Ayush FAR

Exchange lacking Commercial Substance nonmonetary asset gain/loss recognition

-All loss are recognized. -No boot received = no gain -Boot given <25 = no gain -Boot received <25 = partial gain -Boot >/= 25 = Both party recognize gains and losses.

What must be present in order to require the disclosure of the estimated effect of a change in estimate used in the preparation of financial statements? 1. It is reasonably possible that the estimate will change in the near term. 2. The effect of a change in the estimate would be material. 3. The actual result is different from the estimate.

1 & 2 must be present. Not 3.

Are these financing, investing or operating outflows? 1. Payment of interest on bonds 2. Payment of dividends to stockholders 3. Payment to acquire 1,000 shares of Marks Co. common stock

1. Payment of interest on bonds -> Operating 2. Payment of dividends to stockholders -> Financing. Issuance of stock, purchase of treasury stock, issuance of bonds, borrowing funds, and paying back PRINCIPAL related to bonds and loans. 3. Payment to acquire 1,000 shares of Marks Co. common stock -> Investing

TS, AFS, HTM valuation, Financial statement and JE:

1. TS - FV(BS) -IS Unrealized loss xxx Trading debt security xxx Trading debt security xxx Unrealized gain xxx 2. AFS - FV(FV) - OCI - IS when sold. Realized G/L in income statement. Unrealized G/L reversed. Unrealized loss xxx AFS debt xxx AFS debt xxx Unrealized gain xxx 3. HTM - Amortized cost Credit loss = Amortized cost(purchase price) - present value

The following stock dividends were declared and distributed: % outstanding, fair, par 10 15000 10000 28 40000 30800 What aggregate amount should be debited to retained earnings?

45800. Less than 20-25%, fair value is capitalized. More than 20-25%, par value is capitalized from retained earnings.

What should we report as FV of Asset? 1. Net sales after transaction cost:76 Transaction cost: 6 2. Net sale after TC: 80 TC: 1

81 is FV of asset because 80 is the highest price you can get after transaction cost. But, the asset must be reported at FV.

Cash Equivalent investment maturity

90 day or less

Accretion and Depreciation calculation

=ARO (Asset Retirement Obligation)/(1+r)^n

Percentage of Completion Method

Actual cumulative work done / (Work done + Estimated future cost) * total profit Total profit = Contract price - Cumulative cost incurred - future estimated cost

Foreign currency transaction and translation

Adjust to GAAP Remeasure to make foreign currency functional. (IS) Translate functional currency to reporting currency. (OCI)

Costs added to land

All cost until excavation.

Bond Terminology

Always pay off at Face, regardless of discount or premium. Coupon rate = Rate of interest X Face. Regardless of premium or discount. Selling price = Present value of future cash payments including principal and interest. Discount = Market rate > stated rate. Premium = M<S

Proceed on sale of bonds

Always use the market rate when using CHART. Use stated rate and then market rate for interest. PV of principal = FV*Market rate PV of $1 PV of interest = FV*stated% Use the calculation above and multiply it by PV of Annuity for market Always use the market rate when using CHART. Use stated rate and then market rate for interest.

BAE BAE

Appropriated -> Encumbered -> Expenditure -> Disbursement Appropriation (limit) : Maximum expenditure authorized to spend. Encumbrance (reserve) : estimated amount recorded for purchase order, contracts, and other expected expenditures chargeable to an appropriation. Recording Budgets: Estimated Revenue (DR) - Actual revenue (CR) = Revenue to be recognized. Appropriations (CR) - Actual expenditure (DR) - Encumbrance = Balance available for expenditure Exercise: City gov - revenue estimated at 500,000 expenditure of 450,000 appropriated. JE beg. of period DR Estimated revenue 500,000 CR Appropriation 450,000 CR Fund Balance 50,000 end of period - same but reversed. Exercise: Office orders machine on 01/02/15 which had a list price of 1,750. DR Encumbrance - 2015 1,750 CR Reserve for encumbrance - 2015 1,750 1). Estimated revenue at 5,600 and expenditure of 5,550 appropriated DR Estimated revenue 5,600 CR Appropriations 5,550 CR Fund balance 50 2). During year, gov. actually collected 5,800 in fees and taxes DR Cash 5,800 CR Revenue 5,800 3). Ordered goods and services for 3,000 DR Encumbrance 3,000 CR Reserve for encumbrance 3,000 4). During year, it received and paid for 2,800 of goods and services it encumbered. Expects remaining 200 following year. First, DR Reserve for encumbrance 2,800 CR Encumbrance 2,800 Then, DR Expenditures 2,800 CR Cash 2,800 5). Incurred 2,500 in goods and services that had not been encumbered DR Expenditure 2,500 CR Cash 2,500 6). Year end closing entries Reverse JE 1 DR Appropriation 5,550 DR Fund Balance 50 CR Estimated revenue 5600 7). Close revenue, expenditure & encumbrance account. DR Revenue 5,800 Expenditure 5,300 Encumbrance remaining 200 Fund balance 300

Temporary differences in tax

Assume Y1 had 225,000 in income before taxes. Y1 tax DEPRECIATION exceeded book depreciation by 25,000. Y1 tax rate was 25% and 21% for years after. In Y1, what deferred income tax liability should they report? Tax depreciation > Book means less income shown in Y1. The tax will have to be paid later (Deferred income tax liability) Tax depreciation in excess of book = 25000 25000*0.21 = 5.250 deferred income tax liability.

Basic vs Diluted EPS

Basic: Simple capital structure =Income available to common shareholders (NI-Preferred dividends)/ Weighted average number of common shares outstanding (WACSO). Diluted: Complex capital structure =Income available to common shareholders (NI-Preferred dividends)+ Interest on conversion of bonds(net of tax)/ Weighted average number of common shares, assuming all dilutive securities are converted to common stock.

Serial vs debenture bonds

Bond issues maturing on a single date are called term bonds, whereas bond issues maturing in installments are called serial bonds. Debenture bonds are unsecured bonds; they are not supported by a lien or mortgage on specific assets.

Bonds payable at beginning of the year calculation.

Bonds payable end of the year + payment of principal

Conditional promise vs conditional gift vs unconditional promise

C Promise not recorded. C gift recorded as liability (refundable advance) until condition is met. Unconditional promise - Increase in net assets with donor restrictions.

Net position from governmental activities & Change in net positions from governmental activities (Mnemonics)

CANS mnemonics: Total Gov fund balance + Capital asset - Accumulated depreciation -Non-current liabilities Eliminate/reverse deferred inflows -Accrued interest payable + Internal service fund net position = Net position from governmental activities CPAS RIDeS mnemonics Net change in fund balance. +Capital Outlay +Principal payment on NON-current debt. -Asset disposals (net book value) -Sources (other financing sources-debt proceeds) +Revenue (measurable but unavailable) -Interest expense (accrued) -Depreciation Expense +Internal service fund net revenue =Change in net position of governmental activities.

Consolidation journal entries

CAR IN BIG Dr Common stock -subsidiary Dr APIC - subsidiary Dr Retained earnings - subsidiary Cr Investment in subsidiary Cr Noncontrolling Interest Dr Balance sheet adjusted to FV Dr Identifiable intangible asset fair value Dr Goodwill

Allowance for Doubtful Accounts

CR: Beg balance, Recovery and BDE DR: Write offs

Inventory at retail to inventory at cost

Calculate inventory cost/retail ratio (include markup exclude markdown) Multiply the ratio with ending inventory of retail to calculate ending inventory of at cost.

GR: Interest expensed as incurred. Exception?

Capitalized if the borrowing is used to build asset for business use (not sale). "Expenditure"(not sale) x Weighted average interest rate = Capitalized interest

Cash Flow Direct Method

Cash method: Received from customers Paid to suppliers and employees Operating expenses paid in cash Interest received and paid Dividends received but not paid Taxes paid Purchase and sale of Trading securities classified as current assets.

Statement of Changes in Net Assets available for Benefits VS. Statement of Changes in Accumulated Plan Benefits

Changes in Net Assets Available for benefits shows causes of changes of a pension plan's assets. Includes increases like investment income as well as decreases from benefits paid to beneficiaries. Changes in accumulated plan benefits shows causes of changes in PV of benefits to be paid, which would include factors like effect of plan amendments and changes in actuarial assumptions as well as benefits paid to beneficiaries.

What is Undiscounted future CF compared to for impairment test?

Compared to Carrying value, not Fair Value.

AFS debt security Sale JE: Cost $100 FV 01/01/Y1 120 Sold 09/15/Y1 150

Cost $100 FV 01/01/Y1 120 Sold 09/15/Y1 150 dr Cash 150 dr Unrealized gain (PUFI) 20 cr AFS debt security 120 cr Realized gain 50

Cost vs Par value method G/L

Cost - G/L calculated upon reissue. Par - G/L calculated immediately. G/L not reported on Income Statement for Treasury Stocks.

PP&E cost of fixed asset and treatment of repairs.

Cost to acquire and place it in condition for intended use. Includes purchase price, freight in, installation, sale taxes, etc. Ordinary repair expensed. Extraordinary capitalized if increases usefulness, decrease accumulated depreciation if increases life.

Accounts Receivable t account

DR: Opening Balance and Sales CR: Cash and Write-offs

Deferred Tax Assets and Liabilities

DTA = Tax income > Book income DTL = Tax income < Book income

Cash dividend: Journal Entry for Declaration date, Record date & Payment date (Issuers perspective)

Declaration date: Dr Retained Earnings Cr Dividends payable Record date: n/a Payment date: Dr Dividends payable Cr Cash

Sum of years depreciation

Depreciation rate: (Remaining life/ Sum of year digits) * (Cost-Salvage) Denominator if 3 years = 1+2+3 = 6

Stock dividend recorded on par or stock?

Dividend less than 20% of outstanding capital stock, reduce RE by fair market value. Dividend greater than 25% of outstanding capital stock, capital stock is recorded at par value.

When a parent-subsidiary relationship exists, consolidated financial statements are prepared in recognition of the accounting concept of....

Economic Entity

Days in Inventory (inventory conversion period) equation

Ending Inventory/ (COGS/365)

price index

Ending inventory at current year cost/ Ending inventory at prior year base year cost

Accounting for stock options as employee compensation.

Equally divide FV of options from issue date to date exercisable.

Internally developed intangible assets amortized expensed or capitalized?

Expensed. (US GAAP) does not allow for the capitalization of R and D, goodwill or any intangibles that are not specifically identifiable or have determinate lives. Finite life intangible assets reported at cost less amortization and impairment. Infinite life intangible cannot be amortized but is subject to impairment test.

Fair value measurement and market levels

FV is exit price not entrance price. If there's principal market, that price will be FV. If not, most advantageous market will be FV price. Transaction cost used to determine advantageous market but not included in final FV amount. Level 1 - identical (observable) Level 2 - similar (observable) Level 3 - Discounted CF, PV. (non-observable, assumptions)

FV vs Equity vs Acquisition cutoff

FV= 0-20 no sig influence Equity = 20-50, less if sig influence is present Acquisition = >50

Financial Instruments Derivatives Disclosure

Financial Instruments: Cash, currency, demand deposit, ownership interest, bonds and derivatives. Derivatives: Forwards, futures, options or swaps (OFFS). Disclosure: FV disclosed if practicable to estimate along with Carrying amount.

Finite life intangible impairment test & Infinite life Intangible assets impairment test Goodwill impairment

Finite life: If sum of undiscounted CF<Current value, then there's impairment. FV-CV=Loss Infinite life: FV-CV = Loss Goodwill impairment: 1 Qualitative: Stock price decrease/Financial performance/Industry conditions 2 Quantitative: If there's greater than 50% chance that FV>CV, then FV-CV

NFP restricted donation operating or financing or investing? (In statement of Cash Flows)

For restricted donations: Financing before disbursement (Before conditions met). Investing after disbursement. For unrestricted: Operating

Form 3, 4, 5

For the insiders. Directors, officers or beneficial owners that own 10% or more of the equity.

GOV fund financial statements Proprietary fund financial statements Fiduciary fund financial statements

GOV BS: Assets+deferred outflows of resources, Liabilities+deferred inflows of resources, and fund balance. Statement of revenue, Expenditure and changes in fund balance: Other financing sources and other financing uses. Proprietary Statement of net position: Assets+deferred outflows of resources, Liabilities+deferred inflows of resources, and net position Statement of revenue, Expenditure and changes in net position. Statement of cash flows. Fiduciary Statement of net position:Assets+deferred outflows of resources, Liabilities+deferred inflows of resources, and net position Statement of changes in net position

R&D GR and EXCEPTIONS

GR: Expensed in the period incurred. Exception: Before feasibility, software is expensed. Software after feasibility is capitalized until production. After production, cost goes to inventory. Technological feasibility is when program is completed or working model. Capitalize and depreciate as R&D expense if alternative use on other future project is planned.

Governmental funds

GRaSPP - Modified accrual, Current financial resources measurement focus (Collectible up to 60 days is current asset). No Fixed assets and no Long term debt. General - General fund Special Revenue - Restricted for certain activity. Debt Service - Payment of interest or principal. Capital Projects - Acquisition or construction of capital asset. Permanent - Legally restricted. Income not principal may be used.

NRV (Net Realizable Value)

Gross A/R - Allowance for Doubtful account

Hedging Derivative

Hedging reduces risk. No hedge designation = speculation FV Hedge = Hedges an exposure to changes in FV of recorded asset of liability. FV included in IS but offset by changes in FV of hedged item. Cash Flow Hedge = Hedges an exposure to variability in cash flows of recognized asset or forecasted transaction. Changes in FV of CF hedge are included in OCI SHE until related cash flows are realized. Derivative derive value from other security (interest rate, exchange rate, stock or commodity price).

Carrying Value (NBV)

Historical cost-accumulated depreciation- impairment.

During rising prices, which inventory method reports most current inventory on income statement and on balance sheet?

IS - LIFO BS - FIFO

Interest expense and income CF vs IS difference (operating or non-operating?).

IS: Interest expense and income is non operating unless you're a bank. CF: Interest expense and income is operating.

Impairment loss Income Statement presentation

If Undiscounted CF>CV, no impairment loss. If UCF<CV, impairment loss. Presented on IS: Asset held for use= FV-Net CV Asset held for disposal(cost to sell added to loss)= FV-Net CV+Cost of disposal

How is a business segment deemed reportable?

If it meets AT LEAST one of the 3 criteria: A segment must be at least 10% of: 1). Combined revenues (whether intersegment or unaffiliated customers), or 2). Operating income (of all segments not having an operating loss), or 3). Identifiable assets.

Indirect vs Direct CF method supplement/disclosure

Indirect: Tax and Interest paid. Direct: Indirect method supplementation.

Bond Amortization calculation

Interest paid - Interest Expense = Amortization Interest paid = Bond face * Coupon rate Interest expense = Net Carrying Value * Effective Interest Rate(also known as market/yield rate).

Calculation of outstanding shares

Issued shares - Treasury shares

Where is purchase of treasury bill reported in Financial Statements?

It's not. Treasury bill is cash equivalent. It's like purchasing cash and doesn't affect financing, operating or investing activities.

Under US GAAP, Impaired loss cannot be reversed unless...

Its a Fixed asset held for sale.

A company leases trucks and properly classifies the lease as finance lease. The leases have 10 - year term, and the lease calculations were done three years ago when the interest rates were lower. Which of the following is the appropriate accounting treatment, if any, for the application of the fair value option to the lease transactions?

Leases are not eligible for the fair value option.

Contingent losses Contingent gains

Loss: Probable : (likely to occur)= adjusting journal entry and note disclosure required. Adjust for small amount if RANGE is given. Reasonably possible : Note Disclosure is required. Remote: Ignore. Gains: No JE. Gains probable or reasonably possible may be disclosed.

lower of cost or market lower of cost and NRV

Lower of Cost and Middle Value of (Replacement cost, NRV, NRV-Profit). NRV = Selling price - Cost to sell Lower of cost and NRV = Lower of cost or Selling price - Cost

8-K

Major corporate events: Change in accountant Management Governance Aquisition Disposal

When and how does NFP report a donation(marketable equity) received in its year end BS?

Market value at balance sheet date.

10-K deadline

Must be filed annually by US registered companies (issuers) Large accelerated filer (greater than 700 million) - 60 days after fiscal year end. Accelerated filer (greater than 75 million)- 75 days All other registrants (less than 75 million) - 90 days

10-Q (not audited) + Deadline

Must be filed quarterly by US registered companies (issuers) Large accelerated filer (greater than 700 million) - 40 days after fiscal year end. Accelerated filer (greater than 75 million)- 40 days All other registrants (less than 75 million) - 45 days

VIE (variable interest entity)

Must consolidate if VIE requires sig. financial support from investor or current VIE holders don't have sig. voting rights. Avoid consolidating if investor doesn't absorb over half of VIE's expected losses.

Reporting Segment Materiality test

Must only meet 1 of 3: -10% or more of internal and external sale. -10% or more of profit or loss. -10% or more of assets. Additional segments must be disclosed only 75% is met. (External revenue only).

Cash Flow Operating Indirect

NI +Depreciation & amortization -Gains & amortization of bond premium +Losses -Equity earnings>$received -Change in Operating Asset (all current assets except cash and cash equivalent, include trading, exclude AFV & HTM) +Change in Operating Liabilities

NOL carry back/forward

NOL in 2018,2019,2020 can be carried back five years and carried forward indefinitely. NOL carried forward to 2021 or later limited to 80% taxable income before NOL deduction. Taxpayers can elect to not carry back and carry forward. NOL 2021 and beyond cannot be carried back but can be carried forward indefinitely.

Comprehensive income

Net Income + Other Comprehensive Income: PUFI Pension adjustment Unrealized G/L AFS securities and hedges. (Cash flow hedge and Foreign currency net adjustment) Foreign Currency Items Instrument Specific Credit Risk

Net Income vs Dividend under equity method

Net income = Earnings Dividends = Reduction of investment, doesn't take away or count towards income.

Are pension plan or headquarters operating segments?

No. They don't earn revenue or incur expenses on behalf of the business.

Operating vs Financing debt

Non-interest bearing= Operating Interest bearing=Financing

Check outstanding

Not accounted for if given book balance because its already been adjusted. Accounted for in bank balance because they don't know yet and must be deducted.

Which of following changes in operating assets or liabilities would be excluded from reported Operating CF under the direct method? Accrued Liabilities Notes payable Prepaid expenses Wages payable

Notes payable because its a financing activity.

Lessee (renter) Operating or Financing capital lease

OWNES = Financing if any met. O = Ownership transfers W = Written option to buy N = Net present value equal to or exceeds 90% E = Economic life of 75% S = Specialized, no other use. Operating = Lessee classifies as operating and lessor classifies as direct finance lease or operating lease depending on PC criteria: Direct financing lease of both met: P Present value of sum of lease payments not included in lease payments and 3rd party guaranteed residual value is equal to or substantially exceeds asset's FV. C Collection of lease payments and any amounts necessary to satisfy residual value guarantees is probable.

Regulation S-X

Outlines form and content of financial statements to be included in SEC filings. Must be audited. 2 comparative BS. 3 comparative other (Statement of income, changes in owners equity, cash flows...).

Selling price of a bond

PV of principal + PV of interest Calculated using effective interest rate (market/yield). (EMY mnemonic). PV of principal = Issue price * PV at market rate PV of interest = Issue price * STATED PERCENT * MARKET annuity rate.

You sold a warehouse to acquire a new warehouse. What's the excess reported as?

Part of continuing operations. Not a reduction of cost of new warehouse.

Primary vs component Gov units

Primary: has a separately elected governing board, is a legal entity and is financially dependent. Component: Gov cannot stand by itself. Discrete vs. blended presentation: Methods for component units. Generally, component units presented as discrete (separate columns) on primary government's financial statements. Blended presentations made when component either exclusively serves primary government or is substantially the same as primary government's governing body.

What are all program expenses and all support expenses of NFP org?

Program services: Activities around which organization is chartered - Education, research, patient care, labor negotiations, training, child care. Support services: everything not program expenses - fundraising, management and general, membership development.

Proprietary and Fudiciary funds

Proprietary SE - Full accrual, Economic resource measurement focus. Internal Service - Provides goods or service to other departments (Janitor, police repair...). Enterprise - Over 50% supported by user charges. Fiduciary CIPPOE - Full accrual, Economic resource measurement focus. Custodial - Resource temporarily held. Investment Trust - External investment pools. Private purpose - Activities neither pension not investment. Pension (and Other Employee Benefit) - Pension trust and employee account.

Change in Accounting Estimate

Prospective approach - Things like changes in useful life, salvage value and settlement of litigation. If change in principle is inseparable from change in estimate, report it as a change in accounting estimate.

Subsequent events recognized vs non-recognized

Recognized SE: J/E if Condition existed at BS date and new info. Non-recognized: No J/E. Did not exist at balance sheet date. Not recognized in financial statements, may be disclosed.

How are property dividends recorded and how do they affect retained earnings?

Recorded at FV, decreases retained earnings.

Repurchase Agreements Forward or Call option (lease or financing arrangement)? Put option (Lease or sale with rights to return or financing arrangement)?

Repurchase Agreements: Contract in which an entity sells an asset and also either promises to or has the right to repurchase the asset. Forward or Call option: Must repurchase = forward or can repurchase = call. If the asset is: -less than original selling price, it will be lease. -equal to/more than original price, it will be financing arrangement. Put option (obligation to repurchase under customers request). If asset is: - less than original selling price, lease if customer has significant incentive to exercise. Sale with ROR if customer doesn't. -equal to or more than the original selling price, financing if repurchase is more than market value. Sale with ROR if repurchase is less than or equal to market value and customer doesn't have significant incentive to exercise.

Change in Accounting Principle

Retrospective approach - One GAAP to another GAAP is adjusted through beginning retained earnings for cumulative effect of change. Change in accounting entity is also retrospective. The comparative statements are restated as if the companies were always combined. Exception to change in Accounting principle (prospective approach) - Impractical to estimate (when switched to LIFO), change in depreciation , amortization or depletion method considered both change in principle and estimate. Error correction = restatement approach (Non GAAP to GAAP). Cash basis is not GAAP. Cash basis to accrual basis is correction of an error. Prior period adjustment and restate.

Double decline balance

Salvage value not considered upfront only at the end. =BV x Rate Rate = 2/N If 5 years, 2/5= 40%. Depreciate by 40% until you cant depreciate anymore.

Which is not considered contingent shares for computing EPS: Shares issuable upon issuance of patent Shares issuable upon achieving a net income target Shares issuable upon exercise of stock option Shares issuable upon the passage of a specific period of time

Shares issuable upon exercise of stock option isn't contingent because option holder is required to pay exercise price.

FOB shipping point vs FOB destination cost added to:

Shipping point: Added to buyers cost. Destination: Added to selling expense.

Simple vs Complex capital structure

Simple: Has only common stock or no other securities that can become common stock. Complex: Has convertible preferred (stocks, bonds, options, warrants). All complex capital structure must present basic and diluted EPS.

NFP financial statement equivalent... Statement of Activities Statement of financial position Cash flows

Statement of Activities - Income Statement Statement of financial position - Balance sheet Cash flows - Cash flows

I business combination, all cost are expensed as incurred except: Fees paid to investment bankers Fees paid to attorneys Stock registration and issuance cost such as SEC filing fees. Indirect cost such as temporary occupancy cost.

Stock registration because they're treated as direct reduction of value of stock on balance sheet.

Temporary vs. Permanent Differences

Temporary difference: Difference between tax basis of asset/liability vs reported amount. Reverses in future period. Example Deferred tax liability, DT asset - sales on account, rent collected in advanced, warranty expense and accelerated tax depreciation. Permanent difference do not affect deferred tax computation and only affect current tax computation. Example pretax, not taxable income items : interest expense on state/municipal obligations, life insurance, proceeds/expense). Also dividends received deduction.

Gov. Wide Financial Statements

The statement of net position (BS) and the statement of activities (IS). Cash flows is not prepared. Preceding basic financial statement is MD&A. Following basic financial statement is RSI (Required supplementary information) that includes multi-year pension data, infrastructure data and budgetary disclosures.

When to use current, historical, average rate

To translate income statement: Average rate To translate common stock/APIC: Historical rate To translate asset and liabilities: Current rate

Stock Dividends and Stock Splits treatment

Treated as if it happened at the beginning of the year.

Factoring with vs without recourse

With: Seller retains any losses on collection of A/R. Without: Buyer assumes the risk of any losses on collection (True sale).

Cost of Goods Sold

beginning inventory + purchases = COGAFS - ending inventory = COGS

Cost of inventory includes:

freight in, sales tax, purchase price