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CPA REVIEW VOLUME 7



The CPA Exam

From CPA Review; Written by Steve Dowling on 2012-01-15
The CPA Exam

The Uniform Certified Public Accountant Examination (Uniform CPA Exam) is the examination administered to people who wish to become Certified Public Accountants in the United States. The Uniform CPA Exam is developed and maintained by the American Institute of Certified Public Accountants (AICPA), and is administered by the National Association of State Boards of Accountancy (NASBA).

The sections have been reorganized as follows:

Auditing and Attestation – This section covers knowledge of planning the engagement, internal controls, obtaining and documenting information, reviewing engagements and evaluating information, and preparing communications.
Financial Accounting and Reporting – This section covers knowledge of concepts and standards for financial statements, typical items in financial statements, specific types of transactions and events, accounting and reporting for governmental...(Read More)


Intangibles

From CPA Review; Written by Steve Dowling on 2012-03-15

What are intangible assets?

Intangible assets are assets that have a life of one year or more and which lack physical substance (e.g., goodwill) or represent a right granted by the government (e.g., patent) or by another company (e.g., franchise fee). "Goodwill" does not include identifiable assets.

How are intangible assets accounted for?

FASB Statement No. 142 (Goodwill and Other Intangible Assets) covers accounting for intangible assets whether purchased or internally developed. The costs of intangibles acquired from others should bereported as assets. The cost equals the cash or fair market value of the consideration given. Individual intangibles that can be separately identified must be costed separately. If not separately identified, the intangibles are assigned a cost equal to the difference between the total purchase price and the cost of identifiable tangible and intangible...(Read More)


Asset Retirement Obligations

From CPA Review; Written by Steve Dowling on 2012-03-15

How are asset retirement obligations accounted for?

FASB Statement No. 143 (Accounting for Asset Retirement Obligations) requires companies to record at fair value a liability when a retirement obligation is incurred, provided fair value can be reasonably estimated even though it is years before the asset's planned retirement. The asset retirement obligation must be measured and recorded along with its associated asset retirement cost. Asset retirements may be from sale, recycling, abandonment, or disposal. When the initial obligation arises, the company books a liability and defers the cost to the long-term asset for the same amount. After the initial recognition, the liability will change over time so the obligation must be accreted to its present value each year. The long-term asset's capitalized cost is depreciated over its useful life. When the liability is settled, the company...(Read More)


Involuntary Conversion

From CPA Review; Written by Steve Dowling on 2012-03-15

What is an involuntary conversion?

There may exist an involuntary conversion of nonmonetary assets into monetary assets, followed by replacement of the involuntarily converted assets. EXAMPLE: A warehouse is destroyed by a fire, and the insurance proceeds received are used to purchase a similar warehouse.

How is an involuntary conversion recorded? Per Interpretation 30, gain or loss is recognized for the difference between the insurance recovery and the book value of the destroyed asset. EXAMPLE: The new warehouse (replacing the destroyed one) is recorded at its purchase price.

Carrying value $50,000
Fair value 46,000
Sum of the undiscounted cash flows 52,000

Because the sum of the undiscounted cash flows exceeds the carrying value, a recoverability situation exists. Therefore, no impairment loss has occurred.

A contingency results if the old fixed asset is damaged in...(Read More)


Impairment of Long Lived Assets

From CPA Review; Written by Steve Dowling on 2012-03-15

Statement No. 144 (Accounting for the Impairment or Disposal of Long-Lived Assets) applies to a company's long-term assets to be retained or to be disposed of. With respect to long-term assets to be retained and used, an impairment takes place when the fair value of the long-term asset group is below its book (carrying) value. The impairment loss is recorded only when the carrying value of the asset group is not recoverable and exceeds its fair value. A lack of recoverability exists when the book value of the asset group is more than the total undiscounted cash flows expected to arise from the use and eventual disposition of the asset group. The impairment loss equals the carrying value of the asset group less its fair value.

What should be footnoted for an impairment loss?

Footnote disclosure required for an impairment loss follows:

- Description of the impaired asset along with...(Read More)





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