Becker CPA Review
Financial Course Textbook and Lecture Errata/Clarifications
2012 Exam Edition
Date
1/1/12
Page &
Item
Erratum/Clarification
F1-39, Item
III.D.4.
In December 2011, the FASB issued ASU 2011-12, which defers the
requirement to present the items that are reclassified from accumulated
other comprehensive income to net income with their respective
components of net income and other comprehensive income. The FASB is
currently reconsidering this requirement.
The textbook states the following:
1/1/12
3/1612
F1-59, Item
2.
F2-9,
Example
An entity must use the same accounting policies in its opening IFRS
balance sheet and in all periods presented in the first IFRS financial
statements. IFRS allows limited exemptions in areas where the cost of
the initial application of IFRS accounting policies would be likely to
exceed the benefits to financial statement users. IFRS also prohibits
the retrospective application of certain IFRS that would require
judgments by management about past conditions after the outcome of
a particular transaction is already known.
The following is a list of the mandatory exceptions to the retrospective
application of IFRS at the time of the initial adoption of IFRS:
•
Derecognition of financial assets and financial liabilities
•
Hedge accounting
•
Non-controlling interests
•
Classification and measurement of financial assets
•
Embedded derivatives
When discussing the example, the National Lecturer refers to the BASE
formula that was shown to you in chapter 1. However, this formula was not
mentioned in chapter 1. The BASE formula can be used to analyze the
changes in an account during a period. It is the formulaic version of the Taccount. BASE stands for:
B – Beginning balance
A – Adds (items that increased the account during the period)
S – Subtracts (items the decreased the account during the period)
E - Ending balance
1 of 4
Becker CPA Review
Financial Course Textbook and Lecture Errata/Clarifications
2012 Exam Edition
Date
Page &
Item
Erratum/Clarification
In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for
Impairment. The effective date of this amendment is for annual and interim
goodwill impairment tests performed for fiscal years beginning after
December 15, 2011, with early adoption permitted. Because early
adoption was permitted, this amendment will be testable on the CPA Exam
on April 1, 2012.
The purpose of ASU 2011-08 is to simplify goodwill impairment testing by
allowing companies to test qualitative factors to determine whether it is
necessary to perform the two-step goodwill impairment test described in
your textbook on F2-24 to F2-25.
Specifically, an entity may chose to assess qualitative factors to determine
whether it is more likely than not (> 50% chance) that the fair value of the
reporting unit is less than its carrying value, including goodwill. Examples
of qualitative factors include:
3/16/12
F2-24, B.
Goodwill
Impairment
– U.S.
GAAP
•
•
•
•
•
•
Macroeconomic conditions
Industry and market conditions
Cost factors that could have a negative effect on earnings and
cash flows
Overall financial performance
Entity-specific events such as bankruptcy, litigation, or changes in
management, strategy, or customers
Sustained decrease in share-price
The two-step impairment test is not necessary if, after assessing the
relevant qualitative factors, an entity determines that it is not more likely
than not that the fair value of the reporting unit is less than its carrying
amount. If the qualitative assessment indicates that there is a greater than
fifty percent chance that the fair value of the reporting unit is less than its
carrying amount , then the entity must perform the first step of the goodwill
impairment test.
An entity has an unconditional option to bypass the qualitative assessment
and proceed directly to the first step of the goodwill impairment test.
One word needs to be changed in this note to make it correct (change
highlighted):
4/23/12
F3-6, U.S.
GAAP vs.
IFRS
1/25/12
F3-35,
Example Gain
Allocation
Under IFRS, an impairment loss is recognized in earnings and the
individual security is written down by either directly reducing the cost basis
of the security or through the use of a valuation allowance. Additionally,
previously recognized impairment losses on held to maturity debt securities
and available for sale debt securities must may be reversed with the
amount of the reversal recognized on the income statement. For a held to
maturity security, the carrying value of the security after the reversal
cannot exceed what the amortized cost of the security would have been
the impairment not been recognized.
In the diagram showing the Subsidiary's Total (100%) Fair Value, there
are two errors:
1. The subsidiary's total (100%) fair value should equal $1,200,000 (not
$1,000,000)
2. The Gain amount should be $200,000 (not $20,000)
2 of 4
Becker CPA Review
Financial Course Textbook and Lecture Errata/Clarifications
2012 Exam Edition
Date
Page &
Item
Erratum/Clarification
In this example, every line of each journal entry is labeled as a credit (CR).
The journal entries should be corrected as follows (changes highlighted):
1/25/12
4/23/12
8/22/12
F4-26,
Example Comparison
of Periodic
and
Perpetual
Inventory
Systems
F4-26,
Comparison
of Periodic
and
Perpetual
Inventory
Methods
F4-32,
Example
DR CR
CR
Cash
$140,000
DR CR
CR
DR CR
CR
Cash
$140,000
Sales
Cost of goods sold
Inventory
$100,000
DR CR
CR
Purchases
Cash
$300,000
$300,000
DR CR
CR
Inventory
Cash
$300,000
$300,000
Sales
$140,000
$140,000
$100,000
The description of the last journal entry in this example should be changed
as follow (change highlighted):
Journal entry to record sale purchase under perpetual method
DR
CR
Inventory
Cash
$300,000
$300,000
The title of this example has an error that should be corrected as follows
(change highlighted):
EXAMPLE – DOLLAR-VALUE FIFO LIFO – PRICE INDEX SUPPLIED
There is an error in the example that shows the calculation of the value of
the bond on the date of issuance (error and correction highlighted):
1/25/12
F5-33,
Example
4/23/12
F5-35.
Example
3/16/12
F5-40,
Example
$386,090 = $50,000 x 7.7218 "Annuity of $1" (10 periods @ 5%)
$613,910 619,910 = Present Value of $1 (10 periods @ 5% = .61391)
$1,000,000 NET PRESENT VALUE
The borrower journal entry should be changed as follows (change
highlighted):
DR Cash
$1,081,105
CR
Discount Premium on bond payable
$81,105
CR
Bond payable
$1,000,000
The first borrower journal entry shown in this example is incorrect and
should be:
DR
CR
CR
Cash
$1,081,105
Premium on bond payable
Bond payable
81,105
1,000,000
In the textbook, the premium on bond payable is incorrectly shown as a
debit.
3 of 4
Becker CPA Review
Financial Course Textbook and Lecture Errata/Clarifications
2012 Exam Edition
Date
Page &
Item
Erratum/Clarification
Please delete the following items (deletions highlighted) from your text:
F7-9, Item VI.A.1.
1. Cost Method (required by IFRS and used by entities under U.S. GAAP
approximately 95% of the time)
F7-10, Item 2.
4/23/12
F7-9, Item
VI.A.1 and
F7-10, Item
2.
2. Legal (or Par/Stated Value) Method (prohibited by IFRS and used by
entities under U.S. GAAP approximately 5% of the time)
The references to IFRS should be deleted because IFRS does not
explicitly outline the methods that can be used to account for treasury
stock. IFRS is only explicit about the fact that profits cannot be created
from treasury stock transactions. The cost method and the legal/par value
method are methods that do not result in profit on the income statement
and therefore either can be used under IFRS.
Note that the description of this IFRS vs. U.S. GAAP difference should also
be deleted from F7-51 and homework question CPA-07095 should be
disregarded.
8/22/12
8/22/12
1/1/12
F7-65,
Class
Question
#13 (TBS00023)
F8, NEW
CONCEPTS
F8-19, Item
1.
F8-20, Pass
Key,
TBS-00003
The par value of the common stock given in the question facts is given as
$10 per share, but should be $20 per share:
Common stock ($10 $20 par)
The GASB has issued new standards requiring the presentation of
deferred inflows of resources, deferred outflows of resources, and net
position. Please click here for an outline of the new standards.
The Pass Key on page F8-20 is meant to give students a high level
overview in order to understand unique governmental accounting issues at
a basic level. We need to be careful, however, to recognize the details
related to revenue recognition to respond effectively to TBS-00003 (class
question #9).
Click here for a detailed explanation.
1/1/12
F9-20, Item
C.2.
There have been several questions regarding major fund reporting. As a
point of clarification, a major fund must meet the 10% criteria within its
category and then also meet the 5% criteria associated with both
categories.
Click here for a detailed explanation.
4 of 4