FAR 2

Question 1

Installment Sales

Answer 1

Delay profit recognition until cash is received

GP is recognized in income in proportion to the cash collection

Use when there is no reasonable basis to estimate the degree of collectibility (i.e. ultimate collectibility cannot be estimated)

Question 2

Cost Recovery

Answer 2

Appropriate when there is doubt that amount due will be collected

Question 3

IFRS Method for L/T construction contract

Answer 3

Cost Recovery Method and Percentage of completion

Question 4

GAAP Method for L/T construction contract

Answer 4

Complete Method and Percentage of completion

Question 5

Non-monetary Exchange
Treatment of gain with
Commercial Substance

Answer 5

Gain/loss recognize immediately

Gain = FV asset given up > BV asset given up
Loss =FV asset given up

Question 6

Non-monetary Exchange
Treatment of gain with
Lack commercial Substance

Answer 6

1. No boot received = no gain is recognized
2. Boot is paid = no gain is recognized
   [report at historical cost + cash]
3. Boot is received = recognize proportional gain (

Question 7

Non-monetary exchanges

IFRS - dissimilar asset

Answer 7

Similar treatment to exchange with commercial substance

Exchange that generates revenue

All gain/loss recognized

Question 8

Non-monetary exchanges

IFRS - similar asset

Answer 8

No gains are recognized

Exchange that generate revenue

Question 9

Other Comprehensive Income

Answer 9

Include all changes in equity from non-owner transactions

Exclude investments by owners and distribution to owners

Question 10

Other Comprehensive Income

PUFER

Answer 10

P - ension Cost 
U - unrealized gain/loss from avaible for sale securities 
F - foreign currency translation
E - effective portion of net cash flows
R - Revaluation gain (IFRS ONLY)

Question 11

Presentation of OCI

Answer 11

May be shown on 
               1. statement of comprehensive income
               2. in I/S under NI
               3. statement of equity
Must show tax effects

Question 12

Comprehensive Income

Answer 12

Net Income + Other Comprehensive Income

Question 13

Research and development cost

‘Expense’

Answer 13

1. R&D performed by another company
2. Equipment with no alternate use
3. Testing for new products
4. Laboratory research
5. Depreciation expense of capitalized asset
6. All costs related to unsuccessful defend of patent (e.g price, acquisition cost, legal cost)

Question 14

Research and development cost

‘Capitalize’

Answer 14

1. R&D to be reimbursed by third party
2. Equipment, materials, facilities with alternate use
3. All costs related to unsuccessful defend of patent (e.g price, acquisition cost, legal cost)

Question 15

Involuntarily exchange

Answer 15

Loss = net book value + costs associated with the transaction

Gain/loss = proceed from sale - carrying amount of FA

Question 16

Goodwill is amortize when

Answer 16

It is purchases externally

Question 17

Goodwill is expenses when

Answer 17

It is developed internally.

Maintaining and developing goodwill costs are expensed as R&D

Question 18

When there is unlimited right of return, nothing should be recorded as…

Answer 18

Sales unless the following conditions are met:

1. sles price is substantially fixed
2. buyer assumes all risk of loss
3. buyer has paid some form of consideration
4. amount of returns can be reasonably estimated

Question 19

Under GAAP, for software developed internally, cost incurred IN/BEFORE the preliminary project stage should be

Answer 19

Expensed

Question 20

Under GAAP, for software developed internally, cost incurred AFTER the preliminary project stage should be

Answer 20

Capitalized and depreciated over the economic life of the product

Question 21

Under GAAP, Start-up cost is immediately

Answer 21

Expense

Question 22

Intangible that has been permanently impaired should..

Answer 22

Record loss equal to its carrying amount

Question 23

Under U.S GAAP, Goodwill should be test for value impairment at which level?

Answer 23

Reporting unit

Question 24

Under IFRS, Goodwill should be test for value impairment at which level?

Answer 24

Cash generating unit level

Question 25

Under U.S GAAP, reversal of impairment loss is

Answer 25

PROHIBITED

Question 26

Converting NI cash to Accrual

Answer 26

Increase in A/R - Add Increase in A/P - SUBTRACT 06929

Question 27

The treatment of research and development for an internally developed intangible asset under IFRS

Answer 27

Research is expensed | Development is capitalized

Question 28

Revaluation model for intangible asset under IFRS

Answer 28

Revaluation losses - Income Statement Revaluation gain - OCI

Question 29

Impairment of intangible assets other than goodwill under U.S GAAP

Answer 29

Step 1: Carrying amount vs. undiscounted CF Impaired if: carrying amount > undiscounted CF Step 2: Recognize amount of impairment FV - carrying amount

Question 30

Impairment of intangible assets other than goodwill under U.S IFRS

Answer 30

Compare FV to recoverable amount of intangible asset FV - recoverable amount (the GREATER OF FV - cost to sell or PV of the intangible asset)

Question 31

Goodwill impairment under GAAP

Answer 31

Step 1: Impaired if FV

Question 32

Quality control during commercial production including routine testing is NOT

Answer 32

R&D expense

Question 33

Translation Method | 'Current rate method'

Answer 33

1. Income Statement - weighted average rate 2. Balance sheet - Asset/Liabilities - current/ year-end date - Common stock/APIC - historical rate

Question 34

Remeasurement Gain/Loss is reported in

Answer 34

Income Statement

Question 35

Translation gain/loss is reported in

Answer 35

Other comprehensive income

Question 36

Remeasurement Method | 'Temporary Method'

Answer 36

1. Balance sheet - Monetary items - current year rate - Nonmentary items - historical rate 2. Income Statement - non-balance sheet related - weighted average rate - balance sheet related - historical rate e. g. depreciation/PP&E, COGS, Amortization

Question 37

Calculate NCI under IFRS partial goodwill

Answer 37

FV of net assets x NCI %