My CPA FAR
Time interest earned ration formula ?
(NI+ interest expense+income tax ) /interest expense how current earnings cover current interest payments.
Pension expense formula
+ service cost +interest cost -expected return + PSC amortization
list the crucial criteria that determine whether a contract exist to which the revenue recognition criteria apply
1, collectibility and 2, identification of performance obligation if it is cancellable without penalty and no work on the performance obligation has begun, not officially a contract.
list the criteria for revenue recognition on a contract (all must be met)
1, parties approved and committed 2. identify each party's rights 3. payment terms 4. has commercial substance 5. consideration collectible
Calculated number days sales in receivable
1. Net sales/Average AR (AR turnover) 2. 365/AR turnover= number of days sales in receivable
Interest capitalization requirements are
1. expenditures made 2. activities to get the asset ready are in progress 3. interest cost is being incurred.
costs to be included in inventory
1. freight in 2. packaging costs 3. insurance on transit
R&D do not include these
1. routine modifications to existing products 2. legal fees to obtain a patent 3. market research for a new product 4. computer software used internally
segment reporting
10% of revenue, asset, profit, rap, the absolute value of the segment profit or loss is 10% or more than the greater of the absolute 1 combined reported profit of all segments not reporting a loss 2. combined reported loss of all segments reporting a loss
form __ is for major events and filed within 4 days
8K
Gains and Losses go to ___ in translation
AOCI in the Balance sheet
The term contract asset with unconditional rights is essentially what?
Account Receivable
uniform commercial code means
The uniform commercial code (UCC) is a legal code that applies to commercial transactions
completed contract, percentage of completion is okay in some cases,
This method of contract is not permitted under IFRS
Interim financial statement should be prepare using the same accounting principles followed in preparing its annual F/S. True of False
True, don't ignore permanent increase in the market value of inventory
IFRS and GAAP treat Defined benefit pension the same way?
Trued, immediate and full recognition in the liability and OCI.
Does IFRS permit presentation of statement of cash flow in both direct and indirect methods
Yes, both methods are okay
Convertible bond in EPS
add to numerator, interest saved net of tax
the realized gain on an investment in equity security should be reported as an
addition to net income in the amount of the security's fair value at the beginning of the period. Unrealized G/L go to current income
reclassification between two investment categories
always recorded at fair value, whether temp or permanent.
Held-to-Maturity characteristics
amortized cost on Balance sheet, not adjusted during holding period, interest and realized G/L go to Net income
Land acquired is reported at the cost of cash paid and mortgage assumed
assessed valuation has no effect on the recorded cost, cost principle requires that assets be recorded at historical costs (cash amounts or equivalent)
trouble debt restructing
bank reduces the reported receivable to the present value of the future cash flows based on the original rates. The interest revenue is recognized using the original rate times the book value of the receivable
Income of Note payable equals
book value times effective interest rate and the number of period since inception, direct loan origination added back to principal indirect loan original is an expense
retrospective application
change in accounting principles and in reporting entity
prospective adjustments
change in estimates and changes in estimates affected by a change in principles
NFP donation, if the middleman has variance power of the donation, (choose recipient) he can record the donation as?
contribution support, otherwise it has to be reported as a liability
under translation, all assets and liabilities are measure at?
current exchange rate, all other accounts are reported at historic rates
define operating cycle
days sale in inventory plus days in trade A/R
For a new separate contract to be formed, additional products must be ____ and the consideration for the additional products must reflect appropriate ____ pricing.
distinct, standalone
Budget set up j/E
dr: estimated revenue dr: estimated other financing sources cr: appropriation cr: estimated other financing uses cr: budgetary fund balances
Interest incurred for machinery for own used
expensed after completion capitalized before completion
defensive interval
financial metric that indicates the number of days that a company can operate without needing to access noncurrent assets current asset/daily operation expense
regulation s-x, regulation that lays out the ? and ? of financial report, specifically the financial statements of public companies
form, content, eg. income statement, balance sheet, changes in shareholders equity, cash flow, foot notes to financial statements.
definition of translation
functional to reporting currency
interest paid and received, dividends received in statement of cash flow
interest paid, received, dividend received operating activities because they are income statement items. dividends paid are financing activities, it is a direct reduction of R/E not an income statement item
Form 10Q filing should be filed within how many days
large accelerated filer (>700mil) 40 days, accelerated filer (75-700mil) 40 days non-accelerated filer (<75 mil) 45 days
Form 10K filing should be filed within how many days
large accelerated filer (>700mil) 60 days, accelerated filer (75-700mil) 75 days non-accelerated filer (<75 mil) 90 days
definition of remeasurement
local to functional currency
inventory measurement under IFRS
lower of cost or NRV
inventory measurement under US GAAP
lower of cost or market
Note payable at discount
market rate more than state rate
Note payable at premium
market rates less than stated rate, youre willing to pay more interest than market
recognized revenues and expenses when cash is received or paid
modified cash basis, not permitted under GAPP, accural used to record long-term assets, reflect depreciation , longe-term debt and owner's equity, double entry accounting.
articulation means
one part of F/S affects the others, e/g an increase in asset is related to the decrease of a liability.
under remeasurement, what are reported at current exchange rate?
only monetary assets and liabilities, g/l go to net income
incidental and peripheral transactions result in
operating gains and losses
In A/R pledging, the title remains with the?
originator
Large stock dividend is recorded at ?
par value
International standards require the cost recovery method be used when the ___method ins not allowed
percentage of completion
percentage of completion method
permitted under GAAP and sometime IFRS, current year cost/ total cost to complete X profit. year 2, subtract y1 profit, if a loss expected in y2, subtract y1 profit realized.
mortgage and lease payment in SCF
principal= financing interest= operating
trading security characteristics
realized and unrealized G/L go to net income, reported at FV
governs the form and content of nonfinancial statement disclosures,
regulation s-K (10K) e.g. description of the business, description of stockholder matters, MD& A, changes in and disagreements with accountants, information on directors and managements.
income statement accounts and direct method equivalent
revenue- cash collected from customer, cogs-cash paid to suppliers, interest expense- cash paid for interest, income tax expense-> cash paid for tax income, salaries expense- cash paid for employees, depreciation expense-> n/a, eliminated
major or central operations from delivering goods, rendering services,
revenues
Asset turnover
sales/average total assets a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.
Encumbrance J/E
set up: DR: Encumbrance CR: fund balance reserved official expense DR: expenditure control CR: A/P
direct method of SCF
shows cash collected from customer-> cash basic. non-cash items like depreciation are omitted, increase in AP is added, increase in AR subtracted, accrual back to cash
smaller reporting company is1. less than 75mil in public float 2, less than 50 mil in the most recent fiscal year
smaller reporting company is not a 1. investment company 2. asset-backed issuer or 3. majority-owned subsidiary of a parent that is not a smaller reporting company
On Fund-based Financial satements
specified that liabilities should be paid usually within 60 days but could be 75 or 90 days.
two statements required for a defined contribution health and welfare benefit plan are?
statement of net assets and statement of changes in net assets
indirect method of SCF
subtract gains, add losses, starts with net income, cash paid for taxes and interests and gains must be disclosed.
Taxable Temporary Difference
taxable income from pretax income - municipal bond interest (nontaxable) + fine forfeiture ( nontaxable) pretax income only reflects depreciation for financial accounting purpose book. eg. excess of depreciation over book is subtracted.
dividend payout ratio
the amount of dividends paid to stockholders relative to the amount of total net income of a company. cash dividends/ Net income
price-earning ratio
the ratio for valuing a company that measures its current share price relative to its per-share earnings. Stock price per share / earning per share
Objective of FASB statement number 8
to provide financial information about the reporting entity that is useful to users.
verifiability
two observers can reach consensus that the information is faithfully represented
available for sale characteristics
unrealized go to AOCI, interest and realized G/L go to net income, reported at FV on balance sheet
restatement
used to correct an error in past financial statements
When inventory is purchased as a group,
value is allocated based on FV
expected value method
when there are past experiences , more than two possible outcome, % X value of consideration A +%X value of consideration B
most likely method
when there are two possible outcome
Does purchase of fixed asset affect the excess of revenue over expenditures on general fund statement of revenue, expenditures, and changes in fund balances.
yes, under modified accrual basis, the purchase of fixed asset are classified as capital expenditure and is on one of the expenditure types included in determining the excess(deficiency) of revenues over expenditures.
Intercompany dividend is eliminated in consolidated F/S
yes, you cant pay dividend to yourself
It is Enhancing to you C U on TV
Comparability(consistency), Understandability, Timeliness, Verifiability
Constant dollar
Consumer price index is used to compute information on a " constant dollar" basis, used restate F/s elements to dollars which have the same purchasing power.
budget close j/e
DR: appropriation Dr: estimated other financing uses DR: budgetary fund balance CR: estimated revenue CR: other financing sources
real estate held as an investment by a govt endowment should be reported at?
Fair value according to GASB 52
Financials are Not Complete without Faithful representation
Free from Error, Neutrality, Completeness
Bank overdrafts under US GAAP vs IFRS
GAAP: overdrafts must be shown as a liability IFRS: overdrafts can be netted against cash
Direct Financing lease: unearned interest is the result of
Gross investment minus sum of PV of the components of the gross investment
Cash surrender value formula
Amount paid-insurance expense
Deferred inflow of resources can be reported on the statement of ?
Statement of Net position, similar to deferred revenue.
4 criteria of capital lease
TT( title change) BPO 75( life) 90(FMV)
allowance method difference between B/S and income
B/S approach: based on ending A/R income approach: based on sales
impairment under GAAP, a loss is recognized when BV< future cash flow
BV -FV= impairment loss
Bank to Book reconciliation
Bank +deposit in transit -outstanding checks
PBO formula
Beg balance +service cost -benefit paid + PBO loss +interest cost = pension expense
AR formula
Beg balance + credit sale+reinstatement- cash collection-write offs = ending balance
Book to bank reconciliation
Book- service charge + bank collections - NSF checks + interest income +/- error
Which hybrid instrument would require bifurcation 1. bond payable with interest rate based on S/P 500 index 2. an equity instrument with a call option allowing the issuing company to buy back the stock
Both, bifurcation separates the embedded derivative instrument from the host contract
Inventory turnover
COGS/Average inventory days to go through inventory 365/inventory turnover
G/L go to____ in remeasurement
Net income
Return on Asset
Net income/ Average asset
profit margin
Net income/ Net sales
Return on Equity
Net income/ average shareholder equity
Nonmonetary exchange with no commercial substance
No gain when you pay cash
impairment under IFRS , a loss if recognized if BV> ? of future cash flow
PV, formula BV less the greater of 1. PV of future cash flow or 2. FV-less cost to sell = impairment loss
I will be RELEVANT when I Pass My Cpa
Predictive Value, Materiality, Confirmatory value