F2

Question 1

Key Terms for Revenue Recognition under IFRS

Answer 1

• economic benefits will flow to the entity
• entity has transferred to the buyer the significant risk and rewards of ownership
• no managerial involvement

Question 2

Accrual vs Deferral

Answer 2

accrual: income statement impact; no cash impact
deferral: no income statement impact; cash impact

Question 3

Treatment of royalty revenue received in advance

Answer 3

*treated as unearned revenue

Question 4

Franchisor Accounting - Initial Franchise Fees

Answer 4

• revenue when substantially performed

* usually can’t be recognized before the franchisee’s first day of operations

Question 5

Franchisor Accounting - Franchise Fees

Answer 5

*revenue when earned (use PV for future cash flows)

Question 6

Goodwill is which type of asset?

Answer 6

not specifically identifiable intangible asset

Question 7

Costs that can be capitalized for internally created intangible assets

Answer 7

• legal fees related to successful defense
• registration or consulting fees
• design costs
• direct costs to secure asset

Question 8

What happens if you lose a lawsuit related to a patent?

Answer 8

*expense cost and test the asset for impairment

Question 9

2 Methods for Reporting Intangible Assets under IFRS

Answer 9

1. cost method

2. revaluation model

Question 10

Franchisee Accounting - Initial Franchise Fees

Answer 10

*intangible asset at PV and amortize

Question 11

Franchisee Accounting - Continuing Franchise Fees

Answer 11

*expense as incurred

Question 12

Organizational Costs are _______

Answer 12

expenses when incurred

Question 13

2 Exceptions to Expensing R&D

Answer 13

1. assets with other uses
   (depreciation expense is a R&D EXPENSE)
2. research performed for others (COGS instead of R&D)

Question 14

Is quality control testing R&D?

Answer 14

No

Question 15

Basis for amortizing internally developed software

Answer 15

*straight line only

Question 16

What if internally developed software is instead sold to outsiders?

Answer 16

*cost recovery method

Question 17

GAAP Impairment

Answer 17

1. compare to undiscounted cash flows

2. impairment is difference between FV and book value

Question 18

GAAP Impairment - Asset with Indefinite Life

Answer 18

Step 2 Only (compare to FV and impair)

Question 19

IFRS Impairment

Answer 19

One Step
Compare Book Value to Recoverable Amount

Recoverable Amount is GREATER of:

1. asset’s value in use
2. selling price less costs to sell

Question 20

Unit Level for Goodwill Impairment: GAAP vs IFRS

Answer 20

reporting unit level vs. cash generating unit level

Question 21

What is a reporting unit?

Answer 21

• a unit with separate cash flows

* management regularly reviews

Question 22

Is the completed contract method allowed under IFRS?

Answer 22

No

Question 23

When to recognize loss for construction contracts?

Answer 23

*in the year of the loss

Question 24

Deferred GP is what type of account?

Answer 24

*a contra-asset

Question 25

Are gains and losses realized when there is commercial substance?

Answer 25

Yes

Question 26

Rules for Recognizing Gains/Losses for Noncommerical Exchanges

Answer 26

No boot received: no gain recognized Boot RECEIVED under 25% of compensation: gain recognized in proportion to total compensation Boot involved (either way) greater than 25%: full recognition losses are always recognized in full

Question 27

Gain/Loss Computation for Exchanges

Answer 27

*ONLY ON THE ASSET; not on total consideration given or received

Question 28

Are Gains/Losses recognized on involuntary conversions?

Answer 28

Yes; all gains and losses are recognized (proceeds less the basis determines gain or loss)

Question 29

Historic Cost Current Cost Nominal Dollars Constant Dollars

Answer 29

* actual exchange rate at a prior date (appreciation) * cost that would be incurred at the present time (appreciation) * unadjusted for changes in purchasing power (inflation) * dollars restated based on calculations of CPI ratios (inflation)

Question 30

Monetary Assets & Liabilities

Answer 30

*assets lose purchasing power and liabilities gain purchasing power during periods of inflation

Question 31

List of Monetary Assets

Answer 31

``` Cash Bonds - non-convertible A/R & N/R Long-term receivables A/P & N/P Accrued Expenses Bonds/notes payable ``` * contra accounts are assigned according to their related balance sheet account * DOES NOT INCLUDE INVENTORY OR MARKETABLE SECURITIES

Question 32

Monetary Purchasing Power = | Non-monetary =

Answer 32

Inflation | Appreciation

Question 33

Translation Method

Answer 33

1. Income Statement = weighted average 2. Balance Sheet * **year-end rate * **C/S and APIC at historical * **roll forward R/E (beginning translated R/E plus translated NI less translated dividends) 3. Plug to AOCI

Question 34

Remeasurement Method

Answer 34

1. Balance Sheet * **Monetary: current/year-end * **non-monetary: historical 2. Income Statement * **non-balance sheet = weighted average * **historical for * ***depreciation, COGS, amortization of bonds/intangibles 3. G/L plugged to get NI to equal required R/E

Question 35

Is a statement of cash flow required for OCBOA presentation?

Answer 35

No

Question 36

Cash Basis Financial Statements

Answer 36

1. Statement of Cash and Equity | 2. Statement of Cash Receipts and Disbursements

Question 37

Personal Financial Statements Issues

Answer 37

* statement of financial condition * assets are reported at estimated current FV * life insurance loans payable are netted against the cash surrender value of life insurance * vested pension plan benefits are reported at FV * liabilities are reported at estimated current amount * made in order of liquidity; no current or noncurrent classifications