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FAR > Review > Flashcards

Review Flashcards

1
Q 
What are the following reports and who is required to file:
10-K
10-Q
8-K
S-X
A 
SEC Registrants (companies with assets of more than 10 million and 500 or more shareholders and securities that trade on a national securities exchange
10-K - Annual Report
10-Q - Quarterly Report
8-K - Material Disclosures
S-X - Form & Content
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2
Q

What does/doesn’t the Fair Value Option (ASC 825) apply?

A

Does:
AFS, HTM, & Equity Method Securities
Certain Financial Liab.
Firm Commitments
Written Loan Commitments
Non-financial insurance settled by a third party
Warranty contracts settled by a third party
Host financial instrument that is an embedded nonfinancial dervative instrument separated from a nonfinancial hybrid instrument

Doesn't:
Consolidations
Pensions
Leases
Share-Based Payments
Stock Options
Postemployment Benefits
Exit/Disposal Activities
Financial Instruments that are a component of Equity
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3
Q

What accounting policies must be disclosed?

A
  1. Accounting principles used when alternatives exist
  2. Principles peculiar to a particular industry
  3. Unusual or innovative applications of accounting principles
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4
Q

Regarding ASC 820 and Fair Value Election, what is the difference between the Principal & Most Advantageous Market?

A

Principal = where the greatest volume & level of activity occurs

Most Advantageous = where the maximum price occurs

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5
Q

According to ASC 850, Related Party Disclosures, what should be disclosed on the FS?

A 
Material transactions except:
Compensation agreements
Expense allowances
Items in the ordinary course of business
Transactions which are eliminated in the preparation of the consolidated/combined FS

Material Transaction Disclosures Include:

  1. Nature of relationship
  2. Description of transactions
  3. Dollar amounts of transactions
  4. Amount due to/from
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6
Q

Risks & Uncertainties must be disclosed in what four areas?

A
  1. Nature of Operations
    Quantification not required
  2. Use of Estimates in FS preparation
  3. Certain Significant Estimates
    If possibility of change in near term would cause a material difference
  4. Current vulnerability due to concentrations
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7
Q

Are losses due to Strike considered extraordinary?

A

No

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8
Q

How is COGM Computed?

A 
Direct Method:
Beg WIP
\+ DM Used
\+ DL
\+ Factory OH
- End WIP
= COGM
Indirect Method
Beg Finished Goods
\+ COGM
- End Finished Goods
= Cost of Sales
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9
Q

Do Gains/Losses on Trading Securities require separate disclosure?

A

Yes

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10
Q

Foreign Currency Translation - Remeasurement vs Translation:

A 
Remeasurement Method
Functional does NOT equal Local Currency
Gain/Loss recognized in Income
Aggregate Gain/Loss disclosed either in FS or Notes
Monetary A&L = Current Rate on BS Date
Non-Monetary A&L = Historical 
SHE = Historical (except RE which is brought forward)
Dividends = Historical on date of dec.
R&E = WA of year except for allowcations
Current Rate Method
Functional EQUALS Local Currency
A&L = Current Rate on BS Date
R&E = WA Rates for the year
SHE = Historical
Dividends = Historical rate on date of declaration
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11
Q

Other Comprehensive Income is composed of what?

A
  1. Unrealized G/L on AFS Securities
  2. FC Translation adjustments
  3. Minimum Pension Liability Adjustments
  4. Reclassification to avoid double counting
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12
Q

How is a transaction computed into constant dollars?

A 
Use the To/From Ratio:
Ex:
Year 1 CPI = 180
Year 2 CPI = 200
Depreciation Exp is $200,000 a year

200/180*$200,000 = $222,222

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13
Q

What are examples of Exit Activities?

A
  1. Sale & termination of line of business
  2. Closure of business activities at a particular location
  3. Relocation of business activities
  4. Changes in Management Structure
  5. Fundamental reorganization of the business
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14
Q

Under IFRS, what items must be disclosed on the Income Statement?

A
  1. Income
  2. Finance Costs (Interest Expense)
  3. Share of Profits under Equity Method
  4. Tax Expense
  5. Discontinued Operations
  6. Profit or Loss
  7. Non-controlling interest in P/L
  8. Net P/L attributable to equity holders in the parent
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15
Q

Difference between Sales Type Lease & Direct Financing Lease?

A

Gross Profit is earned on a sales type lease at the inception of the lease

A Direct Financing Lease is when a Bank acts as a third party to purchase the asset in cash from the manufacturer or dealer and then leases to the company needing the equipment

A Sales Type Lease is when the company leases directly from the Manufacturer/Dealer

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16
Q

In financial reporting for segments of a business enterprise, segment data may be aggregated when?

A

Before performing the 10% tests if all of the aggregation criteria are met

17
Q

When goods are sold with unlimited right of return and an obligation to pay based on sale of the goods, when is revenue recognized by the original seller?

A

When the buyer is obligated to pay the seller

18
Q

What are the four types of foreign currency hedges?

A
  1. Unrecognized Firm Commitment
  2. AFS Securities
  3. Forecasted Transaction
  4. Net Investment in Foreign Operation
19
Q

How is current year profit calculated in the percentage of completion contract method?

A

Current Year Profit = (Costs to Date/Total Expected Cost) x Expected Profit - Profit recognized in previous periods

20
Q

Under IFRS, what is the approach used in segment reporting?

A

Management Approach

21
Q

What two criteria are required for a derivative to be classified as a hedge?

A
  1. Sufficient documentation to identify (1) the objective and strategy of the hedge (2) the hedging instrument & hedged item (3) how the effectiveness of the hedge will be assessed on an ongoing basis
  2. The hedge must be highly effective throughout it’s entire life
22
Q

Under the Periodic Inventory System, what is the difference between the Gross & Net Methods?

A

Under the Gross Method, Purchase Discounts are recorded when actually realized

Under the Net Method, Purchase Discounts are realized right off the bat and adjusted later if they are not met

23
Q

Under the Percentage of Completion contract method, what are done with an expected loss in gross profit?

A

It should be expensed entirely in the current period instead of multiplying by the percentage of completion

24
Q

What is included in the Construction in Progress account when using the Percentage of Completion Contract Method?

A
  1. Cost to Date
  2. Gross Profit Recognized (A loss would not be subtracted, but would be shown as a separate liability - Unearned Revenue)
25
Q

How is the Gross Margin Method for Inventory used?

A

By taking the historical margins on sales to estimate the Cost of Inventory

This method is typically used for Interim Reporting because it is not accurate enough to use for year-end reporting

26
Q

When there is a decline in market value below the contract price on a noncancelable purchase commitment, what must be done?

A
  1. An unrealized loss must be reported in the period of decline
  2. The nature of the contract should be disclosed in the FS.
27
Q

Pension Asset/Liability is the result of what?

A

The cumulative amount of pension expense vs the funded pension amount

28
Q

Under IFRS, where are gains/losses recorded?

A

OCI

29
Q

When depreciating capital software, what methods are appropriate?

A

The greater of:
1. The SL Depreciation

  1. Ratio of Actual Yearly Sales to Total Expected Sales
30
Q

The test for impairment for assets is?

A

UNDISCOUNTED future cash inflows less related cash outflows

31
Q

May Development Costs be capitalized?

A

Yes in very restrictive conditions

32
Q

Can Assets which have been written down and had a loss recorded before the asset was classified as for sale be written back up?

A

Yes, but only to the carrying amount before the write down.

33
Q

What is a nonreciprocal asset transfer?

A

Donation of an asset at FMV

Gains/Losses are reported on the difference between the CV and the FMV

34
Q

What is considered program revenue on the government-wide financial statements?

A
  1. Charges for Services
  2. Operating Grants & Contributions
  3. Capital Grants & Contributions

FAR (28 decks)

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