CPA FAR Exam (Correct Answers)
Identifying a Variable Interest (VIE)Correct AnswersAll Must be Met:
1. There is an arrangement between company and business entity
2. The business entity is a legal entity
3. The business fails to qualify for an exclusion
4. The interest is more than insignificant
5. The company has an explicit or implicit variable interest in the entity
Securities and Exchange CommissionCorrect Answers- established in 1934 by
Securities and Exchange Act
- all public and large private companies are subject to their rules and regulations
- has issued specific accounting rules and regulations in Regulation S-X, Financial
Reporting Releases (FRR), Accounting Series Releases (ASR), Interpretative Releases
(IR), etc.
Committee on Accounting ProceduresCorrect Answersdetermined GAAP from 1939 to
1959
- part-time committee of the AICPA that promulgated Accounting Research Bulletins
Accounting Principles BoardCorrect Answersdetermined GAAP from 1959 to 1973
- part time committee of the AICPA that issued Accounting Principles Board Opinions
and APB interpretations
Financial Accounting Standards BoardCorrect Answersestablished in 1973 and has
determined GAAP ever since then
- up to 2009 issued Financial Accounting Standards, FASB interpretations, FASB
technical Bulletins, Emerging Issues Task Force Statements, FASB Staff Positions,
FASB implementation Guides, and Statements of Financial Accounting Concepts
- has 7 full time members with 5 year terms
FASB Accounting Standards CodificationCorrect Answers- codified on July 2009
- became the single source of authoritative nongovernmental US GAAP
FASB updates to ASC & SEC contentCorrect Answers- FASB amendments issued for
public comment through exposure drafts
- majority vote of the Board need to approve an exposure draft for issuance
- FASB staff analyzes all comment letters from public and then the Board re-deliberates
the issue
- FASB staff prepares an Accounting Standards Update for Board
- majority vote of Board needed to amend the ASC
IASBCorrect Answersestablished in 2001 as part of the International Financial
Reporting Standards Foundation
FASB Conceptual FrameworkCorrect Answers- statements of financial accounting
concepts
-serve as basis for financial accounting concepts for business and nonbusiness
enterprises
- NOT GAAP, just basic reasoning of why
Objective of General Purpose Financial ReportingCorrect Answersto provide financial
information about the reporting entity that is useful to the primary users in making
decisions about providing resources to the reporting entity
,Form 10-K DeadlinesCorrect Answers- Large Accelerated = 60 days
- Accelerated = 75 days
- All Others = 90 days
Form 10KCorrect Answersmust be filed annually by US registered companies
- contains financial disclosures, including a summary of financial data, management's
discussion and analysis, and audited financial statements prepared using GAAP
Form 10QCorrect Answersfiled quarterly by US registered companies
- includes unaudited financial statements, interim period MD & A and certain disclosures
Form 10-Q DeadlinesCorrect Answers- Large Accelerated = 40 days
- Accelerated = 40 days
- All Others = 45 days
Form 11KCorrect AnswersEmployee Benefit Plans
Form 20 FCorrect Answers- non US annual report
Form 40 FCorrect AnswersCanadian annual report
Form 6 KCorrect Answersfiled semiannually by FOREIGN private issuers
similar to 10-Q
Form 8 KCorrect Answersreports major events
Ex: new CEO, audit firm, asset acquisitions, disposals
Forms 3, 4, and 5Correct Answersforms required by 10% owners
Interim Financial ReportingCorrect Answers- Balance Sheets: end of the most recent
fiscal quarter and as of the end of the preceding fiscal year
- Income Statements: most recent fiscal quarter, for period between the end of the
preceding fiscal year and the end of the most recent fiscal quarter, and for the
corresponding periods of the preceding fiscal year
also for the cumulative 12 month period ended during the most recent fiscal quarter &
the corresponding preceding period
- Statement of Cash Flows: period between the end of the preceding fiscal year and the
end of the most recent fiscal quarter, and corresponding period for the preceding fiscal
year
cumulative 12 month period ended during the most recent fiscal quarter and for the
corresponding preceding period
Annual Financial ReportingCorrect Answers- 2 Balance Sheets
- 3 Income Statements
- 3 Cash Flows
- 3 Changes in Owner's Equity
Annual financial Reporting IFRSCorrect Answers- 2 balance sheets
- 2 statements of comprehensive income
- 2 statements of changes in equity
- 2 statements of cash flows
XBRLCorrect Answerssoftware that uses XML to electronically file data and link it
TagCorrect Answersa machine readable code
includes descriptive labels, definitions, references to US GAAP that provide contextual
information
, instance documentCorrect AnswersXBRL formatted document that contains tagged
data
SEC interactive data ruleCorrect Answersrequires US public companies to present
financial statements using XBRL
- SEC registration statements
- quarterly and annual reports
- 6K and 8K
- notes
- schedules
* management's discussion & analysis NOT required
Required Disclosure of Operating SegmentsCorrect Answers- for public companies only
- disclose segment profit/loss, assets, and certain related items
- NOT liabilities (IFRS ONLY)
Operating SegmentsCorrect AnswersA component of an entity that
- engages in business activities
- its operating results are regularly reviewed by entity's Chief Operating Decision maker
- its discrete financial information is available
* headquarters & pension plans are not included
Private Company CouncilCorrect Answerscommittee that established alternatives to US
GAAP for privately held companies
Change in method of accounting for Long-Term Construction ContractsCorrect
Answers- a change in accounting principle
- reported retrospectively
Example:
change from complete contract to percentage of completion method
Primary Beneficiary (VIE)Correct Answers- Required to consolidate the VIE
- Is the entity that has power to direct the activities of a variable interest entity and
a. absorbs the expected VIE losses
b. receives the expected VIE returns
Arrangements between Company and Business Entity (VIE)Correct AnswersOne of
Four:
1. The company participated in the business entity's design
2. Substantially all of the business entity's activities are conducted on behalf of the
company
3. More than half of the total of the equity/financial support is provided by the company
4. Primary activities of entity - securitizations or other forms of asset-backed financing
agreements
Business Entity a Legal Entity (VIE)Correct Answersa corporation, partnerships, LLCs,
trusts, and majority owned subsidiaries
Not a Business Entity for VIECorrect Answers- A nonprofit organization
- employee benefit plans
- investment companies
- separate accounts of life insurance companies
Identifying a Variable Interest (VIE)Correct AnswersAll Must be Met:
1. There is an arrangement between company and business entity
2. The business entity is a legal entity
3. The business fails to qualify for an exclusion
4. The interest is more than insignificant
5. The company has an explicit or implicit variable interest in the entity
Securities and Exchange CommissionCorrect Answers- established in 1934 by
Securities and Exchange Act
- all public and large private companies are subject to their rules and regulations
- has issued specific accounting rules and regulations in Regulation S-X, Financial
Reporting Releases (FRR), Accounting Series Releases (ASR), Interpretative Releases
(IR), etc.
Committee on Accounting ProceduresCorrect Answersdetermined GAAP from 1939 to
1959
- part-time committee of the AICPA that promulgated Accounting Research Bulletins
Accounting Principles BoardCorrect Answersdetermined GAAP from 1959 to 1973
- part time committee of the AICPA that issued Accounting Principles Board Opinions
and APB interpretations
Financial Accounting Standards BoardCorrect Answersestablished in 1973 and has
determined GAAP ever since then
- up to 2009 issued Financial Accounting Standards, FASB interpretations, FASB
technical Bulletins, Emerging Issues Task Force Statements, FASB Staff Positions,
FASB implementation Guides, and Statements of Financial Accounting Concepts
- has 7 full time members with 5 year terms
FASB Accounting Standards CodificationCorrect Answers- codified on July 2009
- became the single source of authoritative nongovernmental US GAAP
FASB updates to ASC & SEC contentCorrect Answers- FASB amendments issued for
public comment through exposure drafts
- majority vote of the Board need to approve an exposure draft for issuance
- FASB staff analyzes all comment letters from public and then the Board re-deliberates
the issue
- FASB staff prepares an Accounting Standards Update for Board
- majority vote of Board needed to amend the ASC
IASBCorrect Answersestablished in 2001 as part of the International Financial
Reporting Standards Foundation
FASB Conceptual FrameworkCorrect Answers- statements of financial accounting
concepts
-serve as basis for financial accounting concepts for business and nonbusiness
enterprises
- NOT GAAP, just basic reasoning of why
Objective of General Purpose Financial ReportingCorrect Answersto provide financial
information about the reporting entity that is useful to the primary users in making
decisions about providing resources to the reporting entity
,Form 10-K DeadlinesCorrect Answers- Large Accelerated = 60 days
- Accelerated = 75 days
- All Others = 90 days
Form 10KCorrect Answersmust be filed annually by US registered companies
- contains financial disclosures, including a summary of financial data, management's
discussion and analysis, and audited financial statements prepared using GAAP
Form 10QCorrect Answersfiled quarterly by US registered companies
- includes unaudited financial statements, interim period MD & A and certain disclosures
Form 10-Q DeadlinesCorrect Answers- Large Accelerated = 40 days
- Accelerated = 40 days
- All Others = 45 days
Form 11KCorrect AnswersEmployee Benefit Plans
Form 20 FCorrect Answers- non US annual report
Form 40 FCorrect AnswersCanadian annual report
Form 6 KCorrect Answersfiled semiannually by FOREIGN private issuers
similar to 10-Q
Form 8 KCorrect Answersreports major events
Ex: new CEO, audit firm, asset acquisitions, disposals
Forms 3, 4, and 5Correct Answersforms required by 10% owners
Interim Financial ReportingCorrect Answers- Balance Sheets: end of the most recent
fiscal quarter and as of the end of the preceding fiscal year
- Income Statements: most recent fiscal quarter, for period between the end of the
preceding fiscal year and the end of the most recent fiscal quarter, and for the
corresponding periods of the preceding fiscal year
also for the cumulative 12 month period ended during the most recent fiscal quarter &
the corresponding preceding period
- Statement of Cash Flows: period between the end of the preceding fiscal year and the
end of the most recent fiscal quarter, and corresponding period for the preceding fiscal
year
cumulative 12 month period ended during the most recent fiscal quarter and for the
corresponding preceding period
Annual Financial ReportingCorrect Answers- 2 Balance Sheets
- 3 Income Statements
- 3 Cash Flows
- 3 Changes in Owner's Equity
Annual financial Reporting IFRSCorrect Answers- 2 balance sheets
- 2 statements of comprehensive income
- 2 statements of changes in equity
- 2 statements of cash flows
XBRLCorrect Answerssoftware that uses XML to electronically file data and link it
TagCorrect Answersa machine readable code
includes descriptive labels, definitions, references to US GAAP that provide contextual
information
, instance documentCorrect AnswersXBRL formatted document that contains tagged
data
SEC interactive data ruleCorrect Answersrequires US public companies to present
financial statements using XBRL
- SEC registration statements
- quarterly and annual reports
- 6K and 8K
- notes
- schedules
* management's discussion & analysis NOT required
Required Disclosure of Operating SegmentsCorrect Answers- for public companies only
- disclose segment profit/loss, assets, and certain related items
- NOT liabilities (IFRS ONLY)
Operating SegmentsCorrect AnswersA component of an entity that
- engages in business activities
- its operating results are regularly reviewed by entity's Chief Operating Decision maker
- its discrete financial information is available
* headquarters & pension plans are not included
Private Company CouncilCorrect Answerscommittee that established alternatives to US
GAAP for privately held companies
Change in method of accounting for Long-Term Construction ContractsCorrect
Answers- a change in accounting principle
- reported retrospectively
Example:
change from complete contract to percentage of completion method
Primary Beneficiary (VIE)Correct Answers- Required to consolidate the VIE
- Is the entity that has power to direct the activities of a variable interest entity and
a. absorbs the expected VIE losses
b. receives the expected VIE returns
Arrangements between Company and Business Entity (VIE)Correct AnswersOne of
Four:
1. The company participated in the business entity's design
2. Substantially all of the business entity's activities are conducted on behalf of the
company
3. More than half of the total of the equity/financial support is provided by the company
4. Primary activities of entity - securitizations or other forms of asset-backed financing
agreements
Business Entity a Legal Entity (VIE)Correct Answersa corporation, partnerships, LLCs,
trusts, and majority owned subsidiaries
Not a Business Entity for VIECorrect Answers- A nonprofit organization
- employee benefit plans
- investment companies
- separate accounts of life insurance companies
