasurement g/l reported?

Answer 9

NI

with separate disclosure in face or notes

Question 10

Where is translation g/l reported?

Answer 10

Comp inc

Question 11

What rate is used for FS translation

Answer 11

Preferred = current (for all elements of FS)

Can use weighted avg bc of numerous dates in which a transaction occurred

Question 12

Historical rate

Answer 12

Inventory @ cost

Exception to current rate rule

Question 13

Functional currency

Answer 13

Currency of primary Econ where operates

Question 14

changes in rate for contracts

Answer 14

Seller - rate increases from date of sale –> gain

Buyer - rate increases from date of sale –> loss

Question 15

Rates to use & when on purchase contracts

Answer 15

PurchasED - spot rate

ENTER into contract TO purchase - forward rates

Question 16

Where is Remeasurement g/l reported?

Answer 16

NI (on IS)

With separate disclosure in face or notes

Question 17

Where is translation g/l reported?

Answer 17

Comprehensive income

Question 18

What rate should be used to translate FS?

Answer 18

• current for all elements of FS
• but, can use weighted avg when there are numerous dates that the trans occurs
• inventory at cost issues historical rate

Question 19

How to determine g/l on FX transactions

Answer 19

Seller
Rate increases from date of sale = gain

Buyer
Rate increases from date of sale = loss

Question 20

When to use spot rate vs. forward rate

Answer 20

PurchasED - spot

Forward contract TO purchase - fwd

Question 21

GAAP impairment loss

Answer 21

1. Is CV > FCF
   yes - loss = CV-FV
   no - no loss

Question 22

Impairment loss - IFRS

Answer 22

1. Recoverable amount
   higher of
   1. PV disc FCF
   2. NRV
2. Recoverable amt > NRV
   Yes - loss = CV-recoverable amt
   No - no loss

Question 23

Recognition for no monetary transactions

Answer 23

1. Is there commercial substance? (FCF are significantly different)
   Yes - use FV recd
   Gain = FV given-CV given
   No - use BV + cash pd
   Partial gain (cash recd:FV consideration recd)

Question 24

Characteristics of reportable segment

Answer 24

• max 10
• NO separate legal standing req’d
  
  • report to segment mgr & COO

Question 25

How to determine reportable segment

Answer 25

1. Revenue - 10% combined rev of all op segment
2. Profitability
   10% combined profit for segment w profit
   10% combined loss for segment w loss
3. Assets - 10% combined assets

Question 26

Recognition of R&D costs

Answer 26

Expense as R&D
1. Technological feasibility
Capitalize
2. Production - inventory

3. Internal training - expense

Question 27

R&D costs

Answer 27

• R&D performed by others for you
  (NOT vice versa)
• uncertainty of future events = exp
• patent costs = exp
• patent registration = cap & am over Econ life
• equip with alternate (future) use = dep over useful life
  
  • if benefits now, include c.y. dep