Misc. Items for FAR

Valuation Allowance

(Contra-Account) If it is more likely than not (more than 50%) that all or part of the deferred tax asset will not be realized, a valuation allowance is recognized. A change in circumstances that results in a change in judgement concerning the potential realization of a deferred tax asset should be recognized in income from continuing operations in the period of change

Calculation of Gain/Loss on Bond Extinguishment before maturity

(Gain) or Loss = Reacquisition price - Net Carrying Amount Carrying amount = Face -Unamortized Discount, or +Unamortized Premium, and -Unamortized Bond Issuance Costs

IFRS required disclosures

-Disclosure of Judgements and Estimates that management has made- generally made in disclosure of significant accounting policies -Statement of Compliance with IFRS - Summary of Significant Accounting Policies

Calculation of Gross Profit (% of Completion)

1. Calculate total Gross Profit = Contract Price - Total Estimated Cost = Gross Profit 2. Calculate % Complete = Cost to Date/Total Estimated Cost 3. Gross Profit Earned to Date = Step 1 x Step 2 4. Current Gross Profit = Gross Profit Earned to date - Gross Profit previously recognized= Current Gross Profit

Cash Flow From Operations (Direct Method)

1. Cash Received From Customers Revenues -Increase in Receivables +Decrease in Receivables +Increase in unearned revenue -Decrease in unearned revenue =Cash Received From Customers 2. Interest Received (increases Cash) 3.Dividends Received (increases cash) 4. Other operating cash receipts such as receipt of insurance proceeds and lawsuit settlements(+cash) 5. Cash received from sale of securities classified as trading securities, if current assets (+cash) 6. Cash Paid to Suppliers and employees(decreases cash) COGS +Increase in inventory -Decrease in inventory -Increase in AP +Decrease in AP =Cash Paid to Suppliers 7. Interest Paid (-cash) 8. Income taxes paid (-cash) 9. Cash paid to acquire securities classified as trading securities, if CA (-cash) 10. Other operating cash payments (-cash) Other operating expenses -decrease in prepaid expenses +Increase in prepaid expenses +Decrease in accrued liabilites -Increase in accrued liabilities =Cash paid for other expenses

Under US GAAP, R&D costs for software are...

1. Expense as R&D all costs up to and including point of Technological Feasibility 2. Technological Feasibility is when detail program is completed or working model 3. Costs AFTER TF - capitalize as software until production 4. Production = Inventory

Withdrawal of a partner: Bonus method

1. Revalue assets to reflect Fair value Asset Adjustment xx A Capital (%) xx B Capital (%) xx C Capital (%) xx 2. Journal Entry to pay off withdrawing partner A Capital (%) xx - Make up difference B Capital (%) xx - make up difference C Capital (100%) xx - Buy him out Cash xx Paid more than his cap account in this example

When factoring a receivable, what conditions must be met for a With Recourse factoring to be treated as a sale?

1. Seller's obligation reasonably estimated (Due From) 2. Transferor surrenders control 3. Transferor cannot be required to repurchase AR JE Cash 94 Due From 1 Loss 5 AR 100 If all conditions are not met, treat as loan - note disclosure

PV Factor Calculator

1/(1+r)^n

Retrospective requirement for IFRS

3 Balance Sheets 2 of each other F/S

Form 10Q

40-40-90 Large= greater than 700mil Accel= 75-700 Others= Less than 75

Form 10K

60-75-90 Large= greater than 700mil Accel= 75-700 Others= Less than 75

Comprehensive Income Includes:

All changes in equity except for owner contributions and distributions The exchange of Common Stock for productive assets represents a transaction with owners

The If-Converted Method

Assumes that the securities were converted to common stock at the beginning of the period (or at the time of issue, if later) Convertible Bonds (net of tax) Convertible PS (not net of tax)

Admission of a Partner: Bonus Method

B=Bonus=Balance in total capital accounts controls the capital account allocation Bonus to existing partners - when new partner pays more than the capital accounts book value (credit to existing ptrs cap accounts) Bonus to new partner - when new partner pays less than the capital accounts book value (Debit to existing ptrs cap accounts)

Statement of Net Assets Available for Benefits

BS - Assets A statement that includes information regarding the net assets available for benefits at the end of the plan year.

Statement of Accumulated Plan Benefits

BS - Liabilities Information regarding the actuarial present value of accumulated plan benefits as of either the beginning or end of the plan year

Regulation S-X

BS 2 All other FS 3

Direct Write off Method (not GAAP)

Bad Debt Expense xx AR xx

EPS Disclosures

Basic & Diluted EPS reported on face of IS Discontinued Operations can be reported on Face or Notes Note: Cash flow per share should NOT be reported

Ending FV of Plan Assets Formula

Beginning FV of Plan Assets +Contributions +Actual Return on Plan Assets -Benefits Paid to Retirees =Ending FV of Plan Assets

Projected Benefit Obligation Formula

Beginning PBO +Service Cost +Interest Cost +Prior Service Cost +Actuarial Losses -Actuarial Gains -Benefits Paid to Retirees =Ending PBO

Collateral Trust bonds

Bonds backed by financial assets.

Mortgage bonds

Bonds that are secured by real property.

Convertible Bonds

Bonds that can be converted into common stock at the bondholder's option

Which defined benefit pension plan financial statement would report the amount of benefits paid to beneficiaries during the year? I. Statement of Changes in Net Assets Available for Benefits II. Statement of Changes in Accumulated Plan Benefits A. I only B. II only C. Both I and II D. Neither I nor II

Both

Par Value (Legal Method) Treasury Stock JE

Buy Back JE - Gain (Buyback below issue price) Treasury Stock(at par) 100 APIC - CS (reverse) 40 Cash 130 APIC - TS (Gain) 10 Buy Back JE - Loss (Buyback above issue price) Treasury Stock(at par) 100 APIC - CS (reverse) 40 Cash 200 RE(or APICTS) 60 Reissue Shares JE (NO G/L) Cash 200 Treasury stock(at par) 100 APIC - CS (plug) 100

Market Rate for Bond

C/P Coupon/Price

Consolidating Workpaper Eliminating Journal Entry

CAR IN BIG Common Stock - Sub APIC - Sub RE - Sub Investment in Sub NCI BS Adjusted to FV Identifiable intangible assets FV Goodwill (plug)

Goodwill Impairment (IFRS)

Calculated at the Cash Generating Unit for IFRS Recoverable Amount - CV = Impairment Loss Recoverable amount is the higher of NRV or Value in Use NRV= Fair Value - Costs to Sell Value in Use= Present Value of future cash flows

Goodwill Impairment (US GAAP)

Calculated at the Reporting Unit Level for US GAAP FV<CV if yes then impairment is CV-FV, max charge is CV of Goodwill

Direct Financing Lease First Payment: Lessor

Cash 5000 Interest Income 1480 Lease Receivable 3520

Financing cash flows

Cash Receipts and disbursements from Debt Equity

According to SAS 62, a comprehensive basis of accounting other than GAAP would include:

Cash basis and modified cash basis Tax basis Prescribed regulatory basis Other basis with substantial support (e.g., price level basis)

Operating Cash Flows

Cash receipts and disbursement from 1. transactions reported on income statement 2. current asset(operating) and current liabilities(operating)

Investing Cash Flows

Cash receipts and disbursements from non-current assets

Operating Lease Initial and Subsequent Entry: Lessor

Cash xx Rental Income xx Depr. Exp xx Accum Depr xx

Exceptions to Change in Accounting Principle

Changing Inventory valuation method TO LIFO (other changes should be retrospective) Change in Depreciation Method Change in Valuation

Which of the following statements best describes risks associated with derivative contracts? A. Credit risk is a bigger concern for the party that stands to gain from its position B. Credit risk is higher for futures contracts than for comparable forwards contracts C. Market risk is defined as the risk that both parties to a contract will lose value D. Market risk occurs when a derivative contract changes in value

Choice "1" is correct. Credit risk is defined as the risk that the counterparty to a derivative contract will not perform. There is a stronger likelihood that the party that is in the "losing" position will fail to perform, which means that credit risk is a bigger concern for the party that stands to gain from its position. Choice "2" is incorrect. Credit risk is considerably higher for private party contracts like forwards, as opposed to exchange-traded contracts like futures. Choice "3" is incorrect. Derivatives are a "zero-sum game," which means that one party will lose and the other party will gain. Choice "4" is incorrect. Market risk is the risk that a party to a derivatives contract stands to lose on its position. Although a derivative contract will likely change in value, one party will gain and the other party will lose.

Farleigh Co. has not declared or paid dividends on its cumulative preferred stock in the last three years. These dividends should be reported: A. In a note to the financial statements. B. As a current liability. C. As a non-current liability. D. As a reduction in stockholders' equity.

Choice "A" is correct. Dividends in "arrears" (undeclared dividends on cumulative preferred stock) should be reported in the footnotes. Since they are not declared, no journal entry is made. Neither liabilities nor equity are affected.

Charm Co. owns a delivery truck with an original cost of $10,000 and accumulated depreciation of $7,000. Charm acquired a new truck by exchanging the old truck and paying $2,000 in cash. The new truck has a fair value of $5,000 at the time of the exchange. What amount of gain or loss should Charm recognize? A. $0 B. $2,000 gain. C. $2,000 loss. D. $3,000 loss

Choice "A" is correct. Gains and losses are recognized in exchanges having commercial substance and are computed as the difference between the fair value of the acquired asset and the book value of the asset given up. At the time of exchange, the truck has a depreciated cost of $3,000 (historical cost of $10,000 less accumulated depreciation of $7,000). The exchange of the truck, plus $2,000 cash, results in a total decrease of $5,000 in net assets. The fair value of the acquired truck determines the cost to record at acquisition, but as the acquired cost of $5,000 is equal to the book value of what is exchanged, there is no gain or loss on the transaction.

Scott Co. exchanged similar nonmonetary assets with Dale Co. and no cash was exchanged. The carrying amount of the asset surrendered by Scott exceeded both the fair value of the asset received and Dale's carrying amount of that asset. Scott should: A. Recognize the difference between the carrying amount of the asset it surrendered and the fair value of the asset it surrendered as a loss. B. Recognize the difference between the carrying amount of the asset it surrendered and the fair value of the asset it received as a gain. C. Recognize the difference between the carrying amount of the asset it surrendered and the carrying amount of the asset it received as a loss. D. Recognize no gain or loss

Choice "A" is correct. In all nonmonetary transactions, the fair value given is equal to the fair value received. Therefore, the carrying amount of the asset surrendered must exceed the fair value of the asset surrendered, which means Scott has a loss on the transaction. Losses on nonmonetary transactions must be recognized in full.

On which of the following dates is a public entity required to measure the cost of employee services in exchange for an award of equity interests, based on the fair market value of the award? A. Date of grant. B. Date of restriction lapse. C. Date of vesting. D. Date of exercise.

Choice "A" is correct. Per SFAS 123 (ASC 718-20), equity instruments issued for employee services are to be valued at the date of the grant.`

Universe Co. issued 500,000 shares of common stock in the current year. Universe declared a 30% stock dividend. The market value was $50 per share, the par value was $10, and the average issue price was $30 per share. By what amount will Universe decrease stockholders' equity for the dividend? A. $0 B. $1,500,000 C. $4,500,000 D. $7,500,000

Choice "A" is correct. The net effect on Universe's stockholders equity is zero, as the reduction to retained earnings is offset by an equal increase in common stock. Journal Entry:

At December 31, High Horse Company has the following pension plan information: Fair value of plan assets, beginning of year 1,000,000 Fair value of plan assets, ending of year 1,135,000 Contributions 275,000 Benefits paid 340,000 Expected rate of return on plan assets 7% The expected return on plan assets was used to calculate net periodic pension cost. No actuarial gains or losses were incurred during the year. What is the net gain to be reported in other comprehensive income under U.S. GAAP? A. $0 B. $23,000 C. $100,000 D. $77,000

Choice "B" is correct. Absent any actuarial gains or losses, the net pension gain or loss incurred during an accounting period under U.S. GAAP is the difference between the expected return on plan assets recorded in net periodic pension cost and the actual return on plan assets earned during the accounting period. This amount is reported in other comprehensive in the period incurred. The expected return on plan assets is calculated as: Beginning fair value of plan assets × Expected rate of return = $1,100,000 × 7% = $77,000 The actual return on plan assets is calculated as: Beginning fair value of plan assets $1,100,000 + Contributions 275,000 − Benefits paid (340,000) + Actual return on plan assets 100,000 Squeeze Ending fair value of plan assets $1,135,000

Which of the following financial statements may be prepared, but is not required to be prepared, for both defined benefit pension plans and defined contribution pension plans? A. Statement of Pension Equity B. Statement of Cash Flows C. Statement of Changes in Accumulated Plan Benefits D. Statement of Changes in Funded Status

Choice "B" is correct. Both defined benefit pension plans and defined contribution plans may prepare Statements of Cash Flow, but they are not required to do so. Choice "A" is incorrect. There is no pension plan financial statement called "Statement of Pension Equity." Choice "C" is incorrect. The Statement of Accumulated Plan Benefits is required for defined benefit pension plans and is not prepared for defined contribution pension plans. Choice "D" is incorrect. There is no pension plan financial statement called a "Statement of Changes in Funded Status."

Which of the following would be reported as an investing activity in a company's statement of cash flows? A. Collection of proceeds from a note payable. B. Collection of a note receivable from a related party. C. Collection of an overdue account receivable from a customer. D. Collection of a tax refund from the government.

Choice "B" is correct. Loans to other entities and the consequent collection of the loans are reflected in the investing activity section of the cash flow statement.

Which one of the following is not considered contingent shares for purposes of computing EPS? A. Shares issuable upon achieving a specific net income target. B. Shares issuable upon exercise of a stock option. C. Shares issuable upon the passage of a specific period of time. D. Shares issuable upon the issuance of a patent.

Choice "B" is correct. Shares issuable upon the exercise of a stock option are not considered contingent shares as the option holder is required to pay the strike price to exercise the options.

On July 31, Year 10, Tern Co. amended its single employee defined benefit pension plan by granting increased benefits for services provided prior to Year 10. Under IFRS, this past service cost will be reflected in the financial statement(s) for: A. Years before Year 10 only. B. Year 10 only. C. Year 10, and years before and following Year 10. D. Year 10, and following years only.

Choice "B" is correct. Under IFRS, past service cost is recognized on the income statement in the period of the plan amendment.

A company issued bonds with detachable common stock warrants. The issue price exceeded the sum of the warrants' fair value and face value of the bonds. The fair value of the bonds cannot be determined. What value, if any, should be assigned to the warrants? A. The excess of the proceeds over the face value of the bonds. B. The proportion of the proceeds that the warrants' fair value bears to the face value of the bonds. C. The fair value of the warrants. D. No amount, because the total proceeds should be assigned to the bonds.

Choice "C" is correct. Because the warrants are detachable, the issue price of the bonds and warrants together should be allocated based on each component's fair values on the issuance date. Because the warrants' fair value is known, the remainder of the issuance price not allocated to the warrants is allocated to the bonds.

Footnote disclosures in the financial statements for pensions do not require inclusion of which of the following? A. The components of net periodic pension cost. B. The amount of unrecognized prior service cost. C. The differences in executive and non-executive plans. D. A detailed description of the plan including employee groups covered.

Choice "C" is correct. The difference in executive and non executive plans is not a required disclosure. Choice "A" is incorrect. The components of net periodic pension cost "SIRAGE" is a required disclosure. Choice "B" is incorrect. The amount of unrecognized prior service cost must be disclosed. Choice "D" is incorrect. Disclosure showing a detailed description of the plan including employee groups covered is required.

During the current year, Lake Co. issued 3,000 of its 9%, $1,000 face value bonds at 101 l/2. In connection with the sale of these bonds, Lake paid the following expenses: Promotion costs $20,000 Engraving and printing 25,000 Underwriters' commissions 200,000 What amount should Lake record as bond issuance costs to be amortized over the term of the bonds under U.S. GAAP? A. $0 B. $220,000 C. $225,000 D. $245,000

Choice "D" is correct. $245,000 bond issuance costs to be amortized over the term of the bonds using the effective interest method, similar to bond discount and premium.

When a property dividend is declared and the market value of the property exceeds its book value, the excess A. Increases additional paid-in-capital. B. Decreases net income for the period. C. Decreases additional paid-in-capital. D. Increases net income for the period.

Choice "D" is correct. A property dividend is recorded at the fair value of the property to be distributed. The property has to be adjusted to fair value with the adjustment affecting earnings for the period. Additional paid-in-capital is not affected.

On September 1, Canary Co. sold used equipment for a cash amount equaling its carrying amount for both book and tax purposes. On September 15, Canary replaced the equipment by paying cash and signing a note payable for new equipment. The cash paid for the new equipment exceeded the cash received for the old equipment. How should these equipment transactions be reported in Canary's statement of cash flows? A. Cash outflow equal to the cash paid less the cash received. B. Cash outflow equal to the cash paid and note payable less the cash received. C. Cash inflow equal to the cash received and a cash outflow equal to the cash paid and noted payable. D. Cash inflow equal to the cash received and a cash outflow equal to the cash paid.

Choice "D" is correct. Cash inflow equal to the cash received for the old equipment that was sold, and a cash outflow equal to the cash paid for the new equipment.

Bal Corp. declared a $25,000 cash dividend on May 8, to stockholders of record on May 23, payable on June 3. As a result of this cash dividend, working capital: A. Was not affected. B. Decreased on June 3. C. Decreased on May 23. D. Decreased on May 8.

Choice "D" is correct. Decreased on May 8. Working capital is decreased on the declaration date, May 8, per the rule that the liability for a cash dividend is incurred and recorded on the declaration date.

Tem Co. issued rights to its existing stockholders without consideration. A stockholder received a right to buy one share for each 20 shares held. The exercise price was in excess of par value, but less than the current market price. Retained earnings decreases when: Rights are issued Rights are exercised A. Yes Yes B. Yes No C. No Yes D. No No

Choice "D" is correct. No (when issued) - No (when exercised). When stock rights are "issued" without consideration, no entry (only disclosure) is made by either the "issuer" or the "recipient." At the time the rights are "exercised" (and the corporation receives a cash inflow), additional paid-in capital would be credited if the purchase price of the stock exceeded the par value (which is usually the case). Retained earnings is not affected because this is a "capital" transaction, not an "operations" transaction.

What type of bonds mature in installments? A. Debenture. B. Term. C. Variable rate. D. Serial.

Choice "D" is correct. Serial bonds are pre-numbered bonds that the issuer may call and redeem a portion by serial number. Choice "A" is incorrect. Debentures are unsecured bonds. Choice "B" is incorrect. Term bonds are bonds that have a single fixed maturity date. Choice "C" is incorrect. Variable rate bonds have interest rates that change.

In a compensatory stock option plan for which the grant and exercise dates are different, the stock options outstanding account should be reduced at the: A. Date of grant. B. Beginning of the vesting period. C. Beginning of the service period. D. Exercise date.

Choice "D" is correct. Stock options outstanding are reduced at the exercise date. Choice "A" is incorrect. Stock options outstanding are increased at the date of grant. Choice "B" is incorrect. The beginning of the vesting period is not used. Choice "C" is incorrect. The beginning of the service period is the beginning of the period over which the compensation expense is amortized.

Mend Co. purchased a three-month U.S. Treasury bill. Mend's policy is to treat as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in Mend's statement of cash flows? A. As an outflow from operating activities. B. As an outflow from investing activities. C. As an outflow from financing activities. D. Not reported.

Choice "D" is correct. The U.S. Treasury bill is considered to be a cash equivalent item so purchasing the T-bill merely changes the form of cash held, it does not change the cash position of the entity. Thus, the purchase is not reported on the statement of cash flows.

The market price of a bond issued at a premium is equal to the present value of its principal amount: A. Only, at the stated interest rate. B. And the present value of all future interest payments, at the stated interest rate. C. Only, at the market (effective) interest rate. D. And the present value of all future interest payments, at the market (effective) interest rate

Choice "D" is correct. To determine the market price of a bond, the present value of the principal is added to the present value of all interest payments, using the market interest rate.

Under IFRS, all of the following statements regarding defined benefit plan accounting are true except: A. Past service cost does not go to other comprehensive income. B. Service cost and interest cost are usually shown separately on the income statement. C. A plan is underfunded if the defined benefit obligation exceeds the fair value of plan assets. D. Gains and losses are amortized out of other comprehensive income into the income statement.

Choice "D" is correct. Under IFRS, gains and losses (referred to as remeasurement of the net defined benefit liability) remain in other comprehensive income and are not reclassified to the income statement in subsequent periods..

Under IFRS, interest paid during a period is reported on the statement of cash flows in: A. Operating cash flow only. B. Financing cash flow only. C. Operating or investing cash flow. D. Operating or financing cash flow.

Choice "D" is correct. Under IFRS, interest paid may be reported in either operating cash flow or in financing cash flow. Under U.S. GAAP, interest paid must be reported only in operating cash flow because interest expense is reported on the income statement.

Items not included in in Significant Accounting Policies

Composition and detailed dollar amounts of account balances Details Related to changes in accounting principles Dates of Maturity and amounts of long term debt Yearly Computation of depreciation, depletion, and amort

Accounting For Percentage of Completion Step 3

Compute Gross Profit Earned (Profit to Date) Gross Profit x % of Completion Step 1 x Step 2

Accounting for Percentage of Completion Step 4

Compute Gross Profit Earned for Current Year PTD at current FYE <PTD at beginning of period> =Current year-to-date GP

Accounting For Percentage of Completion Step 1

Compute Gross Profit of Completed Contract Contract Price <Estimated Total Cost> =Gross Profit

Accounting For Percentage of Completion Step 2

Compute Percentage of Completion Total Cost to Date/Total Estimated Cost of Contract

CAR IN BIG

Consolidating Eliminating Workpaper JE CS APIC Retained Earnings Investment in Sub NCI BS ID Intangibles GW

Under U.S. GAAP, what is the present value of all future retirement payments attributed by the pension benefit formula to employee services rendered prior to that date and based on past and current compensation levels only?

D. Accumulated benefit obligation Under U.S. GAAP, the accumulated benefit obligation is the present value of future retirement payments attributed to the pension benefit formula to employee services rendered prior to a date, based on current and past compensation levels

Deferred Bond Issuance Costs

Deferred on the BS until the liability is recorded Added to discount Subtracted from premium

Under US GAAP, R&D costs are...

Expenses as incurred Exceptions: 1. Software after feasibility 2. If alternative use, capitalize and depreciate

Impairment US Gaap (Intangible Assets with Indefinite Lives)

FV < CV If yes, then impaired If impaired, FV - CV = Loss

Admission of a partner: Admission of a Partner (Exact Method)(How to get a specific partnership interest)

Finger Math: Get 1/4 interest = 4-1 = 3, Divide the total by 3 Get 1/5 interest = 5-1 = 4, Divide the total by 4 Get 1/20 interest = 20-1 = 19, Divide the total by 19

Selling expenses

Freight out, salaries and commissions, advertising

Legal(Par Value) Method of Accounting for Treasury Stock

G/L Calculated Immediately upon repo G/L is direct adjustment to SHE, do not affect NI

legal method of accounting for treasury stock

G/L Calculated Immediately upon repurchase

cost method of accounting for treasury stock

G/L Calculated Upon Reissue "Gain/Loss" determined when treasury stock is reissued. APIC is credited for gains and debited for losses. If APIC does not have large enough balance to absorb loss, RE may be debited

Cost Method of Accounting for Treasury Stock

G/L Calculated upon Reissue G/L is direct adjustment to SHE, do not affect NI -Used 95% of the time Shares recorded at reacquisition COST Gains are credited to APIC-TS Losses are debited to APIC-TS, unless there is not enough in APIC-TS to absorb loss, excess Debit to RE RE will never Increase from Treasury Stock Transaction

Treasury Stock (Cost Method)

G/L Calculated upon reissue Treasury stock is recorded at cost

Treasury Stock (Par Value Method)

G/L Calculated upon repo Treasury Stock is recorded at Par Value When Gain is recognized (Purchased for less than original issue) APIC-Treasury Stock is recognized When Loss is recognized (Purchased for more than original issue) APIC-Treasury Stock is eliminated then RE is reduced for excess

Admission of a Partner: Goodwill Method

G=Goodwill=Going in investment Goodwill is recognized based upon the total value implied by the new partners contribution 1. Compute new "net assets" before Goodwill after admitting new partner or paying old partner' Goodwill is credited to old partners

Statement of Changes in Net Assets Available for Benefits

IS A statement that includes information regarding the changes during the year in the net assets available for benefits

Restricted Cash

If restriction is associated with a current asset or current liability, classify as a current asset but separate from unrestricted cash If restriction is associated with a non-current asset or non-current liability, classify as a non-current asset but separate from either investments or other assets section

Exchanges Lacking Commercial Substance - Losses

If the transaction lacks commercial substance and a loss is indicated, the loss should be recognized.

Diluted EPS

Income Available to the common stock shareholder + Interest on dilutive securities/Weighted average number of common shares(assuming all dilutive securities are converted to common stock)

Basic EPS

Income available to common shareholders/Weighted-average number of common shares outstanding

Level 2 Inputs

Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Similar Assets in active markets; or Similar or identical assets in inactive markets

Eliminating Interco Inventory Transaction

Intercompany Sales (selling affiliate) Intercompany COGS (selling affiliate) COGS (purchasing affiliate) Inventory (purchasing affiliate)

Finance Lease Subsequent Entry: Lessee

Interest Expense 2779 Lease Liability 15221 Cash 18000 Amort Exp 16113 Accum Amort 16113

Intraperiod Tax Allocation

Involves apportioning the total tax provision for financial accounting purposes in a period between the income or loss from: Income from Continuing Operations Discontinued Operations Accounting principle change(retrospective) OCI(Pufier)

Cost Method (Treasury Stock) Journal Entries

JE upon repurchase Treasury Stock (at cost) 100 Cash 100 JE upon reissue Gain Cash 110 Treasury Stock (at cost) 100 APIC - TS 10 JE upon reissue Loss Cash 90 APIC - TS (First then RE)10 Treasury Stock (at cost) 100 Retained Earnings 10

Operating Lease Subsequent Entry: Lessee

Lease Expense 18000 Cash 18000 Lease Liability 15221 Accumulated Amortization - ROU Asset 15221

Sales Type Lease: Lessor

Lease Expense 450 Residual Asset 6891 Lease Receivable 17325 Cash 450 Gain 2216 Truck 22000

Fair Value Hierarchy of Inputs

Level 1: Active Market for Identical Assets -Allows for use of quoted prices -Most reliable Level 2: Similar Assets in an Active Market or Quoted prices for Identical or Similar Assets in an Inactive Market Level 3: Discounted Future Cash Flows -Least Reliable -Subject to mgmt judgment -Should be used only when there are no observable inputs from Level 1 or Level 2 markets

Statement of Changes in Accumulated Plan Benefits

Liability changes Information regarding the significant effects of certain factors affecting the year-to-year change in the actuarial present value of accumulated plan benefits

Discount

Market Rate is higher than the stated rate = loss Collected less than the face value

Impairment of Fixed Assets (US GAAP)

Must be reviewed for impairment at least annually 1. Impaired if Sum of Undiscounted CF< CV 2. FV - CV = Impairment Loss If asset is held for disposal, Cost of disposal is added to loss and Restoration is permitted

Cash Flow From Operations (Indirect Method)

Net Income + Noncash expenses/losses -Noncash income/gains + Increases(decreases) in operating liabilities(assets) - Increases(decreases) in operating assets/liabilities

multiple-step income statement

Net Sales -COGS = Gross Margin -Selling Expenses -General and Administrative Expenses -Depreciation Expense = Income / Loss from Operations Other Revenues and Gains: +Interest Revenue +Gain on Sale of Fixed Assets +Other Revenue =Subtotal Other Expenses and Losses: -Interest Expense -Loss on Sale of Fixed Assets =Income before Unusual items and Income tax -Loss on Sale of AFS Securities =Income before Income Tax -Income Tax expense =Net Income (or Income from continuing operations)

Income Available to Common Shareholders

Net income (-)dividend declared in period on non cumulative preferred stock (regardless of whether they have been paid (-) dividend accumulated in period on cumulative preferred stock (regardless whether they have been declared)

Exchanges Lacking Commercial Substance - No Boot Is Received

No gain is recognized

Exchanges Lacking Commercial Substance - Boot Is Paid

No gain is recognized if boot paid is less than 25 percent of the total consideration

Permanent Differences

Non taxable Non deductible Special Tax Allowances

Financing Liabilities

Note Bond Debt Debenture Line of Credit Negotiated Financing

Additional shares outstanding

Number of Shares - ((Number of Shares x Exercise Price)/Avg Market Price)

If any one of the following criteria is met, the lease will be classified as sales-type lease by the lessor and a financial lease by the lessee: if none then operating for lessee

OWNES 1. Ownership of the underlying asset transfers from the lessor to the lessee by end of term 2. Lessee has a written option to purchase, and is reasonably certain to exercise 3. NPV of all lease payments equals or exceeds assets FV 4. Term of lease represents the major part of economic life for asset 5. Asset is specialized such that it will not have an expected, alternative use to lessor when term ends

Lease contracts should be combined if they meet all of the following criteria

One or more contracts contains or is a lease The contracts are entered into at approximately the same time The Parties to the contract are the same, or are related parties One or more of the following: 1. Performance or price of one contract affects the consideration paid in the other contracts 2. Have the same commercial objectives

PUFIE(R)

Pension Adjustments Unrealized Gains and Losses (AFS Debt Securities) Foreign Currency Items Instrument Specific Credit Risk Effective Portion of Cash Flow Hedge Revaluation Surplus (IFRS Only)

For the Lessor, if none of the OWNES criteria are met, the classification will depend on the following two criteria: If both are met then Direct Financing Lease If one or none met then Operating Lease

Present value of the sum of lease payments, lessee guaranteed residual value not included in the lease payments, and any third party guaranteed residual value is equal to or substantially exceeds the assets fair value Collection of lease payments and amounts necessary to to satisfy residual value guarantees is probable

Exchanges Lacking Commercial Substance

Projected cash flows after the exchange are not expected to change significantly

Level 1 Inputs

Quoted prices in active markets for identical assets

Operating Lease Initial Entry: Lessee

ROU Asset 48,338 Lease Liability 48,338

Finance Lease Initial Entry: Lessee

ROU Asset 48338 Lease Liability 48338

Exchanges Lacking Commercial Substance - Boot is Received

Recognize Proportional Gain (<25% Rule) If the exchange lacks commercial substance and the boot received is less than 25% of the total consideration received, a proportional amount of the gain is recognized. A ratio (the total boot received/the total consideration received) is calculated, and that proportion of the total gain is recognized. If boot is 25% or more of total consideration, both parties account for the transaction as a monetary transaction, and gains/losses are recognized in their entirety.

Net Discount Method

Records sales and AR net of available discount If payment received after discount period, then Sales Discount Not Taken (Revenue) is credited

Impairment IFRS (Intangible Assets)

Recoverable Amount - CV = Impairment Loss Recoverable amount is the higher of NRV or Value in Use NRV= Fair Value - Costs to Sell Value in Use= Present Value of future cash flows

Security Deposits - Lessor Accounting

Refundable security deposits are expensed/counted in revenue in the period that they are used If tenant moves out at the end of the term, the security deposit is taken into revenue and matched with cleaning costs and damage repair

Direct Financing Lease Initial Entry: Lessor

Residual Asset 6891 Lease Receivable 17775 Truck 24216 Cash 450

Temporary Differences

Result in taxable or deductible amounts in future years, when the reported amount of the asset/liability is recovered/settled

Net Periodic Pension Cost Formula

SIR AGE current Service cost Interest cost <Return on plan assets> Amortization of Prior Service Cost <Gains> and losses amortization of Existing net obligation or net asset =Net Periodic Pension Cost

Weight Average Number of Common Shares Outstanding

Shares outstanding at the beginning of the period +Shares sold during the period(on a time-weighted basis) -Shares reacquired during the period(on a time-weighted basis) +Stock dividends and stock splits (retroactively adjusted) -Reverse stock splits (retroactively adjusted) = Weighted average number of common shares outstanding Anything before stock split is retroactively adjusted

Cash Equivalents

Short-term, highly liquid investments that can be readily converted to a specific amount of cash and which are relatively insensitive changes in value. 3mos

Summary of Significant Accounting Policies Includes:

Specific Accounting Principles and methods used during the period: Basis of Consolidation Depreciation Methods Amort of Intangibles Inventory Pricing Use of Estimates Fiscal Year Definition Special Revenue Recognition

Impairment US Gaap (Intangible Assets with Finite Lives)

Sum of Undiscounted FCFs < Carrying Value If yes, then impaired If impaired, FV - CV = Loss

US GAAP required disclosures

Summary of Significant Accounting Policies

When companies use the expected return on plan assets to calculate net periodic pension cost...

The Difference between actual and expected return must be recognized in OCI each period and amortized to net periodic pension cost over time with any actuarial gains/losses

If the coupon rate is lower than market rate:

The bond will be issued at a discount Use market rate for PV factors

If the coupon rate is higher than the market rate:

The bond will be issued at a premium Use market rate for PV factors

Bond Indenture

The document that describes the contract between the issuer (borrower) and bondholders (lenders)

Form 40-F

The equivalent of a 10-K filing for Canadian companies

Withdrawal of a partner: Goodwill Method

The partners may elect to record the implied goodwill in the partnership based on the payment to the withdrawing partner. The amount of the implied goodwill is allocated to ALL of the partners Step 1: Adjust Assets to FV Asset Adjustment xx A Capital (%) xx B Capital (%) xx C Capital (%) xx Step 2: Journal Entry to record goodwill to make withdrawing partners capital account equal payoff Goodwill xx A Capital (%) xx B Capital (%) xx C Capital (%) xx - Get him to the exact amount of the buyout Step 3: Pay off the partner C Capital (100%) xx Cash xx

Face (par) value

The total dollar amount of the bond and the basis on which period interest is paid $1000

Remaining Notes to the Financial Statements

These notes are not used to disclose facts presented in either the body of F/S or summary of significant accounting policies -material info regarding inventory, PPE, and other significant asset/liability balances -Changes in Stockholders equity, including Capital Stock, Stock Dividends, and other capital changes -Required Marketable Securities Disclosures, including CV and gross unrealized gains/losses -Fair Value Estimates -Contingency Losses -Contingency Gains -Contractual Obligations -Pension Plan Description -Segment Reporting -Subsequent events -Changes in Accounting principles or implementation of new accounting standards update

IFRS vs. US GAAP Stmt of Cash Flows

US Gaap Interest received-CFO Interest paid - CFO Dividends Received - CFO Dividends Paid - CFF Taxes Paid - CFO IFRS Interest Received - CFO/CFI Interest Paid - CFO/CFF Dividends Received - CFO/CFI Dividends Paid - CFO/CFF Taxes Paid - CFO/CFI/CFF

Debentures

Unsecured Bond, greater risk

Form 20-F

annual report for non-U.S. companies Audited F/S Can be IFRS or US GAAP

Form 11-K

annual report of company's employee benefit plans

Treasury stock method

assumes that the proceeds from the exercise of stock options, warrants, and their equivalents will be used by the company to repurchase treasury shares at the prevailing market price, resulting in an incremental increase in shares outstanding

Exchanges having commercial substance

commercial substance if future cash flows change as a result of the transaction. change can be in area of risk, timing or amount of cash flows Always recognize a G/L G/L computed as the difference between the FV and BV of the asset given up

Any one of these are potentially dilutive securities (which indicates complex capital structure)

convertible securities (convertible preferred stock, convertible bonds, etc.) warrants and other options contracts that may be settled in cash or stock contingent shares

Form 6-K

filed semi-annually for foreign private issuers, unaudited financial stmts

Commercial Substance

future cash flows will change as a result of the transaction Monetary Exchanges Assume there is commercial substance unless told otherwise

Sum of the years digits formula

n(n+1)/2

Market (effective) interest rate

rate of interest actually earned by the bondholder and is the rate of return for comparable contracts at the time Int. Exp - IS Yield

Gross Discount Method

records a sale without regard to the available discount if payment is received during discount period, then Sales Discount (contra rev) is Debited

Unusual or Infrequent items

reported separately as part of income from continuing operations

Form 10-K

the annual report that publicly traded companies must file with the SEC Large Accelerated (700mil+) 60 days Accelerated (75-700mil) 75 days All others (Less than 75mil) 90 days

Stated (nominal or coupon) interest rate

the interest to be paid to the investors in cash, specified in the bond contract Int. Paid - CF

Form 10-Q

the quarterly report that publicly traded companies must file with the SEC Large Accelerated (700mil+) 40 days Accelerated (75-700mil) 40 days All others (Less than 75mil) 45 days

Form 8-K

the report used by publicly traded companies to disclose any material event not previously reported that is important to investors