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FAR2 Flashcards

1
Q

Cash Basis F.S.

A

Pure cash basis f.s., cash is only asset, not liabilities, and equity is equal to cash

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2
Q

Direct method exchange rate

A

US$/FC

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3
Q

Indirect method exchange rate

A

FC/US$

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4
Q

Current Exchange Rate

A

Year-end/Spot Rate at B.S. accounts

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5
Q

Forward Exchange Rate

A

bet in future rate, for specific future date

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6
Q

Historical Exchange Rate

A

Used for equity, at date of issuance of stock and acquisition of assets (ex/ PP+E)

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7
Q

Weighted Avg Rate

A

Used for I.S. items (translation)

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8
Q

Functional Currency

A

Is the currency of the primary economic environment in which the entity operates, usually the local currency or the reporting currency

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9
Q

Foreign Currency Translation

A

Functional (start with I.S. move to B.S.) goes to OCI

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10
Q

Foreign Currency Remeasurement

A

Dysfunctional (start with B.S. move to I.S.) goes to I/S

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11
Q

Remeasurement Method (temporal method)

A 
In order from B.S. to I.S.
Balance Sheet
- Monetary items = spot rate (fixed)
- Non-monetary items = historical rate (fluctuate)
*get RE from B.S.
Income Statement - Gain or loss in I/S
- Non-balance sheet items = weighted avg
- Balance sheet items = historical rate (PP+E including A/D,COGS/INV,Amortization/bonds and intangibles)
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12
Q

Translation Method (current rate method)

A 
Income Statement first
- all I.S. items = weighted avg rate
Transfer NI to RE then ending RE to B.S.
Balance Sheet last
- Assets = spot rate
- Liabilities = sport rate
- Equity = historical rate
Gain or loss in OCI - foreign translation adj.
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13
Q

Historic Cost/Nominal Dollars

A

Based on historic prices without restatement for changes in the purchasing power of the dollar. (Method of basis for GAAP)

nominal = today

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14
Q

Historic Cost/Constant Dollars

A

Based on historic prices adjusted for changes in the general purchasing power of the dollar. (adjust inflation)

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15
Q

Current Cost/Nominal Dollars

A

Based on current cost without restatement for changes in the general purchasing power of the dollar (adjust appreciation)

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16
Q

Current Cost/Constant Dollars

A

Based on current cost adjusted for changes in the general purchasing power of the dollar. (adjust appreciation and inflation)

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17
Q

Monetary Assets/Liabilities

A

Fixed

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18
Q

Non-monetary Assets/Liabilities

A

Fluctuate in value

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19
Q

Purchasing Power Gains

A

Assets in deflation and Liabilities in Inflation (only monetary)

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20
Q

Purchasing Power Losses

A

Assets in inflation and Liabilities in deflation (only monetary)

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21
Q

Commercial Substance

A

Gain/Losses recognized, future cash flows will significantly change

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22
Q

Lacks commercial substance

A

No change in cash flows OR fair value cannot be determined

  • Loss recognized immediately
  • Gains (needs boot)
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23
Q

Lacks commercial substance - GAINS

A

No boot received = no gain

Boot is paid = no gain (loss = cash given)

24
Q

Involuntary Conversions

A

Gains and losses recognized

25
Installment Sales
No reasonable basis for estimating the degree of collectibility
26
Gross Profit
Sale - Cost of goods sold
27
Gross Profit %
Gross Profit/Sales Price
28
Earned Gross Profit
Cash collections x Gross profit %
29
Deferred Gross Profit
Installment receivables(A/R) x Gross profit %
30
Completed Contract method (only GAAP)
Recognizes income on completion of contract - Requirements: 1. Difficult to estimate the costs 2. There are many contracts in progress 3. The projects are short duration (collections are not assured) - Losses recognized in full when discovered
31
Percentage of Completion Method
Reasonably estimate profitability and provide reliable measure of progress toward completion
32
% of completion Revenue Recognized
Total costs to date/Total expected costs = Work done/Total expected work = % of job earned Losses = rule of conservatism
33
Contracts: Revenue Recognition Requirements
Signed contract, risk and rewards transfer, no price contingencies, standard collection terms
34
Multiple Elements Arrangement (GAAP)
Recognize a portion of revenue as completed
35
Matching Principle
Expenses = related revenue recognized
36
Accrued Assets (accrued revenues)
DR: A/R CR: Accrued Revenue
37
Accrued Liabilities (accrued expenses)
Dr: Accrued Expense CR: A/P
38
Estimated Liabilities
DR: Accrued Expense CR: Accrued Liabilties
39
Prepaid Expenses (current assets)
DR: Prepaid Expenses CR: Cash Balance sheet only (starts with prepaid then expires to income statement)
40
Deferred Credits (unearned revenue or deferred revenue)
DR: Cash CR: Unearned/Deferred Revenue Balance sheet only in liability section
41
Royalty Revenue
Recognized when earned
42
Unearned Revenue
Revenue received in advance is recorded as a liability
43
Rights to return exist
If conditions aren't met, revenue = deferred 1. Sale price is substantially fixed at date of sale 2. Buyer assumes all risks of loss 3. Buyer has paid some form of consideration 4. Product sold is substantially complete 5. Amount of future returns can be reasonably estimated (not a contingent sale)
44
Initial Franchise Fees
Revenue when "substantially performed" | Intangible asset and amortize over the expected life of the franchise
45
Continuing Franchise Fees
Revenue when earned, expense as incurred
46
Internally developed intangible assets
Expense when incurred Exception: legal fees for a successful defense, registration/consulting fees, design costs, other direct costs to secure the asset - CAPITALIZE
47
Amortization
Must have a finite life
48
Goodwill
No amortization, must test for impairment Acquisition method = goodwill is the excess of an acquired entity's FV > FV of the entity's net assets (including identifiable intangibles assets) Maintaining goodwill = expense
49
IFRS Revaulation Model
Fair Value = Market-to-market Original Cost: - Above = OCI - Below = I.S.
50
IFRS Revaluation Losses
Income Statement Exception: a revaluation loss that reverses a previously recognized revaluation gain is recognized in OCI and reduces the revaluation surplus in Acc. OCI
51
IFRS Revaluation Gains
OCI Exception: gains are reported on the income statement to the extent that they reverse a previously recognized revaluation loss
52
Research and Development Costs
Expense! Exception: material (tangible assets) with alternative future uses and R+D costs of any nature undertaken on behalf of others under contract - CAPITALIZE AND DEPRECIATE
53
Computer Software Development Costs
Expense costs incurred until technological feasibility and | THEN capitalize costs incurred after technological feasibility up to the point that the product is released for sale
54
Reporting an Impairment Loss
Component of Income from continuing operations (I/S)
55
Impairment - Finite LIfe
Useful life is limited, amortize over useful economic life, two-step impairment test (undiscounted net cash flows and FV) FV - net CV = impairment loss OR FV - net CV = loss + cost of disposal = total impairment loss
56
Impairment - Indefinite Life
Life extends beyond the foreseeable future or cannot be determined, no amortization, one-step impairment test (FV) FV - net CV = impairment loss OR FV - net CV = loss + cost of disposal = total impairment loss
57
Personal Financial Statements
Statement of Financial Condition (B.S.) Assets reported at Est. Current FV Liabilities reported at Est. Current amount Statement of Changes in Net Worth (I.S.)

CPA (11 decks)

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