[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for FAR. 🙂

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

[cdn]

I did not know that we also have unit of production depreciation

[Anonymous]

@cdn Asset Retirement Obligation

For when you have an asset that you know will have significant costs when its time to retire it. Like an oil rig – you can't just abandon it, you have to pay to have it shut down properly. You have to go ahead and account for that future liability.

1. Record the liability at Present Value. Credit Asset Retirement Obligation (liability account on the BS) and Debit Asset Retirement Cost (capitalized asset on the BS).

2. At the end of each period, you have to adjust for 2 things. The Liability (ARO) is at PV, so it needs to be adjusted over time to reach the desired Future Value, the adjustment is called Accretion Expense. The Asset (ARC) is part of the capitalized cost of a tangible asset, so it needs to be depreciated, usually straight-line.
Debit Accretion Expense, Credit ARO Liability AND
Debit Depreciation Expense and Credit ARC Asset

3. Retiring the asset – Sometimes it costs more than estimated, in which case expense it.
Debit ARO Liability (to remove it from the Balance Sheet)
Debit Asset Retirement Expense (for the amount over and above ARO)
Credit Cash

If I am doing a MCQ and there are a few discount rates to choose from, I usually go with the credit adjusted risk-free interest rate and its been working out so far.

[norseman88]

Under IFRS, Which of the following would be included in income from continuing operations on the income statement?

I. A large loss from a foreign currency transaction.
II. Union strike that shuts down operations for 3 months.
III. A foreign government take possession of a company's only plant.
IV. Damage to a factory due to an earthquake in an area that had not previously experienced earthquakes.

Answer is all.

Why is a foreign currency transaction loss reported in income from continuing operations on the income statement? I thought foreign currency transactions are reported in Other Comprehensive Income.

[GiniC]

@norseman88-

The F in PUFER (things that go in OCI) is foreign TRANSLATION gains & losses. Transaction and measurement g/l go to the income statement.

[cdn]

@chynablue – thanks so much it really help now after your great explanation 🙂

[norseman88]

@GiniC Thanks for the response. I knew that Foreign currency translation G/L go to OCI and FC remeasurement G/L go to the I/S. I hadn't seen TRANSACTION before in the text, must have missed it. Guess it makes sense as translation would be when consolidating books from foreign functional currency to reporting currency. A TRANSACTION could be in any foreign currency (non functional) I suppose.

Thanks

[Cruzer]

Anyone else having troubles remembering foreign currency translation vs measurement for foreign currency transactions? Just did a MCQ test let and know this stuff is deep as the answer cited FASB ASC. 27 questions in NINJA, I am sure this somehow shows up on exam day.

FASB ASC 830-10-45-17 provides that measurement for transactions denominated in a currency other than the functional currency will give rise to a “foreign currency transaction gain or loss that generally shall be included in determining net income for the period in which the exchange rate changes.”

FASB ASC 830-30-45-12 states, “Translation adjustments shall not be included in determining net income but shall be reported separately and accumulated in comprehensive income.”

Does Bob have a video on PLUS that explains this in more detail where I can understand?

[NYaccountingstudent]

anyone else here using Becker?

I just took the second practice exam and scored a 77 (68.8 on MCQ and 90 on sims)

I know there is a thread somewhere that says people usually score 10 points higher on the actual exam but i am still freaking out

One week to go!!

[NYaccountingstudent]

@cruzer i think on Page 2 of the Ninja Plus videos there is a 13 minute video on Foreign Subsidiaries

[mckan514w]

@chynablue– THANK YOU! for that explanation of ARO's– have been struggling with that!!

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Holly]

Just in case I wasn't the only one – my monitors are now turned on to eye saver mode and it's made all of the difference!

BEC - 79
REG - 85
AUD - 5/27/16

[Holly]

On June 30, Huff Corp. issued at 99, 1,000 of its 8%, $1,000 bonds. The bonds were issued through an underwriter to whom Huff paid bond issue costs of $35,000. On June 30, Huff should report the bond liability at:
A. $955,000.
Incorrect B. $990,000.
C. $1,000,000.
D. $1,025,000.
You answered B. The correct answer is A.

Accounting Standards Update (ASU) 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts; the recognition and measurement guidance for debt issuance costs were not affected by the amendments. Amortization of debt issuance costs also shall be reported as interest expense; issue costs will no longer be reported in the balance sheet as deferred charges.

The carrying value of the debt, initially, the bond liability, is $990,000, computed as the number of bonds multiplied by the face amount per bond, multiplied by the issue percentage, reduced by the bond issue costs of $35,000:

1,000 bonds × $1,000 face × 0.99 = $990,000
$990,000 − $35,000 = $955,000

I thought bond issuance costs are a direct reduction of the bond proceeds and amortized?

BEC - 79
REG - 85
AUD - 5/27/16

[GiniC]

@HRSexton – you have the words correct at the end of your post, but you didn't do it in the numbers!

At 99, the 1,000,000 bond proceeds (cash received) would be 990,000. As you typed, you REDUCE that by the Bond Issuance Costs of 35,000 – to 955,000.

Your journal entry will be
DR Cash ____________________ 955,000 = 990,000-35,000
……CR Bond Discount + BIC_____________________________45,000 = 10,000+35,000
……CR Bonds Payable (face value)___________________1,000,000

Question stem asks what you should report the liability at, which is always the face minus the amount being amortized back in – the 955,000 INCLUDING the BIC.

[Holly]

You are so right. I wasn't thinking about netting Bonds Payable with the BIC at all

BEC - 79
REG - 85
AUD - 5/27/16

[Kala]

Today is my day – attempt #4. I am so ready to get this over with and move on! HUGE mom fail – I forgot I was supposed to enroll my oldest in Kindergarten by today and now I don't have time! Hope they will let me do it on Monday or somehow my hubby can get it done today (doubt it). How could I forget something so important – I hate that I am so into studying and worrying about my test that I completely forgot something important for my son! As if I needed something else to feel guilty about….

Thank you for being so supportive and encouraging. I may not have posted much but I have been keeping up with the thread. You all are amazing! Good luck to everyone!!

[Author]

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