CPA Review School of the Philippines: Financial Accounting and Reporting - Bullet Review

This set covers high-level accounting principles for current/noncurrent assets and liabilities, financial instruments, investments, inventory methods, and financial reporting standards based on the CPA review batch 96 lecture notes.

Bank Overdraft

Reported as a current liability and should not be netted against cash in bank unless held at the same bank.

Current Liability Netting Exceptions

Customers’ credit balances and customers’ deposits are classified as current liabilities and not netted against accounts receivable.

Note Receivable Discounted

An amount that should be deducted from total notes receivable.

Current Financial Assets

Assets held for trading or at FVPL.

Noncurrent Financial Assets

Financial assets at amortized cost or financial assets at FVOCI (available for sale).

OCI Reclassified to Profit or Loss

Includes translation gain or loss, derivatives as cash flow hedge, and debt investment at FVOCI.

OCI Reclassified to Retained Earnings

Includes revaluation surplus, remeasurements of defined benefit plan, equity investment at FVOCI, and changes in fair value attributable to credit risk of a liability designated at FVPL.

Noncurrent Asset Held for Sale Measurement

The lower between carrying amount and fair value less cost of disposal.

Discontinued Operation

A single amount comprising operating income or loss, gain or loss from disposal of assets, termination cost, impairment loss on assets, and other expenses directly attributable to the discontinuance.

Change in Accounting Policy Examples

Change in inventory method, cost recovery to percentage of completion, cost model to revaluation model, cost to fair value model for investment property, or changes required by new PFRS.

10% Reportable Segment Tests

Segments meeting $10\%$ or more of total revenue (internal/external), total assets, or the higher of absolute profit/loss totals.

Overall Size Test

Total external revenue of reportable segments must be at least $75\%$ of the total external revenue of all operating segments.

Cash Equivalent Maturity

Treasury bills, money market, and time deposits with a maturity of three months or less from the date of purchase.

Impairment of Loan

$\text{Carrying amount of loan receivable} - \text{present value of cash inflows using the original effective rate}$.

FOB Shipping Point

Inventory is included in the books of the buyer.

FOB Destination

Inventory is included in the books of the seller.

Net Realizable Value (NRV)

$\text{Estimated selling price} - (\text{estimated cost to complete} + \text{cost of disposal})$.

Biological Asset Measurement

Measured at fair value less cost of disposal.

Bearer Plants

Plants classified as property, plant and equipment (PPE).

Investment in Associate

Accounted for using the equity method of accounting.

Investment Property

Land or building held for rental or capital appreciation, land held for undetermined use, or building under construction for use as investment property.

Capitalizable Interest (Specific Borrowing)

$\text{Actual interest incurred during construction} - \text{interest income on temporary investment of borrowing}$.

Recoverable Amount

The higher between fair value less cost of disposal and value in use.

Asset Indefinite Life Accounting

Items like Trademark and Goodwill are not amortized but tested for impairment at least annually.

Breakage

The value of the expected nonredemption of gift certificates.

Finance Lease Criteria (Lessor)

Includes transfer of title, purchase option reasonably certain, lease term is $75\%$ of useful life, or PV of payments is $90\%$ of fair value.

Current Tax Expense

$\text{Taxable income} \times \text{current tax rate}$.

Basic Earnings Per Share

$\frac{\text{Net income available to ordinary shareholders}}{\text{Average ordinary shares outstanding}}$.

Operating Activities

Principal revenue activities that enter into the determination of net income or loss.

Investing Activities

Acquisition and disposal of long-term assets or nonoperating assets excluding trading investments and cash equivalents.

Financing Activities

Transactions and events affecting shareholders’ equity and nontrade liabilities.