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