FAR Reviewer

EASY QUESTIONS

1. Under the new Conceptual Framework for Financial Reporting (2018),

a. INTERIM FINANCIAL STATEMENTS are not a common type of financial statement
prepared by a reporting entity. Combined, consolidated and unconsolidated financial
statements were mentioned in the conceptual framework. Interim financial statements
are covered by IAS 34.
b. UNCERTAINTIES:
i. Outcome uncertainty – uncertainty about the amount or timing of any inflow or
outflow of economic benefits that will result from an asset or liability
ii. Existence uncertainty – uncertainty about whether an asset or liability exists
iii. Measurement uncertainty – uncertainty that arises when monetary amounts in
financial reports cannot be observed directly and must be estimated.
2. Change in business model will occur only when an entity either begins or ceases to perform an
activity that is significant to its operations. These include:
a. Acquisition of a business line
i. Entity acquires a company that manages commercial loans and has a business
model that holds the loans in order to collect contractual cash flows. The
portfolio is no longer held for sale
b. Disposal of a business line
c. Termination of a business line
i. A financial services firm decides to shut down its retail mortgage business. That
business no longer accepts new business and the financial services firm is
actively marketing its mortgage loan portfolio for sale.
3. NOT a change in business model:
a. Change in intention related to particular financial assets
b. The temporary disappearance of a particular market for financial assets
c. Transfer of financial assets between parts of the entity with different business models.
4. Dividends received and interest received can either be classified as operating or investing
activities in the statement of cash flows.
5. BOTH fair value model and revaluation model use the fair value of the asset on the date of
subsequent measurement.
6. RECOGNITION OF ELEMENTS OF THE FINANCIAL STATEMENTS
a. Not all items that meet the definition of an asset, liability, equity, income, or expense
are recognized. An asset or liability, income or expense is recognized only if its
recognition provides users of financial statements with useful information that is (1)
relevant and (2) faithful.
7. RETROSPECTIVE APPLICATIONS OF CHANGES (IAS 8):
a. Change in reporting entity
b. Change in accounting policy
c. Change in measurement basis
8. PROSPECTIVE APPLICATION OF CHANGES (IAS 8):
a. Changes in accounting estimates
 9. IFRS FOR SMEs: ORIGINAL ISSUE OF SHARES OR OTHER EQUITY INSTRUMENTS
a. If issued prior to receipt of cash, the entity shall present the amount receivable as an
offset to equity in its SFP, not as an asset (CONTRA-EQUITY ACCOUNT)
b. If payment received prior to issuance, the entity cannot be required to repay the cash or
other resources received. The entity shall recognize the corresponding increase in
equity to the extent of consideration received
c. To the extent that the instrument has been subscribed for but not issued, AND the
entity has not yet received payment, the entity shall not recognize an increase in equity.
10. Events After Reporting Period (EARP)
a. Adjusting Events
i. Settlement after the reporting period of a court case that confirms that the
entity had a present obligation at the end of the reporting period.
b. Non-adjusting events (may require disclosure)
i. BusCom
ii. Plan to discontinue an operation
iii. Major purchases of assets, Classifying NCAHFSDO, Disposals, Expropriation
iv. Destruction of major production plant by a fire
v. Announcing, commencing a major restructuring
vi. Major ordinary share transactions and potential ordinary share transactions
after reporting period
vii. Abnormally large changes after the reporting period in asset prices or foreign
exchange rates
viii. Changes in tax rates or tax laws enacted or announced after the reporting
period
ix. Entering into significant commitments or contingent liabilities
x. Commencing major litigation arising solely out of events that occurred after the
reporting period
11. REVENUE RECOGNITION
a. SMEs
i. When the outcome of a transaction involving the rendering of services can be
estimated reliably (recognized using stage of completion or percentage of
completion method. Conditions: (1) amount, stage of completion, costs incurred
can be measured reliably, and (2) probable economic benefits will flow to the
entity.
b. IFRS 15
i. When the entity satisfies a performance obligation. Transfer of “control.”
12. IAS 8 Accounting Policies, Changes in Estimates and Errors
a. Disclosure regarding the accounting policy change if it may have an effect on
subsequent reporting periods.
13. Difference between ‘in the money’ and ‘out of the money’
14. Underlying assumption of Conceptual Framework: Going Concern

AVERAGE QUESTIONS (Questions are very straightforward; you just have to be able think fast)

1. Bonus computations (FIN3)

 2. Amortization of Bond premium (or in general, really)
3. Refinancing (ACFINA1)
4. Gain or Loss on Extinguishment of Liability
5. Deferred Rental Income (Operating Leases include Security Deposit, Last month’s rent and
leasehold improvements after depreciation)
6. Interim reporting: The effect of a disposal of a segment of business are reported separately in
the interim periods in which they occur. The property taxes, if clearly benefits the entire year,
then the property taxes are allocated over the interim periods reported.
7. Computation of Beg. RE from End. RE
8. Discounting own note, customer’s note, factoring
9. Beginning inventory computations squeeze
10. SMEs may replace these two financial statements: SCI and SCE

DIFFICULT QUESTIONS

1. Initial Measurement of ROUA

2. Election of Fair Value option for financial liability
3. LEASE LIABILITY
a. Fixed payments
b. Variable lease payments
c. Guaranteed residual value
d. Bargain Purchase Option (CERTAIN0
e. Termination Fees
4. ANNUAL DEPRECIATION (Leases for SMEs)
a. ASSET RECOGNITION: lower of PV of lease payments and fair value. Any initial direct
costs of the lessee are added to the amount recognized as an asset.
b. If there is no certainty that the lessee will obtain ownership by the end of the lease
term, the asset shall be fully depreciated over the shorter of the lease term and its
useful life.
c. A lessee shall also assess at each reporting date whether an asset leased under a finance
lease in impaired.
5. Computation of Net Income
a. RE, End. + Dividends declared (Cash and Stock) – RE, Beg. = Net Income
6. Computation of Current Assets
7. Computation of Liabilities
8. Computation of Taxable Income
9. Retirement Benefits
10. Book Value per Ordinary Share with cumulative preference shares and liquidation value