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FAR MC > F8 > Flashcards

F8 Flashcards

1
Q

Under IFRS and GAAP where does EPS go on the income statement?

A

Face

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2
Q

Simple capital structure must present what kind of EPS?

A

Basic EPS

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3
Q

Complex capital structure must present what?

A

Basic and diluted EPS

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4
Q

Simple capital structure

A

Common stock only

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5
Q

Income available for common shareholders

A

NI less preferred Dividends

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6
Q

Preferred Dividends

A

Non-cumulative = Dividends declared

Cumulative = dividends accumulated, ignore dividends declared

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7
Q

How do stock splits factor into WACSO?

A

They are retroactively applied to everything that came before it. Anything after ignores the split

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8
Q

How are stock splits handled as a subsequent event?

A

Subsequent event stock splits are included in EPS

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9
Q

Complex capital structure

A

Securities that can be potentially converted to common stock and therefore would dilute (reduce) EPS

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10
Q

What securities could be converted to common stock?

A
  • Convertible securities (convertible preferred stock / convertible bonds)
  • Warrants and other options
  • Contracts that can be settled in stock
  • Contingent Shares
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11
Q

Contingent Shares

A

Shares that are issued only if certain conditions are met

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12
Q

In the money

A

Average price > strike price

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13
Q

Dilutive only if

A

In the money

Avg price > the strike price

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14
Q

Antidilutive

A

Out of the money, average price is less than strike price

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15
Q

Stock warrants

A

Same as stock options

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16
Q

When you see convertible what should you think?

A

Complex capital structure

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17
Q

Solution from options and warrants effect EPS how?

A

Denominator only

“No good news”

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18
Q

How to determine if convertible bonds or preferred stock are antidilutive?

A

Have to compare diluted EPS to basic EPS. If Basic > Diluted, then antidilutive

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19
Q

How to determine if an EPS was diluted?

A

Diluted = EPS goes down

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20
Q

Preferred Dividends tax rules

A

Dividends on preferred stock are not tax deductible

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21
Q

GAAP vs IFRS contracts that can be settled in cash or CS

A

IFRS: always include in diluted EPS
GAAP: judgement call

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22
Q

Is cash flow per share reported?

A

No

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23
Q

Diluted EPS formula

A

Basic EPS +

Dilutive securities converted to CS

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24
Q

Where are cash flows per share disclosed?

A

Not disclosed under GAAP

IFRS doesn’t specify one way or the other

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25
Q

US GAAP bank overdrafts - cash flow

A

Classified as loan (bank is lending you money)

Financing activities

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26
Q

Treasury stock method for EPS vs If converted method

A

If converted method considers the interest savings (after tax) in the numerator

Treasury stock method assumes dilution if options are “in the money” and then assumes company will offset dilution with treasury stock - as much as possible

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27
Q

What extra item might be used to calculated basic EPS?

A

Contingent Shares

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28
Q

What is ignored for basic EPS

A

Convertible securities are ignored for BASIC EPS

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29
Q

When calculating multiple years of stock splits, does a stock split affect the previous year?

A

Yes!

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30
Q

Given a basic EPS and convertible securities, how will you know if they are dilutive?

A

If the convertible security ratio is less than the basic EPS ratio: dilutive

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31
Q

Given a set of convertible securities and their individual effects on EPS, which ones to includes in diluted EPS and which to exclude?

A

Only include effects that reduce EPS. Do NOT include ones that increase EPS

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32
Q

Operating Asset

A

All current assets except cash and cash equivalents

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33
Q

Operating Liability

A

All accruals except interest- bearing liabilities

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34
Q

What special inflows are in cash from operations?

A 
Interest received 
Dividends received
Insurance proceeds
Lawsuit settlements
Recognized gains on Trading securities
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35
Q

Special outflows in CFO

A

Interest paid
Income taxes paid
Trading Securities purchased

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36
Q

IFRS vs GAAP statement of cash flow

A

IFRS is flexible (case by case) for interest, dividends, and tax categories

GAAP is rigid

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37
Q

If statement of cash flows starts with net income what method?

A

Indirect

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38
Q

What does CFO represent?

A

Change in operating assets and change in operating liabilities

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39
Q

What does CFI represent?

A

Change in non-current assets

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40
Q

What does CFF represent?

A

Change in debt and equity

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41
Q

When are supplemental disclosures required for statement of cash flows?

A

When indirect method is used

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42
Q

What supplemental disclosures are required for the cash flow statement if indirect method is used?

A

Cash paid for interest and taxes

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43
Q

If you see ____ the direct method for cash flow statement is being used

A

Cash received from customers

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44
Q

Difference between indirect and direct methods for cash flow statement

A

CFO format, do you start from net income or cash from customers?

Investing and financing are the same

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45
Q

Why do no companies use the direct method?

A

If direct method is used, then indirect method is required as a supplemental disclosure.

So extra work

Except for IFRS

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46
Q

Provided

Cash flow statement

A

Inflow

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47
Q

Used

Cash flow

A

Outflows

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48
Q

CFO formula

A 
NI
- Depr / Amort
\+ Losses
- Gains and amort of bond premium
- Equity Earnings
- change OA
\+ change OL
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49
Q

COGS to Cash

A

COGS
- AP
+ Inv
= Cash

Increase in AP means hasn’t been paid

Inventory was paid, not on IS. Must be added back

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50
Q

Revenue to Cash

A

Revenue
- AR
+ Unearned
Cash

Increase in AR means hasn’t been received

Unearned HAS been received but not recognized

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51
Q

Expenses to Cash Paid

A

Expenses
- Accrued Expenses
+ Prepaid Expenses
= Cash

Accd expenses haven’t been paid

Prepaid expenses already paid, not on IS. Must be added back.

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52
Q

Are inflows and outflows netted on statement of cash flows?

A

No - separate

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53
Q

IFRS Dividends paid

A

CFO or CFF

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54
Q

Where would this go on statement of cash flows?

Collection of proceeds from note payable

A

Financing

Cash received from issuing a note payable

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55
Q

Except for subtracting gains - indirect method

A

Gain on trading securities - do not subtract

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56
Q

Interest paid

Where on cash flow for GAAP?

A

CFO

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57
Q

Interest received

Where on cash flow for GAAP?

A

CFO

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58
Q

Purchase of bonds payable

Where on cash flow?

A

Investing - it’s really a bonds Receivable

59
Q

Should tax attributable to a gain on an investing activity be included in CFI?

A

No, the tax remains part of operating activities.

Taxes payable is operating

60
Q

Codification # for non profit accounting

A

Codification 958

61
Q

Which standards board regulates non profit accounting

A

FASB

NOT GASB

62
Q

Users of a not for profit financials

A

Donors / creditors / members

63
Q

Statement of financial position

A

BS

64
Q

Statement of Activities

A

IS

65
Q

BS and IS names for non-profit accounting

A

Statement of financial position

Statement of activities

66
Q

Which financial statements present funds?

A

Government

NOT non-profit

67
Q

What basis of accounting for non-profit?

A

Full Accrual basis

68
Q

What is the primary reporting emphasis of non-profit accounting

A

Disclosing sources of the institution’s resources and how they were expended

69
Q

Government not for profit are governments by which standards board?

A

GASB

70
Q

Program services

A

Costs related to purpose and mission of non-profit

71
Q

Support

A

Management and general fundraising / membership development

72
Q

Natural Classifications

A

Expenses such as salaries, rents, utilities, interest expense, supplies

73
Q

Functional classifications

A

Categorized Cost by major class of program + support service

74
Q

Function vs Natural classifications

A 
Function = what they are for
Natural = what they are
75
Q

Where can expenses for a non-profit be reported?

A

Face
Notes
Separate financial schedule

76
Q

Assets restricted or designated for non-current purposes - non current or current?

Non-profit

A

Non-current

77
Q

Are board designated funds classified as restricted or unrestricted?

A

Unrestricted

Board cannot restrict use of funds on BS. Only donor can

78
Q

Categories of net assets for non profits

A

With and without donor restrictions

79
Q

Net Income for non profits

A

Changes in net assets

80
Q

Statement of cash flows methods for non profit

A

Same as for profit

GASB is the only different one

81
Q

Non-profit vs commercial statement of cash flows direct method main difference

A

Commercial: if direct is used, indirect must be disclosed

Non-profit: if direct is used, indirect is NOT required to be disclosed

82
Q

Satisfied donor restrictions are reclassified as

“Contributions without donor restrictions”

Yes or no?

A

No!

Reclassifications aren’t contributions

83
Q

Support services

For non profit

A

Fundraising
Management and general administrative
Membership development

84
Q

Program services can be found where on statement of activities for non-profit? Revenues or expenses?

A

Expenses

You donate to a non-profit so they can spend the money on their programs, no?

85
Q

Expenses on a statement of activity are broken up how for non profits?

A

Between program and support services

86
Q

Are board designated donor restrictions on the statement of activities?

A

No

87
Q

Not for profits financials focus on what?

A

Basic information for the organization as a whole

88
Q

Do board designated net assets appear in the financials?

A

Yes - in the NOTES

Under net assets without donor restrictions

89
Q

For a non-profit, all expenses are reported as decreases in which net asset classes?

A

Net assets with donor restrictions

There are NO expenses associated with donor restricted assets

90
Q

How does a non-profit recognize program revenue?

A

When a program expense occurs

91
Q

What is the primary purpose of the statement of activities for a non profit?

A

Report change in net assets for the period

92
Q

If a non profit received only donations with restrictions throughout the year, how can assets released from restrictions for the current year be calculated?

A

Will be equal to the revenue

93
Q

Non profit fees

Revenue or expense?

A

Revenues

94
Q

Net change to net assets for non profit can be calculated as

A

Earnings of the endowment net of the program deficit classified as Within donor restrictions

95
Q

Ownership interest is to owner’s equity as ______ is to net assets for non profit

A

Residual interest

96
Q

Can contributions with donor restrictions be considered revenue?

A

Yes

97
Q

Can contributions with donor restrictions be considered revenue?

A

Yes, but will have no associated expenses

98
Q

Should an increase or decrease in FMV change net assets with donor restrictions?

A

Yes, FMV changes effect the earnings if an investment that is donor restricted

99
Q

Where would proceeds from insurance for insurance resulting from the loss of of a fixed asset be shown on the statement of cash flows?

A

CFI

100
Q

Sale of works of art appear where no the cash flow statement?

A

CFI

101
Q 
Exchange transaction
(Non profit)
A

Non profit earns resources in exchange for services performed

102
Q

Are exchange transactions classified as increases to net assets w/o or w/ donor restrictions?

A

Without

103
Q

Condition vs Donor restrictions - how different?

A

Donor restriction - satisfied by /use/ of donated resources

Conditions - not satisfied by use of resources

104
Q

Difference between non profit and commercial uncollectible pledges

A

No bad debt expense

105
Q

SOME

Donated services are recognized only SOME of the time

Non profit

A

Specialized skills
Otherwise needed by org
Measurable
Easily

106
Q

Donated Services - when recorded

A
  1. Create or enhance nonfinancial asset

2. Specialized skill otherwise needed by an org that is measurable easily

107
Q

Recruitment of volunteers - how to account for cost?

A

Fundraising Expense

Doesn’t matter if specialized or non-specialized

108
Q

What are the conditions for art or historical treasures to NOT be recorded by non profit or gov?

A
  1. Item is part of a COLLECTION - held for public viewing, exhibition, or research (NOT profit)
  2. COLLECTION is cared for, preserved, and protected by org
  3. Any proceeds from sale is reinvested in other COLLECTION items
109
Q

How are premiums handled in non profits regarding contributions received?

A

Contribution Revenue is net of premiums

110
Q

Cancelled classes - Revenue for non profit universities?

A

No - revenue from tuition and fees is net of cancelled classes

111
Q

What deductions are necessary to arrive at “net patient service revenue” did health care non-profits?

A
  • Charity care
  • Contractural Adjustments
  • Discounts
  • Admin Adjustments
  • Bad Debts
112
Q

Capitation Agreement

A

Charges are “capped”

113
Q

What are the three categories of revenue for health care non profit?

A

Patient Service Revenue
Other Operating Revenue
Nonoperating Revenue

114
Q

Donated supplies vs donated services for health care - which revenue category?

A

Donated supplies = other operating

Donated services = non operating

115
Q

Are net assets released from restriction the same as contributions?

A

No…contributions with donor restrictions are still contributions regardless of whether or not they are satisfied

116
Q

Other operating revenue revenues for a hospital

A

Revenues generated by operations other than patient services:

Gift shop revenue
Educational revenue
Parking revenue

117
Q

Should bad debt be netted against gross patient revenue?

A

No - not unless it’s bad debt resulting from inability to collect debt never assessed for quality or collectibility (special case)

118
Q

Does revenue, gains; and other support without donor restrictions include “other revenue”?

A

Yes

119
Q

Does revenue, gains; and other support without donor restrictions include “net assets released from restrictions used for operations”?

A

Yes

120
Q

How are unconditional promises to contribute in the future reported for non profits?

A

Contributions WITH donor restrictions. Future = implied time restriction

121
Q

Are exchange transactions restricted or unrestricted?

A

Unrestricted. They are a reciprocal transfer

122
Q

Are split interest agreements restricted or unrestricted?

A

Unrestricted

123
Q

How do scholarships, tuition remossion, and fellowships affect net revenue from tuition and fees?

A

No effect

124
Q

Beneficial interest

A

Non profit

Means not interrelated financially

125
Q

Underwater endowment disclosures

A

FED

Fair value
Endowment gift’s original amount
Deficiency

“How hard is it for the intended beneficiaries to be FED”

126
Q

Are works of art or historical treasures depreciated for non profits?

A

No

127
Q

If non profit recipient has variance power, and approves money to be allocated to beneficiary, but it doesn’t move yet, how does the beneficiary record?

A

Beneficiary does NOT record if the recipient has variance power until assets are remitted

128
Q

JE for beneficiary if the recipient has no variance power and orgs are financially interrelated

A

Beneficiary:

Interest in investee income
Change in interest in investee income

Recipient:
Cash
Revenue w/o donor restriction

129
Q

NFP interrelated definition

A

Both able to influence the operating and financial decisions of the recipient AND

has ongoing economic interest in recipient

130
Q

Refundable advance liability vs contribution w/ donor restriction

A

It is a liability if the organization lacks variance power

131
Q

Variance power

A

Power to decide who gets resources and when they get it

132
Q

Can a NFP be interrelated AND have variance power?

A

No, interrelated requires recipient to not have variance power

133
Q

Commercial vs NFP basis for how debt and equity securities are measured

A

NFP - all gains or losses hit statement of activities and measured at fair value

Commercial - much more complicated

134
Q

Required Supplemental disclosures for indirect method of cash flow

A

Interest paid

Taxes paid

135
Q

When preparing statement of cash flows, what special item is in CFF?

A

Dividends paid

136
Q

Decrease in deferred taxes (indirect method)

A

Operating

Operating liabilities are any non interest liabilities (curr or non-curr)

137
Q

JE of SOME services donated

A

Expense (FV of services)

Support

138
Q

Investment income for NFP - debt securities is net of what?

A

FV adjustment

139
Q

JE to move cash w/ donor restrictions to cash w/o donor restrictions

A

Funnel through account satisfaction of restriction

Cash - without donor restriction
Satisfaction of restriction
Satisfaction of restriction
Cash - with donor restriction

140
Q

Unskilled day laborers donating their time to build a daycare center - contribution or not?

A

Contribution. The only exception to the SOME rule is the creation or improvement of a fixed asset

141
Q

If a doctor is paid $20K for their services when they would normally be paid $100K for a non profit, how much is the contribution?

A

$80K

What would be paid normally net of what was paid. What wasn’t paid is a contribution instead of a cash outlay

142
Q

Are reclassified net assets due to satisfaction of donor restrictions affect net assets without donor restriction?

A

No - only affect the satisfaction / reclassification accounts

Does NOT create revenue without donor restrictions

143
Q

Who prescribes auditing standards for the gov?

A

Government Accountability Office

144
Q

Cornerstone of gov accounting

A

Accountability

FAR MC (10 decks)

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