FAR 2 New Flashcards
How do you test impairment on an intangible asset with a finite (limited) life?
Carrying amount is compared to the sum of undiscounted future cash flows
If negative=impairment
Impairment loss is equal to the difference between the carrying amount and it’s FV
If it’s an asset held for disposal, then you have to add in the cost of disposal to impairment amount
How do you check and calculate goodwill impairment?
Compare the book value to the fair value.
If the book value is more than the fair value, you have an impairment.
The impairment loss would be your:
calculated goodwill impairment minus the book value of goodwill
How do you recognize gross profit or loss in the completed contract method?
Contract price - total costs = gross profit or loss
How do you compute percentage of completed work in the percentage of completion method?
Work done divided by total expected costs of job = % of job completed
How do you compute gross profit of completed contracts in percentage of completion method?
Contract price - estimated total cost = gross profit
How do you compute gross profit earned or profit to date in a percentage of completion method?
Take the % completed x gross profit
How do you compute gross profit earned for current year in the percentage of completion method?
Subtract out what was previously recognized but if there’s a loss, add what was previously recognized.
Example had a gain of $600 before but had a loss of ($200) this year
Current year gross profit is $(800)
Then the next year would show
($200) previously recognized then current year would show what’s left over
What is the gross profit formula?
Sales - cost of goods sold = gross profit
What is the gross profit percentage formula?
Gross profit/sales
What is the gross profit earned formula?
Cash collected x gross profit percentage
What is the deferred gross profit formula?
Installment A/R x gross profit percentage
How do I kno if a transaction has commercial substance?
future cash flows will change significantly
How do I kno if a transaction lacks commercial substance?
It will have little to no change in the cash flows
For non-monetary exchanges, how do you determine a gain or loss on disposal when an exchange has commercial substance?
Take the FV of the asset being given up less the cost of the given up asset less any deprecation (gives you BV) and the left over amount is the gain or loss
For non-monetary exchanges, how do you determine the cost of the asset your receiving when an exchange has commercial substance?
Take the FV of the asset being given up and add any cash being paid towards the new asset.
