E-FAR Flashcards

Question

List the dates when an entity may elect to use fair value option for an eligible item.

Answer 1

1. When item is first recognized; 2. When firm commitment occurs; 3. When financial, an asset previously reported at fair value with unrealized gain/loss in earnings, no longer qualifies for that fair value treatment; 4. When accounting treatment for an investment changes because it becomes subject to the equity method or ceases to be eligible for consolidation; 5. When an item is measured at fair value at the time of an event, but does not require fair value measurement at subsequent reporting dates.

Answer 2

This approach converts future amounts to a single present amount.

Answer 3

1. An investment in a subsidiary or variable interest to be consolidated; 2. Employers' and plans' obligations for pension benefits, other postretirement benefits, post-employment benefits; 3. Financial assets and liabilities under lease accounting; 4. Demand deposit liabilities of financial institutions; 5. Financial instruments classified by the issuer as a component of shareholders' equity.

Answer 4

1. Recognized financial assets or financial liabilities, (some exceptions); 2. Firm commitments; 3. Written loan commitments; 4. Rights and obligations under insurance contracts and warranties; 5. Other financial instruments embedded in non-financial derivative instruments.

Answer 5

This approach uses the amount currently required to REPLACE the service capacity of an asset.

Answer 6

Regulation S-X

Answer 7

The end of preceding fiscal year. The B/S for the end of the preceding fiscal year would have been the last audited B/S. This B/S is presented along with the current fiscal quarter.

Answer 8

Product market share.

Answer 9

R.E Beg. + NI = R.E. End. Revenue [4,500] - Expenses [3,750] = EBT =750,000 Income taxes = 0.30 * 750, (225,) Net income =525,000 Retained earnings, 1/1/Yr. 5 350,000 Retained earnings, 12/31/Yr. 5 875,000

Answer 10

Includes multiple subtotals of revenues, expenses, gains, and losses. (Sales - Cost of Goods Sold = Gross profit; Gross profit - operating expenses = income from operations; Income from operations + or − other income / expenses= Income B/F Taxes; IBT − taxes = Net Income.)

Answer 11

Total revenues and gains − total expenses and losses.

Answer 12

The excess of operating revenues over operating expenses. (OP Rev - OP Exp)

Answer 13

In a single step income statement, total revenue is the sum of all revenues, including Net Sales Revenue + Interest Revenue+Gain on sale of equipment.Results from discontinued operations are reported at the end of the income statement. The cumulative change item is not reported in current year's .income statement, as it was a one-time adjustment for the prior reporting period.

Answer 14

COGM is the cost of goods brought to completion during the year. The following schedule shows how it is computed given the information in the question. COGM? + finished goods beginning inventory $400,000 - finished goods ending inventory (360,000) = cost of sales $240,000

Answer 15

1. International Accounting Standards Board. 2. IFRS Interpretations Committee. 3. IFRS Advisory Council.

Answer 16

1. Appoint the members of the IASB and establish their contracts of service and performance criteria. 2. Appoint the members of the IFRS Interpretations Committee and the IFRS Advisory Council. 3. Approve the annual budget of the IFRS Foundation and determine the basis for funding.

Answer 17

To take account of, as appropriate, the needs of a range of sizes and types of entities in diverse economic settings.

Answer 18

The objective of the IFRS Foundation is to develop, in the public interest, a single set of high-quality, understandable, enforceable, and globally accepted financial reporting standards based upon clearly articulated principles. These standards should require high-quality, transparent, and comparable information in financial statements and other financial reporting to help investors, other participants in the world's capital markets, and other users of financial information make economic decisions. There are NO MEMBER associations of the IASB. Rather, representatives of many associations do partake in an advisory capacity, through the IFRS Advisory Council.

Answer 19

1) Add the item to the Working Agenda (IV), 2) Discuss the issue (V), 3) Prepare the Discussion Paper (III), 4) Publish the discussion paper (VII) 5) Issue the Exposure Draft (II) 6) Analyze comments to the Exposure Draft and (I) 7) Issue the IFRS (VI)

Answer 20

as presented in IAS 8: 1. the requirements in IFRS dealings with similar or related issues; 2.the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework; 3.the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature, and accepted industry practices, to the extent that these do not conflict with IFRS or the Framework. IAS 8, para. 12.

Answer 21

The IASB Framework has 5 elements: asset, liability, equity, income, and expense. Note that income includes both revenues and gains.

Answer 22

1. unrealized gains and losses on available-for-sale investments and foreign currency items, including any reclassification adjustments, 2.the pension liability adjustment required to recognize the funded status of the plan. (Treasury stock is deducted from stockholders' equity and not a component of other comprehensive income.)

Answer 23

net of tax in retained earnings as an adjustment of the beginning balance.

Answer 24

Comprehensive income = the net change in owners' equity for the period other than from transactions with owners. (stockholder dividends are not a component of comprehensive income)

Answer 25

is to report a measure of overall enterprise performance by displaying all changes in equity of an enterprise that result from recognized transactions and other economic events of the period other than transactions with owners in their capacity as owners. An enterprise should continue to display an amount for net income with equal prominence to the comprehensive income amount displayed.

Answer 26

If the fair value option is not elected, held-to-maturity securities are reported at amortized cost. Any decreases or increases in fair value are reported neither in net income nor as part of other comprehensive income.

Answer 27

The accumulated balance of other comprehensive income should be reported as a component of equity, separate from retained earnings and additional paid-in capital.

Answer 28

Unrealized loss on trading securities is NOT a component of comprehensive income

Answer 29

Reconciles all of the beginning and ending balances in the equity accounts.

Answer 30

If the par value of the stock is $2, and the increase in the common stock account is $2,000, then $2,000/$2 = 1,000 shares issued. The average issue price=par value ($2)+ additional PIC ($10,000/1,000 shares, or $10), which totals $12.

Answer 31

cash inflows and cash outflows based on the kind of sources that generated cash and the kind of recipients to which cash was paid.

Answer 32

Salary expense less the increase in wages payable from the beginning to the end of the year.In a statement of cash flows in which the operating activities section is prepared using the direct method, the cash paid for wages would be equal to the accrual-basis salary expense, plus/minus any decrease/increase in the wages payable account. (The logic is essentially the same as an accrual-basis to cash-basis adjustment.)

Answer 33

major classes of cash receipts and cash payments are shown. The minimum cash flows to be disclosed under this method are cash collected from customers, interest and dividends received, cash paid to employees and suppliers, income taxes paid, and interest paid.

Answer 34

An outflow equal to the year 1 principal payments only. Financing activities include the repayment of debt principal or, as in this case, the payment of the capital lease obligation. Thus, the cash outflow is equal to the year 1 principal payments only. The interest on the capital lease is classified as an operating cash outflow.

Answer 35

because while they do not affect cash in the current year, they may have a significant effect on the prospective cash flows of the company. Therefore, conversion of debt to equity is disclosed as supplemental information to the statement of cash flows. However, cash flow per share should not be reported on the statement of cash flows because it may be misleading and may be incorrectly used as a measure of profitability.

Answer 36

NOT reported. The statement of cash flows is required to be prepared based on inflows and outflows of cash and cash equivalents during the period. The purchase of a cash equivalent using cash is not an outflow of cash and cash equivalents; it is merely a change in the composition of cash and cash equivalents. Cash has decreased and cash equivalents have increased, but total cash and cash equivalents is unchanged. Therefore this purchase is not reported in the statement of cash flows.

Answer 37

Deduction from net income.The objective of a statement of cash flows is to explain what caused the change in the cash balance. The first step in this process is to determine cash provided by operations. When presenting cash from operating activities under the indirect approach, net income must be adjusted for changes in current assets other than cash and in current liabilities. These adjustments are required because items that resulted from noncash events must be removed from accrual-based income. For example, when inventory increases during the period, inventory sold is less than inventory purchased. Considering only the increase in the inventory account, cost of goods sold on an accrual basis is less than it would have been if cash basis were being used. In converting to the cash basis, the increase in inventory must be subtracted from net income to arrive at cash from operations.

Answer 38

added back (to net income).

Answer 39

subtracted from the amount of the expense to derive cash outflow.

Answer 40

subtracted from cost of goods sold to derive the cash effect.

Answer 41

True Accrual --> Cash for Expense

Answer 42

NI-paid cash dividend*%ownership | 60,000- 20,000*.3=12,000

Answer 43

Conversely, merchandise inventory is considered a nonmonetary asset account since its value will change based on relative price levels in the future.

Answer 44

A purchasing power gain or loss is the net gain or loss determined by restating in units of constant purchasing power the opening and closing balances of, and transactions in, monetary assets and liabilities. During a period of rising prices, monetary liabilities give rise to purchasing power gains because they will be settled with cash which can be used to purchase relatively fewer goods or services at a future time.

Answer 45

Advances to unconsolidated subsidiaries, allowance for doubtful accounts, and unamortized premium on bonds payable are all monetary items.

Answer 46

recognition, measurement, and disclosure.

Answer 47

GAAP requires disclosure of all significant concentrations of credit risk from receivables and other financial instruments in the notes. A concentration of credit risk occurs when receivables from different sources reflect common economic risks (for example, a group of receivables from several firms within the same industry).

Answer 48

In operating activities as a deduction from income. Operating section of Indirect method is the reconciliation of NI and net cash flow from operations. The gain on sale of eq. increased NI but did not provide any Operating cash inflow.

Answer 49

The investing cash inflow = BV-loss

Answer 50

``` Cost of goods sold $ 900,000 + Ending inventory 180,000 Cost of goods available for sale $1,080,000 − Purchases − 960,000 Beginning inventory $ 120,000 ```

Answer 51

Dividend payout ratio = Dividends per share/ | Earnings per share

Answer 52

Earnings per share =(Net income − Preferred dividends)/ | Weighted-average number of shares outstanding

Answer 53

Annual dividend per share/EPS

Answer 54

CS+PIC+RE-TS/# of shares outstanding OR Total OE/# of shares outstanding

Answer 55

From the given information, (asset turnover) = 2 = sales/(average total assets). (AR turnover) = 10 = sales/(average AR). Therefore, (average total assets) are 5 times (average AR). (average total assets) = 5(average AR) = 5($200,000) = $1,000,000.

Answer 56

1. Cash 2. Not cash 3. Cash 4. Cash 5. Cash 6. Not cash 7. Cash 8. Not cash 9. Not cash 10. Not cash 11. Not cash 12. Not cash

Answer 57

When the bank is the source of the info, the NSF check and the bank service charges are already reflected in the balance per bank statement and do not need to be adjusted.

Answer 58

Under the allowance method for uncollectible accounts there is no impact on the balance sheet or net income when the receivable is written off. The estimated uncollectible is recognized at the time of the sale; therefore, when the account is written, off the allowance and the accounts receivable are both reduced resulting in no effect on the income statement or balance sheet.

Answer 59

MR>SR=Discount | MR

Answer 60

All costs necessary to prepare goods for sale: 1. purchase price of the goods, 2. freight-in, 3. insurance, 4. warehousing, 5. any costs necessary to get the goods to the point of sale -Sales and other taxes paid on acquisition of inventory (Abnormal freight and handling should be charged to expense of the period). 6. Purchase (if any) returns must be subrtracted

Answer 61

A range in production levels that will vary based on business and industry-specific factors. Normal capacity is the production expected to be achieved over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance.

Answer 62

the seller bears all costs of transporting the goods to the buyer:Packaging for shipment; Shipping; Special handling charges

Answer 63

Beg. Inv. + Net purchases = End. Inv. +COGS OR COGS is determined (in a periodic inventory system) as: Beg. Inv. + Net Purchases = Goods Available for Sale - Ending Inventory = Cost of Goods Sold

Answer 64

As a period cost. It is the cost of distributing the inventory to customers. The cost does not contribute to the process of placing the inventory in a salable condition.

Answer 65

assets - understated COGS - overstated net income - understated retained earnings - understated

Answer 66

All costs necessary to prepare inventory for sale are capitalized to inventory. Freight-in is such a cost. The goods must be shipped to the seller's location before they can be sold. Interest on inventory loans is a financing cost. It does not contribute to the process of making the inventory ready for sale

Answer 67

Cost+.4(selling price)=selling price Ex: cost +.4(5)=5 let cost be X so X+2=5 X=3

Answer 68

``` Indicate whether each of the following is included in the cost of inventory.Yes: 1. Merchandise purchased for resale 3. Direct materials 6. Factory overhead 9. Freight-in 10. Direct labor No: 2. Freight-out 4. Sales returns 5. Packaging for shipment to customer 7. Interest on inventory loan 8. Purchase discounts not taken ```

Answer 69

weighted-average: periodic moving-average: perpetual The weighted-average method computes a weighted-average unit cost of inventory for the entire period and is used with periodic records. The moving-average method requires that a new unit of cost be computed each time new goods are purchased and is used with perpetual records.

Answer 70

False....it's FIFO

Answer 71

Dollar-value LIFO. DV LIFO is based on price level indices. The End Inv at current cost, and then reduced to the price level existing at the base-year (the year LIFO was adopted). The End Inv measured in base-year dollars is compared to Beg. Inv in base-year $. The difference is the increase in Inv measured in base-year $. This difference is then raised to the current-year price level and added to Beg Inv DV LIFO, yielding End Inv DV LIFO.Thus, price-level changes are used throughout this method.Price-level changes are used to estimate End Inv. Individual item costs are not maintained or used in the valuation of inventory.

Answer 72

Capitalized: if it improves the asset (or increases productivity) Expensed: if it merely maintains the asset at its current level (Continuing and frequent repairs, repainting the plant building, partially replacing the roof tiles) These are ordinary, regularly occurring expenditures which maintain, rather than improve, the plant building.

Answer 73

preparing land for its ultimate use (such as a factory site) purchase price + legal fees+title insurance+cost of demolition - proceeds from sale of scrap

Answer 74

An accounting method used to delay the recognition of expenses by recording the expense as long-term assets. In general, capitalizing expenses is beneficial as companies acquiring new assets with a long-term lifespan can spread out the cost over a specified period of time.

Answer 75

cost necessary to place the asset into its intended condition and location. purchase price + Shipping + Installation +Testing

Answer 76

Part of continuing operations. The gain or loss on the sale of an asset is part of continuing operations as it is expected that a company will sell existing assets from time to time as the assets are replaced.

Answer 77

The amount is increased by the excess of the replacement forestland's cost over the condemned forestland's carrying amount. The two transactions are not related. The land account is decreased by the book value of the land condemned and increased by the cost of the land purchased. The relative magnitudes of the book values are shown below: award > book value of condemned land cost of new land > award Therefore: cost of new land > book value of condemned land Thus, the land is increased by the net amount: cost of new land-book value of old land

Answer 78

(1) increase in useful life or (2) increase in productivity or efficiency including cost reduction. (The criterion for capitalizing post-acquisition costs is NOT whether the market value of the overall asset is increased. )

Answer 79

``` Land: Purchase price of land Legal fees for contracts to purchase land Demolition of old building on site Sale of scrap from old building Building: Architects' fees Construction cost of new building ```

Answer 80

the lower of AVOIDABLE interest or ACTUAL interest. Avoidable interest =the interest computed on the weighted-average amount of accumulated expenditures on the building

Answer 81

Interest incurred after completion All interest incurred For some assets if interest costs incurred in their production - capitalize: 1.assets constructed or otherwise produced for an enterprise's own use AND 2.assets intended for sale or lease that are constructed or otherwise produced as discrete projects. The capitalization period ends when the asset is substantially complete and ready for its intended use - now EXPENSE. (the interest costs associated with the machinery for Bay's own use should be capitalized during the construction period and expensed after completion. Additionally, all costs associated with the machinery held for sale should be expensed because the machinery does not meet the "discrete project" criterion.

Answer 82

The requirements for capitalization of interest are met if: (1) expenditures for the asset have been made, (2) activities that are necessary to get the asset ready for its intended use are in progress, and (3) interest cost is being incurred. The amount to be capitalized is the lower of avoidable interest or actual interest. Avoidable interest is the average accumulated expenditures multiplied by the appropriate interest rate or rates. Since $2,000,000 was spent on the building evenly throughout the year, the average accumulated expenditures were $1,000,000 ($2,000,000 ÷ 2) and the avoidable interest was $120,000 ($1,000,000 × 12%). Since actual interest ($102,000) is less than avoidable interest, the actual interest cost is capitalized.

Answer 83

If markup on cost=40% What is % applied to SALES to get to COGS? C+.4C=S so 1.4C=S. Therefore COST to SALES ratio (%) is C/S --> 1/1.4=.71

Answer 84

OR Beg inv + Purchases=Goods Available for Sale- COGS= End Inv

Answer 85

trading securities are held for short-term price appreciation. If the value of the trading portfolio increases or decreases, that gain or loss should be recognized in earnings Securities available for sale held for purposes other than short-term price appreciation

Answer 86

Permanent losses on securities available-for-sale (AFS) are recognized in earnings as if they were realized. This is an example of conservatism. If the market value is not expected to recover, a loss is probable and therefore should be recognized in earnings.

Answer 87

On available-for-sale securities, only realized gains (from sale or reclassification) are recognized in the period. These securities are not sold for the purpose of relatively quick sale. Rather, they are held for different purposes and may be held long-term. The unrealized changes in market value are recorded in owners' equity.

Answer 88

A standstill agreement is a written agreement between two firms whereby certain actions between the firms are limited.

Answer 89

Under the equity method, the investor recognizes its share of the investee earnings in its own income.

Answer 90

cost method, the dividend is recorded as revenue. | equity method, the dividend is recorded as a decrease in the investment account.

Answer 91

Goodwill resulting from an investment in another entity (i.e., the excess of the cost of the investment over the investor's share of the fair value of the investee's identifiable assets) is not amortized. Dividends from the investee are not recognized as income; rather, they reduce the investment account.

Answer 92

Further, cash dividends received by the investor from the investee are not recognized as investment income; rather they are recognized as a debit to cash and a reduction in (credit to) the investor's investment in investee account.

Answer 93

The common stock investment is accounted for under the equity method, which treats all dividends received as a return of capital. Dividends reduce the investment account under this method.

Answer 94

Only cash or property dividends are recognized as income to the recipient. Stock dividends are not recognized as revenue.

Answer 95

Cash paid − (Ending CSV − Beginning CSV) − Cash divs. received..........CVS=cash surrender value

Answer 96

Costs incurred in connection with securing a patent, as well as attorney's fees and other unrecovered costs of a successful legal suit to protect the patent, can be capitalized as part of patent costs.

Answer 97

False. Goodwill is Not amortized, but yes it is tested at least annually for impairment.

Answer 98

The life assigned to the intangible asset is the shorter of its legal and useful life.

Answer 99

Indefinite life intangibles are not amortized, but are tested for impairment on an annual basis.

Answer 100

NO. Although impairment losses on plant assets held for disposal can be reversed to the extent of previous losses, this is not the case for intangibles.

Answer 101

Typically, only costs paid to outside entities are capitalized to intangible assets, and only those intangibles with definite lives are amortized.

Answer 102

the amount of cost that is recoverable in future periods.

Answer 103

1.compare the carrying value of the reporting unit to its fair value. If FV> CV there is no need to perform the second step of valuing the unit's assets and liabilities. Goodwill is never tested at the entity level.

Answer 104

Goodwill is the portion of the purchase price not attributable to identifiable assets.

Answer 105

Goodwill is recognized and measured at the date of a business acquisition. Goodwill is measured as the difference between the consideration transferred in a business acquisition and the fair market value of the identifiable net assets acquired.

Answer 106

Periodic payment of interest NO | Secured by collateral NO

Answer 107

``` Beg. Balance + advances received - advances applied - advances cancelled = End. Balance ```

Answer 108

``` stated interest rate also known as: (SR) coupon interest rate contractual interest rate face interest rate nominal interest rate ```

Answer 109

``` effective interest rate also known as: market interest rate, (MR) yield to maturity, (YTM) discount rate, internal rate of return, annual percentage rate (APR), targeted or required interest rate. ```

Answer 110

SR>MR ---Price>Face Value----Premium SR=MR ---Price=Face Value----Par SR

Answer 111

When the fair value option is elected, any effects of discounts or premiums are REMOVED from the financial statements, and the accounting rules for reporting discounts and premiums no longer apply.

Answer 112

``` Cash paid (interest payable)based on the stated rate (Face value * Stated rate===cash payment always the same) 1,000*.06=60 Interest expense is based on the market rate (BV*MR) ```

Answer 113

Interest Expense=BV*MR | Cash Interest Paid=FV*SR ....always the same amount

Answer 114

when bonds are sold at either a discount or a premium, the amount of amortization using the interest method will increase each year.

Answer 115

The carrying value of a bond issue=face value -unamortized discount.

Answer 116

1)The company intends to refinance and, 2) The company demonstrates an ability to refinance. One way a company can demonstrate the ability to refinance is by entering into a financing

Answer 117

FAS 47 requires the disclosure of the aggregate amount of maturities and sinking fund requirements for all long-term debt for each of the five years following the balance sheet date. The detail for each year is disclosed by the amount of both the sinking fund requirement and the maturity.

Answer 118

BEG BV ($1,040,000) -the amortization ($22,000) =to determine the 7/1/Y6 book value of $1,018,000. The gain is $8,000 ($1,018,000 book value less $1,010,000 cash paid).

Answer 119

Loss = cash paid - book value + unamortized bond issue costs.

Answer 120

Recognized in income from continuing operations in the period of extinguishment.

Answer 121

Both sets of standards treat settlements as extinguishments with a gain to the debtor for the difference between debt book value and fair value of consideration paid.

Answer 122

(1) refinancing current debt on a long-term basis (reduces current liabilities (increases noncurrent debt) and increases the current ratio. ) (2) appropriating retained earnings (an action that typically signals a future reduction in dividends, albeit on a temporary basis. As a result, total retained earnings is maintained at a higher level.)

Answer 123

of shares outstanding + # of shares in the treasury.

Answer 124

This is one of the few examples of a recognized executory contract. Given that collectability is not an issue, the recording of a stock subscription is essentially the same as the entry for issuing stock for cash, except that a receivable stands in place of cash, and common stock subscribed stands in place of common stock. Common stock subscribed is an owners' equity account that is replaced by common stock upon issuance. Any additional paid-in capital is recorded when the contract is signed or recorded, just as if cash were received at that point.

Answer 125

When a firm retires preferred stock, cash is paid to the shareholders reducing total owners' equity. Retained earnings can never be increased when shares are retired, redeemed, or converted into another class of stock.

Answer 126

Market value at date of declaration.

Answer 127

Declaration. A legal liability comes into existence at declaration. The firm has committed itself to paying resources to shareholders from retained earnings on that date.

Answer 128

10% stock dividend - Stock dividends, like all dividends, cause a decrease (debit or charge) in retained earnings. A stock dividend is a permanent capitalization of retained earnings to contributed capital. Stock dividends are made in lieu of cash dividends. Small stock dividends (those less than 20% to 25%) are capitalized at the market value of the shares issued.

Answer 129

Dividends in arrears are footnoted only. They are not recognized as a liability until they are declared

Answer 130

A liquidating dividend is a return of capital. Its source is not earnings, and, therefore, it is NOTretained earnings. The firm is liquidating part of its permanent capital. The usual account to debit for a liquidating dividend is additional paid-in capital.

Answer 131

Retained earnings are debited in a stock dividend, and common stock and possibly additional paid-in capital are credited. Therefore, retained earnings are reduced, but total owners' equity is unchanged, because all accounts affected by the stock dividend are owners' equity accounts.

Answer 132

Retained earnings appropriated is credited when an appropriation is created

Answer 133

Fair Value

Answer 134

When installment sales are material, and there is no reasonable basis for estimating collectibility. The installment method of revenue recognition is used when the realizability criterion of revenue recognition is not met. In other words, there is significant uncertainty that the receivable will be collected. Until cash is collected (realizability is therefore assured for the amount collected), no gross profit is recognized. The cost-recovery method, which is even more conservative, may also be used in this situation.

Answer 135

The cost recovery is the most conservative of the methods listed in the answer alternatives. It recognizes income slower than any other method listed. This method recognizes no income until the cash collections exceed the cost of the equipment and would tend to overstate income the least. The cost recovery method is more conservative that the installment method, which recognizes profit on each dollar of cash collected

Answer 136

At Fair Value Pension plan assets are accumulated for the purpose of paying retiree benefits under the plan. In assessing the ability of the plan to pay benefit payments, fair value is the most relevant reporting attribute. The bulk of pension plan assets are invested in financial instruments whose value varies over time. Measurement of these investments is most appropriate at fair value and is consistent with reporting projected benefit obligation at present value—both are current values as of the reporting date.

Answer 137

Accumulated benefit obligation: is the present value of all unpaid future retirement benefits as of the balance sheet date based on (1) service rendered to that date, and (2) current salary levels. Even if the pension benefit formula incorporates future salaries, accumulated benefit obligation uses current salary levels only to provide a more current measure of the pension liability

Answer 138

The reported liability for defined benefit pension plans is the unfunded projected benefit obligation. This is the projected benefit obligation, less pension plan assets at fair value. Projected benefit obligation is the fundamental measure of a firm's pension liability, but is reported only in the footnotes.

Answer 139

B/S Funded status is the difference between projected benefit obligation and plan assets at fair value. Neither of these amounts is reported in the balance sheet (they appear in the notes only), but their difference is reported in the balance sheet as the reported pension liability for defined benefit plans. It is the amount the plan is "behind" in terms of having assets available for payment of benefits.

Answer 140

(a) a description of the plan, (b) the amount of pension expense by component (current service cost, interest cost, return on plan assets, etc.), and (c) the weighted average discount rate used in pension calculations. There is no requirement to provide estimates of future contributions.

Answer 141

The immediate increase of $5mn in PBO is recorded as a decrease in other comprehensive income. Therefore, comprehensive income (the sum of other comprehensive income and net income) is immediately decreased by the present value of the increase in the cost of the pension plan. The journal entry at January 1 debits other comprehensive income and credits pension liability.

Answer 142

``` Beg (PBO), January 1, 2005 + interest cost (growth in PBO), .10($72,000) + service cost - benefits paid in 2005 = EndPBO, December 31, 2005 ```

Answer 143

Date of grant...The fair value on the grant date is used for measuring compensation expense, because, on that date, the employer has given a resource of value to the employee.

Answer 144

Is based on the value of the option at the grant date, adjusted for forfeitures.: The fair value of the option sets the compensation expense to be recognized for each option expected to be vested. Applying the forfeiture rate ensures that only options expected to be vested will be entered into the calculation

Answer 145

An item is included in the calculation of net income in one year and in taxable income in a different year

Answer 146

1Unrecognized firm commitments. 2Available-for-sale securities. 3Foreign currency denominated hedge forecasted transactions. 4Net investments in foreign operations. (Trading securities is not one of the 4 types.)

Answer 147

In current earnings.

Answer 148

that sufficient documentation must be provided at the beginning of the process and the hedge must be "highly effective" throughout its life

Answer 149

1The amount of accounting loss the entity would incur should any party to the financial instrument fail to perform according to the terms of the contract and the collateral, if any, is of no value. 2The class of financial instruments held. 3Categorization between instruments held for trading purposes and purposes other than trading.

Answer 150

1. Objectives and strategies for achieving them. 2. Context to understand the instrument. 3. Risk management policies. 4. A list of hedged instruments. Disclosure of the maximum potential accounting loss is only required for financial instruments with concentrations of credit risk.

Answer 151

Recognizing gains and losses in other comprehensive income

Answer 152

A firm had 4 internal deferred tax accounts all in the same amounts and all classified differently. This firm would report no deferred tax accounts in the B/S

Answer 153

carryforward, and | carryback-carryforward

Answer 154

DDB depreciation for Year 3 = the book value at the beginning of Year 3 multiplied by 2/6.

Answer 155

non-cash asset - fair value. | , but if remains under the control of the acquirer - carrying value

Answer 156

fair value (identifiable assets acquired, liabilities assumed, and any non-controlling interest in the acquiree are measured at fair value. A few exceptions exist for selected assets and liabilities.

Answer 157

The investment value used in computing goodwill is the sum of the fair value of the consideration transferred by the acquirer and the fair value of the noncontrolling interest, if any, in the acquiree

Answer 158

to a lower amount, but not to a higher amount

Answer 159

But not expenses

Answer 160

In the merger and consolidation forms of business combination, only one firm will remain after the combination. Therefore, there will not be two (or more) sets of financial statements to consolidate.

Answer 161

When an intercompany inventory profit resulting from a sale by a LESS than 100% owned SUB to its parent is eliminated, the full amount (100%) of the decrease in profit is deducted from consolidated net income available to the parent shareholders False

Answer 162

the amount of profit still in the buying affiliate's inventory at year-end

Answer 163

the asset is written off

Answer 164

reducing noncontrolling interest

Answer 165

overstate (gain) or understate (loss) depreciation expense for consolidated purposes

Answer 166

at its original cost from a non-affiliate

Answer 167

retained earnings of the selling affiliate

Answer 168

in the amount of goodwill recognized:If a parent elects to measure noncontrolling interest at proportional share of fair value as permitted under IFRS, the noncontrolling interest recognized in consolidated shareholders' equity would be less than if full fair value measurement were used

Answer 169

controlling ownership of the other firms

Answer 170

Unconsolidated subsidiaries; Companies under common management

Answer 171

an exchange of cash or ownership interest in an entity

Answer 172

footnote disclosure

Answer 173

the loss and liability

Answer 174

a recognized liability. A provision that has a reasonably possible chance of requiring the outflow of benefits is treated as a contingent liability

Answer 175

, but not under international accounting standards

Answer 176

that neither basic nor diluted EPS are reduced

Answer 177

only declared dividends should be subtracted from the numerato

Answer 178

Only the amount of noncumulative preferred stock dividends DECLARED during the year is subtracted in the numerator of BEPS True

Answer 179

Only income amounts on a per share basis are reduced by preferred stock dividends

Answer 180

the retained earnings balance below what it was at the beginning of the year

Answer 181

the effect of potential common stock. A dilutive potential common stock decreases EPS

Answer 182

will be less than BEPS

Answer 183

from lowest to highest in terms of the ratio of numerator effect to denominator effect

Answer 184

The denominator of DEPS for income from continuing operations

Answer 185

foreign, functional, and presentation currencies

Answer 186

1 Nonmonetary items measured at historical cost are translated at the historical exchange rate. 2 Monetary items are translated at the year-end spot 3 If the functional currency is the same as the presentation currency gains or losses are reported in profit and loss for the period.

Answer 187

the currency of the primary economic environment in which the company operates.

Answer 188

IFRS has no requirement for the presentation of interim financial statements, but if they are presented, four basic financial statements are required.

Answer 189

a component of income from continuing operations in the income statement

Answer 190

The ineffective portion of a hedge of a forecasted transaction should be deferred and reported as an item of "Other Comprehensive Income. False

Answer 191

OCI, similar to the accounting for a cash flow hedge

Answer 192

recognized as a gain in net income for the period

Answer 193

current net income

Answer 194

the income statement

Answer 195

the difference in their changes in fair value for a period

Answer 196

forward exchange rate

Answer 197

partly in other comprehensive income and partly in current income

Answer 198

partly in current income and partly in other comprehensive income

Answer 199

False.A gain or loss that results from revaluing a forward exchange contract for speculative purposes should be recognized in the income statement. ALSO Gains and losses on forward contracts for speculative purposes are recognized in the period(s) in which the forward exchange rate changes

Answer 200

the functional currency is the local currency

Answer 201

the amount of the required translation adjustment

Answer 202

the exchange rate in effect when the investor acquired the entity

Answer 203

book value- fair value

Answer 204

part of income from continuing operations

Answer 205

an impairment loss should be recorded

Answer 206

book value - fair value

Answer 207

Both parties depreciate the asset

Answer 208

the beginning lease liability multiplied by the lessee's interest rate

Answer 209

the market value or normal sales price of the asset leased

Answer 210

multiplies the implicit interest rate by the beginning net lease receivable balance

Answer 211

The initial direct costs in an operating lease are capitalized and expensed on a straight-line basis ( are accounted for only by the lessor)

Answer 212

In a sales-type lease, the lessor includes a lessee guarantee of residual value in the gross lease receivable

Answer 213

Both the lessee and lessor will capitalize the present value of the bargain purchase amount in their respective net lease liabilities and net lease receivables

Answer 214

the difference between the fair value of the asset exchanged and its book value

Answer 215

producing revenues, reviewed periodically, and generate financial information

Answer 216

If the segment's positive operating income is 10% or more of the absolute value of the sum of the operating income for those segments with negative operating income, then the segment is a reportable segment

Answer 217

Only capitalized computer software costs are amortized

Answer 218

75 days after the company's fiscal year-end has a deadline of 60 days, have a deadline of 90 days.

Answer 219

Income. The IASB Framework has five elements: asset, liability, equity, income, and expense. Note that income includes both revenues and gains.

Answer 220

a component of equity, separate from retained earnings and additional paid-in capital.

E-FAR Flashcards

(414 cards)