FAR F2-F3 Flashcards
(35 cards)
Foreign Financial Translation - what are the two methods?
Remeasurerment & translation method
Remeasurement method is…
F/S of foreign sub are NOT in the sub’s functional currency…
Balance sheet first - -
Monetary items - CY end rate
nonmonetary items - Historical rate
plug currency gain/loss to balance B/S.
Translation method is
F/S of foreign sub are in the sub’s functional currency…
Income statement first..use WEIGHTED AVG RATE
plug “translation adjustment” to other comprehensive income.
Goodwill under GAAP
Fair Value of sub - FV of sub net assets
Goodwill under IFRS
Acquisition Cost - FV of sub net assets ACQUIRED!!!
calculated by using a one-step test at the cash generating unit level in which the cv of the cash generating unit is compared to the cash generating unit’s recoverable amount.
an impairment loss is then recognized to the extent that the cv of the cash generating unit > recoverable amount - - first is allocated to goodwill
Fees of finders and consultants vs Registration Fees for equity securities issued
Fees of finders and consultants are expensed
Registration fees are to reduce APIC
Types of accounting changes and how to treat
Changes in accounting estimate - prospective
Changes in accounting principle - retrospective
Changes in accounting entity - retrospective
ChangeS in accounting principle
- Change only if required by GAAP/IFRS
- Adjusting beginning retained earnings and if there’s prior period f/s - the should be restated.
- RETROSPECTIVELY, UNLESS IT’S IMPRACTICAL TO ACCURATELY CALCULATE THIS CUMULATIVE EFFECT ADJUSTMENT
ERROR CORRECTION
Prior period adjustment
- correct the information if the year is presented if not,
- adjusted beginning r/e of the earliest year
- GAAP same as IFRS. need to correct it retrospectively.
Equity method
must disclose the company’s accounting policy for the investment
Employee’s benefit pension plan should be reported at
fair value
whenever you cant determine between a change in accounting estimate or a change in accounting principle has occured
the change should be considered a change in estimate which is treated prospectively
Goodwill should be recognized on the balance sheet when..
Goodwill has been created in the purchase of a busines
Goodwill - acquisition method
Goodwill is a representation of an acquired company’s fair value over the fair value of the entity’s net assets
Cost of equipment used in research and development with alternative future uses
still have to capitalized and depreciated over its estimated useful life.
Transactions that have commercial substance
gain is recognized in a nonmonetary exchange = difference between the fv of asset given up and bv of asset given up.
How to recognize a bargain purchase in a business acquisition
assets and liabilities acquired in a business combination must be valued at the fv. difference is recognized as a gain by the acquirer at the time of the acquisition.
Old building is being actively marketed for sale
it will be reclassified as an asset held for sale, current asset and will no longer be depreciated… it will also be valued at the lower of its book value or nrv (fv-cost)
Revaluation under IFRS
The reversal of a revaluation is recognized in profit or loss..
the increase in fv should be credited to other comprehensive income.
Transaction lacking commercial substance
no boot -»> NO GAIN»_space;> book at book value
boot is paid -»> NO GAIN RECOGNIZED
***boot is received -»»> if»_space;»»»»»» if >25% recognized all gain
IMPAIRMENT securities
held to maturity — no unrealized
trading ————–income statement
available for sale –OCI
———————–be careful with accumulated OCI
———————–is it asking for one year info or accumulated amount???
Capitalized cost
O - ownership transfer
W - written bargain
N - 90% FV < PV of cash flow
S - 75% life Lease term/economic life
SP < FV < NBV
SP < FV - deferred
FV < NBV - recognized
goodwill for the impairment
compare between fair value of all assets and carrying value.
