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Financial Reporting and Analysis
Formulas
170
Finance
Professional
01/26/2013

Additional Finance Flashcards

 


 

Cards

Term
Cash movement prior to accounting recognition
Definition
Unearned (deferred) Revenue
Prepaid expense
Term
Cash movement after Accounting Recognition
Definition
Unbilled (accrued) Revenue
Accrued Expenses
Term
Unearned (deferred) Revenue Entries
Definition
Originating - record cash receipt and establish a liability

Adjusting - reduce the liability and recognize revenue
Term
Prepaid expense Entries
Definition
Originating Entry - record cash payment and establish an asset

Adjusting - Reduce the asset and recognize the expense
Term
Cash movement in the same period as accounting recognition
Definition
Settled transaction - no accrual entry needed
Term
Unbilled (accrued) Revenue Entries
Definition
Originating - record revenue and establish an asset

Adjusting - When billing occurs, reduce unbilled revenue and increase accounts receivable. When cash is collected, eliminate the receivable
Term
Accrued Expenses Entries
Definition
Originating - Establish a liability and record an expense

Adjusting - reduce the liability as cash is paid
Term
Basic EPS
Definition
[Net income - Preferred dividends] / Weighted average number of shares outstanding
Term
Diluted EPS
Definition
[(Net income - Preferred dividends) + Convertible preferred dividends + (Convertible debt interest * (1 - t))] / [Weighted average shares + Shares from conversion of convertible preferred shares + Shares from conversion of convertible debt + Shares issuable from stock options
Term
Comprehensive Income
Definition
Net Income + Other comprehensive income
Term
Gains and Losses on Marketable Securities: Balance sheet - Held-to-Maturity securities
Definition
Reported at cost or amortized cost
Term
Gains and Losses on Marketable Securities: Balance sheet - Available-for-sale Securities
Definition
Reported at fair value. Unrealized gains or losses due to changes in market values are reported in other comprehensive income within owners' equity
Term
Gains and Losses on Marketable Securities: Balance sheet - Trading Securities
Definition
Reported at fair value
Term
Gains and Losses on Marketable Securities: Income Statement - Held-to-Maturity Securities
Definition
Interest Income.

Realized gains and losses
Term
Gains and Losses on Marketable Securities: Income Statement - Available-for-sale Securities
Definition
Dividend Income.

Interest Income.

Realized gains and losses.
Term
Gains and Losses on Marketable Securities: Income Statement - Trading Securities
Definition
Dividend Income.

Interest Income.

Realized gains and losses.

Unrealized gains and losses due to change in market values
Term
Cash Flow from Operations: Inflows
Definition
Cash collected from customers

Interest and dividends received

Proceeds from sale of securities held for trading
Term
Cash Flow from Operations: Outflows
Definition
Cash paid to employees

Cash paid to suppliers

Cash paid for other expenses

Cash used to purchase trading securities

Interest paid

Taxes paid
Term
Cash Flow from Investment: Inflows
Definition
Sale proceeds from fixed assets

Sale proceeds from long-term invetments
Term
Cash Flow from Investment: Outflows
Definition
Purchase of fixed assets

Cash used to acquire LT investment securities
Term
Cash Flow from Financing: Inflows
Definition
Proceeds from debt issuance

Proceeds from issuance of equity instruments
Term
Cash Flow from Financing: Outflows
Definition
Repayment of LT Debt

Payments made to repurchase stock

Dividends payments
Term
Cash Flow Classification under IFRS and GAAP:

Interest and dividends recieved
Definition
IFRS - CFO or CFI
US GAAP - CFO
Term
Cash Flow Classification under IFRS and GAAP:

Interest Paid
Definition
IFRS - CFO or CFF

US GAAP - CFO
Term
Cash Flow Classification under IFRS and GAAP:

Dividends paid
Definition
IFRS - CFO or CFF

US GAAP - CFF
Term
Cash Flow Classification under IFRS and GAAP:

Dividends Received
Definition
IFRS - CFO or CFI

US GAAP - CFO
Term
Cash Flow Classification under IFRS and GAAP:

Taxes paid
Definition
IFRS - CFO, but part of the tax can be categorized as CFI or CFF if it is clear that the tax arose from investing or financing activities

US GAAP - CFO
Term
Cash Flow Classification under IFRS and GAAP:

Bank overdrafts
Definition
IFRS - Included as a part of cash equivalents

GAAP - not considered a part of cash equivalents and included in CFF
Term
CFO Presentation format under IFRS and US GAAP
Definition
IFRS - Direct or indirect. The former is preferred.

US GAAP - Direct or indirect. The former is preferred. However, if the direct method is used, a reconciliation of net income and CFO must be included
Term
Disclosures on CF Statements under IFRS
Definition
Taxes paid should be presented separately on the cash flow statement
Term
Disclosures on CF Statments under US GAAP
Definition
If taxes and interest paid are not explicitly stated on the cash flow statement, details can be provided in footnotes
Term
Free Cash Flow to the Firm
Definition

FCFF = NI + NCC + [Int * (1-t)] - FCInv - WCInv

 

FCFF = CFO + [Int * (1-t)] - FCInv

Term
Free Cash Flow to Equity
Definition
FCFE = CFO - FCInv + Net Borrowing
Term
Inventor Turnover
Definition
Cost of Goods Sold / Average Inventory
Term
Days of Inventory on Hand (DOH)
Definition
365 / Inventory Turnover
Term
Receivables Turnover
Definition
Revenue / Average Recievables
Term
Days Sales Outstanding
Definition
365 / Receivables Turnover
Term
Payables Turnover
Definition
Purchase / Average trade payables
Term
Number of Days Payables
Definition
365 / Payables Turnover
Term
Working Capital Turnover
Definition
Revenue / Average Working Capital
Term
Fixed Asset Turnover
Definition
Revenue / Average Fixed Assets
Term
Total Asset Turnover
Definition
Revenue / Average Total Assets
Term
Current Ratio
Definition
Current Assets / Current Liabilities
Term
Quick Ratio
Definition
[Cash + Short-term marketable investments + receivables] / Current liabilities
Term
Cash Ratio
Definition
[Cash + short-term marketable investments] / Current liabiliteis
Term
Defensive Interval Ratio
Definition
[Cash + short-term marketable investments + receivables] / Daily cash expenditures
Term
Cash Conversion Cycle
Definition
DSO + DOH - Number of Days Payables
Term
Debt-to-Assets Ratio
Definition
Total Debt / Total Assets
Term
Debt-to-Capital Ratio
Definition
Total Debt / [Total debt + Shareholders Equity]
Term
Debt-to-Equity Ratio
Definition
Total Det / Shareholders' Equity
Term
Financial Leverage Ratio
Definition
Average Total Assets / Average Total Equity
Term
Interest Coverage Ratio
Definition
EBIT / Interest Payments
Term
Fixed Charge Coverage Ratio
Definition
[EBIT + Lease Payments] / [Interest Payments + Lease Payments]
Term
Gross Profit Margin
Definition
Gross Profit / Revenue
Term
Operating Profit Margin
Definition
Operating Profit / Revenue
Term
Pretax Margin
Definition
EBT (Earnings before tax, but after interest) / Revenue
Term
Net Profit Margin
Definition
Net Profit / Revenue
Term
Return on Assets
Definition
Net Income / Average Total Assets
Term
Adjusted Return on Assets
Definition
[Net Income + (Interest Expense * (1-t)] / Average total assets
Term
Operating Return on Assets
Definition
Operating Income or EBIT / Average total assets
Term
Return on Total Capital
Definition
EBIT / [Short-term debt + long-term debt + equity]
Term
Return on Equity
Definition
Net Income / Average Total Equity
Term
Return on Common Equity
Definition
[Net Income - Preferred Dividends] / Average Common Equity
Term
DuPont Decomposition of ROE
Definition
Net Income / Average Shareholders' Equity
Term
2-Way DuPont Decomposition of ROE
Definition
[Net Income / Average total Assets] * [Average Total Assets / Average Shareholders' Equity]

ROA * Leverage
Term
3-Way DuPont Decomposition of ROE
Definition
[Net Income / Revenue] * [Revenue / Average total assets] * [Average total assets / average shareholders' equity]

Net Profit Margin * Asset Turnover * Leverage
Term
5-Way Dupont Decomposition
Definition
[Net Income / EBT] * [EBT / EBIT] * [EBIT / Revenue] * [Revenue / Average Total Assets] * [Average total assets / Average shareholders' equity]

Tax Burden * Interest Burden * EBIT Margin * Asset turnover * Leverage
Term
Price-to-Earnings Ratio
Definition
Price per share / Earnings per share
Term
Price to Cash Flow
Definition
Price per share / Cash flow per share
Term
Price to Sales
Definition
Price per Share / Sales per share
Term
Price to Book Value
Definition
Price per Share / Book Value per Share
Term
Cash flow per share
Definition
Cash flow from operations / average number of shares outstanding
Term
EBITDA per share
Definition
EBITDA / Average number of shares outstanding
Term
Dividends per Share
Definition
Common Dividends Declared / Weighted average number of ordinary shares
Term
Dividend Payout Ratio
Definition
Common share dividends / Net income attributable to common shares
Term
Retention Rate
Definition
1 - Dividend Payout Ratio
Term
Sustainable Growth Rate
Definition
Retention Rate * ROE
Term
LIFO vs FIFO when Prices are Rising:

COGS
Definition
LIFO - higher

FIFO - Lower
Term
LIFO vs FIFO when Prices are Rising:

Income before taxes
Definition
LIFO - lower

FIFO - Higher
Term
LIFO vs FIFO when Prices are Rising:

Income taxes
Definition
LIFO - Lower

FIFO - Higher
Term
LIFO vs FIFO when Prices are Rising:

Net Income
Definition
LIFO - Lower

FIFO - Higher
Term
LIFO vs FIFO when Prices are Rising:

Cash Flow
Definition
LIFO - Higher

FIFO - Lower
Term
LIFO vs FIFO when Prices are Rising:

EI
Definition
LIFO - Lower

FIFO - Higher
Term
LIFO vs FIFO when Prices are Rising:

Working Capital
Definition
LIFO - Lower

FIFO - Higher
Term
LIFO vs FIFO when Prices are Rising, Effect on Ratio:

Profitablility Ratios, NP and GP Margin
Definition
Numberator - Income is lower unde rLIFO b/c COGS is higher

Denominator - Sales are the same under both

Effect on Ratio - Lower under lifo
Term
LIFO vs FIFO when Prices are Rising, Effect on Ratio:

Debt to Equity
Definition
Numerator - same debt levels

Denominator - Lower equity number under LIFO

Effect on Ratio - Higher under LIFO
Term
LIFO vs FIFO when Prices are Rising, Effect on Ratio:

Current Ratio
Definition
Numerator - current assets are lower under LIFO because EI is lower

Denominator - Current liabilities are the same

Effect on Ratio - Lower under LIFO
Term
LIFO vs FIFO when Prices are Rising, Effect on Ratio:

Quick Ratio
Definition
Numerator - Assets are higher as a result of lower taxes paid

Denominator - Current liabilities are the same

Effect on ratio - Higher under LIFO
Term
LIFO vs FIFO when Prices are Rising, Effect on Ratio:

Inventory Turnover
Definition
Numerator - COGS is higher under LIFO

Denominator - Average inventory is lower under LIFO

Effect on Ratio - Higher under LIFO
Term
LIFO vs FIFO when Prices are Rising, Effect on Ratio:

Total Asset Turnover
Definition
Numerator - Sales are the same

Denominator - Lower total assets under LIFO

Effect on Ratio - Higher under LIFO
Term
Initial effect on statements when a cost is capitalized
Definition
Noncurrent assets increase

Cash flow from investing activities decreases
Term
Future period effect on statements when a cost is capitalized
Definition
The asset is depreciated or amortized:

Noncurrent assets decrease

Net Income decreases

Retained earnings decrease

Equity decreases
Term
Effect on financial statements when a cost is expensed
Definition
Net Income decreases by the entire after-tax amount of the cost

No related asset is recorded on the BS and therefore, no depreciation or amortization expense is charged in future periods

Operating cash flow decreases

Expensed costs have no financial statements impact in future years
Term
Capitalizing vs Expensing Costs:

Net Income (First Year)
Definition
Capitalizing - Higher

Expensing - Lower
Term
Capitalizing vs Expensing Costs:

Net Income (Future years)
Definition
Capitalizing - Lower

Expensing - Higher
Term
Capitalizing vs Expensing Costs:

Total Assets
Definition
Capitalizing - Higher

Expensing - Lower
Term
Capitalizing vs Expensing Costs:

Shareholders' Equity
Definition
Capitalizing - Higher

Expensing - Lower
Term
Capitalizing vs Expensing Costs:

CF Operations
Definition
Capitalizing - Higher

Expensing - Lower
Term
Capitalizing vs Expensing Costs:

CF Investing
Definition
Capitalizing - Lower

Expensing - Higher
Term
Capitalizing vs Expensing Costs:

Income Variabliity
Definition
Capitalizing - Lower

Expensing - Higher
Term
Capitalizing vs Expensing Costs:

Debt to Equity
Definition
Capitalizing - Lower

Expensing - Higher
Term
Depreciation Expense under Straight Line
Definition
[Original Cost - Salvage Value] / Depreciable Life
Term
Depreciation Expense under Accelerated
Definition
Dep in Year X = [2 / Depreciable Life] * Bok value at the beginning of Year X
Term
Estimated Useful Life
Definition
Gross Investment in Fixed Assets / Annual Depreciation Expense
Term
Average Cost of Asset
Definition
Accumulated Deprecation / Annual Depreciation Expense
Term
Remaining Useful Life
Definition
Net Investment in Fixed Assets / Annual Depreciation Expense
Term
Carrying amount greater than tax base for Asset and Liability
Definition
Asset - Results in Deferred Tax Liability

Liability - Results in Deferred Tax Asset
Term
Tax base greater than carrying amount for Asset and Liability
Definition
Asset - Results in Deferred Tax Asset

Liability - Results in Deferred Tax Liability
Term
Income Tax Accounting under IFRS vs GAAP:

Revaluation of Fixed Assets and Intangible Assets
Definition
IFRS - Recognized in equity as deferred taxes

GAAP - Revaluation is prohibited
Term
Income Tax Accounting under IFRS vs GAAP:

Treatment of undistributed profit from investment in subsidiaries
Definition
IFRS - Recognized as deferred taxes except when the company is able to control the distribution of profits and it is probable that temporary differences will not reverse in future

GAAP - No recognition of deferred taxes for foreign subsidiaries that fulfill indefinite reversal criteria. No recognition of deferred taxes for domestic subsidiaries when amounts are tax-free
Term
Income Tax Accounting under IFRS vs GAAP:

Treatment of undistributed profit from investments in joint venture
Definition
IFRS - Recognized as deferred taxes except when the investor controls the sharing of profits and it is probable that there will be no reversal of temporary differences in future

GAAP - No recognition of deferred taxes for foreign corporate joint ventures that fulfill indefinite reversal criteria
Term
Income Tax Accounting under IFRS vs GAAP:

Treatment of Undistributed Profit from Investment in Associates
Definition
IFRS - Recognized as deferred taxes except when the investor controls the sharing of profits and it is probable that there will be no reversal of temporary differences in future

GAAP - Deferred taxes are recognized from temporary differences
Term
Income Tax Accounting under IFRS vs GAAP: Deferred Tax Measurement:

Tax Rates
Definition
IFRS - Tax rates and tax laws enacted or substantively enacted

GAAP - Only enacted tax rates and tax laws are used
Term
Income Tax Accounting under IFRS vs GAAP: Deferred Tax Measurement:

Deferred tax asset recognition
Definition
IFRS - Recognized if it is probable that sufficient taxable profit will be available in the future

GAAP - Deferred tax assets are recognized in full and then reduced by a valuation allowance if it is likely that they will not be realized
Term
Income Tax Accounting under IFRS vs GAAP: Deferred Tax Presentation:

Offsetting of Deferred Tax Assets and Liabilities
Definition
IFRS - Offsetting allowed only if the entity has right to legally enforce it and the balance is related to a tax levied by the same authority

GAAP - Same as in IFRS
Term
Income Tax Accounting under IFRS vs GAAP: Deferred Tax Presentation:

Balance Sheet Classification
Definition
IFRS - Classified on balance sheet as net noncurrent with supplementary disclosures

GAAP - Classified as either current or noncurrent based on classification of underlying asset and liability
Term
Effective Tax Rate
Definition
Income tax expense / Pretax Income
Term
Income Tax Expense
Definition
Taxes Payable + Change in DTL - Change in DTA
Term
Income Statement Effects of Lease Classification:

Operating Expenses
Definition
Finance Lease - Lower

Operating Lease - Higher
Term
Income Statement Effects of Lease Classification:

Nonoperating Expenses
Definition
Finance Lease - Higher

Operating Lease - Lower
Term
Income Statement Effects of Lease Classification:

EBIT (Operating Income)
Definition
Finance Lease - Higher

Operating Lease - Lower
Term
Income Statement Effects of Lease Classification:

Total Expenses - early years
Definition
Finance Lease - Higher

Operating Lease - Lower
Term
Income Statement Effects of Lease Classification:

Total Expenses - later years
Definition
Finance Lease - Lower

Operating Lease - Higher
Term
Income Statement Effects of Lease Classification:

Net Income - early years
Definition
Finance Lease - Lower

Operating Lease - Higher
Term
Income Statement Effects of Lease Classification:

Net Income - later years
Definition
Finance Lease - Higher

Operating Lease - Lower
Term
Balance Sheet Effects of Lease Classification:

Assets
Definition
Capital Lease - Higher

Operating Lease - Lower
Term
Balance Sheet Effects of Lease Classification:

Current Labilities
Definition
Capital Lease - Higher

Operating Lease - Lower
Term
Balance Sheet Effects of Lease Classification:

Long Term Liabilities
Definition
Capital Lease - Higher

Operating Lease - Lower
Term
Balance Sheet Effects of Lease Classification:

Total Cash
Definition
Capital Lease - Same

Operating Lease - Same
Term
Cash Flow Effects of Lease Classification:

Cash Flow from Operations
Definition
Capital Lease - Higher

Operating Lease - Lower
Term
Cash Flow Effects of Lease Classification:

Cash Flow from Finance
Definition
Capital Lease - Lower

Operating Lease - Higher
Term
Cash Flow Effects of Lease Classification:

Total Cash Flow
Definition
Capital Lease - Same

Operating Lease - Same
Term
Impact of Lease Classification on Financial Ratio:

Asset Turnover
Definition
Numerator - Sales - same

Denominator - Assets - higher

Effect on Ratio - Lower

Ratio is worse under finance lease
Term
Impact of Lease Classification on Financial Ratio:

Return on Assets (in early years)
Definition
Numerator - NI lower in early years

Denominator - Assets - Higher

Effect on Ratio - Lower

Ratio is worse under finance lease
Term
Impact of Lease Classification on Financial Ratio:

Current Ratio
Definition
Numerator - Current Assets - same

Denominator - Current Liabilities - higher

Effect on Ratio - Lower

Ratio is worse under finance lease
Term
Impact of Lease Classification on Financial Ratio:

Leverage Ratios (D/E and D/A)
Definition
Numerator - Debt - Higher

Denominator - Equity - Same; Assets - Higher

Effect on Ratio - Higher

Ratio is worse under finance lease
Term
Impact of Lease Classification on Financial Ratio:

Return on Equity (in early years)
Definition
Numerator - NI lower in early years

Denominator - Equity- same

Effect on Ratio - Lower

Ratio is worse under finance lease
Term
Financial Statement Effects of Lease Classification from Lessor's Perspective:

Total Net Income
Definition
Financing Lease - Same

Operating Lease - Same
Term
Financial Statement Effects of Lease Classification from Lessor's Perspective:

Net Income (early years)
Definition
Financing Lease - Higher

Operating Lease - Lower
Term
Financial Statement Effects of Lease Classification from Lessor's Perspective:

Taxes (early years)
Definition
Financing Lease - Higher

Operating Lease - Lower
Term
Financial Statement Effects of Lease Classification from Lessor's Perspective:

Total CFO
Definition
Financing Lease - Lower

Operating Lease - Higher
Term
Financial Statement Effects of Lease Classification from Lessor's Perspective:

Total CFI
Definition
Financing Lease - Higher

Operating Lease - Lower
Term
Financial Statement Effects of Lease Classification from Lessor's Perspective:

Total CF
Definition
Financing Lease - Same

Operating Lease - Same
Term
Leverage Ratios
Definition
Debt-to-assets ratio
Debt-to-capital ratio
Debt-to-equity ratio
Financial Leverage Ratio
Term
Debt-to-assets Ratio
Definition
Expresses the percentage of total assets financed by debts

Total Debt / Total Assets
Term
Debt-to-capital Ratio
Definition
Measures the percentage of a company's total capital financed by debt

Total Debt / [Total Debt + Total Shareholders' Equity]
Term
Debt-to-equity Ratio
Definition
Measures the amount of debt financing relative to equity financing

Total Debt / Total Shareholders' Equity
Term
Financial Leverage Ratio
Definition
Measures the amount of total assets supported by one money unit of equity

Average Total Assets / Average Shareholders' Equity
Term
Coverage Ratio
Definition
Interest Coverage Ratio
Fixed Charge Coverage Ratio
Term
Interest Coverage Ratio
Definition
Measures the number of times a company's EBIT could cover its interest payments

EBIT / Interest Payments
Term
Fixed Charge Coverage Ratio
Definition
Measures the number of times a company's earnings (before interest, taxes, and lease payments) can cover the company's interest and lease payments

[EBIT + Lease payments] / [Interest Payments + Lease Payments]
Term
Adjustments Related to Inventory
Definition

EIFIFO = EILIFO + LR (aka LIFO Reserve)

 

COGSFIFO = COGSLIFO - (Change in LR during the year)

Term
Net Income Tax under FIFO will be greater than LIFO net income after tax by:
Definition
Change in LIFO Reserve * (1 - Tax Rate)
Term
When Converting from LIFO to FIFO Assuming Rising Prices:

Equity (retained earnings) change by:
Definition
Increase:

LIFO Reserve * (1 - Tax Rate)
Term
When Converting from LIFO to FIFO Assuming Rising Prices:

Liabilities (deferred taxes) change by:
Definition
Increase:

LIFO Reserve * Tax Rate
Term
When Converting from LIFO to FIFO Assuming Rising Prices:

Current Assets (inventory) change by:
Definition
Increase:

LIFO Reserve
Term
Adjustments Related to Property, Plant, and Equipment
Definition
Gross Investment in fixed assets / Annual Deprediation Expense= [Accumulated depreciation expense / Annual Depreciation expense] + [Net Investment in Fixed Assets / Annual Depreciation Expense

Estimated Useful or Depreciable Live = Average age of asset + Remaining Useful Life
Term
Categories of Marketable Securities and Accounting Treatment:

Held-to-maturity
Definition
Balance Sheet Value - Amortized cost (Par value +/- unamortized premium/discount)

Gains and Losses:
Unrealized - Not reported
Realized - Recognized on income statement

Income (Interest and Dividends) - Recognized on Income Statement
Term
Categories of Marketable Securities and Accounting Treatment:

Held-for-trading
Definition
Balance Sheet Value - Fair Value

Gains and Losses:
Unrealized - Recognized on income statement
Realized - Recognized on income Statement

Income (Interest & Dividends) - Recognized on Income statement
Term
Categories of Marketable Securities and Accounting Treatment:

Available-for-sale
Definition
Balance Sheet Value - Fair Value

Gains and Losses:
Unrealized - recognized in other comprehensive income
Realized - Recognized on Income Statment

Income (Interest & Dividends) - recognized on income statement
Term
Property Plant and Equipment:

US GAAP
Definition
Balance Sheet - Cost minus accumulated depreciation

Changes in BS Value - Does not permit upward revaluation

Effects of changes in BS Value - No effect
Term
Property Plant and Equipment:

IFRS
Definition
Balance Sheet - Cost minus accumulated Deprecation

Changes in BS Value - Permits upward revaluation. Asset is reported at fair value at the revaluation date less accumulated depreciation following the revaluation

Effects of Changes in BS Value - Increase in asset's value from revaluation is reported as a part of equity unless it is reversing a previously-recognized decrease in the value of the asset. Decrease is reported on IS unless it is a reversal
Term
Long-Term Investment Extent of Control and Accounting Treatment:

Less than 20%
Definition
Extent of Control - No significant control

Accounting Treatment - Classified as held-to-maturit, trading, or available for sale securities
Term
Long-Term Investment Extent of Control and Accounting Treatment:

20-50%
Definition
Extent of Control - Significant Influence

Accounting Treatment - Equity method
Term
Long-Term Investment Extent of Control and Accounting Treatment:

More than 50%
Definition
Extent of Control - Significant control

Accounting Treatment - Consolidation
Term
Long-Term Investment Extent of Control and Accounting Treatment:

Shared (joint ventures)
Definition
Extent of Control - Joint control

Accounting Treatment - Equity method/proportionate consolidation
Term
Treatment of Identifiable Intangible Assets:

GAAP
Definition
BS - Only purchased may be recognized as assets. Developed cannot. Reported at cost - accumulated amort for assets with finite useful lives, cost - impairment for assets with infinite useful lives

Changes in BS Value - Does not purmit upward revaluation

Effects of Changes in BS Value - No effect
Term
Treatment of Identifiable Intangible Assets:

IFRS
Definition
BS - Only purchsed may be recognized as assets, internally developed may not. Finite useful lives - reported at cost - accum amort. Infinite useful lives - reported at cost - impairment

Changes in BS Value - Permits upward revaluation. Reported at fair value as of reval date less subsequent accum amort.

Effects of Changes in BS Value - Increase - part of equity (unless a reversal) Decrease - on IS unless it is a reversal
Term
Long-Term Contracts:

GAAP
Definition
Outcome can be reliably estimated - percentage-of-completion method

Outcome cannot be reliably estimated - completed contract method
Term
Long-Term Contracts:

IFRS
Definition
Outcome can be reliably estimated - percentage-of-completion method

Outcome cannot be reliably estimated - revenue is recognized to the extent that is is probable to recover contract costs. Profit is only recognized at project completion
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