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FAR -Random Flashcards

1
Q

Software Costs

A

It is between production and technological feasibility. Cost includes coding and testing after TF and product master.
It is amortized at larger of SL or revenue calculation

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2
Q

Technological Feasibility

A

Includes program, design, coding and testing
Equip for R and D = expense
Equip for current & future = Amortize and depreciate
Material and labor= R and D

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3
Q

Cash Flow Hedge

A

Against forecasted transactions that are expected to take place in the future
Changes are reported in OCI in DENT until transactions occur.

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4
Q

Fair Value Hedge

A

Against a recognized asset and liability on the BS

Changes are reported in income from continuing

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5
Q

Reporting Unit

A

Group of assets, liabilities, and activities for separate book and records are maintained to facilitate internal decision making and reporting

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6
Q

Franchise Revenue

A

Revenue is recognized when franchiser performed all material service and conditions

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7
Q

Trading securities

A

Not held at cost, but at FV
Realized gains = price - FV
Reported on the income statement

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8
Q

Available for sale securities

A

Does not have FV election:
Held at cost, marked at OCI
Realized gain/loss = Price - cost

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9
Q

Excluded from Cash

A 
Compensating balance
Postdated checks or NSF
Overdraft protection
Restricted cash
Postage stamps

These items should be disclosed

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10
Q

Amortized cost under IFRS

A

Business model is to hold the asset to collect future CF
CF are payments of principal and interest
All other should be measured at FV

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11
Q

Serial bonds

A

Bonds in which the principal upon maturity in installment

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12
Q

Term Bonds

A

Pay entire principal upon maturity at the end of the term

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13
Q

Bond Issue Costs

A

Amortize along with discount and premium

Includes - printing and engraving, legal and acct fees, underwriter commission, and promotion costs

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14
Q

Cost approach

A

Used to measure Fair Value

Cost incurred to replace the benefits derived from the assets

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15
Q

10 key elements under GAAP

A

Assets, liabilities, equity, investment by owner, distribution to owner, comprehensive income, revenue, expense, gain, loss

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16
Q

Significant influence under IFRS Equity investment

A

Having power to participate in the decision of the investees

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17
Q

Appropriate valuation technique (FV measurement)

A

MIC

Market approach, income approach, cost approach

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18
Q

Market approach

A

Used to measure FV

Involve identical or comparable asset/liability

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19
Q

Input for valuation

A

Level 1: used of observable data
Level 2: directly/indirectly input of observable data
Level 3: unobservable data and largely based on management’s judgment

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20
Q

Where will non-controlling interest appears on BS

A

Non-controlling interest in a subsidiary is considered as SE
Reported in SE Section

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21
Q

Goodwill transaction

A

Only recognized on the BS through the purchase
Maintained at purchase value unless it is impaired
Costs to maintain/develop GW are an expense - not capitalized
Reporting unit can be operating segment or 1 level below

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22
Q

Recognition

A

Process of reporting an item on the financial statement

Meet the definition of an element of financial statement

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23
Q

Realization

A

The conversion of an item or service into cash or a claim to cash

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24
Q

Order of authority

A
  1. FASB Statement of Fin Acct Std
  2. FASB Interpretation
  3. AICPA Acct Principles Board Opinion
  4. AICPA Acct Resarch Bulletins
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25
Methods to recognize expense
- Causes and Effect - Systematic and rational allocation - immediate recognition
26
Monetary Unit Assumption
Events and transactions are quantitatively measured in terms of the equivalent amount of money Common denominator of economic activity and provides acct measurement and analysis
27
Matching
Process of recognizing an expense in the same period in which a related benefit is recognized
28
5 key elements under IFRS
Asset, liability, equity, income, expense
29
IFRS recognition & measurement
Probability of occurrence | reliable measurement
30
Income Approach
Used to measure FV and it involves future amount in the forms of revenues, cost savings, and earnings
31
Net realized value
Amount expected to be collected
32
Pledging
Pledge receivables as collateral for a loan | Must be disclosed in footnote
33
Inventory turnover ratio
= COGS/Inventory | FIFO produce lower inv ratio as it has higher ending inv at rising prices (inflationary economy)
34
Indefinite Life Intangibles
Not amortized, must be tested for impairment each year | 2 step process - 1. FV< CV 2. FV net asset vs FV of reporting
35
Exchange assets w/commercial substance (assume all)
Either 1, 2, or 3 - Amt use to record new asset 1. FMV given up + cash paid (-received) 2. FMV of asset received 3. BV given up + cash paid (-received)
36
Exchange asset lack commercial substance
Lower of 3 - amt use to record new asset 1. FMV given up + cash paid (-received) 2. FMV of asset received 3. BV given up + cash paid (-received)
37
Intangible Impairment
1. CV > FV | 2. FV is determined based on market price, income - expected amount, and costs -replacement value
38
Copyrights
Protection of artistic work Period of creators' life + 70 years Amortize over useful life
39
Patent
Capitalize cost of obtaining legal Do not include R and D Max 20 years or shorter of useful life
40
Factor's hold back
Amount which provides a margin of protection against sales discount, returns, allowance and disputed accounts
41
Factoring receivables
Convert AR into cash by assigning it with or without recourse W/o Recourse = buyer assume risk w/ recourse - buyer retains collecting rights
42
Assigning AR
Client borrows cash and agree to use receivables to pay
43
Intangible assets are amortized
Over the shorter of legal life or useful life
44
Statement of financial accounting concepts
Intended to create a conceptual framework for accounting | It establishes objective and concepts on accounting and reporting are base on .
45
Fair Value (for asset/liability)
FV is the exit price of an asset/liability | Amount received when disposing of an asset and the amount required to be paid to transfer liability.
46
Allocation
Process if spreading a cost over more than one period
47
Asset Valuation accounts
Separate item that reduces or increases the carrying amount of an asset
48
Accounting Standard updates
Due-process activities of FASB | to amend the FASB Accounting standard of codification
49
What is the core principle of revenue recognition?
(1) revenue is to be recognized upon the transfer of promised goods and service (2) the amount of revenue recognized represents the consideration the entity expects to receive in exchange for those goods and services
50
Patent
Capitalize cost of obtaining legal protection | Max 20 years life - use shorter of useful life or legal life
51
Copyright
Protection of artistic work Period is for the life of the creator +70 years Amortize over useful life
52
Trademark
Exclusive use of an identifying name for a product or process Renewal is 10 years
53
Franchise
Operation of a business unit under a contractual arrangement with another party
54
5 steps process in revenue recognition
1. identify contracts with customers 2. identify all separate performance obligation within each contract 3. Determine the total consideration for the contract 4. Allocate total consideration amount obligation 5. Recognize revenue either delivered/performed
55
Market risk in investment
risk of interest rate will change
56
Performance risk
Debtor not perform - payments are missed/late
57
Nonrefundable lease bonus paid by leasee
Recognize over the life of the lease - treated as part of lease payments.
58
Valuation Account
Contra-account to reduce the value of the paired account indirectly. Must be paired with another account
59
How does IFRS report inventory ending balance
Lower cost or NRV
60
Impairment for Goodwill and PPE
Assets should be tested for impairment loss before goodwill
61
Measuring monetary unit
``` Historical cost Replacement cost Fair market value Net realized value Present value ```
62
FASB amends the accounting standard codification through...
The Issuance of Accounting Standard Updates
63
Statement of Financial Acct Concepts intended to establish...
The Objective and concept for use in developing standards of financial acct and reporting
64
Monetary Unit
Measure in terms on the equivalent amount of money they represent
65
Comprehensive Income
Measure performance by calculating on entity's changes in equity from non-owner transactions and events
66
Stock Dividend
Stock dividend increases the number of share outstanding. It has no monetary effect on SE
67
Treasury stock methods under IFRS
Cost method par value method Constructive retirement method
68
Constructive method in treasury stock
Similar to par value method. | This method is used when the company does not intend to reissue the shares
69
Accumulated benefit obligation
The present value of all future retirement payments that the employees already entitled to based on services rendered
70
Projected benefit obligation
Amount that will owed to the employee assuming the employee will continue to work until retire age
71
Disclosures for defined benefits pension plan
Description of the plan Amount of pension expense by components The weighted average discount rate The estimated future contribution for the next fiscal year
72
Actuarial technique used in IFRS to account for defined benefit pension plan
Projected unit credit method
73
The if-converted method of computing eps in convertible securities as of the....
As of the beginning of the earliest period reported (or at time of issuance, if later)
74
Permanent difference in income taxes
``` Municipal bonds Dividend received deduction Life insurance Fines/penalties 50% meals and entertainment Federal income tax payment ```
75
Reporting a change from cash to accrual
Considered as correction of an error. | Similar to change in accounting principle, it needs to go back and change prior year adjustment (net of tax)
76
Prospective financial statement should include....
Summary of significant accounting policies | Summary of significant assumptions

FAR (7 decks)

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