CPA - Basics

Matching Expenses with Revenue

Revenue from business activities and expenses associated with earning that revenue are recorded in the same accounting period.

Non Controlling Interest (50-100% Ownership Characteristics) Characteristics

- Equity accounts of aquiree are eliminated and a non controlling interest is established for FV of shares of stock held by non controlling interest at date of acquisition - Effects of Intercompany transactions are eliminated - Portion of NI and dividend of acquire are allocated to non controlling interest - Non Controlling Interest is reported at original share price + NI% - Dividend %

SOCF Disclosures

- Treatment and definition of cash and cash equivalents - Significant Non Cash Investing and Financing Activities - Interest Paid - Interest Taxes Paid

Test for Goodwill Impairment

1) Is Fair Value more than Book Value, if yes, not impaired. 2) If no, then compare Fair Value of Individual Assets with overall FV of company to get new goodwill.

List the conditions that must exist for debt to be extinguished.

1. Debtor pays creditor and is relieved of obligation; 2. Debtor is legally released from being primary obligor.

In transitioning to IFRS, on the opening balance sheet date, what must an entity disclose relating to investments in subsidiaries, joint ventures, and assOCIates?

(1) the total of investments for which deemed cost is equal to the carrying amount under previous GAAP; (2) total of investments for which deemed cost is fair value on the opening balance sheet date; and (3) total adjustment to carrying amounts reported under previous GAAP

List the components of capitalized costs of self-constructed assets.

1. Labor; 2. Material; 3. Overhead; 4. Interest Cost.

What is the distinction between notes payable and accounts payable?

1. Time period is usually extended; 2. Notes have an interest element.

# Days supply in Average Inventory

365 / Inventory Turnover Measures number of days inventory is held before sale, reflects inventory policies

Dividends

> A company records its liability for a dividend on the date that the dividend is declared by the board of directors. > Owners who hold shares of stock on the date of record are entitled to receive any distributed dividends.

Stock Dividends

> A stock dividend is classified as small if it is below 20 to 25 percent and large if it is above 20-25 percent of the previously outstanding shares of stock. > Small stock dividends are recorded at the fair value of the shares issued. > Large stock dividends are recorded at the par value of the shares issued. > Stock dividends are recorded as a decrease to retained earnings and an increase to contributed capital.

Extraordinary Gains/Losses

> Any gain or loss that results from an event that is judged to be both unusual in nature and infrequent in occurrence is dropped to the bottom of the income statement and reported separately (net of its tax effect) as an extraordinary gain or loss. > A restructuring is a program that is planned and controlled by management and materially changes either (1) the scope of the business undertaken by the company or (2) the manner in which that business is conducted. Restructuring costs are recognized when incurred.

Stmt of Cash Flow - Direct Method

> Creates Income Statement with Cash balances of Inc. Stmt Accounts > FASB has indicated this method is preferable. > If Direct Method used, must also show indirect method and tie back to net income. > Show investing activities and then financing activities separately.

Pension - Prior service cost amortization =

1. prior service cost * number of employee service years ÷ total employee service years 2. prior service cost ÷ [total service years ÷ number for employees]

10K Requirements - SEC

AUDITED o Large Accelerate Filer - 700M in equity - 60 days o Accelerated Filer - 75-700M in equity - 75 Days o Everyone Else - 90 days

Tax Exempt Organizations

According to the IRS Publication 557, in the Organization Reference Chart section, these types of Section 501 (c) organizations are described as follows: ---501(c)(3) — Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations ---501(c)(4) — Civic Leagues, Social Welfare Organizations, and Local Associations of Employees ---501(c)(5) — Labor, Agricultural, and Horticultural Organizations ---501(c)(6) — Business Leagues, Chambers of Commerce, Real Estate Boards, etc. ---501(c)(7) — Social and Recreational Clubs

Pension - Disclosure of underfunded plans

Aggregated and disclosed as a Current liability, Non-current liability, or both. (funding status may not be netted)

Pension - Disclosure of overfunded plans

Aggregated and disclosed as a Non-current asset (funding status may not be netted)

Forward Contract

Agreement between two parties to buy and sell specific quantity of commodity, currency, or financial instrument at an agreed upon price with delivery an/or settlement at an agreed upon date -----Terms aren't clean and less defined ; not traded on exchange

Present Value of an Annuity Due

An annuity whose payments are made at the beginning of each period.

Length of Operating Cycle -

# days supply in average inventory + # of days sales in average receivables Length of time from purchase of inventory to collection of cash

Stock Split

# shares double and par value cut in half ; can be reverse stock split as well Stock splits to not affect account balances only number of shares

List the two-step process involved in computing capitalized interest.

(1) Compute average accumulated expenditure; and (2) Apply the appropriate interest rate(s).

Gain and Loss from Discontinued Ops

(1) the gain or loss on the operations of that activity for the period (2) the gain or loss on the disposal of that activity. > Income taxes or tax benefit are deducted from or added to that amount to determine the gain or loss after taxes.

The IASB framework says there are 3 costraints under IFRS?

(1) timeliness; (2) balance between benefit and cost; and (3) balance between the qualitative characteristics (materiality is a component of relevance)

ratio-Cash Ratio

(Cash Equivalents + Marketable Securities) ÷ Current Liabilities

How do we calculate the annual straight-line depreciation amount of an asset?

(Cost - Salvage Value) / Useful Life.

What are the major differences between U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) in accounting for joint ventures?

1. Contributions of nonmonetary assets: a) U.S. GAAPat carrying value; b) IFRS at FV for share not owned by contributing entity, with gain/loss recognized. 2. Methods of Reporting: a) U.S. GAAP - primarily using equity method; partnership or full consolidation basis when appropriate; b) IFRS - equity method or proportionate consolidation.

How do we account for the transfer of an investment from held-for-trading to held-to-maturity or available-for-sale?

1. Credit Trading at recorded fair value; 2. Debit held-to-maturity or available-for-sale at current fair value; 3. Recognize unrealized holding gain/ loss in net income.

How do we account for the transfer of an investment from available-for-sale to held-to-maturity

1. Credit available-for-sale at recorded fair value; 2. Debit held-to-maturity at current fair value; 3. Unrealized holding gain/loss stays in Accumulate Other Comprehensive Income in Shareholders' Equity 4. Unrealized holding gain/loss at date of transfer amortized over remaining life of debt.

How do we account for the transfer of an investment from held-to-maturity to available-for-sale?

1. Credit held-to-maturity at unamortized cost; 2. Debit available-for-sale at fair value; 3. Unrealized (holding) gain or loss to Other Comprehensive Income.

List the requirements for inclusion in plant assets.

1. Currently used in operations; 2. Have a useful life extending beyond one year; 3. Have physical substance.

List the steps in applying Dollar Valued (DV) Last In First Out (LIFO retail method.

1. DV LIFO is applied to inventory at retail; 2. FIFO retail method cost/retail ratio is applied to retail layer; 3. Cost layer is added to beginning inventory at DV LIFO cost.

FV Option Election Dates Available

1. Date first recognized 2. Date enters into firm commitment 3. When Financial assets cease to qualify for FV treatment due to specialized accounting rules, can elect to use FV 4. Percentage of ownership change and can no longer consolidate 5. Modifications of debt

List the criteria for a held-to-maturity classification.

1. Debt security; 2. Investor has intent to hold to maturity; 3. Investor has ability to hold to maturity.

Categories of Non Exchange Transactions - GASB

1. Derived Tax Revenues 2. Imposed Non Exchange Transactions 3. Government Mandated Non Exchange Transactions 4. Voluntary Non Exchange Transactions

LCM Steps

1. Determine Market by comparing Replacement Cost to Ceiling & Floor - Ceiling - Net Realizable Value (Selling price less selling costs and costs to complete) - Floor - NRV less normal profit - If Replacement cost is between, use Replacement Cost 2. Determine Cost - ignore floor and ceiling - Ex - LIFO, FIFO, AVG METHODS (PERPETUAL/PERIODIC) 3. Select LCM for ENTIRE inventory item or SPECIFIC CLASSES of inventory

Bonus Method for New Partner Admission

1. Determine Old Capital + Additional Capital = New Capital Amounts 2. Multiply New Capital Amount times New Partners's % = New Partners Capital Account Amount 3. Difference between their payment amount and their capital amount = bonus to new partner or bonus to old partner ; JE is recorded based on this

Reporting Servicing Assets

1. Display separate line items for amounts valued at FV and those at Amortization Method 2. Display aggregate amounts for all assets and liabilities, and disclose FV amount

List the two different methods of amortizing a discount or premium on a note.

1. Effective interest method; 2. Straight-line method.

Fair Value Option Accounting Characteristics

1. Electing to measure financial asset or liability at FV 2. Must elect to use FV method on specific items 3. Report unrealized gains/losses in earnings 4. Classified on statement of cash flow - rules of FAS 95 apply

3 Criteria for that Bifurcation must occur (all 3 required)

1. Embedded derivative meets definition of derivative 2. Hybrid instrument is not regularly recorded at FV, with changes reported in current earnings as they occur under GAAP 3. Economic characteristics and risks of derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract. ------Examples include: Bond payable with interest rate based on SP 500, Equity instrument with a call option, equity instrument with a put option, loan agreement permitting debtor to pay off loan prior to its maturity, convertible debt

What are the steps in the Basic Retail Method?

1. Ending inventory at retail is determined; 2. Cost to retail ratio is calculated; 3. #1 x #2 = ending inventory at cost.

List the Last In First Out (LIFO) cost flow assumptions.

1. Ending inventory composed of oldest inventory; 2. Cost of Goods Sold (COGS) composed of newest inventory; 3. Produces lower net income and ending inventory valuation in periods of rising prices.

List the First In First Out (FIFO) cost flow assumptions.

1. Ending inventory composed of units most recently acquired; 2. Cost of Goods Sold (COGS) comprised of oldest units; 3. Most closely matches most firms' actual physical flows; 4. Produces higher net income and higher valuation of inventory in periods of rising prices

List the considerations that must be given when electing to expense or capitalize an item.

1. Estimated time benefit; 2. Materiality.

LCM Method Characteristics

1. Floor limitation prevents recognition of more than normal profit in future periods 2. Ceiling limitation prevents recognition of loss in future periods 3. LCM applied to individual items will typically be lower than LCM applied to entire inventory 4. Once written down, no recovery from write-down until sale (opposite of Marketable Securities)

List the methods used for estimating ending inventory.

1. Gross Margin method; 2. Retail Inventory method; 3. Dollar Value LIFO Retail method.

List the two different methods of recording a note for which a discount or premium is recorded?

1. Gross method; 2. Net method.

Identify the three possible levels of influence over an investee for accounting purposes.

1. Not significant; 2. Significant influence, but not control; and 3. Control.

List the reasons for a Last In First Out (LIFO) liquidation

1. Poor planning; 2. Lack of supply

Order of Dividend Payments

1. Preferred Stockholders - arrears and annual -------Dividends in Arrears - not recorded until declared ; only disclosed 2. Common Stockholders 3. Remaining stock to Preferred and Common based on pro rata of par value

Equity Interest Priority -

1. Preferred claims - claims with priority 2. Fully secured creditors - claims fully covered with realizations from assets pledged to claims 3. Partially secured creditors - claims may not be fully covered by realizations of pledged assets for these claims 4. Unsecured creditors - claims with no priority 5. Stockholders Equity - any residual claim

Financial Statement FV Disclosure Locations

1. Present aggregate FV and non FV amounts on same line (FV in parentheses) 2. Two separate lines for each 3. Disclose difference between FV and aggregate unpaid principle balance

What amounts should be included in the initial recording of a held-for-trading investment?

1. Purchase price of security; 2. Directly related cost of acquisition, e.g., brokerage fee, transfer fee, etc.

What amounts should be included in the initial recording of a held-to-maturity investment?

1. Purchase price of security; 2. Directly related cost of acquisition, e.g., brokerage fee, transfer fee, etc.; 3. Accrued interest, if any, is not included in the cost of the investment.

Carrying Value Allocation % for Bonds

(FMV of Bonds / (FMV of Bonds +FMV of Warrants)) x Carrying Value

List the depletion rate formula.

(Natural Resources account balance - residual value) / (Total estimated units).

List the Margin on Cost formula.

(Sales-Cost of Goods Sold) / Cost of Goods Sold.

List the Gross Margin Percentage formula.

(Sales-Cost of Goods Sold) / sales.

Loss Contingencies -

- Accrue if Probable (ie. slight) - If loss is Reasonably Possible (ie. More than Remote but less than likely), DISCLOSE contingency i. Disclose obligations to reduce debts - If loss if Remote (noted as slight on Exam) NO RECOGNITION OR DISCLOSURE required i. General or unspecified business risks do not warrant disclosure If a range of liability is estimated, USE LOWEST AMOUNT IN RANGE OR BEST ESTIMATE

Real Estate Sales Transactions

- Complexity relates to when ownership has clearly been transferred and when revenues should be recognized - Profit is recognized in full, provided profit is determinable and earnings process is virtually complete - Methods to Record Sales - Deposit, cost recovery, installment, reduced profit, percentage of completion, full accrual

Variable Interest Entity

- Control Achieved through arrangements not involving ownership or voting interests - Control achieved based on contractual, ownership, or pecuniary interests that change with the entity's net asset value - Entity with the controlling financial interest in VIE is considered primary beneficiary and must consolidate.

Disclosures for Recognition of Milestone Payments

- Description of arrangement - Description of each milestone and related contingent consideration - Determination of whether each milestone is substantive - Factors considered in determining whether milestones are substantive - Amount of considerations recognized during period for the milestone

Controlling Interest in a VIE Exists when:

- Entity has power to direct activities of a VIE - Entity has obligation to absorb losses of VIE that could be significant to VIE

GAAP Hierarchy of Guidance - Prior to Codification

- FASB Statements and Interpretations - Technical Bulletins - AICPA Accounting Standards Executive Committee Practice Bulletins (EITF's) - Q&A's ASC Codification combined all Categories into one set of Accounting Standards

Statement of Cash Flow Characteristics

- Final statement prepared - Must convert accrual basis items to cash basis - Need Income Statement and CY and PY BS to prepare

Direct Method - Operating Activities - SOCF

- Revenue and Expenses are converted from accrual to Cash Basis within Operating Section - Net Income is disclosed - More Difficult and FASB Preferred - Disclosures - ----- Treatment and definition of cash and cash equivalents ----- Significant Non Cash Investing and Financing Activities ----- Reconciliation of NI to Cash from Operating Account

4 Criteria to recognize Real Estate Transactions

- Sale is consummated - Buyers initial and continuing investment are adequate to demonstrate a commitment to pay for the property - Sellers Receivable is not subject to future subordination - Seller has transferred to the buyer risks and rewards of ownership and no continuing involvement with property

Costs to put FA into Use

- Shipping, installation, labor to install, insurance for FOB shipping - Razing/demolition old building cap'd to land (Cost - Sale of Scrap) - Sidewalk, fences, parking lots -Attorney's fees for land/building is capitalized -Interest on construction is capitalized until construction complete

Types of Entries in Accounting Cycle

- Transactional - Adjusting o Accruals - AR, AP, etc o Deferrals - Depreciation, Amortization, prepaids, unearned revenues • Closing

Examples of Extraordinary Items

-Abandonment of plant due to infrequent flood or earthquake -Expropriation of the plant by the Government -A prohibition of a product due to new laws -certain gains and losses on extinguishment of debt if not part of entity's norman recurring operations Key Point: Early retirement of debt is not considered extraordinary unless explicitly stated

Legally Required ARO's

-Existing law or statute -Written or oral contract -Legal construction of contract under inferred legal obligation

Examples of Non Extraordinary Items

-G/L on the abandoment of PPE -Loss due to major strike by Employees -Large write off on: Receivables Intangibles Inventories Long term debt -Long term debt extinguishment as part of common management strategy

Instrument by Instrument Election of FV Option Characteristics

-If multiple advances to one borrower for single contract, fair value options is applied to larger balance and not each individual advance -If FV applied to investment that can use equity method, must be applied to all interest in same entity -If applied to insurance contracts, must be applied to all claims and obligations for that contract

Indirect Method - Operating Activities - SOCF

-More Prevalance because less work -Net Income is base point and adjusted for changes in: -----Current Assets and Liabilities (Fake Cash Method) -----Plus Additions: Non Cash Expenses (Depr/Amort, BD Exp, Warranty Exp), Losses, Bond Discount Amort -----Less Deductions: Non Cash Revenues (Equity and Earnings of Investee), Gains, and Bond Prem Amort

Proprietary/Enterprise Funds Statement of Cash Flow Differences to GAAP

-ONLY DIRECT METHOD -Reconcile from Operating Income to Net Cash Flows from Operating Income - as opposed to Net Income -4 Categories rather than 3 - Financing Split Up Into - Noncapital Financing and capital financing -Interest receipts are INVESTING, not operating -Interest Payments are FINANCING, not operating -Capex Purchases are FINANCING, not investing

Service Costs

-PV of benefits attributed by pension benefit formulat to employee service during current period -Determined by Actuary -INCREASES PENSION EXPENSE

Other Comprehensive Income

-Reclassification Adjustments -Unrealized G/L on A4S Securities -Pension or Other Post Retirement Benefit Adjustments -Unrealized Gain/Loss on Cash Flow Hedges & FC Hedges - FX Translation Adjustments - Current Rate Method

Accounting for Factoring as a Sale Characteristics

-Recourse liability treated as reduction of proceeds in transfer -In computing initial Gain/Loss you must take into account BD expense, sales returns, and discounts

Selling/Pledges of Receivables and future Revenues - GASB

-Situation can be result in either a sale of rec/rev or a collateralized loan -Treat as collateralized loan unless receivables/revenues are transferred and no further involvement is had with them -Sales of Rec/Rev are removed from financials with g/l recorded

Required Supplemental Information (RSI) - GASB

1. Schedule of Funding Progress 2. Schedule of Employer Contributions 3. Budgetary Comparison Schedules 4. Information about Infrastructure Assets 5. Claims Development information when government sponsors public entity risk pool

Pension Expense Calculation - 5 Factors

1. Service Costs 2. Interest on Pension Benefit Obligation 3. Actual Return on Plan Assets Prior Service

List the non-accelerated methods of depreciation.

1. Straight-line Method; 2. Service Hours Method; 3. Units of Output Method.

List the accounting approaches for post-acquisition expenditures.

1. Substitution; 2. Increase larger asset account by post-acquisition cost; 3. Debit accumulated depreciation.

List the methods of accounting for exploration costs.

1. Successful Efforts; 2. Full costing.

What is the required accounting for a potential loss on a Purchase Commitment when the commitment cannot be modified?

1. The loss must be accrued because the loss is probable and estimable; 2. Inventory is recorded at market, and a loss is recorded for the difference between contract and market; 3. If contract is not executed as of the balance sheet date, loss is recognized and liability established.

IFRS - differences in inventory accounting

1. no LIFO 2. valued at lower of original cost or NRV (estimated selling price less costs to sell) 3. previously recognized impairment losses can be reversed

What is required in opening IFRS statements?

3 balance sheets (end of current, end or prior, beginning of prior); 2 statements of comprehensive income and 2 income statements if using 2 step; 2 statements of cash flows; two statements of changes in equity, and related notes

Derivatives Defined

3 distinguising characteristics 1) one or more underlyings and one or more units(notional amounts) 2) Financial instrument or other contract requires no initial investment or a net investment that is smaller than would normally be required 3) Terms settle by a) a net settlement either in the contract or outside the contract, b) provides for the delivery of the asset that puts the recipient not substantially different than net settlement. > Reported at Fair Value

Number of day's supply in average inventory

365 / Inventory Turnover Number of days inventory is held before sale ; reflects efficiency of inventory policies

# Days Sales in Average Receivables -

365 / Receivable Turnover Average length of time AR is outstanding, reflects credit and collections

ratio-A/R turnover in days

365 ÷ A/R turnover

ratio-inventory turnover in days

365 ÷ inventory turnover

Stock Split

> A stock split is not viewed as a reward to the owners or a distribution from the company. It is merely a mechanical method of reducing the market price of the shares.

In-Process Research and Development Costs

> Acquiring company gains control over an acquiree company, the fair value (on that date) of any inprocess research and development projects of the acquiree are capitalized in producing consolidated financial statements. Thus, that is a major exception to the rule that research and development costs must be expensed. > Any in-process research and development costs that are capitalized in this manner are viewed as having an indefinite life and, thus, are not amortized. Instead, they are tested at least once a year for the impairment of the reported value.

Develop Software to Sell or Lease

> All costs incurred up to the point of achieving technological feasibility (normally defined as having a working model) are viewed as research and development cost and expensed as incurred. > Once the product has reached technological feasibility, further costs are capitalized and reported as an asset up to the point of having market feasibility (the product can be used to generate revenues). > Any subsequent costs are viewed as inventory costs. = Costs up to technological feasibility - record as research and development expenses = Costs to move from technological feasibility to market feasibility - capitalize = Costs after achieving market feasibility - add to the cost of the inventory

Assets Held for Sale

> Asset Held for Sell if an active buyer is being sought, price is reasonable, asset is immediately available, and sale is expected within one year. > Are on the books for lower of Book Value or Net Realizable Value. > NRV is Fair Market Value less any selling expenses or expenses getting the asset ready for sale. > If book value is lower, there is neither a gain nor loss recognized. > If net realizable value is lower, a loss must be recorded to reflect the drop in reported value. > Depreciation of the asset is stopped when it qualifies as being held for sale. > If payment is deferred, record at NPV of the sale price. > Don't forget to accrue interest on the NPV amount if asked to give realized gain or loss.

Recording Bonds Payable

> Difference between negotiated and stated interest rate is recorded to Bonds Payable at the payout of interest or close of the period. > Effective Rate Method records based on applying the difference in negotiated and stated rate. Negotiated rate principle changes with each payment of stated rate. > Straight-line takes the premium or discount and evenly divides it over the life of the bond recording the difference to bond payable.

Government Wide Fin. Stmts

> Full Accrual Accounting/All Economic Resources > Classified into Governmental & Business Type Activities > Fiduciary Funds Excluded from Govt Wide Presentation > Financial Commitments (encomberances) are not reported in Government Wide Financial Stmts.

Depreciation

> Half Year Conventioning - If less than a year, assume ½ year. > Double Declining Balance = 2/Yrs, Residual Value is not a consideration > Composite Method - Total Costs of Assets/Annual Depr of Category of Asset = % to calculate depr.

Intercompany Transactions

> If an asset is held on a balance sheet at a cost higher than when it actually entered the business combination, this unrealized gain must be removed in the process of creating consolidated financial statements. > This includes fixed assets where the gain is recorded on the seller's books and the fair value is reduced back down to where the book value was had the sale not taken place.

Fixed Asset Impairment

> If asset can generate cash flow greater than asset book value, no impairment exists. > If not, the impairment is the book value less the Fair Market Value of the asset.

Recording Bond Liability

> If the fair value option is elected for a financial liability, the bond is always reported at its latest fair value. > Because the reasonable interest rate for this type of transaction is different from the cash rate, the present value (using the reasonable rate) of the future cash flows must be determined and recorded for the asset and liability. > If interest rate is less than a reasonable rate, calculate liability based on present value of cash flows for bond.

Impairment of intangible assets

> Intangible asset that is amortized should be tested for impairment if a possible problem is noticed. > Total of the future cash flows expected to be generated by the asset is determined and compared to the current book value of the asset. > If the net cash flows exceed book value, the asset value is not impaired. > If the net cash flows are less than book value, the value is impaired. > Book value is reduced to current fair value and a loss for the drop is recognized.

Historical Costs - Fixed Assets

> Interest on borrowed funds is capitalized as part of the purchased asset. Once construction complete , no further interest can be capitalized. > If surrendered asset used in trade, use FMV of surrendered asset. > If exchange has no commercial substance, record at previous asset's book value. > If extending the useful life of an asset, improvements are a reduction of Accumulated Depreciation > If no interest rate is defined, assume reasonable interest rate. Use Present Value of cash to be paid. > Use PV of an annuity due on interest payment and PV of cash for Land Value. Accrue Effective interest less interest paid. > Cost of land includes costs to get Land ready for use. > If clean up costs are legally required, it is termed an "asset retirement obligation" and must be recognized as part of the cost of the asset at the PV of the costs using interest that company can reasonably get on the market. > If the expenditure is not legally required of the company, then it is a contingency and is only recorded if it is judged to be probable. > Whenever future cash flows are to be paid or received and a reasonable interest rate is not included in those cash amounts, the cash flows must be recorded at present value using a reasonable interest rate.

Capital Lease

> Lessor removes the asset from its books and records interest revenue and a possible gain on sale (even though, legally, no sale took place). > Further lessor must determine if the lease is a sales-type lease or a direct financing lease. > The lessee uses its incremental borrowing rate unless the implicit interest rate built into the contract by the lessor is known to the lessee and it is a lower rate.

EPS

> Net Income less dividends for preferred stock/Weighted Average Outstanding Shares-Common. > If the preferred stock dividend is cumulative, the annual amount is subtracted whether declared or not. > Stock Dividends are assumed to have taken place at the beginning of the year.

Stmt of Cash Flow - Categories

> Operating Activity - Cash received or paid from interest revenue, dividend revenue, and interest expense are all classified as operating activities. > Investing Activity - Investments purchased within 3 months of maturity are considered as cash. Therefore they are not reported on the Stmt of Cash Flows since it is a debit and credit in cash. > Financing Activity - Financing activities encompass all transactions that involve either a liability or a stockholders' equity balance but are not part of the day to day operations of the business. = Signing a note payable to purchase equipment is a non-cash transaction and is not reflected on the Stmt of $ Flows. Stockholder's Equity

Bond Issuance

> Premium is received at stated interest rate based on payout dates. > Interest Expense is only calculated from the issuance date doesn't include the premium amount. > Effective Rate is determined by Present Value of Bond Amt plus Present Value at the effective rate of the Annuity for the Stated Interest to be Paid.

Restructuring Debt - Creditor

> Present Receivable minus Present Value using original interest rate of the new agreed principle plus interest payments = Loss to Record (must occur even if there is no stated interest rate in restructuring) > Accrue interest at old interest rate times Present Value of new principle. > Interest PV may need to be calculated as annuity.

Loss Contingency

> Recognized if it is probable, and the loss can be reasonably estimated. > Disclosed If the future event is reasonably possible. > If the likelihood of loss is remote, no reporting or disclosure is necessary. > A loss estimation within a range, the best estimate is recognized but if no number is a best estimate then, the lowest number within the range is recognized.

Statement of Activities - Non Profit

> Reports Revenues, Expenses, Gains and Losses. > Normally done in 4 columns that show: 1) Unrestricted Net Assets 2) Temporarily Restricted Net Assets 3) Permanently Restricted Net Assets 4) Total for the Organization > Also a line between revenues and expenses for reclassifications amounts where temporary restrictions have been met so that the funds are now viewed as unrestricted. Temporarily restricted net assets are reduced and unrestricted net assets are increased.

Research and Development

> Research is the search for new ideas that might eventually turn into revenue generating activities. > Development is the attempt to turn those new ideas into revenue generating activities. > Research and development costs are expensed as incurred so that the amount spent on these actions can be determined by readers of financial statements.

Stmt of Cash Flow - Indirect Method

> Start with Net Income and Remove Non-cash items then differences in affected balance sheet accounts. > Show investing activities and then financing activities separately.

What are the three main objectives of segment reporting?

After determining the segments that need to be reported (using the 10% tests), if their combined external revenue is less than 75% of total combined external revenue; keep reporting segments until that threshold is reached.

Forward exchange contract

Agreement to exchange in the future, currencies of different countries at specified rate (forward rate)

Repurchase Agreements -

Agreement to sell asset to lender then repurchase asset Uses assets for collateral of a loan

Firm Commitment

Agreement with unrelated party's legally binding both via significant terms including disincentive for nonperformance -----Purchase Order or Contract

Firm commitment

Agreement, usually legally enforceable, specifies all terms including quantity, price, and timing of transaction. Includes no incentive for nonperformance that makes performance probably.

List the conditions that must exist to capitalize interest.

1. Qualifying expenditures have been made; 2. Construction is proceeding; 3. Interest cost is being incurred.

How are available-for-sale investments accounted for and reported in financial statements?

1. Recognize interest income (one debt securities)/dividends (on equity securities); 2. Amortize discount or premium, if any, on debt securities; 3. Adjust investment to fair value at balance sheet date with any gain/loss reported as an item of other comprehensive income.

The Reporting Entity

All boards, commissions, agencies under reporting entity must be reported a. Primary Government - b. Component Unit (ie. School Board)

Average Cost Methods for Inventory

All costs and units are merged so no specific item can be identified COGS and EI are valued at average unit cost ; PERIODIC and PERPETUAL methods available Ex. Weighted Avg, Moving Avg

Define "get ready costs".

All costs incurred to get the asset on the company's premises and ready for use.

Identify the three major equity method items recognized each period by an investor.

1. Recognize investor's share of investee's net income/loss; 2. Recognize investor's share of investee's dividends declared; 3. Recognize adjustment to share of investee's net income/loss for "depreciation/amortization" of amount allocated to excess of fair value over book value.

What inventory costs are required to be capitalized?

All costs necessary to bring the item of inventory to salable condition.

What costs are included in the full costing method for exploration costs?

All costs of exploring for the resource are capitalized to the natural resources account.

What is comprehensive income?

All income from non-owner sources (add IDE to PUFER (other comprehensive income))

If Average Accumulated Expenditures (AAE) > total interest bearing debt, what is interest expense for the period?

All interest cost is capitalized and there is no reported interest expense for the period.

Transfers are segregated into separate Assets and Liabilities. Entities involved in transactions are required to:

1. Recognize only assets it controls and liabilities incurred after the transactions has occurred and 2. Derecognizes assets which control has been given up or lost and liabilities which are extinguished

What merchandise is included in ending inventory?

All owned inventory, regardless of location.

Basket Purchases Formula

Allocate costs of individual items based on the FMV of each FMV A / FMV All Assets x Cost of all assets

Stock Appreciation Rights

Allow employees to receive stock or cash in amount of difference between market value and predetermined amount per share for no cash outlay Compensation expense is recorded in excess of market value over a predetermined amount ----Recorded each period ----Adjusted up or down as market value of stock changes before settlement date

Quasi Reorganization -

Allows company to avoid formal bankruptcy proceedings through informal proceedings Deficit in Retained Earnings and can't pay dividends - No one will usually buy the stock - Need to eliminate RE deficit - Disclose this happened for 10 years

Tax Difference for Depreciation

Always considered non-current.

Income Tax Expense - Deferred

Always the amount to adjust the deferred liability from the beginning balance.

Methods to Measure Servicing Assets

Amortization method or FV Method Must elect method for each class of assets and liabilities -Method can be changed

Fair Value

Amount A/L is bought or settled at an arm's length transaction

Determinable Liabilities

Amount of cash and time of payment are reasonable and precise -Contract Usually exists or an implied agreement / legal statute -Ex. Notes Payable and various tax liabilities

Materiality

Amount that would influence or change judgment of reasonable person

What is the amount of interest to be recognized after a troubled debt restructure that modifies the terms of the original debt such that the sum of restructured cash flows is less than the book value of the original debt?

Amount to be recognized is zero.

Present Value (Carrying Value) of a Future Amount

Amount you would pay now for an amount to be received in future periods given an interest rate Ex. Money lent today for a non interest bearing notes receivable in the future -Lending $100 today at 10% to receive $110 at YE PV calc not required if NP is due within 1 Year Future Value will never be asked

What entry is made by an investor who receives stock rights?

An entry is made to transfer some of the cost of the investment in the stock that "earned " the rights to an account for the rights. The entry is: DR: Security Stock Rights CR: Investment

Under what conditions does International Financial Reporting Standards (IFRS) No. 9 permit an investor to elect to measure a debt investment at fair value that would otherwise be measured at amortized cost?

An investor can elect to measure a debt investment that would otherwise be measured at amortized cost at fair value when the use of fair value would eliminate or significantly reduce a measurement or recognition inconsistency that results from an accounting mismatch. An accounting mismatch occurs when assets or liabilities, or recognizing gains or losses on them, are measured on different bases.

Dividend Declaration

Announcement of Dividends Dividend amount is based on % dividend times the total Par Value of either CS or PS portion

Percentage Completed Method Formula

Annual Income Formula - (Actual Costs to Date / Total Estimated Costs to complete ) x GP ( Contract Price less total costs to complete) = Total GP Recognized - GP recognized in previous years

Fair Value Option

Available for reporting Financial Assets and Liabilities - Non financial Insurance Contracts and warranties can only be recorded at FV if obligations can be settled by paying a 3rd party to provide the goods and services & FV is Settlement amounts

CoGS - Weighted Avg Costs

Average at the end of Reporting Period

What interest rates should be used to determine capitalized interest?

Average interest rate during period or specific interest rate applicable to construction debt.

Actual Return on Plan Assets

BB of Plan Assets + Employee Contribution - Employee Benefits Paid = Actual Return INCREASES OR DECREASES PENSION EXPENSE - If Actual Return > Ending Balance increase pension cost - If Actual Return is less than Ending Balance > reduce pension cost

Year End AR Method to determine BD Expense

BD Expense is a % of AR Buckets Solves for Ending Allowance Balance -Difference between Allowance Balance and Ending Balance is plug

FS Required for Health Care Organization - N4P

BS Stmt of Operations Changes in Net Assets Cash Flows Notes to FS

Non Controlling Interest (50-100% Ownership Characteristics) Entries

1. Record Investment - Same as 100% ownership 2. Calculate Goodwill a. In Step 1, subtract out FV of non controlling interest (NCI Shares x FV) b. In Step 3, also remember to subtract out FV of Non Controlling Interest 3. Allocate Goodwill - For yourself and Non Controlling Interest, calculate FV of Acquisition Cost (yourself) and FV of Non Controlling Interest Shares LESS % allocation of FV of Net Identifiable Assets 4. Record Equity Entry Same as above but also record credit to Non Controlling Interest - Differential still plug 5. Eliminate Differential with offset to Asset Accounts

Steps in 100% Acquisition of Company

1. Record Investment ----------Record Investment and Equity of Acquired company 2. Calculate GW using 3 Step Process 3. Complete Consolidated TB Worksheet by Recording Necessary JE's -----------Eliminate Acquirees Equity and Acquirer's Investment Account -----------Eliminate Differential Account (plug above) and record asset write ups to FV, new identifiable intangibles, and goodwill -----------Other Entries to eliminate Intercompany Transactions

Lease Keywords

Bargain Purchase option, capital lease, cost to terminate, direct financing lease, guaranteed residual, initial direct costs, lease bonus, lease modification, leasehold improvement, minimum lease payments, modified lease, new agreement operating lease, operating lease, sale leaseback, sales type lease, substantial rights, termination costs, termination agreement, transfer title, unguaranteed residual

Categories of Governmental Funds (Memorize This)

Based on how strong the constraint on funds are and how they can be spent ; MEMORIZE THESE Non Spendable - Can't be spend b/c - i. Not in spendable form (ie. Inventory, prepaid, LT loans or NR, property acquired for resale) ii. Legally required to remain in tact b. Restricted - restricted to specific purposes due to external requirements Committed - restricted to specific purposes based on internal restrictions Assigned - government INTENDS to use for specific purposes but aren't restricted or committed Unassigned - default category if things don't fit into above categories General fund is the only fund with a positive unassigned fund balance

Units of Production Method

Based on units produced during the year Includes salvage value

Earnings Per Share Keywords

Basic EPS, Diluted EPS, Treasury stock method, Weighted average common shares

Direct Financing Lease

Basis = FV Lessor has only one profit - Interest Income from Collection of lease payment - No Gain / Loss on asset sale b/c Basis = FV

Cost Accounting

Basis for accounting for INVENTORY and COGS and is a function of # of Units and price per unit

Communication Methods in General Purpose External Financial Reports - GASB

Basis for selecting communication methods to present information

Sales Type Lease

Basis is not Equal to FV Lessor has two profits from transaction --Gain / Loss from sale of asset --Interest income from collection of lease payment Present Value is SELLING PRICE unless otherwise given

Artwork - Non Profit

Because they are protected and preserved, many art works and historical treasures have lives that can be extended almost indefinitely. Depreciation of such items over such a long period of time has questionable value for reporting purposes. Therefore, if the life is viewed as extraordinarily long, the depreciation of art works and historical treasures is allowed but not required. The organization also has the option to make no recording at all because the art work does not necessarily have the characteristics of an asset (it provides a future economic benefit).

Pension - FMV of plan assets BASE

Beg. FMV of assets Add contributions and actual return Subtract benefits paid Ending FMV of assets

Cash Flow - Formula for "cash paid for goods to be sold" in preparing for statement of cash flow under operating is?

CGS + (End. Inv. - Beg. Inv.) - (End. AP - Beg. AP) = Cash Paid

Inventory Turnover -

COGS / Average Inventory Measures number of times inventory was sold ; reflect inventory order policies

ratio-inventory turnover

COGS ÷ average inventory

Calculating GW in 100% Acquisition

Calculate Differential Acquisition Cost + FV of previously held shares + FV of Non Controlling Interest - BV (Net Assets) of company = Differential Compute FV of Net Assets (see FV disclosures in problem) Calculate Goodwill Acquisition Cost +FV of Previously Held Shares +FV of Non Controlling Interest - FV of Net Identifiable Assets = Goodwill

Investment in Securities - Equity Method - Dividends

Can not claim dividend revenue for dividends paid. Dividends Paid have no affect on Net Income claimed.

Partner Death or Withdrawal - Bonus Method

Cap Accounts Reduced for remaining partners -----Difference between payout amount to leaving partner and partners current cap balance is adjustment amount

partner Death or Withdrawal - Goodwill Method

Cap accounts increased for remaining partners -----Difference between payout amount to leaving partner and current cap balance is goodwill amount for that partner. This GW amount is prorated to other partners as well based on income percentage

What are the categories and subcategories of stockholder's equity

Capital Stock, Paid in capital in excess of par totals to paid-in capital; retained earnings, AOCI, less treasury stock at cost

What is the general rule for capitalizing expenditures?

Capitalize all expenditures necessary to bring the plant asset to its intended condition and location.

Capital Lease - Lessee Capitalization Rules

Capitalize at PV of Future Lease PMT (less Tax, Ins) - Discount Rate lessor lease rate of market rate $ of Cap O Rule - PV Pmts and req buyout W Rule - PV Pmts and bargain buyout N&S Rule - PV of Pmts only Depreciable Life Used O&W Rule - Asset Life N&S - Lease Term

How are bond issue costs accounted for?

Capitalized as a noncurrent deferred charge (asset account) and amortized to expense over the term of the bonds using the straight-line method.

What is the limitation for capitalized interest?

Capitalized interest is limited to lower of avoidable interest or interest actually paid.

IFRS - recording investment property under the Cost Model

Carried at Cost minus Accumulated Depreciation

Interest Revenue/Expense Calculation

Carrying Value x Interest Rate

Cash Flow - The cash inflow from the sale of equipment is recorded as?

Carrying amount plus the gain

Acid Test Ratio

Cash +Mark Securities + Net Receivables / Current Liabilities Ability to pay current liabilities from cash and near cash items

Installment Sales Formulas - VERY IMPORTANT

Cash Collections X GP% = Realized Gross Profit Ending AR x GP% = Deferred Gross Profit May be asked to find either type Beginning Receivables = Installment Sales GP is recognized on installment sales in proportion to cash collected

Reg SK

Describes form and content of financial statements including - o Selected financial data for last 5 years o Supplementary financial information o MD&A o Changes in an disagreements with auditors o Quantitative and Qualitative disclosures on market risk o Disclosure controls and procedures o Internal control over financial reporting

IFRS Financial Stmt Presentation

Comparative Prior Yr Info Required Statement of Comprehensive Income Required instead of allowing within changes in Stockholder's equity IFRS has no extraordinary gains/losses Under certain circumstances, subs may be omitted in consolidation

Blended Presentation - GASB Financial Statements

Component Units which activities are INDISTINGUISHABLE to primary government and are included in primary government section Blend Financials of Component Unit and Primary Government when: a. Fiscal dependency is not enough to be component unit and must have financial burden or relationship b. Management of primary government works for component unit, financials must be blended c. If primary government is main source for paying Component Unit debt, must be blended

Cost Ben - Conservative - Materialism

Constraints

List the Specific Method of Interest Capitalization formula.

Construction loan interest rate x construction loan debt + (average interest on non-construction loans x (AAE - construction loan debt))

Categories of Stockholder's Equity

Contributed Capital + Retained Earnings + Accumulated OCI - Contra stockholders equity item

Consolidation of Financial Statements Exception -

Control is likely to be temporary Control is not held by the majority owner - Investee is in legal reorganization or bankruptcy - Investee operates in foreign country with various restrictions REPORTED AS LT INVESTMENT UNDER COST METHOD

Convertible Bonds

Convert Bonds into Common Stock a. JE's same as above, only use Convertible Bonds Payable naming

Anti-Diluted Convertibles

Convertibles (Stock or Bonds) that can cause EPS to increase. These convertibles are excluded from the diluted EPS calculation so the worst case scenario is communicated.

What must be included in interim statements?

Corporate headquarters and pension plan (other post-retirement benefits)

Ratio Analysis - Inventory Turnover

Cost of Good Sold/ Avg. Inventory(Beg + Ending)/2

List the weighted average cost per unit formula.

Cost of Goods Available for Sale/Number of Units Available for Sale.

What is Original Selling Price?

Cost plus initial markup.

Describe the relative sales value method for recording costs.

Cost to be recorded for each item is based on its relative sales value to the total sales value of the group.

Deferred Tax Liability

Created when an event occurs which leads to taxable income being greater than book income at some point in the future (so that an extra amount in income taxes will have to be paid in the future). > Examples include Accelerated Depreciation and Installment Sales Method vs. Accrual Accounting

Ratio Analysis - AR Turnover

Credit Sales/Avg AR (Beg + Ending)/2

What requirement must exist for a debt restructuring to be troubled?

Creditor makes a concession.

Development Stage Financial Statements

Cumulative losses within SHE IS and SOCF should have both current period and cumulative amounts First year after development state - disclose previously in development stage

Functional Currency

Currency of primary economic environment theentity operates

What are the categories and subcategories of assets on a classified balance sheet?

Current Assets (cash and equivalents, trading securities FV, A/R net of allowance for uncollectible accounts, notes receivable, merchandise inventory lower cost or market, prepaid expenses); Investments (available for sale securities FV, held to maturity securities, land held for future plant site) Property, plant, equipment (land, building, equipment, less:accumulated dep); Intangible Assets (goodwill, patents net of amort.); Other assets (bond issue costs, pension and other postretirement benefit assets )

ratio-Working Capital

Current Assets - Current Liabilities

Current Ratio -

Current Assets / Current Liabilities Ability to pay current liabilities from cash, near cash, and cash flow items

Ratio Analysis - Current Ratio

Current Assets/Current Liabilities

What are the categories and subcategories of liabilities on a classified balance sheet?

Current Liabilities (long term debt due within year, A/P, N/P, Int/P, Salaries/P, Tax/P, advances from customers (unearned revenue), unearned rent revenue); Long-Term Liabilities (bonds payable plus: unamortized premium on bonds or less discount , pension and other postretirement benefit liabilities)

What is the classification of liabilities that are due on demand?

Current Liability.

Present Value of $1

Current Value of a future amount. Used in Finance that calculates the present day value of an amount that is received at a future date.

What is the classification of liability subject to a subjective acceleration clause?

Current if it is possible the debt will be called; noncurrent if a remote chance exists of calling the debts.

List the journal entry for an Investor to recognize proportionate share of investee dividends using Equity Method.

DR: Dividends Receivable/Cash CR: Investment in X

List the journal entry for an Investor to recognize proportionate share of investee income using the Equity Method.

DR: Investment in X CR: Investment (equity) revenue

If a firm has a Purchase Commitment that cannot be modified and the price declines, what journal entry should be booked?

DR: Loss on Purchase Commitment. CR: Liability on Purchase Commitment.

How should detachable warrants be accounted for after issuance?

Debit cash for exercise price, debit detachable warrants, credit common stock and additional paid in capital (APIC).

How Creditor Determines if Debtor Requires Debt Restructuring

Debtor must have the following for a debt restructuring 1. Financial Difficulty - if debtor doesn't have creditors help, they'd have financial difficulty 2. You must give concessions on the receivable -----------Items are considered concession if the debtor couldn't get the same debt agreement terms elsewhere if they didn't already have debt with the creditor

Required Supplementary Information about Infrastructure Assets - GASB

Depreciation is not Required as long as two requirements are met: i. Government manages assets using asset management system ii. Government documents that assets are being preserved at condition level established and disclosed by the government

Depletion

Depreciation of Natural Resources Depletion base is total cost of property providing natural resources Ex. Exploring Drilling, excavating, and other preparatory costs Depletion on resources extracted during period is allocated between inventory and COGS

Disclosures of Derivative and Hedging Instruments

Derivative Instruments - How and why entity uses derivatives - How derivatives and hedges are accounted for - How derivatives and hedges affect financial position, performance and CF's Types of information disclosed - Risk exposure such as interest rate, credit, fx rate, and price - Purpose of instrument (ie. Risk management) - Location and FV amounts of derivative instruments on BS - Location and amounts recognized on IS

Multiple Deliverable Agreement

Determine if separate unit are being delivered to customer Two conditions for separate unit of accounting - -----Delivered item has value on standalone basis -----If arrangement has right of return for delivered item, undelivered item must be substantially in control by vendor

Time Value -

Difference between options price and intrinsic value

Funded Status of Pension Plan

Difference between the PBO and FV of plan assets Reported on BS PBO Greater than FV = Liability PBO Less than FV = Asset

Cumulative Effect

Difference between the new and old principle since company first started business until first period presented

What is the amount of interest to be recognized after a troubled debt restructure modifies the terms of the original debt such that the sum of restructured cash flows is greater than the book value of the original debt?

Difference between the sum of restructured cash flows and the book value of the original debt.

Diluted EPS Calculation - Convertible Bonds

Diluted EPS begins with the income and share figures determined for basic EPS assume that each convertible item was actually converted at the beginning of the year and then factor in the resulting impact of that conversion. o Convertible Bonds - Assume conversion, save the related interest expense, and increase the income tax expense. When adding back interest, consider the tax effect since tax is already taken out of Net Income. Don't forget about the discount affect on Interest.

List the methods of recording Lower of Cost or Market.

Direct method or Allowance method.

Related Party Transactions - GASB

Disclose All

Long Term Borrowings Disclosures

Disclose aggregate amounts of maturities and sinking fund requirements for five years following BS date

Accounts Receivable

Disclose at Net Balance (less uncollectible items) -Separately disclose Office, employee, and affiliate AR -Disclose unearned interest and finance charges

Gross Method of Recording Purchases

Discounts are shown as "purchase discount" and netted against the purchase account

Split Interest Agreement

Donor makes gift to N4P and N4P has beneficiary interest but is not sole beneficiary

What depreciation method does not use salvage value?

Double declining balance.

Cash Flow - [Direct Method] Payments for Purchases (Inventory increased by 30 and A/P increased by 20. COGS is 200) The entry would be?

Dr. COGS 200 Dr. Inventory (change) 30 Cr. A/P (change) 20 Cr. Cash 210 (plug)

Cash Flow - [Direct Method] Cash collected from Customers (A/R increased by 80. Sales is 600) The entry would be?

Dr. Cash (plug) 520 Dr. A/R (change in A/R) 80 Cr. Sales 600

Cash Flow - [Direct Method] Payments for G&A expense 40 The entry would be?

Dr. G&A 40 Cr. Cash 40

Cash Flow - [Direct Method] Income tax expense (deferred tax liability decreased by 10, taxes payable increased by 40, and income tax expense is 60) The entry would be?

Dr. Income tax expense 60 Dr. Deferred tax liability 10 Cr. Income taxes payable 40 Cr. Cash (plug)

Cash Flow - [Direct Method] Interest expense (amortization of discounts or premiums changed by 5, interest expense is 30) The entry would be?

Dr. Interest expense 30 Cr. Amortization of discount 5 Cr. Cash 25 (plug)

Cash Flow - [Direct Method] Payments for Selling expenses (Allowance for bad debts increased by 20, bad debts 100 is considered a selling expense) The entry would be?

Dr. Selling expenses 100 Cr. Allowance for uncollectibel receivables 20 Cr. Cash 80

Current Rate Method of FX Translation

Easiest TRANSLATE is key term Easier G/L recorded in OCI

Basic Accounting Assumptions

Economic Entity Going Concern Monetary Unit Assumption Periodicity Assumption

Measurement Focus and Basis of Accounting (MFBA)

Economic Resources Measurement Focus and Accrual Basis of Accounting Current Financial Resources Measurement and Modified Accrual Basis

Periodicity Assumption

Economic activities can be divided into time periods and are reported periodically

Economic Entity -

Economic activity can be identified with a unit of accountability

Inventory Errors

Effect BS and IS through Statement of Cost of Goods Sold a. Produces misstated EI and therefore BI pg. 94 shows relationships between inventory accounts

What method is used to amortize a premium or discount on a security?

Effective interest method or straight-line method if not materially different.

What method is used for premium/discount amortization?

Effective interest method.

Indirect effects on FS

Effects to current / future cash flows as a result of new principle (i.e. Profit sharing) Indirect effects of change in accounting principle should be reported in period which accounting change occurs

Developmental Stage Enterprises -

Efforts taken to establish new business: -Principal operations haven't started -Principle operations have started but no significant revenue has started

List the Dollar Valued (DV) Last In First Out (LIFO) conversion index formula.

Ending Inventory in Current-Year Dollars / Ending Inventory in Base-Year Dollars.

CoGS - Dollar Value LIFO

Ending Value of Ending Inventory / Rate of Inflation

Financial Statements of Trust

Entities holding assets for benefit of beneficiaries - -Following Financials - Accrual Basis @ FV - A/L - Stmt of Operations - Changes in Net Assets

3. Benefits of Factoring

Entity receives cash earlier Risk of non collection is given to factor

Going Concern

Entity will have a long life, unless liquidation is imminent

Fund Definition

Entity with self balancing accounts segregated for the purpose of carrying out specific activities or obtaining certain objectives in accordance with special regulations, restrictions, or limitations

Conversion from Fund Statements to Government Wide Financial Statements

Entries are not recorded on GL, but only worksheet entries to go from Fund to Government Wide Financial Statements

Employee Share Based Payments

Equity - Cost of services is measured at the grant date FV of equity instruments Ex. Stock Option Plan Liabilities - FV of liability incurred Ex. Stock Appreciation Rights

Under U.S. Generally Accepted Accounting Principles (GAAP), what are the methods of accounting that may be used to report an investment in a joint venture?

Equity method or consolidation basis for a corporate joint venture. Partnership basis, with certain equity method-like adjustments, for a partnership.

Types of Accounting Errors

Errors in: Recognition Measurement Presentation Disclosure in F/S Changes from Non GAAP to GAAP

IFRS Contingent Liabilities

Estimating a probable loss that involves a range, use the midpoint. For US GAAP, use the lowest amount if all amounts are equally likely.

Special Purpose Governments

Ex - Park Districts, Tollway Authorities, School Districts, Sanitation Districts SPG with Governmental and Enterprise/Fiduciary required GVT Wide Financials and Fund Financial Statements SPG without Governmental activities need only prepare Enterprise/Fiduciary Fund statements

Health Care Organization Accounting - Private Sector N4P

Ex. Hosipitals and Clinics - Privately Held Excludes Dr's Offices as these are for profit

Accounting for Special Assessments

Ex. Land Held by Government Must be held at Far Value at each reporting period -----Income recorded at earnings

Component Unit

Ex. School Board i. Legally separate organization where officials of primary government are responsible ii. Omission within Primary governments financials would be misleading

PV of Principle @ Market Rate (PV of $1) (Excel)

Excel Formula =PV(rate, periods, int pmt, Face Value, type (0 ord ann, 1 ann due)

PV of Interest Payments & Market Rate (PV of Annuity Chart)

Excel Formula =PV(rate, periods, int pmt, face value, type (0 ord ann, 1 ann due)

Changes in Accounting Prinipals and Estimates

Except for changes in depreciation methods, changes in US GAAP are normally handled retroactively.

Deferred Income Tax

Exists due to termporary Differences

R&D Expenses

Expensed as incurred Exceptions -Intangibles / Fixed Assets purchased from others having alternative future use are capitalized/amortized over life

Start Up Costs Accounting

Expensed as incurred One time activities relating to opening a new facility or new class of customers, initiating new process or new operation

Under International Financial Reporting Standards (IFRS) how is interest during construction accounted for?

Expensed or capitalized.

Depreciation Methods -

Expensing FA's over time Use Shortest life if given multiple on exam Ex. Straight Line, Double Declining, Sum of Yrs digits, Units of Production

Extinguishment of Debt

Extinguished when debtor pays creditor and is relieved of obligations -Troubled restructures prompted by debt holder are not extinguishments - Gain/Loss is ordinary and recorded within income

Pension - pension accrual (calculation)

FMV of plan assets - PBO (positive is a prepaid, negative is a liability)

Principles of Derivatives and Hedging

FV Measurement - Derivatives are either Assets or Liabilities and should be reported at FV -----Gains/Losses are either reported in OCI or Income Hedge Accounting - matching gains and losses of hedging instrument and hedged asset or liability ------Hedged Item can be G/L in OCI or Income IF DERIVATIVE IS NOT A HEDGING INSTRUMENT, G/L MUST BE RECOGNIZED IN INCOME STATEMENT IE. SPECULATORY DERIVATIVE - USED IN GAMBLING AND TO MAKE $

Goodwill or Bargain Purchase Gain Formula - Acquisition Method Business Combinations

FV of Consideration Transferred (Cost to acquirer) + FV of previously held equity interests in acquire + FV of noncontrolling interest - FV of net identifiable assets = Goodwill or gain from bargain purchase

Discount or Premium on Forward Contract

FX amount of contract times difference between the forward rate and spot rate at the date of inception of a contract.

Carrying Value of Bond

Face Value +- Discount or Premium of Bond

Bond Interest Expense Formula

Face Value x Coupon Rate

What is the amount of the periodic payment for an installment note issued at discount?

Face value divided by the annuity factor for the term of the note and the stated rate on the note.

What is the net note balance for a note issued at a discount?

Face value less unamortized discount.

Recording Hedging Activities

Fair Value Hedge - Recorded as Gain or Loss on Income Statement Cash Flow Hedge - Recorded as a component of other comprehensive income provided they were effective. Foreign Currency Hedge - Recorded as Gain or Loss on Income Statement?

Complete & Neutral & Error Free

Faithful Representation

Cash Flow - Proceeds from sale of treasury stock is included in what section of the cash flow statement?

Financing Activity

What cost flow assumption is the same for both the periodic and perpetual systems?

First In First Out (FIFO).

What does the acronym FIFO mean?

First In First Out.

Public Colleges and Universities

Follow Governmental Accounting reporting since they are under the authority of a government.

College and University Accounting - Private Sector Institutions

Follow N4P guidance and have a few specific requirements Student tuition and fees are reported net of scholarships and fellowships Student Graduate Assistanships tuition reimbursements given in return for services are charged as expenses to department provided

Restructuring Debt - Debtor

For the debtor, there are two possibilities: (1) future cash flows are less in total than the amount that is presently owed and (2) future cash flows are more in total than the amount that is presently owed. If Less, recognize gain. If more, no adjustment needed but, a new effective rate is calculated based on new cash flows and interest is recorded.

Foreign Currency Translation Keywords

Foreign currency, foreign currency translation, highly inflationary economy, remeasurement functional currency, translation adjustments, current rate, historical rate, spot rate

Double Declining Balance Depreciation

Formula - (1/life) x 2 x (Historical Cost less Accum Depr) Exponential decrease in amortization - Ignores salvage value

Creating PV Tables from Scratch (PV of 1$)

Formula - 1/(1+ rate)^ # periods Ex. Period 1 @ 6% rate = 1/(1.06)^1 To get PV of Ordinary Annuity for 2 periods add PV of $1 calc for first two periods

Sum of Years Digit Depreciation

Formula = n (n+1) / 2 Yrs left / Formula x Depreciable Basis - Equal decrease in depreciation ignores salvage value

Swap

Forward based contract to exchange streams of cash flows in the future

Foundations within Public Universities Accounting -

Foundations are reported as discretely presented component units in universities financial statements if -----Resources held by separate organization/foundation are for benefit of primary government, component unit, or its constituents -----Primary government/ component units is entitled to majority of economic resources received or held by organization/foundation -----Resources received by organization/foundation that primary government is entitled to are significant to primary government

Cash Available for Unsecured Creditors

Free Assets + Assets from Full Creditors - Liabilities from Fully Secured Creditors = Cash Available - Priority Liabilities = Cash for Fully Unsecured Priority Claims

Inventory Includes

Freight-In Handling Costs Normal Spoilage Product

Modified vs Full Accrual

Full Accrual Accounting - Revenue Recognized When Earned/Expenses Recognized when Incurred Modified Accrual Acctg - 1) Revenue Recognized when measurable and available to finance current expenditures 2) Expenditures recorded when fund liability is incurred.

Fiscal Accountability - GASB

Fund Financial Statements Show how compliance with laws and regulations affecting its spending activities

Pension and Other Employee benefit Trusts

Funds held in trust for payments of employee retirement and other benefits

Assets / Liabilities

Future BENEFITS or SACRIFICES of benefits as a result of past transactions

Interest Only Strips -

Future interest income from serviced assets exceeding servicing fees

Integrated Approach - GASB

GASB requires reconciliation between Fund Financial Statements (Subsidiaries) and Government Wide Financial Statements

Goodwill Method for New Partner Admission

GW attributed to Old Partners capital accounts -----Determine Old Capital + Additional Capital = New Capital Amounts -----Total Capital is New Partners percentage allocated to 100% (ie. 20%x = 20k; x = 100K) -----Difference between total New Capital Amount and Recalc'd Capital amount is GW adjustment with old/existing partners capital account as offset

ASC 100

General Principles

IFRS R & D Costs

Generally expensed in the period incurred. Development Costs cam be capitalized if future economic benefit is probable and the product is commercially and technically feasible.

Other Comprehensive Income

Goofy gains/losses not on Income Statement OCI must be closed to Accumulated OCI and shown on BS (after RE) Includes - • Unrealized G/L on available for sale investment • FX items • Reclassification adjustments • Adjustments for pensions • Post retirement benefits Excludes - • Investments by Owners • Distributions to Owners

Not For Profit Accounting

Governed by GASB as of 1980 Net Assets Divided into 3 Categories 1) Unrestricted 2) Temporarily Restricted 3) Permanently Restricted Restricted means restricted by donors or grantors not the board or administrators.

Schedule of Funding Progress -

Governmental entities reporting pension trust funds

Voluntary Non Exchange Transactions - GASB

Grants and entitlements between governments for something that is not required Ie. Please do this and the government will give you a grant

Large Stock Dividend

Greater than 25% of shares outstanding

Purchases Formula (Included in Inventory Formula)

Gross Purchases - Discount - Purchase Returns and Allowances = Net Purchases + Freight In / Transportation In = COGS Purchases

Non Exchange Transactions

Gvt receiving value without giving equal value in exchange

Disclosures for OPEB Health Care Benefits

Health Care trend rate used to measure expected cost of benefits covered by plan Accumulated Postretirement Benefit Obligation

Foreign Currency Hedge

Hedge of FX exposure of unrecognized firm commitment, available for sale security, forecasted transaction, or net investment in foreign operation

FV Hedge

Hedging exposure to changes in FV of recognized asset or liability or unrecognized firm commitment - INTEREST RATE SWAP Specific Criteria- Hedged item must be either all or specific portion of a recognized asset/liability or unrecognized firm commitment -----Unrecognized form commitment must be ----------Binding on both parties ----------Specific with respect to all significant terms ----------Contain nonperformance close making performance probable Gains/Losses recognized in current earnings

Embedded Derivative Instruments and Burification -

Hybrid Instruments with features that have features of derivative (ie. Bonds with stock options embedded) and separate instruments must be separated through bifurcation

What is the presentation order of the major components of an income and retained earnings statement?

IDEA- I ncome from continuing operations; income from D iscontinued operations; E xtraordinary items; cumulative effect of change in Accounting principle

Share of P&Ls of associates and Joint Vs using EquityM

IFRS Income Statement Equity Method item

Reporting Requirement - Publically Traded Companies

IS & SOCF - 3 Years BS - 2 Years

Derivatives acquired for speculation

If a derivative does not qualify as a hedge, then any and all changes in fair value are recorded immediately within net income.

Operating vs. Capital Lease

If any one of these criteria is met, capital lease under GAAP. > Does title transfer to lessee? > Lease contains a bargain purchase option? > Lease term more than 75% of the useful life of the asset & is not executed in the last 25% of the useful life of the asset? > Present value of the minimum lease amount is 90% or more of the net fair value of the asset.

When and how are subsequent adjustments to previously reported items in discontinued operations handled?

If directly related to the disposed of discontinued operation, then they are recorded in current period discontinued operations.

What is the useful life for depreciating an addition?

If integral part of old asset, over shorter of addition's or old asset's useful life. If not, over addition's useful life.

Investment in Securities - Equity Method - Value of Purchase

If less than purchase price then determine value of Fair Value over Book Value which will be amortized as part of recognized net income for investment. Remained is goodwill which is not amortized.

Contribution (Donor) and Exchange Revenue (regular business transactions) must be separated - N4P Accounting Differences

If nothing is given by the N4P in exchange for revenue received, transaction is a contribution revenue ---------Recognized as additions to any of the net asset classifications ---------Exchange Revenues (Tuition, membership dues, charges for services) increase Unrestricted Net Assets and are recognized in accordance with regular business enterprises

What is the rule for comparative reporting of segments?

If qualified as segment in the past, but no longer, can still be reported if there is reason; if didn't qualify before but does now, should be reported in all presented periods

Under what conditions does International Financial Reporting Standards (IFRS) No. 9 permit an investor to elect to report gains or losses from changes in fair value of equity investments in other comprehensive income, rather than through profit and loss (net income)?

If the investor does not hold an equity investment for trading purposes, the investor may elect to report changes in fair value through other comprehensive income, rather than through profit and loss (net income). The election must be made when the investment is first recognized and subsequently cannot be changed.

If an owner uses part of property, under what conditions may the other part be accounted for as investment property?

If the part of the property used by the owner and the part not used by the owner can be sold or leased separately and if the part not used otherwise meets the definition of investment property, it can be treated as investment property.

What inventory system is implied when the moving average cost flow assumption is utilized?

Implies the perpetual inventory system.

IFRS - adjustments for adopting to IFRS reported in

In the entity's retained earnings or equity

Where should the amount of interest paid be disclosed?

In the statement of cash flows, as either part of the statement, as a supplemental schedule or in a footnote.

What does inventory for a typical business entity include?

Includes property held for resale, property in the process of production, and property consumed in the process of production.

Operating Activities -

Income Statement accounts Two Methods - Direct Method - Revenues and Expense individually are the focus Indirect Method - Net Income is starting point

GASB 63 - Reporting of Deferred Inflows, Outflows, and Net Position

Incorporates Deferred Inflows and Outflows into financial reporting model 1. Deferred Outflows (Assets) - consumption of net assets applicable to a future reporting position 2. Deferred Inflows (Liabilities) - acquisition of net assets applicable to a future reporting period Similar to Liabilities Statement of Net Assets changed to Statement of Net position and Deferred Outflows and Inflows are added as sections

Pension Expense Gain/Loss

Increases or decreases pension expense G/L recorded on Plan Assets only in this calc Results in experience being different than assumed or change in actuarial assumption

Investments / Distributions by Owners

Increases/Decreases in Equity due to transfers to it / from it by/to external parties

GAINS / LOSSES

Increases/Decreases in Equity from PERIPHERAL/INCIDENTAL transactions

Segment Reporting Disclosures

Information about different components, products, geographic areas, and major customers

Franchise Revenue Recognition

Initial fee to be recognized as revenue upon performance of initial service obligation ----Unearned Revenue = PV of future note payment Only record revenue relating to services that have already been performed

List the interest capitalization formula

Interest Rate x Average Accumulated Expenditures.

IFRS Stmt of Cash Flows

Interest and Dividend Revenue are Operating or Investing activities. Interest Expense is Operating or Financing Activity. US GAAP Interest and Dividend Revenue and Interest Expense are all Operating activities.

Cash Flow - Formula for "cash paid for interest" in preparing for statement of cash flow under operating is?

Interest expense - Discount amortization = Cash paid

What is SFAC #2 and what are some of the qualities of financial information?

It consists of the qualitative characteristics of Accounting Information and says that accounting information must be: understandable to decision makers; relevant (timely information with predictive or feedback value); reliable (verifiable, faithfully representable, and neutral); comparable; consistent; material; and less costly than benefit provided.

Is the fair value option for financial liabilities required and to what securities is it applied?

It is an option (not required) and can be applied to any and all financial liabilities.

Where is revaluation surplus reported under International Financial Reporting Standards (IFRS) until the Property, Plant, and Equipment (PPE) is sold?

It is reported in Equity.

Permanent Deferred Tax Differences

Items on Income Statement that NEVER IN TAXABLE INCOME and no DTA or DTL is recorded a. Life Insurance Premiums b. Life Insurance Proceeds c. Interest on Municipal bonds d. Dividends received from domestic corps / 80% non taxable

Temporary Deferred Tax Differences

Items recorded on Tax return now but income statement later and vice versa Revenues - - Installment Sales Method (tax) vs Accrual Accounting (book) - Completed Contract (tax) vs Percentage Completion (book) - Rental Income when received (tax) and when earned (book) Expenses - - Warranty expense when claimed (tax) vs Warranty expense when sale occurs (book) - Accelerated Depreciation Methods (tax) vs SL Method (book) - Goodwill amortization (tax purposes only)

Dollar Value LIFO Characteristics

LIFO applied to pools of inventory rather than individual items 1. Costs are cheaper under Dollar value LIFO 2. LIFO Conformity rule applies 3. LIFO Liquidation - less likely to occur due to increased number of items in pool 4. Steps of Dollar Value LIFO (Conversion Index s/b given) a. Divide EOY Prices by Conversion Price Index to get EI at Base Year Prices b. Compare BI at base year prices to EI at base year prices to get layer amount c. Multiply base year and layer amounts by CPI to get Dollar Value LIFO of base year and layers d. Add "c" amounts up

LIFO Conformity Rule

LIFO must be used for tax and financial reporting purposes

Cash Surrender Value

LT Investment Asset balance is cash surrender value of the policy if it was cashed in

Proprietary Funds Distinguishable Characteristics

LTD is recorded directly in internal service and enterprise funds Interest on LTD is accrued as an expense unlike General LTD which his not recorded until due (in debt service fund) ----------Premiums/discounts are recorded FA's are capitalized and depreciated and interest is cap'd Revenues, expenses, capital contributions, and transfers are closed out at YE Municipal Waste Landfills - recorded as business if recorded within proprietary fund

LIFO Liquidation

Large profits are incurred when all inventory is sold and early inventory is used as COGS

What cost flow assumption utilizes the latest purchases at time of sale?

Last In First Out (LIFO)

Direct Financing Lease

Lessor recognizes no profit at the time the lease is signed. The difference between what will be received and the cost of the asset is recognized solely as interest revenue over the life of the lease. > First entry is to record the receivable based on the purchase price of the asset and remove the asset from the books. > Second entry is to record the first payment to reduce the receivable. Then accrue interest and record payments against receivable as appropriate.

Deferred Taxes Valuation Allowances

Liabilities - No valuation allowance due to conservatism Assets - If over 50% chance DTA will not reverse, set up Valuation Allowance

What is the international applicability of the fair value option?

Limited to liabilities that are part of a group with financial assets managed together.

Loan Origination Cost

Loan cost Incurred by Bank Lender - -Direct Cost - Add to loan amt -Indirect Cost - Expense costs Borrower - Do Nothing

Betterment

Makes asset more efficient and productive but does not extend life

FV Option Note Disclosures

Management reasons for electing FV option for each item or group of items If FV option is elected for some but not all items -Description of similar items and reason for partial election -Information to understand how group of similar items relates to individual line items on balance sheet Info to understand how line item relates to major categories of FAS 157 FV disclosures Carrying amount of line items including each line item in BS not eligible for FV option Difference between aggregate FV and aggregate unpaid principle balance -Loans and LT receivables -Long term debt instruments -FV of loans more than 90 days past due -FV of loans in non accrual status if interest is recognized separately from changes in FV -Differences between aggregate FV and aggregate unpaid principal balances for loans 90 days or more past due

Matching Principle

Match expenses to revenues when reasonable to do so

What effect does using Last In First Out (LIFO) have on the income statement?

Matching of revenues and expenses on the income statement become significantly improved.

Define "serial bonds".

Mature serially, that is at regular or staggered intervals.

FV Option for Bonds

Measurement should include adjustments for risks Make election at entity recognizes item Can be made on instrument by instrument basis DO NOT REPORT DISCOUNT/PREMIUM Effective interest method not required - Interest expense method must be disclosed Gains/Losses taken to income statement

List some examples of specific attributes in a covenant

Minimum Current Ratio, Maximum Debt to Equity Ratio

Governmental Funds

Modified Accrual Basis - Reconciliation between Fund and GVT Wide Financial Stm required -Focus on current financial resources raised and expended to carry out general government purposes -Revenues recognized when available and measurable (and within 60 days after YE) Fund Types (5) General Debt Service Permanent Capital Projects Special Revenue

Governmental Fund Financial Statements

Modified Accrual Basis a. Balance Sheet b. Stmt of Revenues, Expenditures and Changes in Fund Balances

Multiple Step IS

More details IS with More Sections Like standard IS you are used to

Historical Cost

Most assets should be accounted for at historical cost (except impairments, LCM adjustments)

In Use - Valuation Premises

Most value by using asset with others in a group

Revenues - CoGS = Gross profit ...

Multi-step Income Statement

Converting PV of Ordinary Annuity to PV of Annuity Due

Multiply Ordinary Annuity Factor x 1+Interest Rate First Period Payments for PV of of Future Amount and PV of Annuity are both the same Second year of PV of Annuity is sum of yr 1 and 2 of PV of future amount (same for future years)

How is interest expenses on the current line of an effective interest bond amortization schedule computed?

Multiply one-half the yield rate at date of issuance by the book value of the bond issue on the line above the current line.

Accounting Policies Disclosures

Must be initial Footnote in FS and discuss policies/approaches used

How does an entity prove intent to refinance short-term obligations?

Must be proven, possibly in the form of board of directors' meeting minutes.

Public College and University Accounting

Must be recorded as special purpose governments Can use guidance for Special Purpose governments engaged in ----Only business type activities - only proprietary fund statements are required (most universities do this) ----Only governmental activities - must use Reporting for State and Local governments ----Both business and governmental activities - Must use reporting for state and local governments

Describe the creditor's reporting of a debt settlement restructure.

1. Records loss equal to book value of receivables less market value of consideration received; 2. Remove receivables from books; 3. Record assets received at market value.

Describe the debtor's recording when the nominal sum of restructured flows is less than or equal to book value (BV) of debt + accrued interest.

1. Reduces carrying value of debt to nominal sum of flows; 2. Records gain for difference between book value and nominal sum; 3. No future interest recorded; 4. All restructured flows are principal payments.

List the advantages of Dollar Valued (DV) Last In First Out (LIFO).

1. Reduces the effect of the liquidation; 2. Allows companies to use FIFO internally; 3. Reduces clerical costs.

Revenue Recognition Requirements for Non Exchange Transactions

1. Required Characteristics of Recipient - must be county gvt, municipality, or township 2. Time Requirements - revenues must be used during specified time period 3. Cannot record revenue unless the receiving party spends the funds for desired purpose 4. No longer a contingency related to the amount

Under what conditions can a debt security sold before maturity be considered held to maturity?

1. Sale is near enough to maturity date so that interest rate risk is substantially eliminated; 2. Sale occurs after investor has collected a substantial portion (at least 85%) of the principal outstanding at acquisition date.

Statement of Operations - Health Care Organization - N4P

Must includePerformance indicator (ie. Operating Income, revenues over expenses) Following must be reported separately (underneath) Performance Indicator a. Equity transfers involving other entities that control reporting entity b. Receipt of restricted contributions c. Contributions of long lived Assets d. Unrealized gains/losses on investments not restricted by donors or law, except Trading Securities e. Investment returns restricted by donors and law f. Extraordinary items, disc ops, accounting changes Disclosures must indicate policies adobed to determine what is and what is not a performance indicator Other Revenues, Gains, Losses Includes Investment Income and dividends, Fees from educational programs, Proceeds from sale of cafeteria meals, Proceeds from Gift shop, parking lot revenue, etc, Functional classifications must be based on FULL COST ALLOCATIONS for hospitals

Capital Lease - Lessee Capitalization Conditions (OWNS Pneumonic)

Must only have one OWNS - Only 1 Must Apply -Ownership transfers at end of lease (i.e. Title transfers) -Written Bargain Purchase option is 50% or less than Purchase Price -Ninety (90%) Rule - PV of Minimum Lease Payments / FV Greater Than 90% -Seventy-Five (75%) Rule - Lease Term / Asset Life Greater than or equal to 75% Capitalize at PV of Future Lease PMT (less Tax, Ins) - Discount Rate lessor lease rate of market rate

Related Party Disclosures -

Must report all related party disclosures except - - Compensation Agreements, expense allowances, other similar items in ORDINARY course of business - Transactions that are eliminated in preparation of FS (ie. Intercompany sales / expenses) Must Disclose - - Nature of relationships - Descriptions of transactions - Dollar amount of transactions - Amounts due to/from related parties

Fund raising expenses - N4P Entities

Must report within FS or within notes When an activity involves fund raising or program management activities it is presumed to be fund raising unless 3 criteria meet: -Purpose - Activity has more than one purpose -Audience - audience selected on basis of likelihood to contribute to not for profit, criterion is not met -Content - Mailing or event must include a call to action other than raising money

Basic EPS Formula

Net Income - CY Preferred Stock Dividends / Weighted Average Shares Outstanding CY Preferred Stock Dividends - - Cumulative Preferred Stock - Declared Non Cumulative Preferred Stock - DO NOT INCLUDE NOT DECLARED NON CUMULATIVE PREFERRED STOCK Weighted Average # Common shares outstanding - - Must weight all shares for how long they've been outstanding during the year - Stock dividends are multiplied by each stock issuance separately ------ If Stock dividend may be received in cash or stock, dividend is treated as a share issuance and weighted for the period outstanding - Treasury stock decreases amount of shares - If stock split increases shares outstanding in PY, must adjust prior year shares for comparability purposes

Rate of return on common stockholders' equity

Net Income available to Common Stock holders / Average Common Stockholders' equity NI for CS Holders = NI - Preferred Dividends Common Stock Equity - CS + RE (net of RE segregated for PS holders)

ratio-Total Asset Turnover

Net Sales ÷ Average Total Sales

Dilutive EPS Formula

Net income - CY P/S Dividends + Net of Tax Bond Interest Expense / Weighted Average Shares Outstanding + Common Stock Equivalents Common Stock Equivalents - Avg Market Price - Exercise Price / Avg Mkt Price times # of Option/warrant shares

ratio-Dupont return on Assets

Net profit margin x Total Asset Turnover

What is in the cost/retail numerator?

Net purchases at cost.

What is in the cost/retail denominator?

Net purchases at retail plus additional markups minus additional markdowns.

What is the general rule to calculate the change in fair value adjustment for an international treatment of debt issue costs?

Net sum of the change in the fair value of the liability plus or minus the amortization of premium or discount.

Cash Flow - Are cash inflows and cash outflows netted together on Statement of Cash Flows?

No - as seprate cash receipt or cash payments

Cash Flow - Is the purchase of cash equivalent using cash reported on the statement of cash flows?

No - purchase of cash equivalent using cash is NOT an outflow of cash and therefore does not get reported on Statement of cash flows.

Net Settlement Criteria Required for Derivative Classification

No delivery of an asset equal to notational amount is required Delivery of an asset equal to the notational amount is required by one of the parties ----Ie. Call Option Delivery by one of parties of an asset equal to notational amount is required but the asset is either readily convertible to cash or is required that asset is a derivative instrument

Is interim reporting required under GAAP or IFRS?

No, but guidance is given for how to do it when you so choose

Can a company following International Financial Reporting Standards (IFRS) standards use Last In First Out (LIFO) cash flow assumptions?

No, the company cannot use Last In First Out (LIFO) cash flow assumptions.

Reason for Installment Sales Method

Normally required whenever there is a significant uncertainty in connection with the sale. Gross Profit should be same % throughout recognition through full payment.

Gross Profit Method -

Not acceptable for Tax or GAP Used for management statements, interim reporting, or when inventory is destroyed

Factoring Agreement Characteristics

Notifying customer to forward future payments to the factor Transfer of receivables without recourse (Factor assumes risk of uncollectible AR) and transferor has no further involvement with receivables Difference between Cash received and AR CV is gain/loss

How many months of interest are collected when bonds are issued between interest dates?

Number of months between the most recent interest payment date and the date of issuance.

Sale Lease Back

OWNER SELLS LEASED PROPERTY AND LEASES BACK FROM BUYER (OPERATING OR CAPITAL) Criteria - Based on significance of Lease -Minor Leaseback - PV of Lease Pmts / Sale Price is LESS than 10% = Record Gain/Loss NOW - Major Leaseback (Sale Leaseback) - PV of Lease Pmts / Sale Price is GREATER than 10% = DEFER gain / Record entire loss now - Operating Leaseback - Amortization offset to rent expense in future over lease - Capital Leaseback - Amortization offset to depreciation expense on capital asset in future over lease ------Exception - Lease term is 10% or less than useful life recognize entire profit now

Contingent Liabilities

Obligations MAY exist but are dependent on uncertain future events -Uncertainty exists on whether the liability will owed

IFRS Refinanced Liabilities

Obligations due this year but will be refinanced, determination for liability classification must be made as of the balance sheet date.

Asset Retirement Obligations -

Obligations for retirements of assets resulting from acquisition, construction, development and normal operation Cost to dismantle nuclear plant Cost to dismantle offshore oil platforms

Subsequent Events

Occur after BS date but before FS issued - SEC Filers - must evaluate subsequent events through issuance date - All others - must evaluate subsequent events through date available to be issued

Earnings Per Share Characteristics

Only public entities are required to present EPS Required on FS for two sections of IS - Income from continuing Operations - Net Income Optional FS presentation or Disclosure for two IS sections - Discontinued Operations - Extraordinary Income EPS on CI and OCI components - EPS numbers below net income are not required for comprehensive income components Contingent issuance of common stock - stock subscriptions - Treated as outstanding in computation of dilutive EPS

What costs are included in the successful efforts method for exploration costs?

Only the cost of successful exploration efforts are capitalized to the natural resources account.

Cash Flow - In a lease obligation the interest payments go to what section of the statement of cash flow?

Operating Activity

Cash Flow - Where would the collection of dividends be classified on the Statement of Cash Flows?

Operating Activity

Cash Flow - Investing activities include all cash flows involving assets, other than?

Operating items

2 Types of Accountability of Governmental Accounting

Operational Accountability Fiscal Accountability

Swaption

Option on a swap that provides holder with the right to enter into a swap at a specified future date at specified terms -----Have characteristics of option and swap

Derivative Examples

Options to buy (call) or sell (put) securities Future Contracts Interest Rate Swaps Currency Swaps Swaptions (option on swap) Credit Indexed Contracts Interest rate caps/floors/ collars

Banker acceptances -

Order from a bank customer for payment of sum of money (post dated check) that may be bought and sold

Define "book value".

Original cost less accumulated depreciation to date.

Basket for stuff like unrealized G&L, Foreign Currency Translation,

Other Comprehensive Income

Factoring of Receivables -

Outright sale of receivables to a financing institution known as a FACTOR Most significant in terms of accounting implications

PUFER mnemonic?

P ension adjustments- GAAP recognize in year of change until recognized as component of net periodic benefit cost, IFRS never reclassify to net income; U nrealized gains and losses on available for sale securities (resulting from debt security being transferred to available for sale from held to maturity) (decreases or increases in fair value of available for sale securities previously written down as impaired); F oreign currency items (used as hedges of a net investment in foreign entity) (remain in OCI until sale or liquidation of investment in foreign entity ); E ffective portion of cash flow hedge (OCI until cash flows associated with hedged item are realized); R evaluation of Surplus (only IFRS) (gain recognized when intangible assets and fixed assets are revalued, OCI until transferred transferred directly to retained earnings when related assets used or derecognized

Lease Liability Calculation

PV of Lease Payments --------Using lower of incremental borrowing rate or implicit rate of lease ---------Real Estate taxes not included FV of lease assets

Issue Price / Carrying Value Formula

PV of Principle @ Market Rate (PV of $1) + PV of Int Payments @ Market Rate (PV of Ann Chart)

Pension - accumulated post-retirement benefit obligation

PV of future benefits vested as of measurement date

Deferred Tax Asset

Paid before the item is recognized in the Financial Stmts > Examples include Estimated Warranty Liability & Bad Debt Expense

Partnership Liquidation

Partnership Shut Down Sell off Non Cash Assets resulting in G/L to Capital Accounts -----Gain - Increases Capital Accounts -----Loss - Decreases Capital Accounts Pay Off Creditors - Does not affect partnership accounts Actual amount paid to a partner is their payment amount less any loans they have available ; calculate bonus on this

What are the three subcategories of relevance?

Passing Feels Terrific: Predictive value; Feedback value; Timeliness

IFRS Patent Defense

Patent Defense Costs can only be added to the value of an asset if it increases future benefits derived from the asset. In US GAAP, it can be added regardless.

Deferred Compensation

Payment at future date for work done in earlier periods

LIFO

Perpetual and Period methods are separate calculations -Periodic - Similar but opposite to FIFO Period/Perpetual -Perpetual - Can only sell those items you have at any given date so base LIFO calculation based on most recent purchases IS focus because more accurate COGS balance Lower Ending Inventory during times of rising prices

FIFO

Perpetual and Period methods are the same calculation Higher Ending Inventory during rising prices BS focus b/c more accurate EI

CoGS - Moving Average System

Perpetual system - average is computed at the purchase of each additional inventory

OPEB

Postretirement Benefits other than Pensions

Preferred Stock

Preferential rights to receive dividends first @ % of par value All Features must be disclose in BS

Convertible Preferred Stock

Preferred stockholders have option to exchange stock for CS at a specified ratio - Conversion accounted for at book value

Premium or Discount

Premium - stated rate is higher than the negotiated rate. Discount - stated rate is lower than the negotiated rate.

Bond Issuance Costs

Prepaid Asset or Deferred Costs and Asset i. Net Bond Proceeds exclude Bond Issuance Costs ii. Begin Amortization on ISSUANCE date iii. Engraving/printing, legal/accounting, commissions, promotions

Fund Financial Statements

Prepared internally then consolidated to Governmental Wide Financials using JE Worksheets c. Fixed Assets and LTD NOT reported in Fund Financial Statements

What is the reported amount of a note calling for a face amount due at maturity, issued with an effective interest rate not equal to the stated rate?

Present value of remaining cash flows discounted at the effective rate.

What is the principal amount of a noninterest-bearing note?

Present value of the face amount discounted at the yield rate on the note.

ASC 200

Presentation

Define "base-year dollars".

Price level for the pool at the beginning of the year Dollar Valued (DV) Last In First Out (LIFO) adopted.

Fair Value Definition

Price received to sell or paid to transfer in orderly transaction at the measurement date Examples - investments, derivatives, asset impairments, ARO's, goodwill, business combinations, debt restructurings

Acquisition Method

Primary Method for recording Business Combinations Acquisition Costs Treatment - Direct Costs (Finders Fees) are expensed - Cost of Registering Securities reduce APIC

What is the nature of restructured cash flows for a troubled debt restructure that modifies the terms of the original debt such that the sum of restructured cash flows is less than the book value of the original debt?

Principal payments.

IFRS Defined Benefit Pension Plan

Prior Service Costs (Past Service Costs) is expensed immediately for all employes that have already vested. US GAAP, Prior Service Costs are amortized a year after the obligation increased.

Prior Service Cost or Credit

Prior services are retroactive adjustments granted to recognized services from prior periods Can be caused by: 1. Amending pension plan 2. Giving credit for prior year of service Amortize over the present and future amounts affected via 2 Methods - - Expected future service method - Straight line method - USE THIS INCREASES OR DECREASES PENSION EXPENSE

How should the issuance of bonds with detachable warrants be recorded when the market value of both are known?

Proceeds are allocated based on the respective fair market values of the securities.

How should the issuance of bonds with detachable warrants be recorded when only one market value is known?

Proceeds equal to the fair market value are allocated to that security, and the incremental proceeds are allocated to the remaining security.

What is the amount of interest recognized for a period on a note calling for a face amount due at maturity, issued with an effective interest rate not equal to the stated rate?

Product of effective rate at date of issuing the note and the principal balance at the beginning of the period.

What is the amount of interest recognized for a period on an installment note (one requiring equal periodic payments that include both principal and interest)?

Product of effective rate at date of issuing the note and the principal balance at the beginning of the period.

What is the amount borrowed on an installment note issued at discount?

Product of the periodic payment and the annuity factor for the term of the note and the yield rate on the note.

Categories for N4P Statement of Activities (IS)

Program Expenses - by Program Management and general expenses Fund raising Expenses All Expenses are recognized as unrestricted initially ---------If expenses are temporary, they are reclassed from Unrestricted into temporary category

Scrip Dividends

Promises to pay dividends in the future instead of cash Sometime interest expense is also recorded

Objectives of Financial Reporting (SFAC Ch 1) provides info to users that is:

Provide USERS with Info that is: • Useful to making decisions • Info on economic resources and claims against entity • Changes in resources / claims • Financial performance reflected by accrual accounting • Financial performance reflected by past cash flow • Change in economic resources and claims not resulting from financial performance

Fiduciary Funds

Provide info on resources held and used for people outside of government Accrual Basis Fund Types (4) Agency Funds Investment Trusts Pension and Other Benefit Trusts Private Purpose Trusts

Internal Service Funds

Provide services to other funds of the primary government on reimbursement basis Ex. - print ships, motor pool garage shops, self insurance activities

Government MD&A Section of Financial Statements

Provides comparison of CY and PY, including -Brief discussion on FS -Condensed financial information from FS and Fund Statements -Analysis of variations between Actual to Budget -Description of significant capital asset and LTD for the year -Discussion of GVTs using modified approach to report infrastructure assets -Description of facts having significant effects on governments financial position or results of operations Considered to be Required Supplemental Information (RSI)

Service Efforts and Accomplishments Reporting (Stmt 2 & 5) - GASB

Provides more complete info about gvt performance than traditional statements -----Establish/communicates clear goals/objectives -----set measurable targets and accomplishment -----develop and report indicators measuring progress

Government Mandated Non Exchange Transactions - GASB

Providing party requires funds to be spent on specific purpose Ex. Requiring schools to put up handicap entrances

Basket Purchases -

Purchase of multiple assets in one purchase. -Purchase of an office park with buildings, parking lots, parking garage

Net Purchases Formula (IMPORTANT)

Purchases - Beg AP + Ending AP CAN BE USED WITH INVENTORY FORMULA TO CALCULATE COGS/EI

Periodic Inventory

Purchases Recorded to CoGS Inventory Adjusted at Period End

Perpetural Inventory

Purchases Recorded to Inventory CoGS recorded at time of sale

What account holds inventory acquisition cost during the period under a periodic system?

Purchases.

Securitizations

Purchasing/Selling securities collateralized by a pool of assets (usually receivables)

Ratio Analysis - Quick Ratio

Quick Ratio - Cash, Marketable Securities & Receivables/Current Liabilities

Patent Accounting

R&D Expensed Capitalize processing fees and legal fees if you win

Describe the post-restructure interest rate for a troubled debt restructure that modifies the terms of the original debt such that the sum of restructured cash flows is greater than the book value of the original debt.

Rate that equates the book value of the original debt with the present value of restructured cash flows.

Contract Rate -

Rate which interest payment is calculated and printed on certificate Ex. Coupon, stated, nominal rate -Rate printed -Divide Rate by # payments in the year on Exam problems

Secured Borrowings / Assignment of Receivables

Receivables are pledged as collateral for loan: 1. Customers are not aware of this and they still remit payment to borrower 2. AR remains on borrowers books 3. Must disclose that the assets have been pledged as collateral and that debt is secured by receivables

Completed Contract Method

Recognition of contract profit at contract completion. Method is so conservative that it is only used when percentage of completion method cannot be used.

What is the income statement effect of the fair value option applied to financial liabilities?

Recognize gain or loss for the change in the fair value adjustment of the liability during the period.

Two types of Subsequent Events

Recognized - condition existed at BS date and is therefore recognized in FS (i.e. Contingent legal liability) Unrecognized - condition did not exist at BS date and arose after and not recognized - DISCLOSURE REQUIRED

How are gains/losses from extinguishment of debt reported on the income statement?

Recognized as components of income from continuing operations.

Revenue Recognition Principles

Recognized when realized (convertible to cash or claims to cash) and earned (accomplished what's necessary to be entitled to benefits of revenues)

Effective Interest / Amortized Cost Method of Amortizing PV of Bonds

Record at issue price and effective interest method used to amortize and premium or discount on the bond. Amortization amount grows each month whether discount or premium on bonds

Describe the journal entry recorded before the entry to remove relevant bond accounts in an early retirement?

Record interest expense, amortization of discount or premium, and amortization of bond issue costs for the period between the previous interest payment date (or fiscal-year end, if later), and the date of retirement.

Unconditional promises of contributions

Recorded as a receivable and revenue at present value with an allowance for doubtful accounts. If the promise is conditional nothing is recorded.

How are donated items recorded?

Recorded at fair market value.

Unconditional Promise Commitments

Records Expense at that time or when a condition of the commitment is met.

Why would an entity utilize Dollar Valued (DV) Last In First Out (LIFO)?

Reduces the effect of the LIFO liquidation.

What is the international treatment of debt issue costs?

Reduction in the proceeds from the debt.

Define "depletion".

Refers to the allocation of the cost of the natural resource to inventory.

What does Ending Inventory reflect in First In First Out (FIFO)?

Reflects the latest costs

Contributed Services - Non Profit

Regonized with 2 conditions 1) Enhance a Nonfinancial Asset 2) Require a Specialized Skill - Would need to be purchased if not donated.

Not For Profit Accounting - FASB

Relates to private N4P entities (not public), religious entities ----------GASB handles PUBLIC N4P entities Accounting is the same as FASB accounting aside from some differences to be noted below No IFRS considerations Focuses on basic information on organization as a whole

What is the book value method of recording converted debt?

Remaining book value of the bonds is transferred to the capital stock account and contributed capital in excess of par account. No gain or loss is recorded.

Capital Lease - Lessor Capitalization Conditions (LUC Pneumonic)

Remove from Lessor Books LUC - All Must Apply - Lessee owns property ----I.e. Lessee has one of above criteria met - OWNS pneumonic - Uncertainties regarding collection do not exist - Collectability of lease payments is predictable

Under IFRS what are the difference subcategories of reliability?

Replace verifiability with substance over form, prudence, and completeness

FV Option of Financial Assets / Liabilities

Report CV asset/liability at FV amount and do not record discount a discount EVER - All future FV gains and losses are reported in earnings for the period - Must disclose method used to determine interest rate - Interest Expense is still calc'd on face value of the loan

Private Purpose Trust Funds

Report all other trust arrangements where principal

Investment Trust

Report external portions of investment pools, when government is trustee

What is the balance sheet effect of the fair value option applied to financial liabilities?

Report liability at fair value.

Patient Service Revenue - Health Care Organization - N4P

Reported accrual basis NET of contractual and other adjustments (ie. NET Revenue) Should not include Charity Care 1. Disclose Charity Care policies in notes

Net Asset Reporting Non Profit

Reported as Unrestricted, Temporarily Restricted, and Permanently Restricted instead of capital or equity.

Derivatives Accounting - GASB

Reported at FV Similar to FASB Methods to evaluate effectiveness of hedge (when acquired and at each reporting period): Consistent Critical Terms Method Quantitative Methods a. Synthetic Instrument Method b. Dollar Offset Method c. Regression Analysis Method

Major Fund Characteristics - GASB

Reported in Governmental and Proprietary Funds -----General is always MAJOR fund -----Total A/L/Rev/Exp of fund constitute 10% of individual category -----Total A/L/Rev/Exp are 5% of total Governmental AND Proprietary categories combined

Infrequent OR unsual

Reported in Income from Continuing Operations as a Gross Amount.

Special Revenue Fund

Reports resources for expenditures for specific current purposes other than debt service and capital projects Ex. Gasoline taxes that will be used to fund street Similar to accounting for General Fund Grants are considered Revenue Bond Proceeds and Transfers in form other funds are considered Other Financing Sources No Revenue or Receivable is recorded until the expenditure taxes place repairs

GASB Budgetary Comparison Schedules

Reports to actual to budget material variances for individual funds

Treasury Stock

Repurchasing own stock on open market Not an asset b/c you can't own shares of itself ; CONTRA SHE Gains recorded to APIC - Treasury Stock Losses recorded to Retained Earnings

Agency Funds

Resources held in custody for various reasons -----Report only Assets and Liabilities and no Net Assets

Permanent Funds

Resources restricted to the extent that only earnings (not principal) may be used to support government programs supporting citizens

Define "debt covenant".

Restriction on debtor and possible responses by creditor.

Sales Type - Capital Lease

Result in both (1) a gross profit at the time of the transaction and (2) interest revenue to be earned over the lease term using the effective interest method.

Discontinued Ops (Net of tax)

Results from disposal of business Separate category after income from continuing operations Shown net of tax When reporting previous years, must strip out discontinued ops components for comparability If write down occurs of disc ops Asset/Liabilities to FV amounts, include in disc ops for the period

Par Value Method

Retirement Method All capital balances associated with treasury shares are removed upon acquisition

IFRS Fixed Assets

Revaluation of assets permitted if election is made on entire class. Biological assets are a separate asset category and valued at fair value less selling costs If an asset is impaired and written down, the impairment can be reversed at a later time.

Milestone Revenue Recognition - USED FOR R&D CONTRACTS

Revenue is contingent on achieving one or more substantive milestones related to deliverable A milestone is an event that can only be achieved based on the vendors performance and: - It is commensurate with the vendor's performance or enhancement of value resulting from vendors performance - Relates solely to past performance - Reasonable relative to all deliverables and payment terms - IF MET MEASURE REVENUE IN ITS ENTIRETY

Program Revenues

Revenue that any function of government generates

What is the formula for segment profit or loss?

Revenues less: directly traceable costs, less: reasonably allocated costs (by CEO), =operating profit(loss)

Stock Rights

Right to stock by current stockholders before issuing to outside investors Rights are not recorded until exercised/purchased Same JE as regular CS purchase

Governmental Accounting Concepts

Rules for Writing the Rules Set forth fundamentals on which GVT Accounting and auditing standards are based

Perpetual Method

Running total is kept as sales and purchases are made

Two Types of Capital Leases - Lessor

Sales Type Lease Direct Financing Lease

ratio-Working Capital Turnover

Sales ÷ Average Working Capital

What is the international accounting standard treatment of settlement troubled debt restructures?

Same as U.S. accounting but is considered an extinguishment.

Straight Line Depreciation

Same depreciation each year Basis = Cost - salvage value Easiest Method

Define "secured bonds".

Secured bonds have a claim to specific assets.

Define "equity securities".

Securities representing ownership or right to acquire ownership interest.

Define "debt securities".

Securities representing the right of the Creditor to receive from the Debtor a principal amount at a specified future date and to receive interest as payment for providing use of funds.

Transferring of Financial Assets - Types

Securitizations, Factoring, Transfers of Receivables with Recourse, Repurchase Agreements, Loan Participation, Banker Acceptances

With Recourse

Seller has risk of loss

FOB Destination -

Seller has title until delivered These are never added to inventory value on buyers books even after delivered

Factoring

Selling Receivables to obtain cash

Consignment Sales -

Selling for another individual - -Sale note recorded by consignor until consignee sells inventory -Commission paid to consignee is "consignee commission" which is selling expense - Record Consignment revenue gross and do not net with commission expense

Bifurcation

Separating embedded derivative from its host contract -------Separating a hybrid instrument (ie convertible bond) into debt and equity portions and accounting for each portion under its accounting treatment

Composite Assets

Similar but not the same assets

N4P Statement of Cash Flows

Similar except for following difference: -----Cash from Restricted Contributions are shown in Financing sections -----Interest and dividends restricted for investments are shown in Financing sections

Going Concern Consideration - GASB

Similar to FASB - If Going Concern is in doubt, notes to financial statements should disclose as such - If bankruptcy is filed, Assets/Liabilities should be remeasured

Operating Leases -

Similar to Renting, no transfer of ownership of assets Lessee - Prepayments of future expenses by lessee (tenant) are PPD Expense Lessor - rent payments are income and asset on their books

Revenues+Other income+ Gains = Total Revenue

Single-step Income Statement

Define "debt covenant compliance"

Steps taken by creditor to meet the restriction and reporting such compliance.

Stock Subscriptions

Stock is subscribed by investors Receivable established and stock subscribed established

Defined Contribution Plan

Straight forward 401k plan, no actuary required Ex. Employee makes 100%, 10% is entered into a pension fund

What depreciation method is used for group/composite assets?

Straight-line method to groups rather than individual assets.

What elements affect fixed overhead rates?

Subject to estimation errors and affected by the choice of denominator measure and the budgeting horizon reflected in the denominator.

How is Normal Spoilage handled?

Subtracted along with sales from Goods Available for Sale at Retail to arrive at Ending Inventory at Retail.

General Criteria for Hedging Instruments

Sufficient documentation at beginning of process to identify (3) -----Objective and strategy of hedge -----Hedging instrument and hedged item -----Effectiveness of hedge on ongoing basis Hedge must be highly effective throughout its life

How is total interest for a bond issue using an effective interest bond amortization schedule (assume a premium) computed?

Sum of the cash interest column less sum of amortization of premium column.

What type of allocation is depreciation considered?

Systematic and rational allocation of capitalized asset cost to time periods.

Cash Equivalent Examples

T Bills, Commercial Paper, Money Market Funds, CD's

Non Cash Examples

T Stock, Trading Securities, Sinking Fund Cash, Compensating balance against LT Borrowings, Restricted Cash, Post dated checks, Available for sale securities

How do you calculate the average interest rate on loans?

Take the sum of all loans multiplied by their respective interest rates and then divide by the sum of all loans

GWFS - Derived Tax Revenue

Tax is assessed on underlying exchange. Event tax place - tax is assessed

What is the main reason for using Last In First Out (LIFO) in periods of rising costs?

Tax minimization.

Deferred Tax Assets

Taxable Income is lower in future Similar to tax receivable Must record entire warranty expense now -Higher TI now, lower in the future, causing less expense in future and deductible = DTA Future Deductible Amount x Tax Rate = Deferred Tax Asset

Deferred Tax Liability

Taxable Income will be higher in future Similar to tax payable Accelerated Depreciation for Tax Books - TI is lower now, higher in future, causing future tax liability = DTL Future Taxable Amount x Tax Rate = Deferred Tax Liability

Income Tax Expense - Current

Taxable Income x Tax Rate

Imposed Non Exchange Transactions - GASB

Taxes and other assessments by governments not derived from underlying transactions Ex. Property taxes, special assessments, fines, forfeits

Derived Tax Revenues - GASB

Taxes assessed on exchange transactions Ie. Sales Tax, Income Tax, Motor Vehicle Tax

Define "discount on note".

The amount of revenue recognized over the term of a note exchanged for cash and other privileges.

Pension - Vested benefit obligation

The amount you keep when you leave. (The amount contributed by the employee vests immediately)

Define "bond date".

The first possible issuance date.

If beginning inventory is understated and purchases and ending inventory are correct, what is the impact on Cost of Goods Sold (COGS)?

The impact on COGS is understated.

In year one of an error, if purchases are understated, what is the impact on Retained Earnings?

The impact on Retained Earnings is overstated.

If the proceeds from a specific construction loan are not fully used for financing construction until well into the construction phase, how is the interest handled?

The interest revenue is reported separately with no effect on interest capitalized.

When an investor has significant influence over the operating and financial policies of an investee, what method must be used to account for the investment in the investee?

The investment must be carried on the investor's books and reported in the investor's financial statements using the full equity method of accounting.

What is the required accounting if a change in an investor's level of ownership results in a loss of significant influence, but the entire investment is not disposed of?

The investor must cease using the equity method of accounting and begin accounting for the investment at fair value (either as available-for-sale or held-for-trading). The investment will be adjusted to fair value at the date significant influence is lost and any difference between fair value and the prior equity-based carrying amount will be recognized as a gain or loss in current income.

If stock rights are not exercised and lapse, what entry should the investor make?

The investor writes-off the stock rights and recognizes a loss. The entry is: DR: Loss on Expiration of Stock Rights CR: Security Stock Rights

What is the required accounting for a potential loss on a Purchase Commitment when the commitment can be modified?

The loss is required to be footnoted as a contingent liability, but is not accrued in the accounts because the loss is not probable given that the contract can be revised.

When a convertible bond is issued, how are the proceeds treated?

The same as a nonconvertible bond. Nothing allocated to the conversion feature.

How is the ownership of goods shipped Free On Board (FOB) destination determined?

The seller owns the goods until they reach destination.

Bond Sinking Fund

a. Account that accumulates cash to pay off debt principal b. Long Term Investment account c. Must disclose Sinking Fund Balance requirements and Maturities for 5 years in FS

Distributing Net Income to Partners

a. Certain items increase/decrease Partner's capital account b. When distributing NI, calculate all items above that affect NI and then record final distribution based on this amount c. Weighted Average Questions - Always use weighted average months for each Cap Balance (ie. 6/12 x 12k; 4/12 x 13k; 2/12 x 10k)

BS Items FV Option Applies to

a. Financial Assets and Liabilities (A4S Securities, H2Mat Securities, Equity Method Inv, Liabs) b. Firm commitments involving financial instruments c. Written Loan commitments d. Non financial insurance contracts settled by third party e. Warranties settled by paying third party f. Host financial instruments resulting from separation of embedded derivatives from nonfinancial hybrid instruments

Continued Involvement in Selling/Pledges of Receivables and Future Revenues - GASB

a. Sale can be cancelled b. Ability to subsequently sell or pledge rec/rev can be cancelled by buyer c. Gvt has access to receivables, future revenues, or cash collected from them d. Gvt can substitute for or reacquire specific receivables without buyers consent e. Gvt is involved in future generation of sold receivables

Pension - Reconciliation schedule for benefit obligations relating to defined benefit plans (Disclosure)

amounts for Benefits paid Interest costs actuarial Gains/losses Contributions by plan plan Ammendments amounts for Service costs special Termination benefits Settlements and curtailments

What are some examples of items contained in the remaining notes?

any other relevant information to decision makers not presented elsewhere, can include: changes in stockholders' equity; required marketable securities disclosures including carrying value and gross unrealized gains and losses; contigency losses; contractual obligations (off BS financing, operating leases); pension plan description; and post balance sheet disclosures of certain events that occurred before statements were issued

What are the valuation techniques, with refence to fair value?

can use any or combination of these as appropriate, change is change in estimate; market approach- use prices and other relevant info from market transactions involving identical or comparable assets to measure fair value; income approach- convert future amounts, including cash flows or earnings, to single discounted amount to measure fair value; cost approach- current replacement cost determines fair value

What are some events that result in a change in accounting estimate?

changes in life of fixed assets; adjustments of year-end accrual of officers' salaries and/or bonuses; write-downs in obsolete inventory; material non-recurring IRS adjustments; settlement of litigation; changes in principle that are inseparable from estimate (to Lifo, change in depreciation method)

How frequently do companies have to review depreciation policies under International Financial Reporting Standards (IFRS)?

They have to be reviewed annually.

What amount of bond issue costs are removed from the accounts upon early retirement of 30% of a bond issue?

Thirty percent of the unamortized bond issue cost account at the date of retirement.

How do land improvements differ from land?

This asset differs from land in that it has a finite useful life and is depreciated.

What causes a discount on a note?

This occurs when a note is issued with a yield rate greater than the stated rate.

What causes a premium on a note?

This occurs when a note is issued with a yield rate less than the stated rate.

Temporarily Restricted Net Assets

Time Restriction ----------Including giving $ over period of years Purpose Restriction Term Endowments

IFRS - constraints

Timeliness Cost vs. Benefit Fair Presentation of the company

What conditions must be met under International Financial Reporting Standards (IFRS) No. 9 for an investment in debt to be classified as debt instruments measured at amortized cost?

To be classified as debt instrument measured at amortized cost under IFRS No. 9, two conditions must be met: 1. Business model testthe entity intends to hold the investment to collect the contractual cash flows, not to sell the instrument prior to its contractual maturity to realize changes in fair value; 2. Cash flow characteristic testthe contractual terms of the investment give rise on specific dates to cash flows that are solely payments of principal and interest.

Forecasted transactions

Transaction expected to occurred, but there is no firm commitment and no legal obligation or rights -----No Contract in place -----Knowing that you will purchase inventory in the future and hedging to get the current price

Foreign Currency Transactions -

Transactions denominated in FX other than entity's functional currency Ex. US Company purchasing or selling goods in a foreign location and required to pay in foreign currency Changes in FX rates result in FX Gains and Losses (Other Income/Loss on IS) Accounting for FX Transaction G/L you must: -Determine whether you have an AR or AP item -Note beginning AP and AR item and JE to get to Ending AP or AR item -----Offset to the JE will be the FX Transactional Gain or Loss -----See multiple choices for examples of calc - EASY

Foreign Currency Transactions

Transactions where terms are denominated in currency other than functional

Transfers and Servicing of Financial Assets -

Transfer of financial assets, group of assets, or interest in an asset to Transferee

3 conditions ALL require to classify Transfer of Assets as a SALE

Transferred assets are isolated and beyond reach of transferor and ALL creditors Transferee (receiver) can pledge or exchange assets without constraints Transfer does not maintain control over transferred asset or third party interest in the asset (repurchase agreement) If not met accounted for as a collateralized loan

Under what conditions can property already held be transferred into or out of the investment property category?

Transfers of property into or out of the investment property category can be made only when it is clearly evident that there has been a change in the use of the property.

Securitizations

Transforming Financial Assets into securities (Asset Backed Securities) Homogeneous assets are pooled and divided into securities with cash flows significantly different from original assets Securitized assets cost less than alternative use of the assets as collateral Transferor (issuer or sponsor) forms a security mechanism to buy the assets and issue securities Main objective is to take assets off BS Can be recorded as sale so long as assets are beyond control of transformer, even in bankruptcy

Foreign Currency Translation

Translating FS from Functional to Reporting Currency Expressing reporting currency of enterprise amounts denominated or measured in different currency

Describe the creditor's accounting treatment for the modification of a troubled debt restructuring.

Treat as a loan impairment.

What is the required accounting treatment when an investor has control of an investee?

Treat as a subsidiary and consolidate investee with investor (consolidated statements).

Accounting Errors Corrections

Treated as prior period adjustment by restating prior period financial statements Recorded to adjust assets/liabilities with offset to retained earnings (net of tax) for first period presented Disclose in footnotes that financial statements were restated

Net Investment in Foreign Operations FV Hedge

Treated like CF Hedge with effective portion as OCI and ineffective portion as IS

Unrecognized Firm Commitment FV Hedge

Treated like FV Hedge with Gain/Loss recorded in IS

Available for Sale Securities FV Hedge

Treated like FV hedge with G/L recorded in IS

FV Option for Investments

Treated like a trading security by adjusting FV each month through IS

List the computational methods of determining the post-restructure interest rate for a troubled debt restructure that modifies the terms of the original debt such that the sum of restructured cash flows is greater than the book value of the original debt; the restructured cash flows are not uniform in amount or timing.

Trial and error spreadsheet function for nonuniform cash flows.

Accounting for Collateralized Loan

Typically transformer should record collateral as asset and transferee should NOT record pledged asset unless: -Transferee has control of asset ; then record at FV -Transferor would reclass asset to a receivable -If Transferor defaults, asset is derecognized

IFRS Long Term Contracts

US GAAP and IFRS - Percentage Completion Method is preferable. If reasonable estimations cannot be made, then must use Cost Recovery Method All profits on long-term contracts are recognized once all costs have been recovered if the Percentage of completion method can't be applied.

Realization of a previous unrealized gain loss - Other Comprehensive Income

Unrealized portion must be reversed so that unrealized and realized portions are not double counted (1) Unrealized entry - D - Investments C - Unrealized Gains (2) Reverse entry 1 when you sell the investment as a RECLASSIFICATION ADJUSTMENT (3) Record Realized Entry - D Cash - C Investment & Realized Gain

Net Assets (Equity on Stmt of Position) Sections

Unrestricted Net Assets Temporarily Restricted Net Assets Permanently Restricted Net Assets Reclasses between categories result from expiration of donor imposed restrictions

Extraordinary Items

Unusual and infrequent non recurring event Separate category after discontinued ops Strikes are NOT included

Unusual or Infrequent Items - Income Statement

Unusual or infrequent event that doesn't qualify as extraordinary Income from continuing operations after normal revenues/expenses Ex. Restructuring charge - termination of business line, relocation, change in management structure, severance, contract terminations

Straight Line Interest of Amortizing PV of Bonds

Use ONLY when interest amount is not material

Full Disclosure Principle

Use judgment to decide what's reported on F/S (statements and footnote disclosures)

Calculating FV during Impairment testing -

Use the lowest level as your FV as most reliable (ie. Level I - Quoted Market Price) If 2 FV amounts in same level, use the one that's higher (IE. FV In Use and FV In Exchange)

Basic EPS

Used for companies with simple or complex capital structure - Only have Common Stock and Bond payable - Preferred dividends are subtracted even if not declared - For shares outstanding calc, stock splits are treated as if outstanding for entire year and comparable years

Specific Identification Inventory Method

Used for high cost items that are individually identifiable Ex - automobiles, appliances, jewelry

Installment Sales Revenue Recognition

Used to recognize revenue when sale price is not reasonably assured Revenue Recognized at point of cash collection rather than Point of Sale and GP is Deferred

Cost Recovery Method - Revenue Recognition

Used when delivering on credit Don't recognize revenue until recovering all expenses INCLUDING INTEREST INCOME Used when no reasonable basis for estimating collectability

Cost Recovery Method

Used when there is significant uncertainty about the likelihood of getting paid at all. Gross Profit Recognized when Costs covered

Governmental Fund Accounting

Uses Modified Accrual Accounting and Considers Current Financial Resources

Compound Interest

When interest is compounded more than once per year - Multiply # Per by # times interest is compounded - Int Rate / # times interest is compounded = Interest Rate for each period

When are bonds sold at a premium?

When stated rate > market rate.

Treasury Stock

When stock is repurchased and retired, the original amounts in common stock and additional paid-in capital are removed.

Variable Interest Entity Initial Determination

Whether and entity is a VIE is determined the date the reported entity becomes involved with legal entity - Status is reconsidered if events occur that change the power from voting rights or similar rights to direct the activities of the VIE - Should reconsider consolidation status on an ongoing basis

IFRS - recording significant non-cash transactions in statement of cash flows

disclosed in notes only

Rule for depreciation and amortization within discontinued operations?

don't do it anymore

SEC Reporting Requirements - Assets > 10 Million plus 500 shareholders - Must file:

- 10Q - Review only - 10K - audited - 8K - Reg Sk

Interest on PBO

- Beginning PBO x Settlement Rate = Interest on PBO Increase in PBO due to the passage of time INCREASES PENSION EXPENSE

Other Comprehensive Bases of Accounting (OCBOA) -

- Cash Basis Financials - only asset is cash - Modified Cash Basis - Cash Basis plus the following: ------Fixed Assets, inventory, and related liabilities ------Modifications must be same as GAAP and not illogical - Tax Basis Financials - prepared on basis of tax laws and regulations - Regulatory basis financial statements - prepared by rules established by a delegator agency ------Statements are titled "Balance Sheet - Tax Basis"

Paying Liquidation in Installments

- If any partner has debit balance in capital account, this loss must be attributed to all remaining partners immediately - If any assets can't be sold immediately, but you are liquidating, you must treat these as a loss and attribute to all partners

FV Level Categories

- Level I - Quoted prices from active markets (NYSE, NASDAQ) - Level II - Kelly BB, quoted prices for similar assets - Level III - Unobservable inputs, using entity's assumptions about market and are based on best available info

Statement of Cash Flow Objectives and Purpose

- Provide information about cash receipts and cash payments for the period - Disclose information about financing and investing activities for the period - Help users make assessments on timing and uncertainty of Cash Flow

Projected Benefit Obligation

- What we'd owe in the future - PV of pension obligation under benefits years of service method

Required Financial Statements and Required Supplemental Information (RSI) for GASB

-MD&A (in front of F/S) -Government Wide Financial Statements - Accrual Basis -Fund Financial Statements -Notes to Financial Statements - Major Disclosures include: -Required Supplemental Information (RSI) - Unaudited - Other Supplementary Information - BE FAMILIAR BUT DON'T MEMORIZE

GWFS - Imposed Non-Exchange Revenue

1) Tax is assessed with no underlying exchange. (Property Tax - Fines) 2) Recognized in the period in which use will be made of the funds received.

In what forms may a joint venture be established?

1. By agreement or contract alone; 2. As a corporation; 3. As a partnership; 4. As an undivided interest entity.

List the general rules on costs to capitalize

1. Cash equivalent price; 2. Get ready costs.

How do we account for the transfer of an investment from held-to-maturity to held-for-trading?

1. Credit held-to-maturity at unamortized cost; 2. Debit Trading at fair value; 3. Recognize unrealized holding gain/ loss in net income.

How do we calculate depreciation based on service hours?

1. Depreciation rate x service hours used; 2. Depreciation rate = (Cost-salvage value) / estimated hours.

Describe the debtor's recording of a settlement restructure.

1. Gain = book value of debt + unpaid accrued interest - market value of consideration transferred; 2. Gain/loss on disposal of assets transferred; 3. Remove debt from books; 4. Record any stock issued at market value.

Categories of Fund Financial Statements

1. Governmental Funds - 2. Proprietary Funds - 3. Fiduciary Funds -

List the differences between periodic and perpetual applications of Last In First Out (LIFO).

1. In perpetual, each sale is costed with most recent purchase; 2. Perpetual results in a lower Cost of Goods Sold in a period of rising prices.

List some reasons to avoid Last In First Out (LIFO) liquidation.

1. Increases taxes; 2. Does not match current period expenses and revenues.

Amortization Method of Measuring Servicing Assets

1. Initially record assets and liabilities at FV 2. Amortizing in proportion to received of estimated servicing income or loss 3. Assess for impairment and increased obligation at end of each period Disclosures - a. Beginning ending balances, additions, disposals, amortization, application of valuation allowance to adjust carrying value and other changes b. Recoveries of balance and write downs for period

Foreign Currency Transaction Disclosures

1. Net transaction G/L recorded in Net Income (Other Income) 2. Significant rate changes subsequent to FS date (subsequent events)

List the steps to retire debt on the books.

1. Record interest, amortization of discount/premium, issue costs; 2. Remove debt and related accounts; 3. Record gain or loss.

List the cost flow assumptions of a perpetual inventory system.

1. Specific Identification; 2. Moving Average; 3. First In First Out (FIFO); 4. Last In First Out (LIFO).

List the characteristics for the specific identification cost flow assumption.

1. Specifically identifies cost of each item; 2. Appropriate for large, costly, distinguishable products.

IFRS - assumptions in framework

1. entity is a going concern 2. accrual basis

Statement of Activities - Non Profit

> All expenses are reported as decreases in unrestricted net assets. This one column is the equivalent of an operating income statement.

Intangible Assets

> Bought and should be recorded initially at cost much like a piece of equipment. > Patents, copyrights, and the like are frequently obtained in this way with the cost subsequently amortized to expense over the expected useful life. > The cost of internally developed intangibles are written off as incurred as research and development expense; an exception is the cost to register a patent which is capitalized.

IFRS - Transitioning, what type of financial statement must be produced for the first reporting period

A full comparative statement using IFRS.

What are Net Markdowns?

A net decrease in the original selling price.

What are Net Additional Markups?

A net increase in the original selling price

Define "interest-bearing note payable".

A note in which the interest element is explicitly stated.

Objective Evidence

A source document is prepared for each transaction.

ratio-operating cycle

A/R turnover in days + inventory turnover in days

Non Cash Investing and Financing Activities - SOCF

ACTIVITIES THAT WILL AFFECT CASH IN FUTURE ; NON CASH ITEMS ARE REPORTED AS SEPARATE SECTION - Acquiring an asset through capital lease - Conversion of debt to equity - Exchange of noncash assets or liabilities for other noncash assets or liabilities - Issuance of stock to acquire assets - Taking mortgage on asset

Present Value of an Ordinary Annuity

AKA - In Arrerars or Non Interest Bearing Loan Today's value of a series of payments, given a discount rate, of a series of future payments Example - Five year lease requiring payments of 1,000 for 5 years at 10% rate = $3,791

Investments in debt and investment securities Accounting for N4P entities

ALL gains/losses are reported in Statement of Activities (IS) in appropriate Net Asset Class Equity Method investments are still reported using Equity method not N4P accounting

Pension - EPBO =

APBO + PV of expected future benefits not yet vested

ARO Characteristics

ARO recorded at FV in period incurred Upon recognition, increase asset carrying amount by the same amount as liability recognized Expense costs over same period you are receiving benefits from asset

Enterprise Funds

Account for goods and services provided to public, financed through user charges, and are self supporting Examples - golf courses, public utilities, airports, toll bridges, transit systems, landfills

Premium on Bond

Adjunct liability - credit balance Coupon Rate Greater than Market Rate Sold for more than face value

Allowance Method of Bad Debt

Allows for Proper Matching of Sales to Expenses GAAP preferred method

Contra Stockholders Equity

Amounts deducted after Contributed Capital, Retained Earnings, and Accum OCI are totaled -Treasury Stock - Cost Method

IFRS - reporting "elements"

Asset Liability Equity

Bond Investment

Asset to Bond Holder

Capital Lease

Asset transfers to Lessee's books and removed from Lessor's books

ASC 300

Assets

Group

Assets are not similar

Assets Contributed to Partnership

Assets are recorded at FV and capital account is credited -----Capital account balance is asset balance less any asset related liabilities

Define "qualifying assets" for interest capitalization.

Assets constructed for an enterprise's own use or assets intended for sale or lease that are constructed as discrete projects

Capitalized Interest

Assets constructed over a period of time can have capitalized interest -Constructed Assets for use only (not for sale) -Capitalize LESSOR of average interest or avoidable interest ----------Avoidable Interest = Average expenditures for the year times interest rate

Partner Dissolution Accounting Methods

Bonus Method Goodwill Method

For which method should an ending inventory count be made?

Both periodic and perpetual.

Boot

Cash Received

Converting Partnershp to a Corporation

Changing into a new Entity Record Assets at FMV

Recognition of Discontinued Ops

Component is classified as discontinued operations in the first period that it meets all of the normal criteria for being reported as "held for sale".

GASB Other Supplementary Information

Comprehensive Annual Financial Report (CAFR) Special Purpose Governments

Net Income + Adjustments to Equity

Comprehensive Income

Discount on Bond

Contra liability - debit balance Coupon rate Less than Market Rate Sold for less than face value

Financial liability -

Contract imposing obligation to deliver cash - NOTE Payable

Purchase Commitments -

Contracts to purchase specific goods and fixed prices in the future

Correction of Error

Correction of material error from prior period Prior period adjustment by restating prior period financial statements

Two Treasury Stock Methods

Cost Method Par Value Method

Beg Inv + Purch - A&Rs = CoGA4S - End Inv

Cost of Good Sold order

Pension - Pension Disclosures

D.R.E.A.D. D-escription of funding policies & types of assets held R-econciling items (Fair value of PA, PBO, etc.) E-xpense & Other comp income items (pension exp & OCI) A-ctuarial Assumptions D-iscount Rate

Debt Issued with Purchase Warrants

Debt Issued with Stock

Gain on Involuntary Conversions - Deferred Tax Treatment

Deferred for Tax purposes resulting in DTL

Diluted EPS

Diluted EPS is only reported if (a) the reporting entity has one or more items that could be converted into common stock and (b) that conversion could negatively impact the amount reported as earnings per share.

Stock Dividends

Dividends of Scock Not liability when declared and can be rescinded

ASC 500

Equity

Major Repairs -

Extends Useful Life of asset

3 Types of Hedges

FV Hedge CF Hedge Foreign Currency Hedge

Going Concern

Financial statements are prepared with the expectation that a business will remain in operation indefinitely.

Adequate Disclosure

Financial statements contain all information necessary to understand a business' financial condition.

Cash Flow - In a lease obligation the principal payments go to what section of the statement of cash flow?

Financing Activity

Consolidated Financial Statements

Greater than 50% ownership in an organization

Two Methods of recording Purchases:

Gross Method Net Method

Loan Participations -

Group of Financial institutions purchase a share of a loan

Cross hedging

Hedging the exposure in one currency by the use of futures, forwards, or other contracts in a second currency that is correlated with the first currency

Revenue - Finance costs - expense = profit or loss

IFRS Income Statement

Sales of Goods Over a Year

If no interest, recorded at Present Value

Discount Terms Definition - "2/10 Net 30"

If paid within 10 days, 2% discount; if not, due in 30 days • When two discounts noted, apply each separately

What is the general rule on when to capitalize post-acquisition expenditures?

If the asset becomes more productive or if it extends the asset's life.

How is the cash equivalent price in the issuance of securities determined?

In fair value of asset acquired or of securities issued, whichever can be most clearly determined.

Where are unrealized holding gains and losses on investments held-for-trading reported?

In income (Income Statement) as part of Income from Continuing Operations.

Tax Losses Incurred

In the US the company can recover the last two years worth of income tax and roll forward losses 20 years.

Financial Stmt - Discontinued Ops/Extraordinary Items

Income statement is restructured a bit. These items are shown at the bottom of the income statements to (1) draw attention to their existence and (2) separate them from items that are part of the continuing operations of the organization.

Partnership Accounting FV of Asset/Liability Adjustments

Increases of Assets to FMV increases Capital Accounts by pro rated basis

When is the straight-line method not allowed for notes payable accounting?

Installment notes, and when the yield and stated rates are materially different.

R&D Expense Exceptions

Intangibles / Fixed Assets purchased from others having alternative future use a. Capitalized and amortized over life d. Machines used for multiple future R&D activities can be capitalized ; NEVER ONE TIME USE MACHINES

Periodic Method

Inventory is counted periodically; then priced

Cash Flow - Purchase of Bonds are included in what section of the cash flow statement?

Investing Activity

List some examples of natural resources.

Items such as gravel pits, coal mines, tracts of timber land, and oil wells.

Small Stock Dividends

Less than 20-25% of outstanding Stock

What is the hierarchy of inputs in fair value measurement techniques?

Levels: (1) most reliable; identical assets quoted in active markets; (2) Active market similar asset, identical asset not active market, identical liabilities traded as assets if adjustments to the quoted market price of assets is required, quoted prices for similar liabilities when traded as assets. inputs other than quoted assets that are observable for the asset of liability. inputs derived from or corroborated by observable market data; (3) unobservable inputs for asset, based on entity's assumptions

ASC 400

Liabilities

Bonds Payable

Liability to bond issuer, Long Term Liability

Define "covenant-lite loan"

Loan with less stringent restrictions.

Tax Loss Carryback and Carryforward

Losses can be carried back against prior year (first) and difference can be carried forward (second) ----Results in a tax refund because it decreases taxable income from prior and future years

Segment Reporting Keywords

Major customer, management approach, operating segment, reportable segment

Depreciation is included in overhead and allocated to production based on machine hours or direct labors for what type of asset?

Manufacturing assets

Which is always larger, margin on sales or margin on cost?

Margin on cost.

Out of the Money

Market Price less than Exercise Price

At the Money

Market Value = Exercise price

Generally, what is replacement cost?

Market cost.

Assets that are Securitized

Mortgages, credit cards, trade receivables, loans, leases

Cost Method of Treasury Stock

Most Prevalent Method 1. Debit Cost of Treasury Stock 2. Gain/Loss recognized at point of sale and recorded to APIC-TS or RE

Agency Transactions

N4P receives asset which they have little or no discretion of use of asset

Equity

Net Assets or Ownership Interests in an entity

AR Turnover -

Net Credit Sales / Average AR Measures how rapidly cash is collected from credit sales

Ratio Analysis - Return on Equity

Net Income/Avg Equity for the Period

Revenue Expenditure -

Normal recurring expenditures Repairs and Maintenance Expenses Charged to expense and not capitalized Can be product or period costs

Right of Return and Consignment Sales

On Right of Returns revenue is only recognized if the amount of returns can be reasonable estimated, buyer is separate from the seller and return is not based on buyer's ability to resell it.

Annuity Due

Payment Made at Beginning of Accounting Period

Hist Cost - Rev Recog - Matching - Full Disclose

Principles

Remeasurement Method

REMEASURE is key term Differs by Monetary and Non Monetary Assets/Liabilities G/L recorded in Income

Discretely Presented GASB Financial Statements

Reported in a separate column to the right of the financial statements

Capital Project Funds

Reports resources for capital outlays Usually funded from issuance of LTD and government grants Fund has a project focus rather than fiscal year focus

Debt Service Fund

Reports resources for payment of general long term debt principle and interest Does not account for debt of proprietary funds Normally established for issuing bonds for capital projects

ASC 600

Revenue

Single Step Income Statement

Revenues and Expenses in the one section sections not multiple

Call Options

Right to buy something anytime during the option term

Put Option

Right to sell at any given time

Subsequent Events - GASB

SAME as FASB Record if happened prior to YE Disclose if happened after YE

Assets/Liabilities formed via Securitizations

Servicing contracts, interest only strips, retained interests, recourse obligations, options, swaps, and forward contracts

Servicing Financial Assets Characteristics

Servicing is typically detailed in a contract between parties Contract is recorded based on following criteria: i. More than adequate compensation - record asset ii. Adequate Compensation - No Asset or Liability iii. Less than Adequate compensation - Record liability

Participating Preferred Stock

Share with cs holder in dividends after preferred and common stockholders receive specified dividend payments

Structure of the Stmt of Activities

Shows Net Financial Benefit or Net Financial Burden of each government function.

List the two categories of modification of terms debt restructures for international accounting standards.

Significant modification and not significant modification.

Cost of Start up Activities

Startup costs, including organization costs, are to be expensed as incurred.

Historical Cost

The actual amount paid for merchandise or other items bought is recorded.

Define "cash equivalent price".

The amount of cash paid for the asset on acquisition date.

Define "avoidable interest".

The amount of interest that would have been avoided had the construction not taken place.

Who is the owner of consigned goods?

The consignor (firm that shipped the inventory to consignee).

How does the double-extension method affect ending inventory?

The ending inventory is extended at both base year cost and ending current year cost.

What is the net realizable value as defined by International Financial Reporting Standards (IFRS)?

The estimated selling price in the ordinary course of business less the estimated costs of completion and the estimate costs necessary to make the sale.

What amounts are included in a gain or loss recognized on the sale of an available-for-sale investment?

The gain or loss recognized on the sale of an available-for-sale investment includes: 1. The difference between the carrying value of the investment and its selling price; and 2. Any unrealized gain or loss in Accumulated Other Comprehensive Income related to the securities sold.

Spot rate

The price at which foreign exchange can be bought or sold with payment set for the same day

Under International Financial Reporting Standards (IFRS), what two methods can be used to adjust accumulated depreciation?

The proportional and reset methods.

Country risk

The risk of political and economic uncertainty in a foreign country that affects the value of loans or investments in that country

Currency appreciation

The strengthening of a currency in relation to another currency

What are the two basic constraints on accounting information?

The top and the bottom of the diagram: (1) costs and benefits (benefits of info must be greater than costs); and (2) Materiality (lack of info would make a difference)

Interest arbitrage

The transfer of funds from one currency to another to take advantage of higher rates of return

List the main differences between perpetual and periodic entries.

The use of the inventory account rather than purchases and recording cost of goods sold at sale.

Compensatory Stock Options

The value of stock options is established--for reporting purposes--on the grant date. Must expense based on the amount of time employee must work to receive the option. It doesn't increase through the years.

Currency depreciation

The weakening of a currency in relation to another currency

What is the all other segments category?

This where you put the info for all other segments that were not reported through the 10% and the 75% tests

What is the purpose of detachable stock warrants?

To increase marketability of bond issue.

Cash Flow - What is the primary purpose of statement of cash flows?

To provide relevant information about the enterprise's cash receipts and cash payments during a period

Ratio Analysis - Debt/Equity Ratio

Total Liabilities/Total Equity

How is the total interest expense recognized on a noninterest-bearing note?

Total payments less amount borrowed.

How is the price for group purchases recorded?

Total price is allocated to individual assets.

Current Liabilities Examples

Trade AP, Notes Payable, Short Term Obligations, Dividends Payable, Accrued Liabilities, Deferred Revenues

Translation

Translation Gains & Losses - Accumulated other comprehensive income in Owner's Equity General Procedures - Current Rates for All Balance Sheet except owner's equity Monetary Assets/Liab - Current Rate Non-monetary Assets/Liab - Current Rate Owner's Equity - Historical Rates Sales & Expenses - Average for the Year Cost of Goods Sold - Avg for Purchase, Historical for Beg. & End Inventory Depr & Amort - Historical

Remeasurement

Translation Gains & Losses - Net Income General Procedures - Historical Rates for All Non-monetary Items Monetary Assets/Liab - Current Rate Non-monetary Assets/Liab - Historical Rates Owner's Equity - Historical Rates Sales & Expenses - Average for the Year Cost of Goods Sold - Avg for Purchase, Historical for Beg. & End Inventory Depr & Amort - Historical

Foreign Currency Denominated FV Transactions Hedge

Treated like CF Hedge with effective portion as OCI and ineffective portion as IS

Accounting for Pollution Remediation Obligations - GASB

Triggers Requiring Pollution Remediation Obligations 1. Pollution poses danger to public 2. Gvt has violated pollution prevention permit 3. Regulator has identified government as responsible for cleaning up pollution 4. Government is named in a lawsuit 5. Government begins or obligates itself to begin cleanup

Investment in Securities - Equity Method - Fair Value Method

Trumps Equity Method, use Fair Value Accounting

Discontinued Operations

Two requirements: (1) the operations and cash flows of the component have been (or will be) eliminated from operations as a result of the disposal, and (2) the entity will not have any significant involvement in the component operations after disposal.

Type A Bank Reconciliation Items

Type A - Don't require JE's -Outstanding Checks - Decrease Bank Balance -Deposits in Transit - Increase Bank Balance -Bank Errors - Increase/Decrease Bank Balance

Type B Bank Reconciliation Items

Type B - Already recorded in Bank ; only adjust book balance for these -NSF Checks -Unrecorded Bank Charges -Errors in Cash Account -Unrecorded bank collections of notes receivables

Define "Purchase Commitment".

Type of commitment made when a firm commits to the purchase of materials at a set unit price.

OPEB Characteristics

Typically Health Benefit Costs GAAP requires single method for measuring and recognizing accumulated post retirement benefit obligation (APBO) Similarities to pension accounting - Delayed recognition of changes - Reported at net cost - Offsetting assets and liabilities

Bonds are unaffected by conversion feature until what point in time?

Until conversion takes place.

Extraordinary Items

Unusual and Infrequent in Nature

Investment in Securities - Equity Method

Used when able to apply significantly influence is present even if less than 20% holdings. 1) representative of investor is on the board of directors, 2) other owners only hold a less %, 3) significant intercompany transactions exist.

Lower of Cost or Market Inventory Approach

Used when the utility of the goods is no longer as great as the cost

What are the two allowed methods to compute total interest to be capitalized?

Weighted Average method and Specific method.

Accumulated Benefit Obligation

What we'd owe today Amount computed using current salary amounts instead of future salary DON'T USE THIS IF GIVEN

Under what conditions will an investment give the investor significant influence, but not control, over the investee?

When an investor owns 20% to 50% of the voting equity securities of an investee and there are no impediments to the investor exercising its voting rights to influence the investee's operating and financial policies. Investments in non-voting equity securities (e.g., preferred stock) or in debt securities does not convey influence.

Dividends Payable are recorded:

When declared and can't be rescinded

Acconting for Non-Exchange Transactions

When fund-based financial statements are issued for governmental funds, modified accrual accounting alters these provisions to require that revenue resources must also be measurable and available to finance the expenditures of the current period before recognition is made. Nonexchange transactions are classified into four categories (1) derived tax revenues, (2) imposed nonexchange revenues, (3) government-mandated nonexchange transactions, and (4) voluntary nonexchange trans-actions.

Conservatism

When in doubt choose most conservative method

When is retirement of debt considered extraordinary?

When the "unusual and infrequent" criteria of Accounting Principles Board (APB) Opinion 30 apply

When is the inventory method of depreciation used?

When the inventory items are smaller homogeneous groups of assets and individual records for the assets are not maintained.

When would you increase the asset's account basis by the post-acquisition cost?

When the productivity of the asset is enhanced rather than the useful life extended.

Investment Transition from Cost Method to Equity Method

Year of transition - record as standard Equity Method Transaction Compare Dividend Income recorded in PY to Investment Income that should have been recorded USING THE SAME OWNERSHIP % OF PY - Difference is adjustment in Investment Income recorded via standard investment income entry

Pension - minimum amortization of transition obligation

[APBO - FMV of plan assets] ÷ greater of 20 years or average job life or expense full amount

Pension - minimum amortization of existing obligation/asset =

[PBO - FMV of plan assets] ÷ greater of 15 years or average employee job life

Pension - minimum amortization of gain/loss =

[beginning unrecognized gain/loss - 10% of the greater of beginning PBO or beginning PA] ÷ average remaining service life

ratio-acid-test (quick) ratio

[cash equivalents + marketable securities + net receivables] ÷ current liabilities

ratio-return on investments

[net income + interest expense (1-tax)] ÷ average liabilities and equity

ratio-return on common equity

[net income - preferred dividends] ÷ average common equity

Servicing of Asset Examples

a. Collecting payments b. Paying taxes and insurance c. Monitoring delinquencies d. Foreclosing e. Investing f. Remitting fees g. Accounting

BS Items FV Option does not Apply to

a. Consolidations b. Derivatives c. Share based payments d. Stock Options e. OPED f. Exit or disposal activities g. Leases h. Financial instruments

Governmental Accounting Standards Board (GASB)

a. Establishes standards for all STATE and LOCAL governments b. Does not govern Not for Profits (FASB does) c. Source of funding is by FINRA

Participating Interest Characteristics (All 4 Required)

a. Interest is a proportional ownership interest in entire financial asset b. Cash flows received from asset are divided proportionately among interest holders based on share of ownership c. Rights of interest holders have same priority d. No party has the right to pledge or exchange asset unless all interest holders agree

Benefits of Securitizing Assets

a. Lower financing costs b. Increased liquidity c. Lower Credit Risk

Capital Lease - Lessee Disclosures

a. Minimum lease payments for 5 years b. Aggregate amount for period and thereafter c. Amount in the aggregate

Governmental Accounting Differences to Business Accounting

a. No profit motive, except for enterprise activities (utilities) b. Legal emphasis involving restrictions in raising and spending of revenues c. Inability to match revenues with Expenditures d. Emphasis on accountability of resources e. Fund Accounting and Government Wide Reporting f. Recording of budget in governmental funds which legally adopt a budget (ie. General Fund) g. Modified Accrual Accounting in some funds (Governmental Funds) Recording of budget in governmental funds which legally adopt a budget (ie. General Fund) h. Modified Accrual Accounting in some funds (Governmental Funds)

Financial Statements for N4P entities

a. Statement of Financial Position (Balance Sheet) b. Statement of Activities (IS) c. Statement of Cash Flows - d. Statement of Functional Expenses - Voluntary Heath/Welfare entities only

Loss Contingencies Examples

a. Threat of expropriations of assets b. Pending Litigation c. Actual or possible claims/assessments d. Guarantees of indebtedness of others e. Obligations of commercial banks f. Agreements to repurchase receivables that have been sold g. Bad Debt Expense h. Warranty Expense i. Premiums Offered to Customer

What are some examples of extraordinary items?

abandonment of, or damage to, a plant due to infrequent earthquake or flood; expropriation of a plant by government; prohibition of a product line by a newly enacted law or regulation; certain gains or losses from extinguishment of long-term debt, provided they are not part of the entity's recurring operations and, thus are unusual and infrequent

Pension - Projected Benefit Obligation

actuarial PV of all benefits. includes assumptions about future compensation.

Pension - Accumulated Benefit Obligation

actuarial PV of benefits (vested or not) current minimum pension liability

Pension - defined benefit pension plan

amount to be recieved is specified or estimated

What is form 11-k?

annual report of a company's employee benefit plan

What are requirements for annual statements under s-x?

annual statements must be audited and audit report must accompany statements; must include balance sheets for two most recent fiscal years and statements of income, changes in owners' equity, cash flows for each of the three fiscal years preceding the date of most recent audited balance sheet

Pension - settlement rate

assumed discount rate which pension benefits could be "settled" (derived from rates in current annuity contracts)

Additional requirements of held for sale for IFRS?

before component can be classified held for sale, value must be measured by applicable standards and gains or losses recognized; after classification, reported at lesser of carrying value or fair value less costs to sell

How is a two statement approach formulated?

begin with net income (derived from separate income statement); then OCI, totals to Comprehensive Income

Pension - expected return on assets

beginning FMV of plan assets * expected rate of return

Pension - amortization of prior service cost =

beginning PSC ÷ avg service life

IFRS - date of transition

beginning of earliest period of comparative F/S presented under IFRS in first IFRS financial statements

Pension - reconciliation schedule for plan assets (disclosure)

benefit payments actual return on plan assets contributions by employer/plan participants settlements and divestures

In reference to fair value, what are market participants?

buyers and sellers who are: independent, knowledgeable about the asset; able and willing to transact for the asset or liability,

How are revenue and expense matched on interims?

by quarter

The results of what operations will be reported as discontinued operations?

component has been disposed of or is classified as held for sale

What conditions must be met to report disposed of or held for sale components in discontinued operations?

eliminated from ongoing operations; no significant continuing involvement

What is form 6-k?

filed semi-annually by foreign private issuers; similar to 10-Q

What is accumulated OCI?

functions like Retained Earnings;

Contingent Liability Types (2)

i. Determinable Liabilities ii. Contingent Liabilities

What is a component of an entity?

lowest level for which operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes from rest of entity

Pension - special term benefit =

lump sum payments + PV termination benefits

In reference to fair value, what is the principal market?

market with the greatest volume (regardless of price)

How are components classified as held for sale valued?

measured at lower of carrying amount or fair value less costs to sell.

ratio-A/R turnover

net credit sales ÷ average net A/R

ratio-return on total assets

net income ÷ average total assets

ratio-net profit margin

net income ÷ net sales

In reference to fair value, what is an orderly transaction?

not a fire sale

What are the exceptions to fair value measurement?

not practicable to measure fair value; cannot be reasonably determined; cannot be measured with sufficient reliability

FV Option Disclosures

o 2 Methods to Disclose FV - - Present FV and non FV amounts in same line - Present two separate lines for FV and non FV carrying amounts o Required Disclosures - • Valuation techniques used • FV measurement at reporting date • Levels used • Transfers between levels • Reconciliation of items with Level III disclosure • Total Gains/Losses for period • FV items using significant unobservable inputs

FV Option for Assets/Liabilities Applicable to

o Applies to most all financial assets and liabilities except • Consolidations • Pensions • Share Based Payments • Stock Options • OPEB (Other Post Employment Benefits) • Exit or Disposal Activities • Leases • Financial Instruments a part of Equity

Development State Enterprise Accounting -

o Applies to start up companies with no profits yet o RE Section should be labeled - Accumulated deficit o IS for developmental stage enterprise is the same as regular enterprise but shows cumulative amounts ince the enterprises inception

FV Valuation Techniques

o Market Approach - priced by market transactions - Level I o Cost Approach - replacement cost to replace asset - Level II o Income Approach - PV techniques used to discount cash flows to PV amounts - Level III o Any change in technique is a change in estimate

FV Option for Assets/Liabilities Characteristics

o Measurement is MADE at fair value on the date the item is first recognized, date a commitment is made, date assets cease to qualify for FV treatment due to specialized accounting, when assets are no longer required to consolidate (EQUITY METHOD), o FV Option is never revocable o FV can be made on instrument by instrument basis, but all instruments must use the same method o Unrealized gains/losses are reported on IS NOT OCI

What criteria must be met in order to recognize a liability in exit and disposal activities?

obligating event has occurred (payment of some kind); event results in present obligation to transfer assets or to provide services in the future; and the entity has little or no discretion to avoid the future transfer of assets or providing of services

What is the traditional approach under SFAC #7?

one discount rate used to take the present value of a future cash flow stream; this can be used for something like bonds with scheduled known payments.

Pension - settlement

pension plan assets increase in value

IFRS - recognizing contingent assets

possible asset not recognized just disclosed

What is other comprehensive income?

revenues, expenses, gains, and losses that are included in comprehensive income but excluded from net income under GAAP of IFRS (PUFER mnemonic)

ratio-debt ratio

total liabilities ÷ total assets

Under s-x, can interim financial statements be condensed financial statements?

yes

o Steps to FV measurements -

• Identify Asset • Determine principle market (highest and best use & Greatest volume and level of activity) • Determine valuation premise (in use or in exchange) • Determine Valuation Technique (Market Approach, cost approach, income approach) • Obtain inputs for valuation of the FV item - Use lowest level • Calculate FV

Inventory

• Tangible personal property • Held for sale in ordinary course of business • In process of production for sale (WIP) • To be used currently in the production of items for sale (raw materials)

IFRS - treatment of amortization of intangibles

finite life: it is amortized over useful life. indefinite life: it is not amortized, tested for impairment at the reporting date

What are some examples of non-extraordinary items?

gain or loss from sale or abandonment of property, plant, or equipment used in the business; large write-downs or write-offs of: receivables, inventory, intangibles, long-term securities (permanent decline); gain or loss from foreign currency transactions and translation; losses from major strike by employees; long-term debt extinguishments that are part of common management strategy

IFRS - Relevance

helps user make decisions, predictive value, confirmatory role, materiality

Cash BS Presentation

i. 2 accounts at same bank can be netted ii. 2 accounts at different banks can never be netted

ARO Disclosures

i. Description of ARO ii. Description of FV determination iii. Funding policy iv. Recognition of beginning and ending carrying value

Permanently Restricted Net Assets

i. Entire donation can't be spent but usually interest can ii. Artwork that must be maintained in a certain way iii. Land held in perpetuity iv. Regular Endowments

Objectives of GASB Financial Reporting (Stmt 1)

i. Establishes Objectives of External reporting by state and local governments ii. Gvt Environment is characterized by representative gvt, separation of powers, intergovernmental revenues, services provided to tax payers iii. Budgeting is very significant iv. Controls over Rev/Expenditures are done through fund accounting v. Gvt reports are used to compare Actuals to budgets, assess financial condition, determine compliance with laws/regs, evaluate effect/effic

3 Exception to FV Treatment for Non Monetary Exchanges

i. FMV of assets received and given up are unknown ii. Transaction is done to facilitate sales iii. Transaction lacks commercial substance - Cash flows do not change in risk, timing, amount and - Do not include tax effects when considering cash flows

Hierarchy of Sources of GAAP for Government

i. GASB Statements and Interpretations ii. GASB Technical Bulletins, SOP's, and Accounting/Audit Guides iii. Practice Bulletins iv. Implementation Guides

Acquisition Method Steps (4)

i. Identify the acquirer (parent company) and acquire (subsidiary ii. Determine the Acquisition Date iii. Recognize and measure identifiable assets acquired, liabilities assumed and non controlling interest in acquire iv. Recognize and measure goodwill, or recognize gain from bargain purchase

Percentage Completed Method Characteristics

i. If billing exceed CIP you must show liability ii. If you determine a loss will be incurred, record immediately iii. Revenue for both methods will be the same, just recorded different times iv. % Completion CIP inventory acct includes Construction costs plus GP v. Completed Contract CIP inventory account includes construction costs only

Transactions Increasing/Decreasing Capital Account

i. Loss payout decreases capital account ii. Interest % payout to partners increase their capital accounts iii. Salary payouts increase partners capital accounts

Accounting for Servicing Assets

i. Report Assets and liabilities SEPARATELY ii. Measure assets retained by the transferor by allocating CV based on FV at date of transfer iii. Initially measure all purchased assets, liabilities, and liabilities undertaken in sale or securitization at FAIR VALUE iv. Account separately for interest only strips

Transition Obligation

i. Represent difference between accumulated postretirement benefit obligation and the FV of plan assets at the beginning of the year the plan is adopted ii. May be recognized immediately iii. May be recognized on a straight line basis over maximum of 20 years

Cash and Cash Equivalents Characteristics

i. Short term, highly liquid investments ii. Readily convertible to cash iii. Maturity in less than 3 months iv. Low risk in change of value

Statement of Functional Expenses

i. Shows expenses by Nature and broken out by Net Asset Class ii. Only required by Voluntary Health and Welfare entities

Primary Government Examples within Reporting Entity

i. State Government ii. General Purpose local government iii. Special purposes local government

What additional disclosures are required to be made for a developmental stage enterprise under GAAP?

identify fin states as from a development stage entity; balance sheet-cumulative net losses are deficit accumulated during development stage; income statement-show revenues and expenses for each period and cumulatively from inception; statement of cash flows-include cumulative amounts of cash inflows and cash outflows from inception and current amounts of cash inflows and cash outflows for each period presented; statement of stockholders' equity-number of shares of stock (or other securities) issued, dates of issuance, dollar amounts assigned, if non-cash consideration is involved in the issuance, then include: description of nature of consideration and basis for valuation

What is the cumulative effect of a change in accounting principle?

if non-comparative statements being used, cum effect is diff between beginning retained earnings in period of change and what they would have been if the accounting principle had been changed for all previous affected periods. If comparative statements used, then cumulative effect is diff between beginning retained earnings in first period presented and what they would have been with retroactive application of principle

What is the fair value objective of SFAC #7?

if you can't determine fair value in marketplace, you must obtain an estimate of fair value (i.e. a present value of future cash flows)

What is the definition, under us GAAP, of extraordinary items?

events that are: (1) material in nature; (2) of a character significantly different from the typical or customary business activities; (3) not expected to recur in the foreseeable future; and (4) not normally considered in evaluating the ordinary operating results of an enterprise

Where can a gain or loss on disposal of a discontinued component disclosed?

face of income statement or in the notes

What is form 8-k?

filed to report major corporate events such as corporate acquisitions or disposals, changes in securities and trading markets, changes to accountants or financial statements, changes in corporate governance or management

IFRS - sales leaseback treatment of gain

finance lease: amortized over lease term - Operating: recognized immediately

What must be disclosed with relation to liabilities on exit or disposal activities and where?

in the notes; description of exit or disposal activity (including facts leading to expected activity and expected completion date); for each major cost associated with an activity: (1) total amount expected to be incurred in connection with the activity, amount incurred in the period, cumulative amount incurred to date, and (2) reconciliation of beginning and ending laibility balances showing changes during period for costs incurred, costs paid or otherwise settled, and any other adjustments with explanations; line items in income statement in which costs are aggregated; for each reportable segment total amount of costs expected to be incurred, amount incurred in the period and incurred to date; if liability for cost associated with activity not recognized because fair value can't be estimated, explanation

At the time an investor makes an investment that gives it significant control over an investee, what information must the investor determine in order to use the equity method of accounting?

At the time of investment, the investor must determine: 1. Book value of assets and liabilities of investee; 2. Fair value of assets and liabilities of investee; 3. Allocation of any difference between cost of investment and fair value of investee's assets and liabilities.

List the Average Method of Interest Capitalization formula.

Average interest rate on all loans x AAE

Composite or Group depreciation

Averages service life of numerous assets as if single unit Depreciation Formula - Sum of SL depreciation of individual assets / Total average costs Gains and Losses are not recognized on disposals G/L are netted into accumulated depreciation When composite/group assets are sold, the basis of the group is decreased by the cash proceeds received

Annual Sales Method to determine BD Expense

BD Expense is a % of Sales IS Method

Inventory Formula

BI + Purchases = Goods Available for Sale - Ending Inventory = COGS

Unrestricted Net Assets

Board can use its own discretion to spend funds Quasi endowments

Market Rate

Bond which interest expense/revenue is calculated Ex. yield, effective rate, yield to maturity, real rate -Divide Rate by # payments in the year on Exam problems

Comprehensive Definition - SFAC Definition

Change in Equity due to NON OWNER SOURCES (ie. Not investments by Owners and distributions to Owners) Different from codification definitions

Diluted Earnings Per Share -

Companies with complex capital structure - Companies with dilutive securities, convertible preferred stock, convertible bonds, common stock equivalents, contingent shares

PV of Bonds Keywords

Conversion of debt, Convertible debt securities, Detachable warrants, Extinguishment of debt Gains/losses of extinguishment of debt, FV option, FV election, Bond sinking fund, and Long Term Debt

IFRS Convertible Debts

Convertible Debt is issued, part is recorded as liabilitym, part as stockholder's equity. In US GAAP, all is recorded as liability

Cost / Benefit Relationship

Cost of providing information must not exceed benefit

Sold at Par - Bonds

Coupon Rate = Market Rate

FX Translation Methods

Current Rate Remeasurement Method

Underfunded Pension Plan

Current or Non Current Liability on BS

Two Types of Warrants

Detachable Non Detachable - not tested

How is the cost of ending inventory determined?

Determined by applying one of the four cost flow assumptions .

Present Value of an Ordinary Annuity

Determines the value of a series of future periodic payments at a given time at the end of a period.

Equity Method Deferred Tax Liability

Difference between book income (Equity Income) and taxable income (dividend income) times 20% is your DTL and Deferred Tax Expense

Diluted EPS Calculation - Convertible Preferred Stock

Diluted EPS begins with the income and share figures determined for basic EPS assume that each convertible item was actually converted at the beginning of the year and then factor in the resulting impact of that conversion. o Convertible Preferred stock - Assume conversion and save related preferred stock dividends.

Diluted EPS Calculation - Stock Options

Diluted EPS begins with the income and share figures determined for basic EPS assume that each convertible item was actually converted at the beginning of the year and then factor in the resulting impact of that conversion. o Stock Options - Assume conversion, collect the cash from this conversion, and use the cash to buy back treasury stock at the average price of the stock for the year.

Inventory for Manufacturing Includes

Direct Materials Direct Labor Direct Factory Overhead Indirect Factory Overhead

Bad Debt Methods

Direct Method Allowance Method

Net Method of Recording Purchases

Discounts are assumed taken and purchase price reflects the net price

Liquidating Dividends

Dividends based on other than earnings - Return of capital to stockholders - Disclose APIC is debited rather than RE Liquidating portion is referring to APIC portion only

Cumulative Preferred Stock

Dividends in arrears must be paid to preferred holders before common stock holders - Not liability until declared

Explicit costs

Documented out-of-pocket expenses (e.g., wages, cost of raw materials, etc.)

Cash Flow - [Direct Method] Gain on sale of investment-Assume an Available-for-sale investment that had an original cost of $50, was sold for $60. The cash proceeds would be considered an Investing activity, so the gain is a non-opeerating gain and should not be part of Operating activities. The entry would be?

Dr. Cash 60 Cr. Investment 50 (cost) Cr. Gain on Sale of AVS 10

Issue Price

Equal to: Carrying Value of Bond Total Book Value

Fixed Assets to test for Impairment

FA/PPE Intangibles Goodwill (2 step process)

What authoritative literature is included in the codification?

FEDPRIA mnemonic: F inancial accounting standards board; Emerging issues task force; Derivative impementation groups; accounting Principles board opinions; accounting R eserach bulletins; accounting I nterpretations; A icpa

Cash and Cash Equivalents Keywords

Fair value, Remote, Sale of Receivables, Compensation future absences, Contingency, Current Liabilities, Loss Contingencies, Loss Contingency, Probable, Reasonably Probable, Refinance Obligation, With Recourse, Without Recourse, Working Capital, Surrendering Control

Embedded Derivative

Feature of a financial instrument that makes it a derivative Ie. Convertible bond with a stock option build into it

8K Requirements - SEC

File within 4 Days Information statements Be able to review list of events and determine what s/b 8k disclosure

IFRS - items are recorded on the Income Statement in IFRS - Income

Finance Costs Tax Expense Discontinued Ops Profit/Loss Non-controlling interest in Profit/Loss Net profit/loss attributable from equity

Disclosures for financial Instruments other than Derivatives

Financial Instruments - whether on BS or Not - FV - Information pertinent to estimated FV - Distinguishing between instruments held or issued for trading purposes and those held or issued for purposes other than trading - Do not net or aggregate FV's of derivative financial statement values with FV of non derivative financial statements Financial Instruments with Concentration of Risk - Information about similar activity, region, or economic characteristics - Maximum potential accounting loss - Information about collateral security requirements

Derivative Characteristics

Financial Instruments that have: -----Contract where one party must deliver financial instrument to second party on potentially unfavorable terms with second party ----Right to second party to receive financial instrument from first party on favorable terms with first party Derivatives derive their value from something outside the instrument itself

List the three methods of assigning value to inventory under International Financial Reporting Standards (IFRS).

First In First Out (FIFO), specific identification, and weighted average.

Futures Contract

Forward based contract to make or take delivery of a instrument, currency or commodity at a specific price or yield i. More specified than forward contract and more clean/defined contract ii. Traded on regulated exchange and less risk than forward contract

What accounting principles and practices should be used in preparing interim statements?

GAAP-certain modifications allowed from most recent statements (costs may be allocated to interim periods based on estimates of time expired, benefit received , or other activity associated with interim period; IFRS same principles and practices must be used as were used in most recent financial statements

Two Gross Profit Methods

GP when Sales is 100% GP when Cost is 100%

Interim Reporting Periods

Generally QUARTERLY financial statements Emphasizing timeliness Inventory Losses - Write down inventory during quarter if decrease is not temporary ; losses can be written up to original value only if they increase

Define "market cost".

Generally replacement cost, subject to a range of values defined by an established ceiling value and an established floor value.

Operating Accountability - GASB

Government Wide Financial Statements Show how effective and efficient the organization uses its resources

Schedule of Employer Contributions

Governmental entities reporting pension trust funds

What is a change in accounting estimate and how is it handled?

it is determined that an estimate previously used by the company is incorrect; account for prospectively starting with current period and going forward; if the change in estimate effects future periods, effects on net income should be reported in notes;

Accounting for Transfers of Participating Interests -

In order to be accounted for as a sale, assets cannot be divided into components unless components are a PARTICIPATING INTEREST

Cash Flow - Formula for "cash paid for income taxes" in preparing for statement of cash flow under operating is?

Inc tax exp. - [(End. Inc. tax payable - Beg inc. tax payable) - (End. Def. tax liability - Beg def. tax liability) = Cash Paid for inc. tax

Bargain Purchase Option - Capital Lease

Included in the future cash flows so that the present value figure (recorded for the asset and the liability) will be higher.

GP - OpInc - Ib4T - ICO - D(n) - E(n) - Net

Income statement order

What is the basis on which Lower of Cost or Market (LCM) can be applied?

Individual Item, Category, Total Inventory; But must be consistent from year to year.

Revenues / Expenses

Inflow / Outflows changing assets/liability balances as a result of ONGOING MAJOR OR CENTRAL OPERTIONS

Where are held-to-maturity investments reported on the statement of cash flows?

Investing Activity.

Is a noninterest-bearing note issued at a premium or discount?

It is issued at a discount.

How are adjustments for net realizable value applied?

Item-by-item basis.

IFRS Inventory

LIFO not allowed Market is always Net Realizable Value(Fair Value less costs to sell) to determine lower of cost or market.

IFRS Leases

Land and Building are accounted for separately Instead of 75% of ecomonic life, IFRS uses major part of asset's economic life. Instead of PV being 90% of minimum lease pymt, IFRS must be equal or substantially all the fair value of the assets.

Leasehold Improvement Amortization

Lessor of: Lease term or Useful life

Cash Flow - Financing activities include all cash flows involving (?) other than (?) Items?

Liabilities and owner's equity other than operating items.

Under International Financial Reporting Standards (IFRS), is inventory reported at lower of cost or market OR at lower of cost or net realizable value?

Lower of cost or net realizable value

Segment Reporting

Management Approach is used for segment reporting -----Based on the way management organizes segments internally for making its decisions

Monetary Unit Assumption

Money is denominator of economic activity and provides basis for measurement

Retirement of Stock

Handled similar to treasury stock

Cash Flow Hedge

Hedge exposure to variability in cash flows of recognized asset or liability or forecasted transactions Specific Criteria Hedged asset /liability and hedging instrument must be linked -----Basis for change in cash flow is the same for hedged A/L and hedging instrument Accounting for Cash Flow Hedge - 1. Effective Portion reported in OCI 2. Ineffective portion recorded in Income

5 Attributes to Measure Assets and Liabilities

Historical Cost Current (Replacement) Cost Current Market Value Net Realizable Value Present Value of Future Cash Flows

Appropriation (Reserve) of Retained Earnings

Holds aside RE earnings amounts that are not available for dividends

List the limitation of recorded value of self-constructed assets.

Market value at completion.

In the money

Market value is greater than exercise price

Term Bond

Matures at one date at end of bond life

Serial Bonds

Maturing in series of installment dates

In Exchange - Valuation Premises

Maximum value by using on its own

Solvency Ratios

Measure Short Term ability to pay debts

Earnings Per Share

Measure performance of an entity of reporting period

Non Employees Share Based Payments

Measured at FV of equity instruments or FV of goods and services, whichever more reliable

Inventory Turnover

Measures the number of times inventory was sold and reflects how quickly inventory is bought and then resold Cost of Goods Sold / Average Inventory

Operational Efficiency -

Measures utilization of assets

Comprehensive Income (ASC Definition)

Net Income + Other Comprehensive

Gain Contingencies

Never record unless you are 100% certain you will receive payment

Date of Record

No Entry made

What are the subcategories of reliability?

Nobody Relies on Financials unless Verified: Neutrality; Representational Faithfulness; Verifiability

Overfunded Pension Plan

Non Current Asset on BS

Direct Method of Bad Debt

Non GAAP ; write off AR when determined uncollectable -Does Not match Expense to Sales -Only used when BD is immaterial

What is the classification of natural resources on the balance sheet?

Non-current asset

What is the classification of a liability callable on demand if debt covenant is violated and it is probable that the debtor will cure violation?

Noncurrent Liability.

Derivative Non Examples

Normal purchases and sales Equity Securities Debt Securities Regular way security trades Leases Mortgage backed securities Employee Stock Options Royalty agreements Variable annuity contracts Adjustable Rate Loans Guaranteed Investment Contracts Nonexchanged traded contracts Derivatives serving as impediments to sales accounting

When are unpaid construction input costs included in Average Accumulated Expenditures (AAE)?

Not until cash is paid

IFRS - netting deferred tax assets and liabilities

ONLY if related to the same country/taxing authority

Budget deficit

Occurs when taxes and other governmental revenue are less than government spending

Budget surplus

Occurs when taxes and other governmental revenues are greater than government spending

3 Characteristics of Derivative Instruments

One or more underlying and one or more notational amounts -----Underlying - Specified price- ie. Stock price, interest rate, currency rate, commodity price, credit rating, avg temp -----Notation - # of shares, principle amount, face value, stated value, barrels of oil, etc No initial investment required Terms of financial instrument or contract do one of the following with regard to settlement -----Require or permit net settlement either within the contract or by means outside the contract ----------Net Settlement - contract can be settled through payment of cash rather than exchange of specific assets referenced in contract ------------------Usually occurs with currency or interest rate swap -----Provides for delivery of an asset that puts recipient in a position not substantially different from net settlement

IFRS Deferred Taxes

Only Recognized if it is probable they will be realized

Intangible Assets Accounting - GASB

Only identifiable intangible assets can be recognized as capital assets in statements of net assets Costs for internally developed intangibles are capitalized when: 1. Objective is determined 2. Feasibility is demonstrated 3. Intention to complete or continue development is demonstrated If no useful live is available, indefinite life can be used

Contingency Gains

Only recogized when substantially complete.

Compensated Absences - Sick Days & PTO - Loss Contingencies

Only record liability for VESTED amounts that you are REQUIRED TO PAY OUT I.e. Can collect payment instead of receiving days off

Pension - 4 criteria for Non-retirement OPEB

P.E.A.R. P-ayment is probable E-mployees svcs already rendered A-mount is reasonably estimated R-ights vest or accumulate

Weighted Average

PERIODIC METHOD EI and COGS calculated using the average cost of all units held at period end

Moving Average

PERPETUAL METHOD New weighted avg calc'd after each purchase of inventory

Alternative Revenue Recognition Methods

Percentage of Completion Upon Receipt of Cash - Installment Sales/Cost Recovery Methods Multiple Deliverable Arrangements Milestone Method of Recognition of R&D Contracts

10Q Requirements - SEC

QUARTERLY REVIEW ONLY o Large Accelerated & Accelerated - 40 days o All other - 45 days o Must disclose prior Year Ending balance and Prior Year same quarter (if seasonal fluctuations in business only)

Define "stated rate".

Rate used to calculate accrued interest.

Percentage of Completion Method

Recognition of contract profit during construction based on expected total profit and estimated progress towards completion in the current period. Normally used unless the percentage of work done cannot be estimated or there is some significant uncertainty as to whether the construction company can complete the work or the buyer can make payment. When a loss may be incurred the full estimated loss must be incurred which would include reversing any previous recognized profits.

Contributed Services are recognized as both revenue and expense - N4P Accounting Differences

Recognize Services if EITHER: -----Create or enhance non financial assets -----Require specialized skills

What is the accounting treatment by the issuer for additional consideration paid to induce conversion of convertible bonds?

Recognize expense for the fair value of the additional consideration

Investments - Non Profit

Recorded at Fair Value with Gains/losses flowing to Stmt of Activities

IFRS - recording profit or loss in the current period for investment property under the Fair Value model

Recorded on the Income Statement

Predict & Confirm

Relevance

Pension - Pension Expense calculation

SIRAGE + Service costs + Interest Costs - expected Return on plan assets + Acmortization of prior service costs ± loss/Gain amortization + amortization of Existing obligation/asset

Pension - net post-retirement benefit cost =

SIRAGE current Service cost Interest cost on APBO <actual Return> Amortization of prior service cost <Gain>/loss amortization amortize/Expense transition amount

Cash Flow - Formula for "cash collected from customers" in preparing for statement of cash flow under operating is?

Sales - [Ending AR - (Beg AR - Write-offs)] = Collections

List the formula to arrive at net realizable value

Sales price - estimated cost to complete and sell the inventory.

Cash Flow - What is the direct method for a Statement of Cash Flows?

Starts with Income from Continuing Operations Adjusts for changes in accounts like A/R, A/P, Inventory and non-cash revenues, expenses, gains, losses If used, the Indirect Method must also be shown

Cash Flow - What is the Indirect Method for a Statement of Cash Flows?

Starts with Net Income Adjusts for changes in accounts like A/R, A/P, Inventory and non-cash revenues, expenses, gains, losses

Personal Financial Statements

Statement of Financial Condition (BS) Statement of Changes in Net Worth (IS)

IFRS - required financial statements

Statement of Financial Position Statement of Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes

What is the market value method of recorded converted debt?

The more reliable of market value of the stock or bonds is allocated to the capital stock account and contributed capital in excess of par account. A gain or loss is recorded equal to the difference between the total market value recorded and the remaining book value of the bonds.

What is the basis for general guidelines for determining the level of influence over an investee?

The nature and extent of Investment.

Forward exchange rate

The price at which foreign exchange can be bought or sold with payment/delivery set for some day in the future

What is SFAC #1 and what are its purposes?

The purpose is basically to disclose an entity's performance. The objectives provide: (1) information useful in investment and credit decisions; (2) Information useful in assessing future cash flow prospects; (3) Information useful in assessing an enterprise's resources, the debt and equity claims to those resources, and the changes in them.

Translation exposure

The risk that a company's equity, assets, or income will change in value as a result of foreign exchange rate changes

Transaction exposure

The risk that a firm could suffer economic loss or experience economic gain upon settlement of individual transactions as a result of change in foreign exchange rates

Consistent Reporting

The same accounting procedures are followed in the same way in each accouting period.

Define "bond proceeds".

The sum of the bond price and any accrued interest.

Interest rate parity

The theory that investors should earn the same return on investments in all countries after adjusting for risk

At the time an investment gives the investor significant influence, but not control, over an investee, how will any difference between the cost of the investment and the book value of the investee's assets and liabilities be allocated?

To adjust an investee's assets and liabilities to fair value, then 1. If cost of investment > fair value of investee's net assets, to Goodwill; OR 2. If cost of investment < fair value of investee's net assets, to Gain.

Completed Contract Method -

Total Contract Price - Total Costs incurred = Income on Construction Recognized Income when complete

What two approaches does SFAC 7 allow for determining present value?

Traditional approach and expected cash flow approach.

Define "maturity date".

The date the maturity value is paid, the end of the bond term.

Short Term Obligations - LT Reclass Criteria

Typically ST but can reclass to LT if: -Company intends to refinance obligation on long term basis AND -Intent is supported by ability to refinance i. Post Balance sheet issuance of long term debt or equity ii. Financing agreement permitting refinancing on long term basis -STO amount excluded from current liability should not exceed i. Net proceeds of debt or security issued ii. Net amounts available under refinancing agreement

Inventory Impairment

US GAAP - Lower of Cost or Market Ceiling - Net Realizable Value (Selling Price less Selling Costs and Costs to Complete) Floor - Net Realizable Value les Normal Profit Compare to historical cost, the lower of the 2 numbers is reported for inventory.

How should bonds with detachable warrants be accounted for after issuance?

Unaffected by warrants; amortize premium or discount.

What are the categories of investments under International Financial Reporting Standards (IFRS) No. 9?

Under IFRS No. 9 two categories of investments (and other financial assets) include: 1. Debt investments measured at amortized cost; 2. All other investments, including debt instruments not at amortized cost and all equity investments.

How do you account for an error correction?

correct error in year made (if that year presented); if error year not presented, adjust beginning retained earnings of earliest year presented; under IFRS can restate information from earliest practical date

Under SFAC #7, what other factors must be looked at for FCF for liabilities?

costs to settle, credit standing of company, and others.

ratio-current ratio

current assets ÷ current liabilities

Pension - attribution period

date of hire until the date of full eligibility

What is date of transition to IFRS?

date of opening balance sheet (date of first balance sheet presented)

For a discontinued operation, when is a gain or loss (not previously recognized) resulting from a sale of a component recognized?

date of sale and not before; anticipated future gains not reported until they occur.

IFRS - extraordinary items treated

doesn't allow extraordinary items.

IFRS - tax rates are used for calculating deferred tax assets/liabilities

enacted rate or substantially enacted tax rate

Under SFAC #7, what are the five elements of present value measurement?

estimate of future cash flows; expectations about timing variations of future cash flows; time value of money (risk free rate of interest); the price for bearing uncertainty; other factors( liquidy issues, and market imperfections)

What is a form 10-k?

filed annually; deadline 60, 75, 90 days after end of fiscal year for various filing types; contain (financial disclosures, summary of financial data, management discussion and analysis, and audited financial statements GAAP

What are forms 3,4,and5?

filed by directors, officers, or beneficial owners of more than 10 percent of a class of equity securities of a registered company

What is form 10-q?

filed quarterly; deadline 40, 45 days after end of quarter; contains (unaudited financial statements GAAP, intermim MD&A, and certain disclosures)

What is SFAC #7 and what is its purpose?

framework for using future cash flows to measure assets and liabilities

What is a change in accounting principle and how is it applied?

from GAAP to GAAP or from IFRS to IFRS; new principle must state better; only on recurring change; direct effects are adjustments that would be necessary to restate prior Fin statements; indirect effects differences in non-discret. items occurring if new principle used in prior periods

Which items are normally excluded from segment profit or loss?

general corporate revenues, general corporate expense, interest expense (except for financial insitutions), income taxes, equity in earnings and losses of an unconsolidated subsidiary (under equity method), gains or losses from discontinued operations, extraordinary items, minority interest

Unsecured Bonds

Unsecured bond payable with no collateral I.e. debenture

When are bonds sold at a discount?

When stated rate < market rate.

Under International Financial Reporting Standards (IFRS), is reversal of a write down of inventory permitted?

Yes, it is permitted

Under International Financial Reporting Standards (IFRS), is revaluation of Property, Plant, and Equipment (PPE) allowed?

Yes, revaluation is allowed.

Is fixed overhead one of the four manufacturing input costs?

Yes, this is one of the input costs.

What is emphasized more on interim statements, timeliness or reliability?

a component of an enterprise: (1) that engages in business activities from which it may earn revenues and incur expenses; (2) whose operating results are regularly renviewed by the enterprise's chief operating decision maker to evaluate performance; (3) for which there is traceable cash flow

Electing FV Characteristics

a. Can be elected on instrument by instrument basis b. Is irrevocable c. Must apply to entire instrument, not portion

Comprehensive Annual Financial Support (CAFR) (3 Sections Required)

a. Introductory Section - Letter of Transmittal, Org Chart, List of Officials b. Basic Financial Section - Auditors Report, required financials and supplementary info c. Statistical Section - Net Assets by component, changes in NA, revenue/debt capacity, demographic and economic statistics

Methods to Record LCM Inventory Write Down

a. Make entry to establish EI using the market figure - overstates COGS and records loss within COGS b. Separate entry for to record loss for market Decline i. Debit Loss due to market decline ; Credit Inventory

How do you use the catch up approach to account FO changes in estimated cash flows under SFAC #7?

adjust the carrying amount of the asset or liability to the present value (using revised estimates) and discount using original effective interest rate

What should the disclosure explaining the transition to IFRS contan:?

reconciliation of equity reported under GAAP to IFRS for: date of transition and end of last period presented in entity's most recent annual statements under GAAP; reconciliation of total comp income FAAP to IFRS; dsclosures related to recognition or reversal of impairment losses, if recognized for first time when preparing opening IFRS balance sheet

IFRS - borrowing costs capitalized if

related to acquisition, construction, production of qualifying asset

What are the primary qualities of decision usefulness?

relevance and reliability

Under IFRS what are the subcategories of relevance?

relevance instead of timeliness

IFRS - requirements for using the revaluation model for PP&E

reliably measurable applied to whole class of assets no guidance on frequency of valuation

Proprietary Funds

used for funds with service fees or charges. 1) Internal Service Funds - Internal Cost Reimbursement 2) Enterprise Funds - Intended to be primarily (over 50%) self-supported by user charges. Even in the fund-based financial statements, the reporting for enterprise funds is also much like that of a for-profit organization. Assets are reported as assets. The construction of government-wide financial statements and the financial reporting for proprietary funds are quite similar.

LIFO reserve -

used when LIFO is used for external reporting and another method used for internal reporting

Fiduciary Funds

used when govt holds money for someone else, not for government use. 1) Pension Trust Funds - Defined Benefit Plans 2) Agency Trust Funds - Resources in Temporary Custody 3) Private Purpose Trust Funds - Where Principal and Income is for benefit of specific individuals, private organizations and other govts. (Escheat Property) 4) Investment Trust Funds - External Investment Pools.

When a company issues new securities, what is it required to submit to sec and what does that include?

required to submit registration statement that includes: (1) disclosures about securities being offered for sale; (2) relationship of new securities to company's other securities; (3) information similar to that filed in annual filing; (4) audited financial statements; (5) description of business risk factors

What do you include in calculation of discontinued operations?

results of operations of the component; gain or loss on disposal of component; impairment loss (and subsequent increases in fair value) of the component but only to cancel losses

In transitioning to IFRS, the cost of long term assets, investment property and intangible assets can be deemed fair value if?

the entity discloses: (1) the total of those fair values; and (2) the total adjustment to the carrying amounts reported under previous GAAP

IFRS - first IFRS reporting period

the latest reporting period in first IFRS

What is an asset's highest and best use, with reference to fair value?

the use that maximizes the value of an asset or group of assets; if best use is in-use fair value based on price to sell asset to be used in group; if best use is in-exchange, fair value is based on price to sell asset standalone

What are reclassification adjustments with respect to OCI?

move other comprehensive income items from accumulated OCI to income statement (can be displayed on face of financial statement or disclosed in notes to financial statement).

How do IFRS differ in SFAC #7 material?

they don't consider use of cash flow info and present value in acct measurements

Permanent Tax Differences

o State and municipal bond interest revenue is included in book income but not in taxable income. o Life insurance premium expense (when the corporation is the beneficiary) is deducted for book income but not for taxable income. Consequently, proceeds received on such policies result in a book gain but are not taxable. o Federal income tax expense is deducted for book income but not for taxable income. o Payment of penalty or fine is deducted for book income but not for taxable income. o Dividend received deduction (DRD) is deducted for taxable income but not for book income.

What is the difference between a multiple step income statement and a single step income statement?

on the multiple step: continuing operations are separated into operating and non-operating. On both, that total is reported before tax and then tax is taken out to get to net income or income from continuing operations

Under us GAAP what can a component of an entity be?

operating segment; reportable segment (as defined in segment reporting); reporting unit (as defined in goodwill impairment testing); subsidiary; an asset group (collection of assets to be disposed of together as group in single transaction and liabilities directly associated with those assets transferred in same transaction)

What is fair value and what are some of its characteristics?

price to sell an asset or transfer a liability in an orderly transaction between market participants at measurement date; measured for specific (group of ) asset(s); market-specific not entity-specific; measured in most advantageous market for asset/liability; fair value is exit price not entrance; should reflect all assumptions of market participants including risk; does not include transaction costs, but maybe transportation costs if location is attribute; assumes highest and best use of asset; for liability should include nonperformance risk; assumption about liabilities being sold in marketplace but unusual in practice

Under us GAAP a development stage enterprise is one in which either:?

principal operations have not yet commenced; or principal operations have generated an insignificant amount of revenue (or a loss) (under GAAP expense start-up and organizational costs immediately)

What are some of the costs associated with exit and disposal activities?

involuntary employee termination benefits; costs to terminate a contract that is not a capital lease; other costs associated with exit or disposal activities, including costs to consolidate facilities or relocate employees

Under s-x what disclosures are required for interim reporting?

material contingies; events subsequent to end of most recent fiscal year that have a material impact, but can omit unchanged things shown in previous fiscal year annual statements

What are the regulation s-x requirements for interim financial statements?

must be reviewed by independent accountant and review report must be filed with statements; must include: balance sheets from end of most recent quarter and end of preceding year; income statements for most recent fiscal quarter, y-t-d, and may also include most recent 12 months; statements of cash flows y-t-d and corresponding y-t-d at same time last year,and maybe most recent 12 months

When is a component or a disposal group considered to be held for sale?

must meet all of these criteria: (1) management commits to plan to sell; (2) available for immediate sale in present condition; (3) actively looking for buyer; (4) sale is probable and expected within 1 year; (5) sale actively marketed; (6) unlikely that significant changes to sales plan will be made or withdrawn

IFRS - Fair Value

must still be disclosed in the notes to the financial statements

What is the income statement good for?

performance for a period of time; useful in determining profitability, value for investment purposes, and credit worthiness.

Items that are NEVER R&D

i. Already being produced items ii. Commercial activity iii. Seasonal or routine items

R&D Examples

i. New Knowledge or technology ii. Reformulation of process iii. Prototype or model iv. Application of new research findings

What if something is unusual or infrequent but not both?

if material, these should be a separate line item as part of income from conitnue operations (non-operating)

What amounts are included in discontinued operations and when?

impairment loss; gain/loss from actual operations; gain/loss on disposal; included in discontinued operations when they occur (not before)

When should an entiy start recognizing assets and liabilities according to IFRS?

in opening balance sheet recognize all required by IFRS; needed adjustments to restate in confomity with IFRS made to retained earnings at date of transition

Normal Capacity of Production Facilities -

range varying based on business and industry specific factors

Pension - curtailment

reduce expected remaining years of service or eliminate accrual of defined benefits

IFRS - purpose of revaluation surplus account

revaluation of PPE

Under IFRS, what can a component of an entity be?

separate major line of business or geographical area of operations; or subsidiary acquired exclusively with a view to resale

IFRS - treatment of compound instruments

separated into debt and equity components at relative FMV

Pension - interest on PBO =

settlement rate * beginning PBO

What are forms 20-f and 40-f?

similar to 10-K but must be filed by foreign private issuers

How can comprehensive income be reported?

single statement of comprehensive income; income statement followed by separate statement of comprehensive income starting with net income; or (under GAAP only) statement of changes in equity

How is a single statement approach formulated?

start with revenue, expenses, income before taxes,income taxes arrive at net income; then OCI (net of income tax) total to Comprehensive Income

How are adjustments for fair presentation handled under s-x requirements?

statements should reflect necessary adjustments and a statement explaining that was necessary, if adjustments are all normal there should be statement, and a statement with detailed description of the nature and amount of non-recurring adjustments

When do you start reporting results of discontinued operations?

the process starts when disposed of or held for sale, but report for that period and any other periods presented; for future periods, report in the period they are in

What is the purpose of the statement of retained earnings?

to reconcile the beginning balance of retained earnings to the ending balance (usual presentation is immediately following income statement)

ratio-debt to equity

total liabilities ÷ common stockholders equity

Pension - pension liability synonym

uUnfunded PBO

What is a change in accounting entity and how is it handled?

under US GAAP happens when entity changes composition; if comp fin statements presented, restate to reflect information for new reporting entity (include full disclosure of nature of change and all changes in income because of change); IFRS doesn't recognize change in entity

In reference to fair value, what is the most advantageous market?

used for fair value only if no principal market; best price after considering transaction costs (though transaction costs not included in final calculation

What is the expected cash flow approach under SFAC #7?

used in more complex cases, not a big focus on interest rate selection (risk-free rate is used); instead the focus is on the uncertainty of cash flows, each possibility is assigned a percentage likelihood and they are weighed together

Costs included in Inventory -

• Cost to prepare goods for sale • Freight in (NEVER OUT - selling expense) • Handling • Normal spoilage • Direct materials and labor • Direct and indirect overhead

Pension - net periodic benefit cost (calculation)

+ Service cost + Interest on accumulated post-retirement benefit obligation + Amortization of transition obligation

Statements of Financial Accounting Concepts (SFAC)

- Accounting theoretical and fundamental CONCEPTS - RULES for writing RULES

Callable

- Corporation can repurchase preferred stock at specified price - If called, no gain recorded on I/S -----Gains recorded to APIC from preferred retirement -----Losses recorded to Retained Earnings

List the steps in Lower of Cost or Market (LCM) analysis.

1. Compute market value; 2. Value inventory at lower of cost or market.

4 types of Foreign Currency Hedges

1. Unrecognized Firm Commitment - 2. Available for Sale Securities - 3. Foreign Currency Denominated Transactions - 4. Net Investment in Foreign Operations

Fair Value Definition

Price received to sell asset or paid to transfer liability in orderly transaction between market participants at measurement date

Define "bond".

A financial debt instrument that typically calls for the payment of periodic interest (although a zero-coupon bond pays no interest), with the principal being due at some time in the future.

How do we account for the recovery of a Purchase Commitment loss?

A gain to the extent of the previously recognized loss.

Hedging

A party takes an action that creates the risk of a gain or loss that is the exact opposite of an actual risk that the party already has. Overall risk of loss is eliminated because a loss on either the actual transaction or the new hedge will be offset by a gain on the other item.

Statement of Changes in Net Worth for Personal Financial Statements

Assets @ CV - Liabilities @ CV - Estimated Tax Liability = Net Worth Net CV of A/L - Tax Basis x Tax % = Estimated Tax Liability

Elements of Financial Statements (SFAC 6)

Assets, Liabilities, Equity, Investment by Owners, Distribution to Owners, Comprehensive Income, Revenues, Expenses, Gains, and Losses

Interim Reporting Keywords -

COGS - Interim, Interim Reporting, Interim Period

Inventory Turnover -

COGS / Average Inventory Indicates how rapidly inventory is sold

How is the loss on the early retirement of bonds computed?

Cash paid less book value of bonds retired plus unamortized bond issue costs.

Cash Flow - What items are included in operating activities on the Statement of Cash Flows?

Cash received from Customers, Interest & Dividends, Trading Securities Cash paid to Vendors, Suppliers, Interest, Taxes, Trading Securities

Cash Flow - What items are included in Financing Activities in a Statement of Cash Flows?

Cash received: Issuance of Stock, Issuance of Debt Cash paid: Dividends

Cash Flow - [Direct Method] Depreciation expense

Ignore, no effect on cash

What is the length of a bond term when bonds are issued between interest dates?

Period of time from issuance date to maturity date.

Methods of Recording Inventory

Periodic Method Perpetual Method

Permanent Funds

Permanent funds are governmental funds and are always included within the governmental activities.

Give an example of a response by a creditor if the debt covenant is violated by the debtor.

Require the debtor to pay the debt or refinance the debt.

What is the accounting treatment for convertible bonds with a beneficial conversion feature?

The excess of fair value of the stock to be issued upon conversion (measured at the date of issuance) over the face value of the bonds, is allocated to owners' equity.

What is the interest rate used to recognize interest expense before early retirement of a bond issued?

The yield rate on the date of issuance.

What is the interest rate used to determine the price of a bond issue to be retired early in an open-market purchase?

The yield rate on the date of retirement.

If an inventory error is discovered in year three, what is the impact on Retained Earnings?

There is no impact on Retained Earnings, the error has self-corrected.

Pension - defined contribution pension plan

amount of contribution specified, record liability and expense each year when contribution made

Under GAAP, how is income reported with statement of changes in equity?

as a separate column in statement of owners' equity

IFRS - treatment of land and building leased together

land: operating lease

IFRS - treatment deferred taxes

liability method all deferred tax liabilities reported - only "probable" deferred tax assets reported noncurrent classification only

How is income tax included in interims?

1) 10% size test, only needs to meet one: (is revenue of segment 10% or more of combined revenue, internal and external, of all operating segments (don't include interest income on loans to other segments); is the reported profit/loss of the segment 10% or more (in absolute amount) of combined profit reported for all segments that did not report a loss or the combined reported loss of all operating segments that did report a loss; are the assets of the segment 10% or more of the combined assets of all operating segments?

Why two ways of reporting in Governmental Accounting?

1) Different Measure Focus - Current Financial Resources vs. All Ecomonic Resources 2) Timing of Recognition is Different - Recognizing Current Funds Available 3) Method by which Internal Service Funds are included (Never a part of governmental funds but part of governmental activities) Permanent funds are included in both.

Goodwill Impairment Test

1) Fair Value greater than Book Value, Not Impaired 2) If Impaired, Individual Asset Fair Value less Fair Value of the Division is new Goodwill Amount >> When less than 100 percent ownership is achieved, the fair value of the company as a whole must be determined to arrive at the goodwill to be recognized.

Governmental Fund Types

1) General - Ordinary Govt Ops, taxes & General Revenues, only current 2) Special Revenue - specific taxes and earmarked sources designated to finance specific activities. GASB 34 - no expendable trusts 3) Debt Service - all General Obligation Debt 4) Captial Projects - Resources for acquistion and construction of major capital projects. 5) Permanent - Legally restricted where income not principal can be used to support govt. programs

Investment in Securities - Equity Method - Not Applicable

1) If an investment of more than 20% is temporary. 2) If investment in a foreign company which has severe restrictions on operations and transfer of money outside the foreign country 3) if an investment of more than 20% does not result in the ability to significantly influence.

Required Stmts for Not for Profit

1) Statement of Financial Position 2) Statement of Activities 3) Statement of Cash Flows

How do we calculate the rate used in double declining balance?

1) Straight-line rate (number of years divided into 1) i.e., if 5 years 1/5 = 20%. 2) Twice the straight-line rate 20% x 2 = 40%.

Investments in Securities - Categories

1) Trading - Reported at FMV usually as Current Asset, Unrealized Gains/Losses included in earnings in the current period. 2) Available for Sale - Report at FMV and group appropriately, Unrealized gains/losses excluded from earnings but recorded as Other Comprehensive Income unless decline is not temporary. 3) Available for Sale (Fair Value Option) - Treat as Trading Security 4) Held to Maturity - Reported at amortized costs & classified, Unrealized Gains/Losses exluded from earnings unless decline is not temporary.

If Average Accumulated Expenditures (AAE) < total interest-bearing debt, what is interest expense for the period?

The difference between total interest cost and the amount of interest capitalized.

GASB Notes to Financial Statements Disclosures

1. Accounting Policies 2. Reporting Entity Description 3. Cash and Investment disclosures 4. FA, LTD, Pension, Commitments and contingencies 5. Exceeding the budget and legal level of control 6. Individual funds with deficit balances 7. Risks related to deposits and investments

List the type of costs capitalized for natural resources.

1. Acquisition; 2. Exploration; 3. Development.

List the three ways to meet ability requirement.

1. Actually refinance before issuance of the financial statements; 2. Enter into a noncancelable refinancing agreement supported by a viable lender; 3. Issue equity securities replacing the debt.

List the criteria for held-for-trading securities.

1. Applies to investments in Debt and Equity; 2. Investor buys for the purpose of selling in the near term.

List the two steps of Dollar Valued (DV) Last In First Out (LIFO) Retail.

1. Apply DV LIFO; 2. Multiply by the cost ratio.

Elements of F/S for GASB

1. Asset - resources with present service capacity that government presently controls 2. Liability - Presents obligations to sacrifice resources that government has little or no discretion to avoid 3. Deferred outflow of resources - consumption of net assets by government that is applicable to future reporting period 4. Deferred Inflow - acquisition of net asset by government that is applicable to future reporting period 5. Net Position - residual of all other elements presented in a statement of financial position 6. Outflow of Resources - consumption of net assets by the government that is applicable to the reporting period 7. Inflow of resources - acquisition of net assets y government that is applicable to the reporting period

Bankruptcy Priority of Creditors Claims Against Net Assets (per Statement of Affairs)

1. Assets pledged with fully secured creditors 2. Assets pledged with partially secured creditors 3. Free Assets

FV Method of Measuring Servicing Assets

1. Initially record at FV 3. If elected, method cannot be changed 2. FV is measured at each reporting date Disclosures a. Beginning and ending balances, additions, disposals, and change in FV inputs

Describe the valuation of long-term liabilities.

1. Initially recorded at the present value of future cash flows; 2. Interest and amortization are recognized at the market interest rate the date the liability was established; 3. Interest expense equals the liability balance at the beginning of the period times the market rate of interest the date the liability was recorded.

What are the characteristics of investment property under International Financial Reporting Standards (IFRS)?

1. Investment property consists of building and/or land; 2. Held by the owner or a lessee under a capital lease; 3. For the purpose of earning rental income, recognizing capital appreciation, or both.

Held for Sale Criteria (shown at carrying value of LCM less selling costs) -

1. Management commits to sale 2. Assets available for sale 3. Active program initiated to find buyer 4. Sale probable 5. Asset being marketed 6. Unlikely sale plan will change

Servicing Assets Disclosures

1. Managements basis for determining classes 2. Risks 3. Instruments used to mitigate income statement effect of FV change 4. Contract Details 5. Other qualitative and quantitative details 6. FV Method Assets / Liabilities a. Beginning and ending balances, additions, disposals, and change in FV inputs 7. Amortization Method Assets / Liabilities: - Beginning ending balances, additions, disposals, amortization, application of valuation allowance to adjust carrying value and other changes - Recoveries of balance and write downs for period

List the attributes of Last In First Out (LIFO).

1. Matching of revenues and expenses is significantly improved over FIFO; 2. Income tax advantages associated with LIFO; 3. Balance sheet presentation is less than ideal.

List the attributes of First In First Out (FIFO).

1. Most closely approximates actual physical flow of goods for most companies; 2. Balance sheet valuation of inventory is at more desired current cost; 3. Matching of revenues and expenses on income statement is not ideal.

List the differences between moving and weighted average cost flow assumptions.

1. Moving average computes a new weighted average cost per unit after each purchase of inventory; 2. Moving average results in lower Cost of Goods Sold during period of rising prices.

List the required liability disclosures regarding stocks.

1. Nature and terms of purchase obligations; 2. The fixed or determinable price of redeemable stock and the fixed or determinable date for the stock redemptions; 3. The total maturity value of each long-term obligation; 4. The sinking fund requirements related to each long-term obligation; 5. The aggregate amount of the maturities and sinking fund requirements for each of the five years following the balance sheet.

List the criteria for reclassifying current liabilities to long term.

1. The intent to refinance the short-term obligation must be proven; and 2. The firm must demonstrate the ability to refinance the obligation.

List the investor's considerations in selecting the correct accounting for an investment.

1. The nature of the investment; 2. The extent of the investment; 3. Management's intent.

Qualitative Characteristics of GASB

1. Understandability - info can be interpreted by the user 2. Reliability - info is reasonably free from error or bias 3. Relevance - info can make a difference in a decision by user 4. Timeliness - info is available before it loses its capacity to affect decision 5. Consistency - info is consistently presented over tim 6. Comparability - user can identify similarities and differences between two entities

List the weighted average (WA) cost flow assumptions

1. Weighted average cost per unit is the average cost of all units held during period; 2. Each item is treated as if costed at WA cost.

Govt and Commercial Acctg Differences

1. absence of profit motive 2. restricts raising and spending revenues 3. revenue is total separate from expenses 4. emphasis on accountability & stewardship 5. use of fund acctg for various activities 6. formal bdgt by some funds w/ legal restrictions 7. uses Modified accrual acctg for timing purposes 8. Reporting current financial resources rather than all ecomonic resources

Segment Reporting

> The operating segment must have discrete financial information, earn revenues and incur expenses, and be reviewed regularly by the company's chief operating officer for decision-making purposes. > Separate disclosure is required for an operating segment if it is significant in size (it makes up 10 percent or more of the company's revenues, assets, or net income). All 3 criteria do not have to be met; only one has to be met. > Extensive disclosure is required about a publicly-owned enterprise as a whole such as the existence of major customers, revenues by product line, and the amount of sales generated outside of the country that the company views as its home. > However, determining profitability inside and outside of the company's home country may simply not be possible and is not required. > The rules established for the disclosure of information about a company's operating segments allow use of the company's own methodology as much as possible.

Translation & Remeasurement

> Translation is translating the foreign subsidiary's financials into the functional reporting currency of the parent. Any adjustments needed to balance trial balance are recognized in Other Comprehensive Income. > Remeasurement used to restate local currency into the functional currency of a company. Nonmonetary items use historical costs. Cash, AR, and AP use current rate. Revenues and Expenses are translated using the average rate. Imbalance is included in the calculation of net income.

Acquisition Method

> Use with business combinations > 4 steps in applying the acquisition method: 1. Identify the acquirer - 2. Determine the acquisition date. 3. Recognize and measure identifiable assets acquired and liabilities assumed. Where necessary, recognize and measure any noncontrolling (minority) interest still held in the acquiree. 4. Recognize and measure goodwill, or recognize a gain from a bargain purchase. § Goodwill has an indefinite life so amortization is not appropriate. Rather, it is tested each year and written down if impairment ever occurs. § Search must be made for any intangible assets owned or controlled by the new subsidiary. One of Two Criteria for Recognition must be met: 1) the company must be capable of separating the benefit from the newly-acquired subsidiary so that it could be sold (a list of customers, for example) or 2) where the company has contractual rights to the benefit (a noncompetition agreement, for example).

Property Dividends

Accounted for as Cash Dividends -Recorded at FV of asset transferred with gain recognized between difference of BV and FV at disposition

Government Wide Financial Statements -

Accounted for on Accrual Basis 1. Statement of Net Assets 2. Statement of Activities

Relevance - Faithful Represent - Extending - overall

Accounting Qualities

Fake Cash Method

Accounts for Current Asset/Liability section of Indirect Method of Operating Activities SOCF Whatever debit/credit made to adjust CA or CL, opposite will be recorded to cash

Proprietary/Enterprise Funds

Accrual Basis - Focus on economic resources, income determination, and CF presentation Fund Types (2) Internal Service Enterprise Funds

Fiduciary Funds - Financial Statements

Accrual Basis a. Statement of Fiduciary Net Assets b. Statement of Changes in Fiduciary Net Assets c. RSI Schedules ------Schedule of Funding Progress ------Schedule of Employer Contributions d. Post Retirment Benefits Other than Pension (OPEB) - accrual basis & similar to GAAP

Proprietary Funds - Financial Statements

Accrual Basis a. Statement of Net Assets (Balance Sheet) b. Statement of Revenues, Expenses, and Changes in Fund Net Assets (or Fund Equity) c. Statement of Cash Flows

Statement of Financial Condition for Personal Financial Statements

Accrual Basis at Estimated current Value (FV) -----If not given FV; use discounted CF value -----If given FV of an investment; NI and Dividends DO NOT MATTER

What happens during the reset method?

Accumulated depreciation is reset to zero by closing it to the building account, and then the building is adjusted for the revaluation.

Share Based Payments

Acquiring goods or services by issuing shares, options, or other equity instruments

FA Keywords

Acquisition cost, boot, capitalization of interest, capital expenditure, commercial substance, configuration of cash flows, depreciation, goodwill, goodwill impairment, impairment loss, intangible amortization, non monetary exchange, betterment, major repairs

Loan Origination Fee

Additional Bank Revenue Reducing what borrower receives Lender and Borrow - subtract from Loan amt

What investments are classified as available-for-sale?

Any debt or equity investments not classified as either Held-to-Maturity or Held-for-Trading. The Available-for-Sale category is the default category if an investment in debt or equity does not meet the requirements of either Held-to-Maturity or Held-for-Trading.

How is holding loss reported under the allowance method?

Any holding loss related to inventory is separately identified in a contra inventory account with separate disclosure of the holding loss, holding loss not included in COGS.

How is holding loss reported under the direct method?

Any holding loss related to inventory is simply included in cost of goods sold.

What is not included in Average Accumulated Expenditures (AAE) until paid in cash?

Any unpaid construction input costs.

Investments Accounted for As Equity Method

Applies only to stock investments with Ownership of 20-50% OR YOU HAVE SIGNIFICANT CONTROL AND OWN LESS THAN 20% Net Income for Investee is recorded on investors books as investment and offset to investment income Dividends are a Return on Investment ---- Decrease investment NOT INCOME

Asset and Liability Approach

Approach used to determine income tax expense

Types of Retained Earnings

Appropriated Unapropriated

GASB Standard 60 - Accounting for Service Concessions

Arrangement between gvt unit and operator where gvt unit conveys to operator the right and obligation to provide public services through operations of facility a capital asset in exchange for consideration 1. Operator collects and is compensated by fees from third parties (citizens using concession) 2. Gvt can modify or approve services, services provided to, and price of services 3. Gvt entitled to significant residual interest at end of arrangements (gvt gets asset) 4. Ex. Constructing a sports stadium, municipal complex, toll road, convention center, parking structure, and parking lots

How is interest earned on held-to-maturity investments reported in the income statement?

As an Other Income item in the income statement.

Deferred Taxes

Assets / Liabilities as a result of timing differences in Books and Tax Books MUST KNOW HOW TO RECONCILE FROM FS BOOKS TO TAX BOOKS IF NO PERMANENT OR TEMPORARY DIFFERENCES, NO DEFERRED TAXES ; BI = TI ---IF YOU DON'T KNOW THE FUTURE TAX RATE, USE CURRENT RATE ------Use future tax rates if knownat period end ---If can't relate deferred item to an asset or liability, record as current or non current based on when the item will reverse; RELATED ASSET TRUMPS WHEN REVERSES ---Net non current and current deferred assets and liabilities separately

Fees Charged in Non Profit

Assume to be for services provided. Excess received as fees more than fair value of services is a contribution/public support.

Ongoing - Econ Entity - Money - Period

Assumptions

At what cost are held-to-maturity securities carried and reported?

At amortized cost.

How should exit and disposal liability be measured?

At fair value

How are available-for-sale investments reported in the balance sheet?

At fair value (i.e., original cost +/- allowance to adjust to fair value) as either current or non-current asset (based on entity's policy).

How are held-for-trading investments carried and reported?

At fair value, with changes in fair value reported in current income.

When is inventory reassessed under International Financial Reporting Standards (IFRS)?

At the end of each financial reporting period.

Discontinued Ops at Close of Year

At the end of the year, any of the assets still classified as "held for sale" are reported at the lower of their carrying amounts or fair values less any costs needed to sell (this is the same as net realizable value). If the criteria to classify a component as "held for sale" is met in a period prior to its disposal, the loss on disposal is the estimated loss resulting from the write-down of the assets from their book value to this net realizable value figure.

List the formula for calculating cost of goods sold.

Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold.

Pension - Change in PBO (calculation)

Beginning PBO + service costs +/- Prior svc costs or credit +/- Actuarial g/l - Benefits paid + Interest on PBO (Beg PBO*disc rate) =Ending PBO

Pension Benefit Obligation Formula for Footnote Disclosures

Beginning PBO +Service Cost +Interest cost +- Prior Service cost or credit (changes to plan in current year) +- Actuarial gain/loss -Benefits Paid = End of year PBO

Pension Benefit Obligation Formula for MC Questions

Beginning PBO +Service Cost +Interest cost -Benefits Paid = End of year PBO

If an inventory error is discovered in year two, where is the difference recorded?

Beginning balance of Retained Earnings.

Pension - ending funded status of pension plan =

Beginning funded status + interest costs + net gain - service costs + expected returns + contributions - prior service costs - net loss

What is the calculation for determining Cost of Goods Sold (COGS)?

Beginning inventory + net purchases - ending inventory = COGS (Net Purchases = gross purchases + transportation in purchases returns and allowances purchase discounts).

List the formula for ending inventory for the gross margin method.

Beginning inventory + net purchases = ending inventory + sales (cost/sales).

List the basic inventory equation.

Beginning inventory + net purchases = ending inventory cost of goods sold.

Defined Benefit Plan

Benefit is defined per year by a formula, Actuaries used, more complex plan

Nonretirement Post Employment Benefits

Benefits available to former employees after employment but before retirement Ex. Continued health care and life insurance, severance pay, disability benefits Criteria for accrual - Must be accrued by date employee is fully eligible i. Services already provided ii. Rights to compensation vest or accumulate iii. Payment is probably iv. Reasonably estimable

Derivative Keywords

Bifurcation, Cash flow Hedge, Derivative Instruments, Embedded Derivatives, FV Hedge, Firm Commitment Hedge, Forecasted Transaction Hedge, Hybrid Instrument, Initial net investment, Net Settlement, Notional Amounts, Underlying

What method of recording converted debt does not recognize a gain or loss?

Book value method.

How is the gain on early retirement of bonds computed?

Book value of bonds retired less cash paid to retire bonds less unamortized bond issue costs.

List the gain on debt extinguishment formula.

Book value of debt - unamortized bond issue costs - cash paid.

Methods to Account for Convertible Bonds

Book/Cost Method Market Value

Unit of Measurement

Business transactions are stated in numbers that have common values: that is, using a common unit of measurement.

Without Recourse

Buyer has risk of loss Treated as a sale for seller of receivables

FOB Shipping -

Buyer has title when shipped When silent assume FOB Shipping

How is the ceiling value of inventory calculated?

By reducing the sales price by the estimated cost to complete and sell the inventory.

Cash Flow - What items are included in investing activities on a Statement of Cash Flows?

Cash received: Sale of PP&E, Sale of Investments, Loan Principle Cash paid: Loans, Acquisitions, AFS or HTM Securities, Taxes, Trading Securities

Financial Asset

Cash, evidence of ownership interest in an entity or contract that conveys right to receive cash (NOTE RECEIVABLE)

General Fund

Catchall fund reporting everything except items below -----Ie. General government, public safety, culture and recreation, public works -----Encumbrances at YE should be reported at Fund Balance Reserve in General Fund

Change in Principle

Change from one GAAP to another No longer on IS. Retrospective application adjust cumulative effect of change in carrying amount of A/L with beginning of first period presented with offset to RE

Direct Effects on FS

Change to account balances Direct effect of change in accounting principle are reported retrospectively to earliest period presented

Investing Activities - SOCF

Changes in Asset Accounts Inflows from Asset Accounts - Proceeds from Sale of PPE - Proceeds from sale of investments in stocks and bonds (A4S and H2M) - Proceeds from collection of PRINCIPAL loan payments - Proceeds from selling components of company Outflows from Asset Accounts - Cash paid for securities classified as trading - Capex (PPE Acquisitions) - Buying stocks and bonds (A4S and H2M) - Loans to others - Acquiring other businesses

Financing Activities - SOCF

Changes in Liabilities / Equity Accounts Inflows from Liability / Stockholders Equity Accounts - Proceeds from issuing common and preferred stock - Proceeds from reissuing treasury stock - Proceeds from issuing ST Debt - Proceeds from Issuing Long Term Debt Outflows from Liability / Stockholders Equity Accounts - Paying cash dividends - Repurchasing Treasury Stock - Repaying Short Term Loans (principal only) - Repaying long term loans, including capital lease obligations

Accounting Period Cycle

Changes in financial information are reported for a specific period of time in the form of financial statements.

What causes transfers between classifications for investments which do not give the investor significant influence?

Changes in investor intent or Changes in investor ability to hold-to-maturity.

Capital Expenditures -

Charges incurred after acquisition when asset is in use and depreciating - Additions, betterments, major repairs, adding wing to building - All increase carrying value of assets - Adding wing to building

Capital Assets Impairment - GASB

Circumstances resulting in impairment review: 1. Damage of assets 2. Laws or regulations 3. Environmental factors 4. Technological changes 5. Decline of utility of asset Report at lower of carrying value or fair value Net insurance proceeds against impairment loss Impairments are recorded when: -----Significant decline in service and utility of asset and -----Event/circumstance is outside normal life cycle of asset

Users of GASB External and Local Reports

Citizens Legislative and oversight bodies Investors/Creditors

GASB 64 - Application of Hedge Accounting Termination Provisions

Clarify's whether an effective hedge can be maintained after replacement of the swap counterparty with another party 1. Hedge relationship is maintained and should continue if there are no changes in terms or risk of instrument other than replacement of counterparty

Secured Bond

Collateral supports debt I.e. collateralized bond

Direct Deduction of Revenue

College Financial Aid Private Hospital Negotiated Rates

Types of Contributed Capital Paid In

Common Stock - legal, par, stated, at par Paid in capital in excess of par or stated value Paid in capital from other transactions i. Treasury Stock ii. Stock Retirement iii. Stock dividends recorded at market iv. Stock warrants detachable from bonds v. Laps of stock purchase warrants vi. Conversion of convertible bonds vii. Any other gain on company's own stock transactions

Book value of common stock (at point in time)

Common Stockholder Equity / Shares Outstanding

N4P acting as intermediary (ie. United Way) - N4P Accounting Differences

Intermediary does not recognize contribution revenue Would recognize revenue when: -----Granted Variance Power to redirect resources; then revenue and expense would be recognized to offset Recipient organization will recognize revenue when intermediary recognizes a liability -----When Recipient/Intermediary are financially related intermediary would recognize contribution revenue and beneficiary would recognize interest in net assets of intermediary

Held to Maturity

Investment Type - Bonds Only Treatment - Report at Amortized Cost/ Carrying Value per Amortization schedule

Available for Sale

Investment Type - Bonds and Stock Treatment - Adjust to FMV each period through OCI (net of tax) Unrealized G/L in OCI is CY FV less Cost of original asset

Trading Security

Investment Type - Bonds or Stock Treatment - Adjust to FV each period through IS/RE Unrealized G/L is difference between CY and PY Market Value

List the guidelines for determining no significant influence in an investment.

Investment is: 1. in Debt securities; 2. in Non-voting stock; 3. Temporary in nature; 4. Less than 20% ownership of voting stock

Cash and Cash Equivalents

Investments with maturities of three months or less from date of purchase -Present as first asset on BS -Restricted Cash - report separately

What is the accounting treatment by an investor when a stock split occurs?

Investor adjusts per share cost; not total cost. Original cost is divided by new total number of share (after split) to get new per share cost.

What is the accounting treatment by an investor when a stock dividend is received?

Investor adjusts per share cost; not total cost. Original cost is divided by new total number of shares (after stock dividend) to get new per share cost.

What are the elements that enter into the determination of revenue recognized from an equity method investment?

Investor's share of investee's reported net income/loss - "depreciation/amortization" on excess of cost of investment over book value (OR + "depreciation/amortization" on excess of book value over cost of investment) = net revenue recognized for equity method investment. Dividends received do not enter into the determination of the investor's revenue recognized; they reduce the investment account.

Electing Not to Bifurcate Requirements

Irrevocable and made on instrument by instrument basis Recognized FV changes in earnings How to disclose when NOT Bifurcating -----As separate line items for FV and Non FV instruments on BS -----Aggregate amount of all hybrid instruments with FV shown in parentheses

What amount is allocated to owners' equity on issuance of convertible bonds that can be settled in cash?

Issuance price less the present value of the bonds using the prevailing rate on similar bonds.

How is the value of a stock right determined when the per share market value of rights is given?

The carrying value of the investment at the time the rights are received is allocated between the shares of stock and the newly acquired rights based on the relative market value of each set (total share and total rights). The amount allocated to the total rights is then divided by the number of rights received to get the value of each right.

What are the acceptable methods (models) for measuring and reporting investment property?

The cost method (model) and the fair value method (model). An entity may use only one of these methods to measure and report all of its investment property.

What is included in the cost ratio of the First In First Out (FIFO) Retail Method?

The cost ratio excludes the cost of beginning inventory from the numerator and the retail value of beginning inventory from the denominator.

What is excluded in the cost ratio of the First In First Out (FIFO) Lower of Cost or Market (LCM) Retail Method?

The cost ratio excludes the cost of beginning inventory from the numerator and the retail value of beginning inventory from the denominator. Net markdowns are also excluded from the cost ratio.

What is included in the cost ratio of the Average Retail Method?

The cost ratio includes beginning inventory, along with current period purchases in both the numerator and the denominator of the cost to retail ratio.

What is included in the Average Lower of Cost or Market (LCM) or Conventional Retail Inventory Method cost ratio?

The cost ratio includes beginning inventory, along with current period purchases, in both the numerator and the denominator but excludes net markdowns from the cost ratio calculation.

What ratio is multiplied to Sales to estimate Cost of Goods Sold (COGS)?

The cost/sales ratio.

Define "bond issue costs".

The costs of printing, registering, and marketing the bonds.

Reporting currency

The currency in which an entity prepares its financial statements, normally the U.S. dollar

Functional currency

The currency of the primary economic environment in which a firm operates; normally that is the currency of the environment in which the firm primarily generates and expends cash

Define "issuance date".

The date the bonds are actually sold.

Pension - Funded status

The difference between the PBO and the Fair Value of PA (PBO-FVPA)

IFRS - difference of contingent liabilities between GAAP and IFRS

contingencies are "uncertain future events" and are classified as a provision if probable and measurable

IFRS - recording and valuing PPE

recorded at cost valued using either Cost model (cost less accumulated depreciation less accumulated impairment loss) or Revaluation model (FMV less accumulated depreciation and accumulated impairment loss)

Under u.s GAAP fair value measurement has been defined for all areas that require it except:?

share-based compensation; inventory pricing; measurements based on or using vendor-specific objective evidence of fair value; and fair value measurements used for lease classification or measurement (within IFRS fair value addressed on topic by topic basis

In the transition to IFRS, how are accounting estimates handled?

should be the same as estimates for same date under GAAP except for estimates required by IFRS which should be prepared in accordance with IFRS from date of transition

In the notes to financial statements, what is the summary of significant accounting policies and what should it include?

usually the first or second note in "notes" section and should include: measurement bases used in preparing financial statements; accounting principles and methods; criteria; policies (including: basis of consolidation, depreciation methods, amortization of intangibles, inventory pricing, accounting for recognition of profit on long-term construction contracts, and recognition of revenue from franchising or leasing operations); and pricing; IFRS also requires disclosure of judgments and estimates that management has made in applying accounting policies that have a significant effect on the financial statements, and a statement saying you are complying with IFRS

Compare/Consist & Varify(Direct&Indir) & Timely & Understand

Extending

IFRS - reporting internally generated goodwill

internally generated goodwill not recognized

IFRS - refinancing of current liabilities to long-term liabilities under IFRS differ from GAAP

IFRS: current liabilities can only be refinanced into a non-current liability if the refinance agreement is EXECUTED prior to the balance sheet date

IFRS - Investment P/L

IS

IFRS - PP&E P/L

OCI

Covered interest arbitrage

Occurs if at the same time the investor exchanges the domestic currency for the foreign currency to make the foreign investment, the investor also engages in a forward sale of an equal amount of the foreign currency to coincide with the maturity of the investment

IFRS - For Property, Plant and Equipment, which election is the most efficient method for converting asset?

The Fair Value election

Temporal method

The method required when a firm's books are not maintained in its functional currency

Exchange rate

The price of one unit of foreign currency in terms of the domestic currency

Futures hedge

A hedge transacted in the futures market for foreign currencies

Forward hedge

A hedge transacted in the forward market for foreign currencies

Non-monetary assets and liabilities

Assets and liabilities whose values fluctuate due to changes in specific prices or the general price level

ASC 800

Broad Transactions

IFRS - recording defined benefit plans

Project-unit-credit method calculates the PV of the defined benefit obligation

IFRS - Reliability

Faithful representation, substance over form, neutrality, prudence, completeness

Business Entitiy

Financial information is recorded and reported separately from the owner's personal financial information.

IFRS - recognition criteria

Probable future economic benefit Can be measured reliably

Balanced budget

When taxes and other governmental revenues equal government spending

Current method

The method required when a firm's books are maintained in its functional currency; translation gains and losses are reported in other comprehensive income

IFRS - qualitative characteristics of accounting information

Understandability - Easy to use and understand

IFRS - Comparability

Comparative information from prior year is required

IFRS - completed contract method used

Completed contract method is not allowed under IFRS.

IFRS - valuing intangible assets under IFRS

Cost Model (cost less Accumulated Depreciation and Impairment Loss) Revaluation Model (Fair Value less Accumulated Depreciation)

Hedge transaction

A transaction designed to protect against a price change that would negatively affect profits

Consumer price index (CPI)

Designed to measure the impact of price changes on the cost of a typical basket of goods purchased by urban consumer households

ASC 700

Expenses

IFRS - recording bonds

Fair Value through profit or loss or Amortized Cost

ASC 900

Industry

IFRS - reporting investment property

Initially recorded at cost revalued using either Fair Value model (changes in FMV recognized in profit/loss and no depreciation) or Cost model

IFRS - reporting interest expense and/or finance costs on a statement of cash flows

Operating or Financing

Profit

Total revenue less total costs

IFRS - lease types under IFRS

operating or finance for both lessor and lessee