Conceptual Framework For Financial Reporting Flashcards, test questions and answers

derive their credibility and authority from general recognition and acceptance by the accounting profession.

all of these answers are correct

To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards.

Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply.

decision usefulness.

all of these answers are correct.

to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors in making decisions in their capacity as capital providers

Predictive value.

Faithful representation

Information is measured and reported in a similar fashion across companies.

Information presented by a company applies the same accounting treatment to similar events, from period to period.

Materiality

Neutrality

Timeliness

Relevance

relevance and faithful representation.

is capable of making a difference in a decision.

All of these answer choices relate to relevance

cannot be selected to favor one set of interested parties over another.

verifiability

Relevance: YES Faithful Representation: NO

Faithful Representation: YES Relevance: NO

the nature of the activities that gave rise to the transactions involved.

Distributions to owners

Expenses

Moment in Time: YES Period of Time: NO

Balance sheet

Equity

Historical cost assumption

Periodicity assumption

Going concern assumption

Monetary unit assumption

economic entity assumption.

verifiable

revenue recognition principle.

when the performance obligation is satisfied.

expense recognition principle.

Systematic and rational allocation of cost over the periods benefited

Application of the full disclosure principle

President's letter to shareholders.

Full disclosure.

where it would not make a difference in the actions of a decision maker.

principles.

Relevance: YES Faithful Representation: NO

false

true

false

true

false

true

to stay relevent to the needs of investors, lenders and creditors

the development of a set of standards which ensure that financial reports meet the needs of investors and creditors

information that helps an investor form an opinion about a company's future cash flows

suppliers

regulator

primary users are investors lenders and other creditors that cannot demand information from the entity. When making decisions regarding the conceptual frameworks, the boards consider the needs of these groups to have access to relevant information when assessing the financial health of a company and in forming opinions about the state of the company.

should include discussion on accountability and transparency. Other points could be the need to talk intelligently with their accountant, to know which gauges to watch (and be able to understand their meaning and consequence), and be able to identify economic events that could impact the company. (If open book exam, they could reference the interview with Paul Pacter from Section 2.2.)

true

false

true

false

true

true

false

objective and qualitative characteristics

ovverride existing accounting standards

if the proposed standard meets the objective of financial reporting

consider whether the proposed standard possesses the qualitative characteristics that make accounting information useful

standard setters (The framework provides some guidance to preparers and auditors, but the best answer would be C, standard setters, as it provides them the most guidance with development of standards. )

the FASB and the IASB are working independently on their conceptual framework

fundamental and enhancing

recognition and measurement

concepts

standards

the purpose of the conceptual framework is to establish objectives and fundamental concepts that are the basis for developing and revising financial accounting and reporting standards

standard setters will determine if the proposed standard meets the objective of financial reporting, establish that the information provided by the new standard possesses qualitative characteristics that make accounting information usefule, consider the elements of the financial statements affected and the recognition and measurement concept use to support the new standard, weigh constraints such as the cost and benefit of issuing the new standard which may deter requiring the new standard

objective and qualitative characteristics, measurement, presentation and disclosure

qualitative, made of fundamental and enhancing characteristics. Elements, made of point-in-time and period of time. Principles, made of recognition and measurement.

false

true

true

false

false

true

false

false

true

true

faithful representation and relevance

free from error

fundamental

materiality, predictive value, and confirmatory value

free from error

faithful representation

complete

predictive value

consistency

verifiability

cost

timeliness

confirmatory value

does not faithfully represent the firms financial position

is not free from error, does not faithfully represent the firms financial position.

A financial statement that is free from error is not the same thing as an accurate statement. The nature of accrual accounting is one that relies on estimates; therefore, when saying information reported is free from error, it is really referring to the process used to generate the financial statements being error-free. The amounts reported may be different than the actual amounts in accounts that rely on estimates.

standard setters should compare the cost of requiring information to the benefits derived from presenting this information . Standard setters consider costs for both financial statement reporters and users. To be reported, accounting information not only must be relevant and faithfully represented but it also must pass an economic test by satisfying the cost constraint.

This will be a trade-off between verifiability and timeliness. By estimating the amounts for the liabilities, the statements will be less verifiable — because the associated invoices will not be available. However, this will allow them to prepare the statements quickly — and timeliness stipulates that financial information is available to users early enough to assist with decision making.

false

t/f

false

true

false

false

true

true

false

true

Investments by owners: No Operating Income: Yes

elements

point in time

sales revenue, income statement

point in time elements

three

seven

three

four

revenues and expenses

asset

comprehensive income

gains

distributions to owners are included in other comprehensive income

the nature of the activities that bring about the transactions

profit

revenues and gains

losses and expenses

Capital and Maintenance

Capital maintenance adjustments

physical capital maintenance

the monetary investment in the company

the period of time elements provide a way to describe how the point in time elements change during the accounting period

equity is the residual interest in the asset of an entity that remains after deducting its liabilities. it changes when there are investments by the owners, distributions to the owners, increases or decreases in comprehensive income

Comprehensive income includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. That is, comprehensive income includes revenues, expenses, gains, and losses, and all other changes to equity not resulting from transactions with the owners.

False

true

false

true

false

true

false

true

false

False

monetary unit

recognition

material

the item is relevant

expense

materiality

present value of future cash flows

cash or fixed claims to cash are received, the company receives the right to bill with expectation of payment

earned

current cost

increases in assets and decreases in laibilities

net realizable value

five, four

historical, current cost

historical cost

an arms length transaction

relevance and faithful representation

cash basis

accrual

11250, 3750

0, 3750

24000, 8000

0, 8000

3750, 1250

1750, 2125

625, 2750

9000, 3000

4000, 5000

1000, 6000

match expense to the related revenue, to expense it in the period incurred, or to systematically allocate the expense over periods of use. . An example of matching the expense to the revenue would be matching the cost of goods sold expense to the related revenue recognized when the inventory is sold. Expensing in the period incurred would be recording supplies expense during the period that they were consumed. Depreciating a piece of equipment over its useful life is an example of systematic allocation. While U.S. GAAP focuses on determining the period when an expense is recognized, IFRS focuses on what expenses are recognized during a period. Specifically, IFRS recognizes all decreases in future economic benefits related to a decrease in an asset or an increase in a liability if can be reliably measured. Thus, the matching principle is not explicitly described as an expense recognition principle because it is subsumed under the other IFRS criteria.

companies should recognize revenue to record the transfer of control of goods or services that reflects the consideration to which the company expects to be entitled. this occurs when a company satisfies its performance obligations specified in the contract with a customer

false

true

true

False

False

reliability concept

periodicity assumption

going concern concept

monetary unit assumption

going concern concept

going concern concept

going concern concept

economic entity concept

monetary unit assumption

completeness

the monetary unit assumption

is applicable to all forms of business organizations

economic entity concept

C

C

D

C

C

B

Gains and GM

D

A

C

D

Distributions to owners

assets

investments by owners

assets

expenses

expenses

liabilities

assets

assets

gains

monetary unit

economic entity

going concern

level 1

level 3

level 2

cost constraint

T

F

F

F

T

F

consistency

neutrality

neutrality

relevance and faithful representation

timeliness

cost

relevance

comparability

confirmatory value

verfiability

yes

no

no

expense recognition principle

materiality

measurement fair value principle

economic entity

full disclosure principle

measurement historical cost principle

full disclosure principle

revenue recognition principle

full disclosure principle

expense recognition and revenue recognition

economic entity

periodicity principle

measurement fair value principle

measurement historical cost principle

expense recognition principle

relevant

material

completeness, neutrality, free from error

comparability, verifiability, timeliness, understandability

economic entity

going concern

monetary unit

periodicity

must be carefully designed so as to benefit all the Bs under the T, and it is this concern, that a variation does not disadvantage any of the Bs, which has generated the current legal regime.

essentially to require each sui juris beneficiary, (i.e. of full age and sound mind), to consent to a proposed variation, while the court will consent on behalf of those not sui juris. It will not, however, do so unless it is convinced that a genuine benefit has been conferred on such incapable beneficiaries by the proposed variation.

typically that a B or a group of Bs who is or are sui juris, and who is/are absolutely entitled under the T, may 'call' for the T Rs representing their interests to be conveyed to them. By the same token, sui juris Bs can instead consent to a variation of T - a change in the terms upon which the T Rs are held.

1. re Brockbank [1948] Bs, though sui juris, are not entitled to direct the Tee in the exercise of his discretions under the T. They can collapse the T or insist upon a variation, but they are not entitled to 'micromanage' the T by themselves, taking the decisions that a Tee is authorised to take to give effect to the T. That would completely defeat the point of there being a T. 2. . Only sui juris Bs can consent to a variation. Under-age Bs, or those who are otherwise unable to act for themselves, for example, the mentally disabled, cannot consent.

Court of EQ has an inherent supervisory jurisdiction over T.

House firmly opposed the existence of any such jurisdiction. The inherent jurisdiction of the Court was limited to: 1. granting additional administrative powers to the Tee in 'emergency' situations, e.g. situations where the limitations upon, for example, investment in the T instrument jeopardised the functioning of the T, and 2. sanctioning maintenance payments to a B otherwise not provided for. Variation of Trusts Act 1958: provides the powers courts lacked

Denning LJ's sense that the court's inherent jurisdiction is actively facilitative (a kind of approach you may recognise having studied other of his lordship's decisions in other subjects on the course). Denning looks historically important thing to notice in all these cases is that court did not only emergency or necessity, but only for benefit of infant, and it sanctioned transaction, even though not in T instrument. jurisdiction is not confined to cases where a dispute about extent of beneficial interests, nor to cases of emergency or necessity, but extends wherever a bargain about beneficial interests which is for benefit of infants or unborn persons. Saving taxes (death duties). In Chapman mistake would mean losing 30000 in taxes. Jurisdiction of court should include correcting mistakes of solicitor. court, whose function it is to protect interests of grandchildren, shows itself to be their own worst enemy. grandparents are ready and anxious to correct mistake. So is everyone else. If grandchildren and unborn persons were at liberty to consent, any prudent adviser would tell them that they ought to consent because scheme is so greatly advantageous to them. Lord Simonds LC is clearly more concerned that the court does not take it upon itself to re-write settlements just because it might be beneficial so to do. He is also much more concerned that the law develop piecemeal over time, rather than founding the scope of the court's inherent jurisdiction on a broad, abstract principle of 'doing good' for the Bs. to accept any suggestion that court has an inherent jurisdiction to alter a man's will because it thinks it beneficial. It seems to me that is quite impossible." . . It should then be asked what are exceptions to this rule. They seem to me to be reasonably clearly defined. change nature of an infant's property from real to personal estate and vice versa, though this jurisdiction was generally so exercised as to preserve Rs of testamentary disposition and of succession. Equally, no doubt that from an early date court assumed power, sometimes for that purpose ignoring direction of a settlor, to provide maintenance for an infant, and, rarely, for an adult, B. So, too, court had power in administration of T property to direct that by way of salvage some transaction unauthorized by T instrument should be carried out. Nothing is more significant than repeated assertions by court that mere expediency was not enough to found jurisdiction. extended to cover cases in which no real dispute as to Rs and, therefore, no comP, but it is sought by way of bargain between Bs to rearrange beneficial interests under T instrument and to bind infants and unborn persons to bargain by order of court. function of court to execute a T, to see that Tees do their duty and to protect them if they do it, to direct them if they are in doubt and, if they do wrong, to penalize them. It is not function of court to alter a T because alteration is thought to be advantageous to an infant B. It was, I thought, significant that counsel was driven to admission that since benefit of infant was test, court had power, though in its discretion it might not use it, to override wishes of a living and expostulating settlor, if it assumed to know better than he what was beneficial for infant.

extends the court's power to confer upon Tees additional administrative powers to cases where 'in the opinion of the court' it is 'expedient' to do so. Thus, by virtue of the statute, the situation need not be one of 'emergency', to which cases the House in Chapman v Chapman said the inherent jurisdiction was confined.

Tees of the British Museum successfully persuaded the court to extend their powers of investment so that they would continue to be able to amass the funds necessary to enhance the museum's collection by purchases from time to time. used s57

The court's inherent jurisdiction with regard to the variation of administrative powers is restricted to 'emergency' situations, and the Tees of the British Museum could not argue that an extension of their investment powers was necessary to prevent an emergency. But as it was sensible and 'expedient', the court could allow the variation under s 57.

As a corollary of the principle in Saunders v Vautier, sui juris Bs can consent to any variation of T, but those under-age or otherwise incompetent cannot. The court's inherent jurisdiction is limited to the grant of further administrative powers in cases of 'emergency' powers, though s.57 of the Tee Act 1925 enlarges the power to any case where the enlargement of powers is expedient, and, with respect to dispositive provisions of a T, to allowing maintenance payments. The court can consent to a comP of rights, but this is not properly seen as a power to vary dispositive T provisions. Chapman establishes that the court has no inherent jurisdiction to consent to the variation of T on behalf of those not sui juris, however much in those Bs' interests such a variation might be.

reverses the decision in Chapman, empowering the court to consent to a variation on behalf of Bs who are not sui juris. appears merely to authorise the court to approve a variation of the T on behalf of certain Bs; the remaining Bs (essentially all those who are sui juris and ascertainable) must give their own consent if they are to be bound by the variation (IRC v Holmden [1968] AC 685; re Holt's Settlement T [1969] IMPORTANT:was assumed that the court in effect made an order of variation, but would do so only when all the sui juris Bs consented and the court was able to consent on behalf of the others.

Under the Variation of T Act the court does not itself amend or vary the T of the original settlement. The Bs are not bound by variations because the court has made the variation. Each B is bound because he has consented to the variation. If he was not of full age when the arrangement was made he is bound because the court was authorised by the Act to approve of it on his behalf and did so by making an order. If he was of full age and did not in fact consent he is not affected by the order of the court and he is not bound. So the arrangement must be regarded as an arrangement made by the Bs themselves. The court merely acted on behalf of or as representing those Bs who were not in a position to give their own consent and approval.

In earlier cases, it was assumed that the court in effect made an order of variation, but would do so only when all the sui juris Bs consented and the court was able to consent on behalf of the others. The difference is substantial, for arguably, if the sui juris Bs' consent to the variation agreement effects the variation of the T, rather than the court's order, they 'dispose' of their equitable interests under the T, and must do so in writing or, by s.53(1)(c) , such variation is void If this were indeed the law, variations would be more inconvenient and many past variations would be void BUT cf Holt

53 Instruments required to be in writing. (1)Subject to the provision hereinafter contained with respect to the creation of interests in land by parol— (a)no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law; (b)a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will; (c)a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will. (2)This section does not affect the creation or operation of resulting, implied or constructive trusts.

although, from one perspective, the sui juris Bs 'dispose' of their equitable interests under the T when they consent to the variation and so fall within s.53(1)(c), the court's declared consent on behalf of the other Bs is sufficient to make the variation effective, even in the absence of writing. The court may give its approval on behalf of the classes of Bs set out in s.1 of the Act. s 1(1)(a) comprises minors and others lacking capacity to consent.

(1)Where property, whether real or personal, is held on trusts arising, whether before or after the passing of this Act, under any will, settlement or other disposition, the court may if it thinks fit by order approve on behalf of— (a)any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting, or (b)any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class, as the case may be, if the said date had fallen or the said event had happened at the date of the application to the court, or (c)any person unborn, or (d)any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined. any arrangement (by whomsoever proposed, and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts: Provided that except by virtue of paragraph (d) of this subsection the court shall not approve an arrangement on behalf of any person unless the carrying out thereof would be for the benefit of that person.

court may approve on behalf of those who may in the future become entitled under a T, except for ascertainable, i.e. identifiable, persons who would become entitled on the happening of a single event - such persons, if sui juris, must give their own consent. So for example, if Paul, aged 25 and mentally competent, will become entitled to an interest under the T if his widowed mother re-marries, then he must consent to any proposed variation; the court cannot consent for him. s 1(1)(c) comprises the unborn, while s.1(1)(d) comprises those persons who would be Bs under the discretionary T following the extinction of the principal T under a protective T NOTE: court must be satisfied that any variation benefits each member of classes (a), (b), or (c) before giving its approval on their behalf.

financial advantage is not sufficient to justify variation Provided a scheme is legal, the court found that there was nothing improper or contrary to public policy in approving the variation of trusts for the purpose of avoiding or reducing tax liability. Lord Denning noted that there are a number of cases where the court approved variations that were proposed for that purpose (for a recent example, see Re N's 1989 settlement [1999]). However, the court held that it should not just consider the financial benefit to the infants or unborn children, but also the educational or social benefit. In other words, would it be for the benefit of beneficiaries to emigrate just to save money? As Lord Denning put it: 'The avoidance of tax may be lawful but it is not yet a virtue.' The court considered whether the ties of patriotism were greater or less than the fiscal advantages of the proposed variation. Lord Denning's comments showed his views clearly: • 'there are many things more worthwhile than money' • 'one of these things is to be brought up in this our England, which is still the envy of less happier lands'; and • 'children are like trees: they grow stronger with firm roots'. He found it was not for the benefit of the children to be uprooted from England simply to avoid tax. Moving the trusts to Jersey would only give the beneficiaries an even greater fortune than they would have had if the trusts were still in England and subject to taxation. Here, educational and social considerations outweighed tax-saving benefits. court will be concerned with securing a financial benefit for the beneficiaries, this will not be the only type of benefit it will consider. Non-financial benefits are also relevant.

financial advantage is not necessary to accept a variation The court affirmed Lord Denning in Re Weston in holding that 'benefit' encompasses more than financial benefit. In this case: An important question is the extent to which, if at all, the court should have regard to the settlor's intention. Clearly, the court may override the settlor's plan where it is satisfied that the variation is of benefit to the Bs

here the outcome of the arrangement cannot be predicted with certainty then the Court should be prepared to take on behalf of a minor, a risk which an adult would be prepared to take

settlor's intentions are relevant only in so far as they assist the court in determining what is of benefit to the Bs on behalf of whom the court consents - the court is not bound by the settlor's intention, and the sui juris Bs are not bound by them either. This principle of English T law stands in contrast to the 'material purpose' doctrine prevalent in many US jurisdictions and which has been imported by statute elsewhere; under this doctrine, no variation of a T, even if all the Bs are sui juris, may occur if a 'material purpose' of the settlor in creating the T may yet be fulfilled. This doctrine detracts from the principle of Saunders v Vautier no for UK

The Act requires any ascertainable contingent B who is sui juris to consent to a variation even if the likelihood of his becoming entitled to a benefit under the T is slight; as a result, many individuals who have no real interest under the T must be found and properly advised in order for a variation to proceed, which can cause substantial cost and inconvenience. The situation is no different than it would be under the general law principle in Saunders v Vautier, but the possibility of such cases suggests that the Variation of T Act 1958 should have allowed courts to consent on behalf of such Bs.

duty imposed by section 1 of the Act of 1958 was not confined to inquiring into the effect of a proposed scheme on those on whose behalf approval was sought, but required also consideration on behalf of any person or persons who might have an interest under the discretionary trusts, and whose presence prevented the sole beneficiary from putting an end to the settlement. The proposal had to be looked at as a whole to see whether it was proper to be sanctioned by the court, and the court had to have regard not only to the material benefit of the person who was unable to give his consent because he was not in a position to do so, but to the purpose of the trust. The views of the trustees were relevant though not conclusive That the court should not interfere with the exercise of the trustees' discretionary powers in fulfilment of the duty imposed by the will.

False, it is also known as capital markets.

False. No condition to sell, it must be a promise.

False. It is not based on capital contributions.

False. In Mudharabah it is profit and loss sharing, no gifts or bonuses are given.

False. The agreement of the contract, not the conclusion.

True.

True. As long as contract elements are sharia compliant

True. The Bank does lease its share of the property on the home based off of Ijarah.

True. But tolerated in unilateral charitable contracts.

False. To get cash

False. Only effective profit rate reflects market rate.

True.

False. Only commodities and assets.

True.

False. deposits need not be segregated

False. Custodial fee/Storage costs

True. As long as it states in contract mutually agree

False. Have to disclose the cost and the profit mark up.

False. Shares are not gambling, investing is shariah compliant.

False. Contractually the deposited amount is not guaranteed (no capital protection).

False. Shariah does recognize TVM (Time Value Money). Time is a valuable economic resource.

True. All partners have the right to participate in the business or trade no matter their qualification. However, it should be taken into consideration the skill sets of each individual participating in the business.

True. In a BBA floating rate financing banks are granted to give rebates for early settlement or redemption.

False. Can auction assets

False. Acceptability as sale

False. Unresolved fiqh issues. Islamic perspective on debts.

False. Only Rabbal-mal bears the loss

False. It is given to the operator depending on performance.

False. In a Salam contract the price is paid in advance and delivery of goods is at a future date.

False. In Murabahah contract is a contract of sale where the seller discloses to buyer actual cost of the commodity and the profit margin added.

False. Diminishing partnership.

False. The source of profit for the Murtahin is the storage costs.

True. As long as the Murabahah contract is Shariah compliant and agreed by both parties it remains valid.

False. Materials are only to be bought by the manufacturer, not the purchaser.

True.

False? Can auction asset.

False. Acceptability as sale, etc.

False. Unresolved Fiqh issues, Islam perspective on debt.

False. Only Rabbal-mal.

I or II

sometimes primary and sometimes secondary.

topics are identified and placed on the board's agenda.

all of these answers are correct

1 and 2 are true

cash flow information

all of these choices are correct

companies are viewed as separate and distinct from their owners.

all of the above

FAF (financial accounting foundation)

EITF (emerging issues task force)

develop a single set of high-quality and understandable IFRS for general-purpose financial statements.

IFRS includes standards referred to as International Auditing Standards (IAS).

Accrual basis accounting.

sec

Accounting research studies issued by the AICPA

IASB

larger membership

investors and creditors

all of the above

non financial measurements

the purpose of the Codification is to create new GAAP

true

false. any company claiming compliance with GAAP must comply with all standards and interpretations, including disclosure requirements

true

false. in establishing financial accounting standards, the FASB relies on two basic premises: 1. the fasb should be responsive to the needs and viewpoints of the entire econoimc community not just the public accounting profession 2. it should operate in full view of the public through a "due process" system that gives interested people ample opportunities to make their view known

generally accepted accounting principles.

Research, discussion paper, exposure draft, standard.

any accounting guidance included in the FASB Codification.

It is used when there is no standard or interpretation related to the reporting issues under consideration.

reporting to capital providers.

external users.

accounting standards can have detrimental impacts on the wealth levels of the providers of financial information.

what the public thinks accountants should do and what accountants think they can do.

Cost

the life of a business can be divided into artificial time periods for financial reporting purposes.

fair value principle

$60,000

Cash, short-term investments, land, and patents

$24,000

Usefulness for decision making

Trademarks

A long-term investment

Liquidity

Net cash provided by its operating activities minus (i) expenditures on property, plant, and equipment and (ii) its dividends paid

2.10

$3.60

$2,253,000

2.50

$180,000

Statement of stockholder's equity

Earnings per share

$45,000

Lower liquidity

All of these

net income less preferred stock dividends by the average common shares outstanding.

$120,000

A set of accounting rules and practices that have authoritative support

Financial Accounting Standards Board

$2.33

has predictive value

consistency

faithful representation

Generally, identifiable assets acquired, liabilities assumed, and any non-controlling interest in the acquiree are measured at

Intangible assets on the books of an acquired entity immediately before a business combination would be recognized by the acquiring entity if they

within business combinations recognize the gain even if it is hitting oci

Noncontractual contingencies (contingencies that do not result from an existing contract), including lawsuits, are recognized only

when it asks for how much of consideration it means

Acquition costs are included or not included in a calculated loss/ gain for combinations

goodwill be recognized in a business combination when

A gain occurs in a business combination when

bargain purchase gain

For valuing an investment when acquiring the value must use an active market to value the investments. Default to the side that has an active market.

How should the acquirer recognize a bargain purchase in a business acquisition?

If there is a change after the acquisition it does not change the consideration (amount to purchase) but it does create a gain or loss

When a bargain purchase occurs in a business combination, which of the following types of information must be disclosed in the period of the combination? I. The amount of gain recognized. II. The income statement line item that includes the gain. III. A description of the basis for the bargain purchase amount.

When goodwill is recognized in a business combination, which of the following types of information about that goodwill must be disclosed? I. A quantitative description of the factors that make up the goodwill. II. The amount of goodwill that is expected to be deductible for tax purposes. III. The amount of goodwill allocated to each reportable segment.

Which of the following occurrences in a business combination, if any, identify circumstances that require extensive disclosures in the period of the combination? I. The existence of a noncontrolling interest. II. Achieving control in step acquisition.

When the required acquisition method of accounting is used to record a business combination, all acquired assets and liabilities should be reported at

When trying to find ending paid in capital you must deduct out issuance and registration costs after everything is calculated.

What legal forms of business combination will result in the need to prepare consolidated financial statements?

What gets consolidated if it is a subsidiary?

Variable interest entities:The primary beneficiary has the ability to direct the most significant economic activities of the variable-interest entity.

When does a subsidiary not have to be reported in the consolidated financial statements?

Do you consolidate a sub that has a different year end

Characteristics of a variable interest entity

Under IFRS, contingent assets are or are not recognized?