Part 2 – Section E.4. Recognition, measurement, valuation, a

[Hameed]

???? define the subtopic and describe the characteristics of its components ???? demonstrate an understanding of appropriate valuation techniques for the components of each subtopic ???? demonstrate an understanding of the appropriate accounting conventions for the components of each subtopic ???? compare and contrast valuation techniques and accounting methods ???? show the correct financial statement presentation ???? identify the appropriate disclosure requirements in the body of the financial statements and/or in the footnotes Cash and marketable securities ???? Subtopic components*: cash, cash equivalents, marketable (trading) securities ???? determine when cash is restricted Accounts receivable ???? Subtopic components*: current, noncurrent, trade, and nontrade receivables; trade discounts, cash (sales) discounts, sales returns and allowances, net realizable value, promissory note, factoring receivables, write-offs and collection of writeoffs ???? identify issues related to the valuation of accounts receivable ???? calculate cash discounts using both the gross method and the net method ???? identify two methods of recording uncollectibles and describe why the allowance method is the generally accepted approach * See required knowledge at the beginning of Section E.4. ???? calculate the allowance for uncollectibles using both the percentage-of-sales (income statement) approach and the percentage-of-receivables (balance sheet) approach ???? discount a long-term note using the time value of money tables and indicate its correct valuation at time of sale ???? calculate the interest revenue and discount amortized for each time period of the note ???? define imputed interest rate ???? demonstrate an understanding of receivables when they are used as collateral ???? distinguish between receivables sold on a with recourse basis and those sold on a without recourse basis Inventories ???? Subtopic components*: raw material inventory, work-in-process inventory, finished goods inventory, merchandise inventory; perpetual, modified perpetual, and periodic inventory systems; cost of goods sold, cost of goods available for sale, goods in transit, consigned goods ???? identify issues in inventory valuation, including which goods to include, what costs to include, and which cost assumption to use ???? identify the costs included in inventory ???? differentiate between f.o.b. shipping point and f.o.b. destination ???? demonstrate an understanding of special sale agreements, including sales with a buyback agreement (product financing arrangement), sales with high rates of returns, and sales on installment ???? calculate and indicate the correct entries and financial statement presentation for purchase discounts using the gross method and using the net method ???? identify accounting issues related to purchase commitments ???? identify and compare cost flow assumptions used in accounting for inventories ???? calculate ending inventory and cost of goods sold using the specific identification, average cost, first-in-first-out (FIFO), and last-in-last-out (LIFO) methods ???? calculate the effect on income and on assets of using different inventory methods ???? analyze the effects of inventory errors ???? demonstrate an understanding of the LIFO reserve and LIFO liquidation ???? calculate ending inventory and cost of goods sold using dollar-value LIFO ???? identify advantages and disadvantages of the different inventory methods ???? apply the lower of cost or market rule ???? identify when inventories are valued at net realizable value ???? demonstrate an understanding of the relative sales value method ???? determine ending inventory by using the gross profit method and by using the retail inventory method ???? recommend the inventory method and cost flow assumption that should be used given a set of facts and management goals * See required knowledge at the beginning of Section E.4 Investments ???? Subtopic components*: debt securities: held-to-maturity, trading, and availablefor- sale securities; equity securities: less than 20% holdings (available-for-sale and trading), between 20% and 50% holdings, and holdings more than 50% ???? calculate discounts, premiums, and interest on debt securities using the effective interest method and utilizing time value of money tables ???? define holding gain or loss ???? compute the realized gain/loss on the sale of a debt or equity security ???? calculate the securities fair value adjustment for available-for-sale and trading debt securities ???? identify and describe the fair value method, equity method, and consolidated method for equity securities ???? compare the equity method with the fair value method ???? demonstrate an understanding of reclassification adjustments ???? account for impairment of value and indicate the correct cost basis for the impaired security ???? identify and describe the proper accounting for transfers of investment securities between categories Property, plant and equipment ???? Subtopic components*: land, buildings, equipment, and self-constructed assets; additions, improvements, replacements, reinstallations, and repairs; nonmonetary exchanges; depreciation; depletion; impairment ???? calculate depreciation using the activity method, the straight-line method, the sum-of-the years’-digits method, declining-balance method, the group method, and the composite method ???? calculate and record the gain or loss on the disposition of tangible assets ???? identify the basis on which tangible assets would be valued when payment is in the form of stock ???? demonstrate an understanding of the correct accounting treatment for interest costs incurred for the construction or acquisition of tangible assets ???? determine the effect on the financial statements of using different depreciation methods ???? recommend a depreciation method given a set of data and management goals ???? compute a depletion base given acquisition, exploration, development, and restoration costs ???? demonstrate an understanding of the write-off of resource cost Intangibles ???? Subtopic components*: intangible assets: patents, copyrights, trademarks and trade names, leaseholds, franchises and licensees; purchased intangibles and internally-created intangibles; goodwill; internally created goodwill and purchased goodwill; negative goodwill; amortization; research and development; * See required knowledge at the beginning of Section E.4 Page 28 start-up costs, initial operating losses, advertising costs, and computer software costs ???? demonstrate an understanding of the accounting for impairment of intangible assets ???? determine the effect on the financial statements of various intangible asset transactions Current liabilities ???? Subtopic components*: current liability: notes payable, current maturities of longterm debt, short-term obligations expected to be refinanced, dividends payable, returnable deposits, unearned (or deferred) revenues, taxes payable, and employee-related liabilities; loss contingencies; warranty costs; premiums and coupons ???? identify the classification issues of short-term debt expected to be refinanced ???? identify the different types of employee-related liabilities ???? apply both the expense warranty approach and the sales warranty approach Long-term liabilities and bonds payable ???? Subtopic components*: long-term liabilities/debt: bonds, long-term notes payable, mortgage notes payable, zero-interest-bearing notes, convertible debt ???? calculate interest expense, interest payable, bond discount and premium using the straight-line method and the effective interest method (time value of money tables) ???? identify the proper classification of bond discount and premium as an adjunct account ???? define implicit interest rate and compute imputed interest ???? account for notes issued for property, goods, and services ???? calculate imputed fair value and note discount where the stated interest rate is unreasonable ???? define off-balance sheet financing and identify different forms of this type of borrowing ???? indicate the disclosure requirements for off-balance sheet financing Equity transactions and earnings per share ???? Subtopic components*: preferred stock and common stock; capital stock, additional paid-in capital and retained earnings; treasury stock (cost method and par value method); property dividends, scrip dividends; liquidating dividends; stock dividends (large and small); retained earnings ???? apply the accounting procedures for issuing shares of stock, including par value stock, no-par stock, stock sold on a subscription basis, lump sum sales, and stocks issued in noncash transactions ???? define stock options, warrants, and rights and recognize the correct presentation in the financial statements for these instruments ???? identify transactions that affect paid-in capital and those that affect retained earnings ???? infer the effect on shareholders’ equity of large and small stock dividends * See required knowledge at the beginning of Section E.4 Page 29 ???? define stock split and distinguish from stock dividend ???? identify reasons for the appropriation of retained earnings ???? calculate earnings per share (basic and diluted) Revenues and expenses ???? apply the revenue recognition principle to various types of transactions ???? identify issues involved with revenue recognition at point of sale, including sales with buyback agreements, sales when right of return exists, and trade loading (or channel stuffing) ???? identify instances where revenue is recognized before delivery ???? distinguish between percentage-of-completion and completed-contract methods for recognizing revenue ???? apply the percentage-of-completion and the completed-contract methods ???? compare and contrast the recognition of costs of construction, progress billings, collections, and gross profit recognized under the two long-term contract accounting methods ???? demonstrate an understanding of the proper accounting for losses on long-term contracts ???? identify instances where revenue is recognized after delivery ???? recognize the situations in which each of the following revenue recognition methods would be used: installment sales method, cost recovery method, and deposit method ???? demonstrate an understanding of the accounting procedures under the installment method, the cost recovery method, and the deposit method ???? define gains and losses and indicate the proper financial statement presentation ???? recognize the issues and concerns that have been identified with respect to revenue recognition practices Comprehensive income ???? define comprehensive income and other comprehensive income ???? identify the three alternative ways that other comprehensive income may be displayed in the financial statements ???? calculate comprehensive income Segment reporting ???? define operating segment ???? identify the disclosures required for a reportable operating segment ???? determine if a segment is reportable given a set of data Multinational considerations ???? recognize the challenges inherent in translating foreign entities’ financial statements to the parent’s reporting currency ???? define functional currency ???? distinguish between the monetary/nonmonetary method and the current rate method ???? translate a foreign entity’s financial statements from the entity’s functional currency to the reporting currency ???? re-measure a foreign entity’s financial statement to the functional currency Page 30 ???? describe the significance of a foreign currency transaction gain (loss) on the financial statements ???? define “highly inflationary economy” and identify which currency should be used as the reporting currency for a company in this environment ???? identify disclosure requirements for translation of foreign currency financial statements