F2

Question 1

Key Terms for Revenue Recognition under IFRS

Answer 1

• economic benefits will flow to the entity
• entity has transferred to the buyer the significant risk and rewards of ownership
• no managerial involvement

Question 2

Accrual vs Deferral

Answer 2

accrual: income statement impact; no cash impact
deferral: no income statement impact; cash impact

Question 3

Treatment of royalty revenue received in advance

Answer 3

*treated as unearned revenue

Question 4

Franchisor Accounting - Initial Franchise Fees

Answer 4

• revenue when substantially performed

* usually can’t be recognized before the franchisee’s first day of operations

Question 5

Franchisor Accounting - Franchise Fees

Answer 5

*revenue when earned (use PV for future cash flows)

Question 6

Goodwill is which type of asset?

Answer 6

not specifically identifiable intangible asset

Question 7

Costs that can be capitalized for internally created intangible assets

Answer 7

• legal fees related to successful defense
• registration or consulting fees
• design costs
• direct costs to secure asset

Question 8

What happens if you lose a lawsuit related to a patent?

Answer 8

*expense cost and test the asset for impairment

Question 9

2 Methods for Reporting Intangible Assets under IFRS

Answer 9

1. cost method

2. revaluation model

Question 10

Franchisee Accounting - Initial Franchise Fees

Answer 10

*intangible asset at PV and amortize

Question 11

Franchisee Accounting - Continuing Franchise Fees

Answer 11

*expense as incurred

Question 12

Organizational Costs are _______

Answer 12

expenses when incurred

Question 13

2 Exceptions to Expensing R&D

Answer 13

1. assets with other uses
   (depreciation expense is a R&D EXPENSE)
2. research performed for others (COGS instead of R&D)

Question 14

Is quality control testing R&D?

Answer 14

No

Question 15

Basis for amortizing internally developed software

Answer 15

*straight line only

Question 16

What if internally developed software is instead sold to outsiders?

Answer 16

*cost recovery method

Question 17

GAAP Impairment

Answer 17

1. compare to undiscounted cash flows

2. impairment is difference between FV and book value

Question 18

GAAP Impairment - Asset with Indefinite Life

Answer 18

Step 2 Only (compare to FV and impair)

Question 19

IFRS Impairment

Answer 19

One Step
Compare Book Value to Recoverable Amount

Recoverable Amount is GREATER of:

1. asset’s value in use
2. selling price less costs to sell

Question 20

Unit Level for Goodwill Impairment: GAAP vs IFRS

Answer 20

reporting unit level vs. cash generating unit level

Question 21

What is a reporting unit?

Answer 21

• a unit with separate cash flows

* management regularly reviews

Question 22

Is the completed contract method allowed under IFRS?

Answer 22

No

Question 23

When to recognize loss for construction contracts?

Answer 23

*in the year of the loss

Question 24

Deferred GP is what type of account?

Answer 24

*a contra-asset

Question 25

Are gains and losses realized when there is commercial substance?

Answer 25

Yes

Question 26

Rules for Recognizing Gains/Losses for Noncommerical Exchanges

Answer 26

No boot received: no gain recognized
Boot RECEIVED under 25% of compensation: gain recognized in proportion to total compensation
Boot involved (either way) greater than 25%: full recognition

losses are always recognized in full

Question 27

Gain/Loss Computation for Exchanges

Answer 27

*ONLY ON THE ASSET; not on total consideration given or received

Question 28

Are Gains/Losses recognized on involuntary conversions?

Answer 28

Yes; all gains and losses are recognized (proceeds less the basis determines gain or loss)

Question 29

Historic Cost

Current Cost

Nominal Dollars

Constant Dollars

Answer 29

• actual exchange rate at a prior date (appreciation)
• cost that would be incurred at the present time (appreciation)
• unadjusted for changes in purchasing power (inflation)
• dollars restated based on calculations of CPI ratios (inflation)

Question 30

Monetary Assets & Liabilities

Answer 30

*assets lose purchasing power and liabilities gain purchasing power during periods of inflation

Question 31

List of Monetary Assets

Answer 31

Cash
Bonds - non-convertible 
A/R & N/R
Long-term receivables 
A/P & N/P
Accrued Expenses 
Bonds/notes payable 

• contra accounts are assigned according to their related balance sheet account
• DOES NOT INCLUDE INVENTORY OR MARKETABLE SECURITIES

Question 32

Monetary Purchasing Power =

Non-monetary =

Answer 32

Inflation

Appreciation

Question 33

Translation Method

Answer 33

1. Income Statement = weighted average
2. Balance Sheet
   * **year-end rate
   * **C/S and APIC at historical
   * **roll forward R/E (beginning translated R/E plus translated NI less translated dividends)
3. Plug to AOCI

Question 34

Remeasurement Method

Answer 34

1. Balance Sheet
   * **Monetary: current/year-end
   * **non-monetary: historical
2. Income Statement
   * **non-balance sheet = weighted average
   * **historical for
   * ***depreciation, COGS, amortization of bonds/intangibles
3. G/L plugged to get NI to equal required R/E

Question 35

Is a statement of cash flow required for OCBOA presentation?

Answer 35

No

Question 36

Cash Basis Financial Statements

Answer 36

1. Statement of Cash and Equity

2. Statement of Cash Receipts and Disbursements

Question 37

Personal Financial Statements Issues

Answer 37

• statement of financial condition
• assets are reported at estimated current FV
• life insurance loans payable are netted against the cash surrender value of life insurance
• vested pension plan benefits are reported at FV
• liabilities are reported at estimated current amount
• made in order of liquidity; no current or noncurrent classifications