Becker FAR 2026

Comprehensive income includes...?

all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Which of the following items is included in accumulated other comprehensive income or loss?

A. Unrealized gains and losses from a derivative properly designated as a fair value hedge.

B. Unrealized holding gains or losses on securities classified as trading securities.

C. A reduction of shareholders' equity related to employee stock ownership plans.

D.Gains and losses from defined benefit pension plan accounting.

D.Gains and losses from defined benefit pension plan accounting

comprehensive income =?

Net income + OCI

10k filing deadlines ?

60 for large accelerated filers

75 for accelerated filers

90 for everyone else

In addition to the most recent quarter end, for which of the following periods is the company required to present balance sheets on Form 10-Q?

the end of the preceding fiscal year

10 Q filing deadlines?

Large and accelerated: 40 days

everybody else : 45 days

Which of the following reports would a company file to meet the U.S. Securities and Exchange Commission's requirements for unaudited, interim financial statements reviewed by an independent accountant?

Form 10-Q

Audited financial statements will most likely be found in which of the following SEC required forms?

10k, the rest have unaudited

Condensed* financial statements related to a public company's operations are a component of which of the following forms filed with the U.S. SEC?

10Q , it contains condensed, unaudited financial statements

TRUE OR FALSE: earnings per share data should be reported for both continuing and discontinued operations

True

Earnings per share disclosure is required for

Companies who have made a filing with the SEC in preparation for a sale of public securities

What is NOT counted in using the weighted average to calculate EPS

any stocks that are nonconvertible

"purchased treasury shares" means what in calculating eps?

It must be used as a negative acct to reduce the number of shares outstanding

basic eps formula?

(Net Income - Preferred Dividends) / Wtd. Avg. # of Shares Outstanding

Diluted EPS formula?

[(Net Income - Preferred Dividends) + Convertible Preferred Dividends + Convertible Debt Interest -(TAX intrest exp)/ [Weighted Average Shares + Shares from Conversion of Preferred Shares + Shares from Converted Debt + Shares from Issuable Stock Options]

When calculating the numerator of Diluted EPS, what do you do with the interest expense and the amortization expense?

ADD to the numerator

NI+ INTEREST EXP+ AMORT EXP AND THEN- TAX ON INTEREST EXPENSE

In the 10k, the financial statements are?

comprehensive and audited

Each of the following events is required to be reported to the United States Securities and Exchange Commission on Form 8-K, except:

A.A change in a registrant’s certifying accountant.

B. The quarterly results of operations and financial condition of a registrant.

C.The unregistered sale of equity securities.

D.The creation of an obligation under an off-balance sheet arrangement of a registrant.

B. The quarterly results of operations and financial condition of a registrant.

this is included in the 10Q

How should the effect of a change in accounting principle that is inseparable from the effect of a change in accounting estimate be reported?

As a component of income from continuing operations.

By restating the financial statements of all prior periods presented.

As a correction of an error.

By footnote disclosure only.

As a component of income from continuing operations.

So what exactly is Treasury Stock?

Shares of a companys own stock held by a corporation should and its shown as a reduction in the stockholders' equity section of the B/S.

dividends in arrears are reported as what in the financial statements?

disclosures, and theyre reduced by whatever was paid in cash during th year

Each of the following transactions will cause a decrease in stockholders' equity, except:

a loss on the sale of a discontinued segment

a loss from a foreign currency translation adjustment

the declaration of a cash dividend

The sale of treasury stock at less than cost.

The sale of treasury stock at less than cost.

Why? this is because a loss on treasury stock is the company’s stash of shares. a loss on it will reduce APIC, not retained earnings like the other 3. the other 3 all reduce retained earnings

Net income and retained earnings are ____ by treasury stock transactions

never effected

how are gains and losses of treasury stock recorded under the cost method?

They are recorded as adjustments to APIC (additional paid in capital)

When is retained earnings decreased when a dividend is declared?

on the day that the dividend is declared. Not when its paid, not when its the year end.

What is a liquidating dividend?

it happens when declared dividends are more than retained earnings available

What % of stock dividend outstanding has no effect on Stockholders equity ?

any dividend thats 20-25% or less. changes to these are instead are accounted for in APIC

true or false: Stock dividend decreases Shareholders equity

FALSE, it only increases the number of shares outstanding

change in accounting principle is recorded ___?

prospectively (future onward) and it has no effect on stockholders equity

What reduces stockholders equity?

-Dividends are declared and paid (especially cash dividends) — this reduces retained earnings and cash/assets.

-Losses — such as losses on discontinued operations or net losses, which reduce retained earnings.

-Other comprehensive losses — like foreign currency translation losses, which reduce accumulated other comprehensive income. PUFI acronym

-Purchase of treasury stock — buying back shares reduces equity because cash (an asset) decreases and treasury stock (a contra-equity account) increases.

Par method vs Cost method ? whats the difference?

PAR- includes the par value**, APIC, and retained earnings to the treasury stock journal entry

COST- Does not have par value. includes treasury stock, APIC, and cash in the journal entry

Ignoring taxes, which of the following situations will cause comprehensive income to decrease?

An unrealized loss on a trading security.

A dividend payout to company shareholders.

The amortization of an actuarial pension loss.

An unrealized gain on an available-for-sale security.

An unrealized loss on a trading security.

Explanation: unrealized losses on trading securities go straight to net income which lowers comprehensive income.

A dividend payout to shareholders does not affect comprehensive income because dividends are not an expense; they reduce retained earnings rather than net income.

The amortization of an actuarial pension loss does not effect comprehensive income because actuarial losses are initially recorded in other comprehensive income and later reclassified into net income, which only shifts amounts within comprehensive income without changing the total.

An unrealized gain on available-for-sale securities increases other comprehensive income.

The balance in the accumulated other comprehensive income account at the end of the current year is a debit balance. Where in the financial statements should the balance be properly shown?

In the balance sheet as an asset.

As an expense on the statement of comprehensive income.

In the balance sheet as a reduction of equity.

As an expense net of tax between discontinued operations and net income.

In the balance sheet as a reduction of equity.

TRUE OR FALSE? All public entities must present earnings per share on the face of the income statement.

TRUE

What happens to equity when a company does a stock split?

The value of the equity of the shares stays the same, but the cost per share decreases based on how much it split

example: 10,000 shares × $10 par value per share = $100,000. If the stock splits 5 for 1, 10,000 shares become 50,000 shares. In order to keep total equity at $100,000, the par value must be reduced from $10 to $2. 50,000 shares × $2 = $100,000.

What are the 5 steps of revenue recognition?

1- identify contract with customer

2-identify the performance obligation

3-determine the transaction price

4-allocate the transactions to the seperate performance obligations

5- recognize revenue when/as the entity satisfies each performance obligation

A contract liability is booked when?

an entity has an obligation to transfer goods/services when the customer has already paid prior to performance.

When revenue on a construction contract is recognized over time, how is revenue recorded in the books?

over the term of the construction project based on estimated profitability and cost estimates following a fourstep process

When a long-term construction contract does not meet the criteria for recognizing revenue over time,

revenue and gross profit are recognized when the contract is completed (at a point in time).

TRUE OR FALSE : Both Construction methods recognize estimated losses immediately.

True

how are costs to obtain a contract treated ?

if the entity expects to recover them, they are treated as assets

costs of goods sold is recognized

at the same time revenue is recognized

When can the performance obligation be split into many components in the contract?

when the buyer can benefit from each service/good independently

what are output methods when recognizing revenue?

units produced, time elapsed, milestones achieved, surveys of performance to date

what are input methods when recognizing revenue?

costs incurred relative to total costs, resources consumed, labor hours expended, time elapsed

whats are incremental costs? and how should they be accounted for?

incremental costs are costs incurred in order to win the contract. these include legal fees, travel expenses to the potential client, and sales commissions paid to staff. they are to be accounted for as an asset, capitalized and amortized

when will the seller book the transaction as a financing arrangement?

when the repurchase price is equal to or greater than the original sale price and the expected market value. and the expected market value cannot exceed the repurchase price!

TRUE OR FALSE : exchanges that cannot be returned for cash delay revenue recognition

False. Exchanged goods have no impact on the amount of revenues recognized after the refund time limit expires

Which of the following statements is correct as it relates to changes in accounting estimates?

Most changes in accounting estimates are accounted for retrospectively.

It is easier to differentiate between a change in accounting estimate and a change in accounting principle than it is to differentiate between a change in accounting estimate and a correction of an error.

Whenever it is impossible to determine whether a change in an estimate or a change in accounting principle occurred, the change should be considered a change in principle.

Whenever it is impossible to determine whether a change in accounting estimate or a change in accounting principle has occurred, the change should be considered a change in estimate.

Whenever it is impossible to determine whether a change in accounting estimate or a change in accounting principle has occurred, the change should be considered a change in estimate.

On January 1, Year 3, a company changed its inventory costing method from LIFO to FIFO. The company's Year 3 financial statements contain comparative information for Year 2. How should the company present the Year 1 effect of the change in accounting principle in its Year 3 comparative financial statements?

As part of income from continuing operations in the Year 2 income statement.

As an adjustment to the beginning Year 2 inventory balance with an offsetting adjustment to beginning Year 2 retained earnings.

As an extraordinary item in the Year 2 income statement.

As a note disclosure only.

As an adjustment to the beginning Year 2 inventory balance with an offsetting adjustment to beginning Year 2 retained earnings

explanation: If comparative financial statements are presented, the cumulative effect of a change in accounting principle is presented net of tax as an adjustment to beginning retained earnings in the statement of stockholders' equity. YES it will be disclosed in the financial statements, but recognized too

When there is a change in the reporting entity, how should the change be reported in the financial statements?

Prospectively, including note disclosures.

Currently, including note disclosures.

Note disclosures only.

Retrospectively, including note disclosures, and application to all prior period financial statements presented.

Retrospectively, including note disclosures, and application to all prior period financial statements presented.

TRUE OR FALSE : The cash basis for financial reporting is not a generally accepted accounting basis of accounting (GAAP); therefore, it is an error. Correction of an error from a prior period is a reported as prior period adjustment to retained earnings.

true

Under U.S. GAAP, if a company is not presenting comparative financial statements, where should the correction of an error in the financial statements of a prior period should be reported?

Retained earnings statement as an adjustment of the opening balance.

Cuthbert Industrials, Inc. prepares three-year comparative financial statements. In Year 3, Cuthbert discovered an error in the previously issued financial statements for Year 1. The error affects the financial statements that were issued in Years 1 and 2. How should the company report the error? should the financial statements be reinstated?

Yes. The financial statements should be restated the cumulative effect of the error on Years 1 and 2 should be reflected in the carrying amounts of assets and liabilities as of the beginning of Year 3. and As for Year 3, (the current year) the cumulative effect of the error will have been corrected and reflected in the carrying amounts of the affected assets and liabilities.

What happens to retained earnings if a company finds that they have understated inventory?

An understatement of ending inventory results in an overstatement of cost of goods sold and an understatement of net income. To correct the understatement of prior period net income, beginning retained earnings must be increased on an after-tax basis for the amount of the ending inventory understatement.

How are past accounting errors corrected on CY financial statements?

be corrected by restating the opening balance of retained earnings for the CY

Can Revenue be recognized for a bill and hold arrangements?

No, revenue can only be recognized when the product is delivered to the customer

Which of the following information should be disclosed in the summary of significant accounting policies?

Adequacy of pension plan assets relative to vested benefits.

Guarantees of indebtedness of others.

Refinancing of debt subsequent to the balance sheet date.

Criteria for determining which investments are treated as cash equivalents.

Criteria for determining which investments are treated as cash equivalents.

What is the purpose of information presented in notes to the financial statements?

To provide disclosures required by generally accepted accounting principles.

To present management's responses to auditor comments.

To provide recognition of amounts not included in the totals of the financial statements.

To correct improper presentation in the financial statements.

To provide disclosures required by generally accepted accounting principles.

Which of the following should be disclosed in a summary of significant accounting policies?

I.	Management's intention to maintain or vary the dividend payout ratio.
II.	Criteria for determining which investments are treated as cash equivalents.
III.	Composition of the sales order backlog by segment

II Only- Criteria for determining which investments are treated as cash equivalents.

The summary of significant accounting policies should disclose the

Concentration of credit risk of all financial instruments by geographical region

Maturity dates of noncurrent debts

Criteria for determining which investments are treated as cash equivalents.

Criteria for determining which investments are treated as cash equivalents.

Which of the following information should be included in Melay, Inc.'s summary of significant accounting policies?

Future common share dividends are expected to approximate 60% of earnings.

Property, plant, and equipment is recorded at cost with depreciation computed principally by the straight-line method.

During the current period, the Delay component was sold.

Business segment sales are Alay $1M, Belay $2M, and Celay $3M.

Property, plant, and equipment is recorded at cost with depreciation computed principally by the straight-line method.

TRUE OR FALSE : The summary of significant accounting policies should disclose policies such as revenue recognition

True

What is included in the summary of significant accounting policies?

measurement bases used on preparing financial stmts

specific accounting principles such as -

Basis of consolidation, depreciation methods, amortization of intangibles, inventory pricing, use of estimates, fiscal year definition, and special revenue recognition, such as those in long term construction contracts franchising, and leasing options

ok, so what is NOT included in the summary of significant accounts?

Basically all the details and the nitty gritty stuff. the SUMMARY is not the place for that..

composition and detailed dollar amounts of accounting,

details relating to those changes in accounting periods

dates of maturity and amts of long term debt

yearly computation of depreciation, depletion, and amortization

What are the disclosure requirements for risks and uncertainties under GAAP?

nature of operations, use of estimates in the preparation of financial statements, certain significant estimates, and current vulnerability due to certain concentrations.

what are remaining notes? and what do they contain?

The remaining notes contain all other information relevant to decision makers. These notes are used to disclose facts not presented in either the body of the financial statements or in the Summary of Significant Accounting Policies.

they contain :material information regarding inventory, PP&E, and other significant asset/liability balances; changes in stockholders' equity; fair value estimates; contingency losses; contractual obligations; pension plan descriptions; segment reporting; subsequent events; and changes in accounting principles or implementation of new accounting standards updates.

What is the case when a significant loss occurs in Y2 before the Y1 financial statements are out? should they be recognized and disclosed in Y1?

if the event occurred prior to issuing financial statements and is assumed to have a material impact, it should be disclosed, but not recognized.

when are financial statements considered to be issued ?

Financial statements are considered issued on the date when the financial statements are in a form and format that comply with GAAP and by which the financial statements have been widely distributed to financial statement users. There is no requirement for any shareholders to have acknowledged receipt of the financial statements.

Ok if theres a company that files with the SEC (“a filer”) and one that does not, what are the rules for their subsequent event evaluation period?

The subsequent evaluation period for the company that files with the SEC is through the date that its financial statements are widely distributed to financial statement users

as for the company that did not file,the subsequent event evaluation period for them is through the date that the financial statements are available to be issued. these nonfiler entities also have to add a disclosure of its subsequent evaluation period

What recognized subsequent events should be recorded and disclosed?

settlement litigation- when a company is sued BEFORE the year end and pays the settlement out AFTER the year end

loss on an uncollectible receivable- a company filing for bankruptcy after the YE date but before the financial statements are issued

What are unrecognized subsequent events that are disclosed but not recorded?

sale of bond or capital stock,

business combination,

settlement of litigation if the litigation is after the YE date,

loss of plant/inventory due to fire or natural disaster,

changes in the FV of assets/liabilities/foreign exchange rates, entering into significant commitments/contingent liabilities, loss on receivables resulting from conditions occurring after the YE date

what kind of measure is fair value?

fair value is a market based measurement

what is The fair value for an asset or liability?

The price that would be received when selling an asset or paid when transferring a liability in an orderly transaction between market participants

A transaction price cannot represent the fair value of an asset or liability at initial recognition if the:

Principal markets of the parties are similar.

Transaction price includes transaction costs.

Seller has the option to decline the transaction price.

Transaction is between independent parties.

Transaction price includes transaction costs.

When the recoverability of a building's carrying amount is determined to be impaired, the building's fair value is best measured as the:

Price that would be received for this type of building based on observable inputs in its principal market.

Price the building can be sold for in an advantageous market.

Price determined using internal cost estimates to construct a similar building.

The selling price less transaction costs to complete the sale for this type of building in its principal market.

Price that would be received for this type of building based on observable inputs in its principal market.

If assets are in a market where the principal market cant be identified, how do you determine the FV of an asset?

If the principal market (the market with the greatest volume and level of activity) cannot be identified, the most advantageous market should be used when determining the fair value of a financial asset. The most advantageous market will be the one which generates the highest net price, after considering transaction costs. However, the transaction costs will not be incorporated into the fair value.

whats the case when theres an asset traded in multiple markets, and theres no principal market?

The market with the most advantageous price takes the cake

what are market participants?

They are 3rd party buyers/sellers that are knowledgable, willing, and able to transact for the asset/liability

what are The three different valuation techniques used to measure fair value?

market approach- uses prices and other relevant info involving similar assets/liabilities to measure FV

cost approach- looks at current replacement cost to measure FV

income approach- converts future amts, including cash flows or earnings into a single discounted amt to measure FV

What is The most appropriate fair value to use in the case of an equity investment traded in an active market ? identical, similar, historical, or pv of cash flows?

the quoted price for an identical investment is the most appropriate

how is fv determined under the concept of best use?

the fv of an asset is determined by the price at which an asset could theoretically be employed in its highest and best use, rather than the use in which the asset is currently employed. *Keep in mind that the highest and best use concept only applies to nonfinancial assets such as land

give me the tea about the hierarchy of inputs?

there are 3 levels of inputs that are prioritized, with level 1 having the highest priority and level 3 having the lowest

level 1-quoted prices of identical assets and liabilities that are active

level 2- quoted and observable prices for similar assets and liabilities, identical but not active

level 3- unobservable inputs, assumptions based on the best possible estimation and information

The fair value for an asset or liability is measured as:

The cost of the asset less any accumulated depreciation or the carrying value of the liability on the date of the sale.

The price that would be received when selling an asset or paid when transferring a liability in an orderly transaction between market participants.

The price that would be paid to acquire the asset or received to assume the liability in an orderly transaction between market participants.

The appraised value of the asset or liability.

The price that would be received when selling an asset or paid when transferring a liability in an orderly transaction between market participants.

explanation: FV is an exit price, not an entrance price, so that eliminates the price that would be paid (eliminate any answer choices that say sell/acquire an asset or liability) and it also has nothing to do with the appraised value of the asset or liability

hint is to always look for the word “transfer”

When developing fair value assumptions, the reporting entity need not perform which of the following tasks?

Considering factors specific to the principal (or most advantageous) market for the asset or liability

Considering factors specific to the asset or liability

Identifying characteristics that distinguish market participants

Identifying specific market participants

Identifying specific market participants

market participants are NOT ..?

forced to buy/sell or from related parties

cash basis to accrual basis formula?

Cash basis balance

+ending AR

-beginning AR

-ending unearned Revenue

=ACCRUAL BASIS BALANCE

what is OCBOA?

stands for other comprehensive bases of accounting. theyre non-GAAP presentations that have widespread understanding and support, such as the cash basis/modified cash basis, tax basis of accounting, or a regulatory basis of accounting

What are the general presentation guidelines of OCBOA?

• financial stmts should differentiate between OCBOA and non OCBOA statements

• the required financial stmts are equivalents of the accrual basis balance sheets and the income statement

• the statement of cash flows is not required

Which of the following financial statement titles would not be appropriate for other comprehensive basis of accounting (OCBOA) financial statements?

Statement of financial position. (which is the balance sheet)

The modified cash basis of accounting is a basis of accounting that presents financial statements in accordance with:

A special purpose framework.

What is a requirement for every set of OCBOA financial statements?

a summary of significant accounting policies is a requirement for every set of OCBOA financial statements

statement of financial position is another term for ?

the balance sheet

of these choices which would be included in financial statements with a special purpose framework?

The statement of cash receipts and disbursements.

Which of the following is a common modification used to prepare modified cash basis financial statements?

Capitalizing inventory.

explanation : Capitalizing inventory is a common modification made to cash basis financial statements

In financial statements prepared on the income-tax basis, where should the nondeductible portion of expenses such as meals and entertainment be reported?

Included in the expense category in the determination of income.

Which of the following is a proper title for a financial statement prepared using the income tax basis of accounting?

Statement of assets, liabilities, and equity-income tax basis

TRUE OR FALSE : Tax-basis financial statements do not have to recognize material nontaxable revenues/incomes.

FALSE: Tax-basis financial statements must recognize material nontaxable revenues. The tax-exempt interest should be reported on the income statement either as a separate line item in the revenue section of the statement of revenues and expenses or as an addition to net income in an existing revenue line item.

how should a tax-basis financial stmt be headed

For tax-basis financial statements, the balance sheet should be titled "Balance Sheet (Income Tax Basis)" or "Statement of Assets and Liabilities and Equity (Income Tax Basis)" to differentiate it from GAAP financial statements.