[jeff]

Resources:

Free Study Planner + FAR NINJA Notes (Governmental Accounting): https://www.another71.com/cpa-exam-study-plan/

FAR Exam Experience: https://www.another71.com/cpa-exam-forum/topic/far-exam-experience-official-thread

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Anonymous]

AFS Bonds are reported at Fair Value at the balance sheet date. I've never seen anything to the contrary, got the Becker Final exam book in front of me

[MCLKT]

Clarion had the following investments in its portfolio that were purchased during year 2.

Investment :: Classification :: Cost :: Fair Value 12-31-Y2

Common Stock company x :: Trading :: $100k :: $121k

Bond company y :: Available for Sale :: $96k :: $101k

Bond company z :: Held to Maturity :: $64k :: $63k

On Dec. 31 Y2, the amoritzed cost of bond y was $97k, and the amorized cost of Bond z was $63.5k. Clarion does not elect the fair value option for reporting financial assets. What amount should Clarion record as an unrealized gain in its year 2 income statement?

a. $0

b. $21k

c. $25k

d. $26k

answer b.If Clarion does not elect the fair value option for valuing its financial assets, the rules of ASC Topic 320 apply. Therefore, only the trading security is reported at fair value, and the unrealized gain of $21,000 on Stock X is reported in earnings of the period. The bond investments in Company Y and Company Z would be reported at amortized cost

I chose D because I thought Trading and AFS would be revalued to fair value with unrealized cost.

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[MCLKT]

OMG, I typed all of that out and then realized the AFS bond unrealized gain would be reported in OCI not the income statement. So the AFS bond is still reported as fair value, just not hitting the income statement. It would have been helpful if Wiley referenced that in the answer. Oh well…

Time to switch from red bull to red wine and call it a night, lol.

Thanks you all! Just another little detail to look out for on exam day 🙂

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[Anonymous]

Mclkt : but it's written in the question that company is not using fv option … 🙂

Lol lol ya !! It's I/S : trust me i am doing thr same from this morning .. 🙁

Urghhhhhh anyway got to finish chp 8 govt ..

Happy studying

[MCLKT]

I know! lol….But even if companies do not elect fair value option AFS is still reported at Fair Value. The explanation says only the trading security is valued at fair value, and that's not correct. Because AFS is valued at fair value. The difference is the unrealized gain is recognized in OCI regular but in Income Statement when Fair Value Option is elected.

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[mjp44]

Do I have the logic for deferred tax liability/asset correct?

“Depreciation per tax return exceeds depreciation per book” This results in a deferred tax liability because a higher depreciation on the tax return results in lower amount of taxable income compared that recorded on book. Therefore the company would have a tax liability in the future.

This is a pretty simple example but i want assure that my logic is correct.

FAR- PASSED (11/13)
REG- PASSED (2/14)
BEC- PASSED (5/14)
AUD- PASSED (8/14)

If it's important to you, you will find a way. If it isn't, you will find an excuse.

[MCLKT]

Yes, that's the right logic!

I finally got it. I always break it down to how does this effect income:

Tax income

– Book Income

==========

(negative) means liability

So I do exactly what you are doing. As long as you can get to the income Tax v. Book you are all set!

so in your ex: tax depreciation > book Depreciation

Tax income would be lower

– Book income which is higher

============

Negative, so liability

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[Anonymous]

In EPS, are stock splits and dividends retroactively applied to prior years?

[Anonymous]

Ahhh just got an email from prometrics reminding me about my appt on Wednesday, ::shivers::

[mjp44]

@Cpahopeful. Yes, i believe they are applied to shares outstanding in prior years. At least for stock splits they are. Pretty sure the same for stock dividends.

FAR- PASSED (11/13)
REG- PASSED (2/14)
BEC- PASSED (5/14)
AUD- PASSED (8/14)

If it's important to you, you will find a way. If it isn't, you will find an excuse.

[MCLKT]

Yes, you take the total amount of share outstanding on date of record to calculate the splits/dividends. 🙂

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[Anonymous]

@MCLKT At your suggestion I took a look at cpareviewforfree to brush up on some IFRS. Mainly easy confidence building stuff but I encountered this

A company leases a piece of equipment for 6 years although it has a total expected life of ten years. There is no title transfer in the contract nor is there a bargain purchase option. The present value of the future cash payments do not make up a significant portion of the asset’s fair value. Which of the following statements is true?

A This lease is an operating lease according to US GAAP but could be a capital lease according to IFRS.

B The lease is an operating lease according to both US GAAP and IFRS.

C The lease is a capital lease according to both US GAAP and IFRS.

D The lease is a capital lease according to US GAAP but could be an operating lease according to IFRS.

Now it says the answer is A, but I thought a capital lease under IFRS = a finance lease. I know that these types of organizations do hundreds and thousands of questions, but unless I'm doomed for this test tuesday, that's a lazy error. And through the more questions I go, they keep saying capital lease under IFRS. huh?

[MCLKT]

I saw that one too. They should have said “capitalized” or Finance Lease. I agree 100%. No matter how big or small (that site is just one professor putting them together I think) there are always errors on this stuff. It's ridiculous if you ask me. I've already sent Wiley 2 emails tonight, lol.

Anyways, I usually don't send people to cpaforfree unless they are confident in their knowledge and just want to brush up. With most of us testing this week…. I forgot to put that disclaimer on my earlier post. Thanks for pointing it out! That's a decent resource, but only at the end of your review.

Also, wouldn't D be correct? It could be finance but it could be operating. And sense there is no Capitalized in IFRS, s/b D.

A:[73]97 F:[74]85 R:86 B:[74]82
*NINJA 10 Pt. COMBO & Yaeger*

[Anonymous]

Can't be capitalized under US because its not 90% of the present value, 75% economic life, bargain purchase or title transfer

[SeattleAccountant]

@Banks94

Lease does not satisfy US criteria (do not capitalize) BUT can be still capitalized under the IFRS b/c IFRS is all about substance over the form. Here, substance is 6/10 years which is greater than 50% = possible capitalization by lessee.

So, the answer is “a”, completely agree.

Becker Class of Jan - Aug 2013: FARB DONE!!!!
CPA license pending 🙂

[Author]

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