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CPA- FAR


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[Front]


2 Components of an Income Statement
[Back]


1) Income from Continuing Ops 2) Income from Discontinued Ops

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CPA- FAR - Details

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2 Components of an Income Statement
1) Income from Continuing Ops 2) Income from Discontinued Ops
2 Components of Continuing Operations
1) Operating Rev/Exp 2) Non-Operating (Other Rev/Exp, Gain/Loss)
Elements of Other Comprehensive Income
Pension, Unrealized G/L on Debt Securities, Foreign Currency Translation, Instrument Specific Risk, Effective Portion of CF Hedge, Revaluation Surplus (IFRS ONLY)
Comprehensive Income Calculation
Net Income (after tax) + OCI [PUFIER] (net of tax)
Single-Step Income Statement vs Multiple-Step
Single Step: Revenues - Expenses Multiple Step: Multiple Subtotals
Changes in Accounting Principle or Error Correction:
Retrospectively- Adjust Beginning RE NET OF TAX (earliest period presented)
Subsequent Events: 1. When should subsequent events be recognized? 2. When should they be recorded/disclosed?
1. Recognize if they have existed at the BS Date 2. JE and Disclosure if they occur before the BS Date, Disclosure only if afterwards
OCBOA: Presentation Guidelines: (2)
-Don't use GAAP terms -Statement of CF not required
OCBOA: Cash Basis vs Modified Cash Basis
Modified cash basis has expenses and revenues, but does not have receivables or payables
OCBOA: How should non-taxable revenues and expenses be reported on an Income Tax Basis F/S?
As separate line items, additions/deductions to NI, or a disclosure
Cash to Accrual Basis:
For AR and Unearned Revenue: - Add Good (Increase in A or Decrease in L) - Subtract Bad (Decrease in A or Increase in L) For Everything Else: - Subtract Good (Increase in A or Decrease in L) - Add Bad (Decrease in A or Increase in L)
How should contingency Gains/Losses be accounted for if they are: 1) Probable 2) Reasonably Possible 3) Remote
1) Gains = Disclose; Loss = JE and Disclose 2) G/L = Disclose Only 3) G/L = Ignore (Unless guarantee of indebtedness to others, then disclose)
Direct Method for Operating Activities
Inflows less Outflows = Cash Basis
InDirect Method for Operating Activities
NI + Depr - Gains (Prem. Amort) + Losses - Equity (in excess of recc $) - Change in OA + Change in OL
What is included in Operating Assets?
ALL Current Assets EXCLUDING CASH AND CASH EQUIVALENTS
What is included in Operating Liabilities?
ALL NON-INTEREST bearing Liabilities (including DTL)
Investing Activities
Changes in Non-Current Assets, Payments related to Principal ONLY, AFS, HTM
Financing Activities
Changes in Debt and Equity, Dividends Paid, Repayment/Issuance of Debt, Treasury Stock
Supplemental Portion of Stmt of Cash Flows
If Direct: Indirect reconciliation required; If Indirect: Interest and Taxes Paid; Both: Non-cash Investing/Financing Activities
Market Cap Calculation
CSO x Price Market
Size of Market Cap
Large Accel = 700m+ Accel = 75-700m Small = <75m
10-K Purpose and Filing Days
Annual, 60 (lg) -75-90(sm)
10-Q Purpose and Filing Days
Quarterly, 40 (lg)-40-45(sm)
8-K Purpose
Major Event
Basic EPS Equation
(NI - *Preferred Dividends)/WACSO
Non-cumulative Dividends
Focus on the declared dividends ONLY
Cumulative Dividends
All accumulated dividends (regardless of if declared)
How are dividends and stock splits treated in calculation for WACSO?
Treat them as if they occurred at the beginning of the earliest period presented.
How are convertible bonds treated when calculating Diluted EPS?
"If-Converted" Method: Only affects EPS if dilutive. Numerator changes to NI + Int Earned (Net of Tax) Denominator adds # CS convertable
How are options and warrants treated when calculating Diluted EPS?
"Treasury Stock" Method: If Avg Price > Excersize Price = Dilutive Only Affects denominator # Options - ((# options*excersize price)/avg price)
4 Tests to determine if a segment must be reported separately
10% Internal/External Revenue 10% of sum P/L 10% of Assets Reported segments >75% of external revenue
Selling AR without recourse
True Sale, take AR off books
Selling AR with recourse
Sale (if met by all three) or Loan 1) Seller's Obligation reasonably estimated 2) Transferer surrenders control 3) Transferer not required to repurchase AR
What is the direct write-off method used for, and can it be used for GAAP?
It's used for tax purposes, and no it cannot be used for GAAP. Bad Debt is our plug figure in Allowance for Doubtful Accounts
Freight-In vs Freight Out
Freight-In: INcluded in INventory Freight Out: Selling Expense
FOB Destination
Transfers to BUYER @ DESTINATION
FOB Shipping Point
Transfers to BUYER @ SHIPPING POINT
Equation for Periodic Inventory Cost
BI + Purchases = COGA - EI = COGS
Inventory Valuation: US GAAP
Lower of Cost or Market
Inventory Valuation: IFRS
Lower of Cost or NRV
Equation for Net Realizable Value (NRV)
NRV = Selling Price - Costs to Sell
Market Value Calculation
Middle of: - Replacement Cost - NRV (SP - Cost to Sell) - NRV - Profit
Inventory Costing: Perpetual Moving Average Formula
(COGA/# of units) = Cost/Unit Changes after every purchase
Inventory Costing: Dollar Value LIFO
Price Index = EI Current/EI Base Price Index * Layer Base Increase
Conventional Retail Formula:
Markups NOT included in COGA for Cost AFS (Retail AFS - Sales - Markdowns) * (Cost AFS/Retail AFS) = EI @ LCM
U.S. GAAP PP&E NBV Equation
NBV= Cost - A/D - Impairment
IFRS PP&E Valuations (2)
1. NBV (same as US GAAP) 2. Revaluation = FV on Revaluation - Subsequent A/D - Subsequent Impairment
U.S. GAAP PP&E NBV Equation
NBV= Cost - A/D - Impairment
IFRS PP&E Valuations (2)
1. NBV (same as US GAAP) 2. Revaluation = FV on Revaluation - Subsequent A/D - Subsequent Impairment
Ordinary Repairs are ??? Extraordinary Repairs are ???
Ordinary = Expensed Extraordinary = Capitalize by reducing A/D
Equation for capitalization of construction interest
Lesser of: - Weighted Avg Expenditures * Weighted Avg Rate - Actual Interest
Depreciation: Units of Production
((Cost - SV)/Hours)= Rate per Unit * Units or Hours
Depreciation: Sum of Year's Digits
Rate: (Remaining Life / SYD) SYD if 3 yr life = 1+2+3
Depreciation: Declining (200/150)
IGNORE SALVAGE VALUE Rate: (200 or 150/Number of Years) = %
If the exchange HAS commercial substance, what amount of G/L are recognized?
All G/L recognized if they have commercial substance.
If the exchange does NOT have commercial substance, what amount of G/L are recognized?
ALL LOSSES RECOGNIZED IMMEDIATELY. No Boot= No Gain, FV<25% Paid= No Gain, FV<25% Rec= Proportional Gain, FV>25%= ALL Gain
Involuntary Conversion Calculation
Payment Received - Carrying Value
Available-for-Sale Debt Security: Current or Noncurrent? Measurement? Unrealized G/L? Realized G/L? Credit Loss Treatment?
Current, FV @ BS Date (Compared to Cost), OCI, IS, Amortized Cost-PV=Credit Loss on IS (excess is OCI)
Available-for-Sale (AFS) Debt Security: Current or Not Current? Measurement? Unrealized G/L? Realized G/L? Credit Loss Treatment?
Current, FV@BS Date (Compared to Cost), OCI, IS, Amortized Cost - PV = Credit Loss on IS (excess over FV goes to OCI)
When is the FV Method used in Investments?
Ownership of 0-20% (Not Significant)
When is the Equity Method used in Investments?
Ownership of 20-50% (Significant Influence)
Equity Method: How does each influence "Investment"? 1) Initial 2) Net Income 3) Dividends 4) FV Adjustment
1) Initial: Full Investment = Increase 2) Net Income: % Owned = Increase 3) Dividends: % Owned = Decrease 4) FV Adjust: % Owned = Increase/Decrease
Equity Method: How does each influence "Equity"? 1) Initial 2) Net Income 3) Dividends 4) FV Adjustment
1) Initial: N/A 2) Net Income: % Owned = Increase 3) Dividends: N/A 4) FV Adjust: % Owned = Increase/Decrease
How do you calculate goodwill?
Implied FV (Initial Investment / %) - Fair Value = GW
GAAP vs IFRS: R&D Expense
Research: (Both Same) Research Expensed; Production, Alternative Use, and Successful Legal Capitalized, Development: (GAAP) Capitalize for Software ONLY after feasibility, (IFRS) Capitalize
How should Intangible Assets be amortized?
Finite = Amortize Infinite = Don't Amortize IN BOTH CASES CHECK FOR IMPAIRMENT
When does amortization of computer software begin and end?
It begins at release date and ends when sold
US GAAP Impairment Test: 1) General Rule 2) Exceptions and Rules
1) Sum of Undiscounted CFs > CV = Impaired; Impairment = FV - CV 2) Intangible Assets with Indefinite Lives; FV - CV if negative is impairment/amount impaired If assets are held for sale, then add disposal costs to impairment loss
IFRS Impairment Test: 1) General Rule 2) Exceptions and Rules
1) Higher of NRV or PVFCF = Recoverable Amt; RA - CV = Impairment Loss if Negative 2) No exceptions
Are reversals of impairment allowed?
US GAAP: No (except if classified as a FA Held for Sale/Disposal) IFRS: Yes (except for Goodwill)
Evaluation of Goodwill for Impairment (GAAP and IFRS)
IN BOTH CASES GW CANNOT BE NEGATIVE US= Reporting Unit (Operating Segment) IFRS= Cash-bearing Unit Level (Smallest Identifiable)
Franchisee Accounting: Initial and Continuing Fees
1) Initial Fees: Capitalize and Amortize 2) Continuing Fees: Expense
Start-up Costs
Expense as incurred
Research and Development Expense DOES NOT INCLUDE (2)
1. Items that have alternative future uses 2. Tasks undertaken on behalf of others
When does capitalization of costs start for software development?
After technological feasibility has been established