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31 Cards in this Set
- Front
- Back
when do differed revenue and expenses occur
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when cash is received or expended but is not recognized in financial statements. T
Typically results in recognition of liability or prepaid expense. |
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what does the recognition of an accrued asset represent?
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revenue recognized or earned through the passage of time but not yet paid to the entity.
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accrued liabilities
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represents expense recognized or incurred through the passage of time nut not yet paid to the entity.
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differed credits
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represent future income contract for and or collected in advance.
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How is unearned revenue treated in franchise accounting
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1: the pv of any contact amount relating to future services to be performed should be recorded as unearned.
2: unearned revenue is recognized as revenue once substantial performance has occurred. |
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Franchise accounting, how is earned revenue from initial franchise fee treated.
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Record revenue when all material conditions of the sale have been substantially performed.
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In franchise accounting what what does substantial performance mean.
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Means that the following conditions have been met:
1: franchisor has no obligation to refunds any payment, 2: initial service required of the franchisor has been performed 3: all conditions of the sale have been met |
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What are intangible assets
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Are long lived legal rights and comparative advantages developed or acquired by an enterprise.
they are typically used in operations of a business and provide benefit over several accounting. Periods. |
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How are intangible assets classified
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They can be identifiable or not specifically identifiable.
1: identifiable are Patrons copyrights and franchise. 2: not specifically identifiable is good will. |
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How are purchased intangible assets recorded
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They are recorded at cost.
registration fees and legal fees are not included as they are capitalized. |
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How are legal fees and registration fees to acquire intangible assets treated
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They are capitalized
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How is cost internally developed intangible assets treated
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They are expensed against income in the period incurred because gaap does not allow capitalization of R&D expenses.
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What are the exception to capitalizeing cost associated with intangible assets.
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Cost that is specifically identifiable can be capitalized. Cost such as:
1: legal fees and related cost in the successful defenses of the asset. 2: registration and consulting fees 3: other direct cost to secure the asset. |
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What dwtermins the classification of intangible assets.
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The economic life and severability
1: the classification depends on whither the economic life is can be determined or is indeterminable. 2: depends on whether the asset can be separated from the entity such as patent or is inseparable such as a trade mark or goodwill. |
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When capitalizing cost for acquired intangible assets what should be done
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The cost should be recorded in an arm length transactions as assets.
Cost may be determined by either fair value of consideration given or property acquired, which ever is more evident. the cost of an unidentifiable intangible asset is measured as the difference between the the acquisition and the sum of the cost assigned to identifiable assets acquired less liability assumed. (the cost of indefinable assets should not include goodwill) The cost is measured by: 1: the amount of cash disbursed or the fair value of assets distributed. 2: the pv of the amounts to be paid for the liability incurred. 3: the fair value of considerations received for stock issued |
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How are cost of intangible assets amortized
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The cost should be amortized by systematic charges to income over the estimated period benefited.
note patents are amortized over the shorter of the remaining legal or estimated life |
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How is goodwill amortized
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Goodwill is not amortized. The appropriate approach is to test for impairment annually.
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How is a patient amortized
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Amortized over the shorter of estimated life or legal life
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What is the approach when an intangible assets becomes impaired.
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Write down the asset and recognize the impairment
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What is the approach if the useful life of an intangible assets reduced or extended
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The remaining net book value is amortized over the new life
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Under gaap how are finite life intangible assets treated
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They are reported at cost less amortization and impairment. Whereas nonfinite intangibles are reported at cost less impairment
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What is goodwill
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It is the representation of intangible resources and elements contacted with an entity. Examples include marketing , management expertise's.
it basically means capitalized excess earning power. |
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What are the ways to calculate goodwill
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Acquisition method: the excesses of the acquired entity fair value over the fair value of the entity net assets
Equity method: the exces of the stock purchase over the fair value of the net assets acquired. |
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What is the approach for maintaining goodwill
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Cost related to maintaining, developing, restoring, are expensed and not capitalized. Also goodwill internally generated is also expensed and not capitalized.
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Under us gaap how is R&D cos treated
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R&d cost is expensed unless it has an alternate. Future use. If so then it is capitalized. Also r&d cost incurred on behalf of other is also capitalized.
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How is the cost for software developed to be sold treated.
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Expense up to the point of technological feasibility, which is established. Upon the completion of a working model or a detailed program design.
after feasibility established you capitalize the cost up to the point when the product is released for sale. |
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Capitalized software cost. How is annual amortization determined
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Is is the grater of the percentage of revenue or the straight line method
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Amortization of software cost.
what is the % of revenue formula and when is it used |
It = total capitalized amount times current gross revenue/total projected gross revenue for the product.
it is compared to the straight line method and used to to depreciate software cost whn it is greater than the straight line method. |
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Amortization of software. Cost
what is the straight line method and when is it used. |
It = the total capitalized Amount * 1/ estimated economic life.
it is compared to the % of revenue method and is used when it is the lager number. |
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How often should intangibles be checked for impairment
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Checked at least annually or when changes indicate that the carrying amount may not be recoverable.
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What is the process for emulating good will impairment
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It us a two step process.
step 1: identify impairment by comparing the fair value of each reporting unit with its carrying. Amount including goodwill step 2: measure amount of goodwill impairment loss by comparing Implied fair value with the carrying. Amount of that goodwill. To do this you do the following: |