FAR Deck 3 Flashcards
(17 cards)
What are the standards for a company that files financial statements under the SEC?
When filing through the SEC the evaluation period is through the date the financial statements are issued. Date issued means the date the financials were widely distributed to users in a form and format compliant with GAAP. Under SEC the filers are not required to disclose the date through which subsequent events have been evaluated
**Under GAAP filings users ARE required to disclose in the notes through the date through which subsequent events have been evaluated
Under a Private company should there be a note in the prior year financial statements that have not yet been issued for material items occurring in the following year?
Yes, if the item or items are material is should be disclosed in the notes of the prior year. Failure to disclose would make the financial statements misleading
Finite Life Characteristics of an Impaired Intangible Asset:
Finite means it is possible to estimate the useful life of an asset. Amortize over the years of the life
Indefinite Life Characteristics of an Impaired Intangible Asset:
Indefinite means it is not possible to determine the useful life of the intangible asset. Do not amortize
Assets with Finite Life Impairment Test: Two Step Approach
Step 1: Compare carrying amount to the sum of UN discounted cash flows expected to result from the use of the asset
Step 2: IF CA exceeds total UN discounted cash flows then the asset is impaired and an impairment loss equal to the difference of CA and assets FV is recorded
Assets with Indefinite Lives: Once step approach
Not possible to estimate future cash flows. Test for impairment by comparing difference in CA and assets FV. If FV is less than CA then impairment is recognized(Same as step two in finite life)
How is an impairment loss reported?
Impairment loss is reported as a component of income from cont. ops before income taxes. Carrying amount is reduced by the amount of the impairment loss.
Is restoration of a previously recognized impairment loss allowed?
It is prohibited UNLESS the asset is held for disposal
Impairment loss under IFRS: (One Step Approach)
Carrying Value of asset is compared to Recoverable amount of Asset.
Recoverable Amt = Greater of assets FV less cost to sell OR Assets value in use.
Value in use = Value of future cash flows expected
When testing Indefinite Life Intangibles for impairment what value to we use?
Fair Value must be used instead of undiscounted future net cash flows.
FV (-) Net Carrying Value = Positive(no impair) or Negative (impairment)
When do we test fixed assets held for use for impairment?
Atleast once a year or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.
Impairment of PP&E:
Test PP&E impairment by the following: Difference between UNdiscounted future net cash flows and Net CV If Positive: No Impairment If Negative: Impairment If "Asset Held for Use" Calculate: FV or PV future net cash flows (-) Net CV = Impairment Loss If "Asset Held for Disposal" Calculate: FV or PV future net cash flows (-)Net V = Impairment Loss (+) Cost of Disposal = Total Impairment Loss
Does GAAP or IFRS allow the recovery of impairment losses?
GAAP= Generally no unless asset is held for sale IFRS = Yes which is the greater of FV (-) cost to sell OR assets expected future cash flows
When performing impairment calculations under GAAP: what values are used for determining impairment vs calculating impairment?
Determining impairment = Use UN discounted future net cash flows
Amt of Impairment = Use FV or discounted future net cash flows
What are trading securities?
Trading securities are debt securities that are bought and held principally for the purpose of selling them in the near future. Generally reflect active and frequent buying with the objective in generating profit in short term price. Generally reported as a CURRENT ASSET AS CASH FLOW FROM OPERATIONS. Mark the debt to FAIR VALUE. All Gains and Losses to I/S (both realized or unrealized).
What are Available for Sale Securities?
These are securities not meeting the definition of trading or held to maturity securities. AVS is reported as cash from investing and reported as fair value. If you sell an AVS the realized gain/loss goes to the I/S. If you have not sold it the unrealized gain/loss does to equity in “OCI”
What are Held to Maturity Securities?
> Reported in Cash flow from Investing
Report at Amortized Cost (FMV is distractor)
Have to have the intent and ability to hold these securities to maturity
If the intent is to hold an indefinite amount of time it is not a held for sale security
If it can be paid or otherwise settled in a manner that the holder may not recover substantially all of investment it cannot be classed as held to maturity
Report as : A current or non-current asset based on the time of maturity
