CGMA Management Level Test
What does it mean that accounting for deferred taxes follows a financial position approach? -
✔✔The temporary differences are derived from differences in carrying value from the book
purpose
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CGMA Management Level Test
What does it mean that accounting for deferred taxes follows a financial position approach? -
✔✔The temporary differences are derived from differences in carrying value from the book
purposes and tax purposes
Taxable temporary differences give rise to what? - ✔✔DTLs
A DTA can only be recognized to the extent there will be taxable income to offset it. Otherwise a
what is needed - ✔✔Valuation allowance
What is the journal entry (including the temporary difference for a revaluation surplus of PPE) -
✔✔PPE (dr), Revaluation surplus/OCI (cr), deferred tax liability (cr)
How are DTAs and DTLs classified on the BS? - ✔✔Noncurrent assets/liabs
What is the key factor in determining how a lease is classified? - ✔✔Whether the lease transfers
substantially all of the risks and rewards incidental to ownership
What are four criteria of an intangible asset? - ✔✔Identifiable, separable, controllable, cost of
asset must be able to be reliably measured
T or F? Is internally generated GW recognized on the BS? - ✔✔False!
Describe the rules for capitalizing internally generated intangible assets - ✔✔Expenses from the
research phase cannot be capitalized. All costs in development phase can (except advertising,
relocation, and reorganization)
What is the "recoverable amount" in an impairment test? - ✔✔The higher of the value in use or
the FV - costs to sell
What are the five steps of rev rec? - ✔✔1. ID the contract 2. ID the POs 3. Determine the txn
price 4. Allocate the txn price to the POs 5. Rec rev as POs satisfied
Are warranties separate POs? - ✔✔If warranty is just assuring the product complies with agreedupon specs, then no. Else yes.
How do you know when a PO is satisfied? - ✔✔When control is transferred to the customer
What is a contract asset? - ✔✔When part of the PO has been satisfied but the entity has not yet
received the revenue
Formula for EPS - ✔✔NI - Pref Divs / WASO
Formula for a securities impact on EPS - ✔✔incremental earnings (net of tax) / incremental
shares
What is a provision? - ✔✔An obligation from a past event for which it is probable that
settlement will be made, and the amount of the settlement can be reliably estimated
True or False? Future major repairs are provisions - ✔✔False! Could sell the asset. But
warranties are
Is a provision needed for future operating losses? - ✔✔No!
What are the rules surrounding recognizing a provision for a onerous contract? - ✔✔Recognize
the "least net cost" to fulfill the contract as a provision
When is a provision needed for restructuring costs? - ✔✔When a detailed formal plan exists and
there is a valid expectation it will be carried out. But retraining, marketing, and investment in
new systems are excluded!
Describe a contingent liability - ✔✔An almost pro
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