FAR Flashcards
Best study
when is impairment loss recognized for a long lived asset
ASC Topic 360 requires an impairment loss be recognized if the sum of the expected net future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset. Net future cash flows are cash inflows less cash outflows that are necessary to obtain the inflows. Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, an entity shall review long-lived assets and certain identifiable intangibles to be held and used for impairment.
Under IFRS, what amount should the company report as inventory on its balance sheet?
Under IFRS inventory is reported at the lower of cost or net realizable value.
What is liquidating dividend.
The portion of the dividend reducing the investment carrying value is a liquidating dividend. A liquidating dividend occurs when the investee pays more income than was earned during the period the investor owned the shares of the investee. For example, assume that Pal held 1% of Ima’s outstanding stock from January 1-December 31 of 2004 only. Ima earned $40,000 during 2004 but paid $50,000 in dividends ($10,000 coming from earnings before 2004). Pal would receive $500 dividends in total (1%), but only $400 are attributable to earnings during the period Pal was a shareholder. Thus, $100 of the dividend is attributable to income earned by Ima before Pal became an investor. From Pal’s viewpoint, this is a return of a portion of Pal’s investment, a liquidating dividend.
How is Liquidating Dividen treated
Under the cost method, liquidating dividends are treated as a reduction in the investment account whereas normal dividends are treated as income.
Under the equity method, all dividends are treated as a reduction in the investment account. No dividends received are treated as income under the equity method.
Treatment of impairment in AFS Debt Investment
f the decline in fair value is considered to be other-than-temporary, the unrealized losses in OCI are reclassified to earnings.
Can unrealized gain/loss be recognized in Income statement for AFS Debt
Yes in case if the AFS Debt is opting for FV option then in that case the gain/loss can be transferred to Income statement in other cases where FV is not opted it is accounted for under OCI only.
The premium associated with the investment in a callable bond is amortized over what period
The premium is amortized to the earliest call date .
Under IFRS No. 9, when does an an accounting mismatch arise
Under IFRS No. 9, an accounting mismatch occurs when different elements of a transaction or event are measured on different bases.
under IFRS what investments can be transferred between categories
Only investments in debt securities may be transferred between categories.
If an entity’s business model plan is to make and hold Debt investments solely to receive cash flow from interest and principal repayment, and when there is no accounting mismatch, how should investments in Debt securities be be reported under IFRS No.9
Under IFRS No. 9, investments in debt securities made under an entity’s business model plan to make and hold such investments solely to receive cash flow from interest and principal repayment, and when there is no accounting mismatch, should be reported at amortized cost, not at fair value.
Under IFRS No. 9, investments in debt securities that are not made under an entity’s business model plan to make and hold such investments solely to receive cash flow from interest and principal repayment should be reported at what price /value
Under IFRS No. 9, investments in debt securities that are not made under an entity’s business model plan to make and hold such investments solely to receive cash flow from interest and principal repayment should be reported at fair value
what is a bargain purchase
When the price paid for acquisition is less than FMV of net assets
in accordance with IFRS. What valuation model should be used to value its plant, property, and equipment?
IFRS allows the use of the cost model or the revaluation model for reporting plant, property, and equipment.IFRS does not use the term fair value model for reporting plant, property, and equipment.
The internal costs of developing a patent is capitalized or Expensed?
The internal costs of developing a patent are considered R&D and therefore are expensed.
what are the costs of patents that are capitalized?
The only costs capitalized for internally developed patents are registration and legal costs. This contrasts with the cost of purchasing a patent from an outside party. The entire cost of such a patent is capitalized.
