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audit 6

Terms in this set (40)

indicates which transactions, items, or entities are subject to the guidance within a topic; may list ones not within it; may contain tests to determine what transactions should be accounted for under a certain topic
scope guidance, section 15
ASC 740 Income Taxes
applies to taxes that are based on income
ASC 845
nonmonetary transactions when physical assets are being exchanged
why nonmonetary exchanges are unique
the values of assets being exchanged may not be as objectively determinable as in a cash transaction
ASC 845 basic principle
nonmonetary exchanges should be recognized at the fair values of the assets exchanged but only if the transaction has commercial substance and it cannot be between entities under common control
subsections of ASC 845, each with unique scope requirements
1. general
2. purchases and sales of inventory with same counterparty
3. barter transactions
4. exchanges involving monetary consideration
2 step process for determining whether a transaction is within scope of ASC 845
1. evaluate whether within scope of "general" subsection
2. evaluate whether within scope of specific subsection
investment topics applicable to purchases of noncontrolling interests
ASC 323: investments - equity method and joint ventures
ASC 321: investments - equity securities
ASC 323: investments - equity method and joint ventures
applies to purchases of equity securities where the investor has significant influence (20% ownership or more)
ASC 321: investments - equity securities
generally applies to all investments in equity securities except those accounted for under the equity method
investment topics for purchases of controlling interests
voting model
variable model
ASC 810 (consolidation)
Topic 815
derivatives
derivatives must be carried at
fair value and marked to market each period (instruments/contracts within its scope derive value from changes in market prices or some other factor)
3 requirements to make a contract a derivative
1. have an underlying and notional amount
2. require little or no initial net investment
3. be capable of "net settlement"
stated price (for derivatives)
underlying
quantity (for derivatives)
notional
exists if any of the following conditions are present:
can be settled net (paid for in cash to settle); possible through market mechanism (contract traded on exchange); delivery of asset readily convertible to cash (if product under contract is readily sold just like cash)
net settlement
what, when, and how an item should be recorded in the financial statements
recognition, section 25
often gives additional guidance on how to record an item
other presentation matters, section 45
when and how an item should be removed from the f/s
derecognition, section 40 (generally described as subsequent measurement issues)
items can also be removed from the balance sheet through other means like
amortization or impairments
4 fundamental recognition criteria cited by CON 5, recognition and measurement
definitions
measurability
relevance
reliability
items meeting criteria in CON 5 should be recorded, subject to both
cost/benefit constraints
materiality
disclosure is/is not an adequate substitute for recognition
is not
ASC 606, revenues from contracts with customers, applies to periods beginning after ____ for public companies
12/15/2017
ASC 606 supersedes
ASC 605, revenue recognition
conceptual descriptions of revenue
CON 5: realizable and earned
CON 6: results from increases in assets or decreases in liabilities
revenue recognition under ASC 605-10
when it has been realized or is realizable and it has been earned
additional revenue recognition criteria for public companies (superseded model)
persuasive evidence of an arrangement exists; delivery has occurred or services has been rendered; the seller's price to the buyer is fixed or determinable and collectibility is reasonably assured
revised model revenue definition
inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations
5 step process for recognizing revenue
1. identify the contracts with customer
2. identify the performance obligations in the contract
3. determine the transaction price
4. allocate the transaction price to the performance obligations in the contract
5. recognize revenue when or as the entity satisfies a performance obligation
revised mode, relies upon a single principle in a single subtopic
ASC 606-10 (Overall)
section 5, overview
section 25, recognition
section 32, measurement
section 55, implementation
ASC 740-10 income taxes 2 step process for recognition or tax positions
1. determine whether tax position meets more likely than not recognition threshold
2. if met, determine appropriate measurement of the tax position
event that takes place after the balance sheet date but before f/s are issued
located under broad transactions area, ASC 855
2 types of subsequent events
1. recognized subsequent events (type 1)
2. unrecognized subsequent events (type 2)
recognized subsequent events (type 1)
provide additional evidence about conditions existing at the balance sheet date, including estimates inherent in preparing the f/s; require adjustment to f/s
unrecognized subsequent events (type 2)
provide evidence about conditions that did not exist at the balance sheet date but arose subsequent to that date; do not require adjustment to f/s; may require disclosure to keep f/s from being misleading
provides guidance on when it is appropriate to derecognize a liability
ASC 405-20, extinguishments of liabilities
acceptable methods of extinguishing a liability
debtor pays the creditor and is relieved of its obligation or the debtor is legally released from being the primary obligor under the liability, either judicially or by the creditor
applies these broad liability extinguishment principles to debt instruments
ASC 470-50 debt modifications and extinguishments
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