Miles CPA Review: FAR - 2015 Updates

[Update date Jan 4, 2015]

Going Concern Doubt [study with FAR-1.4]

Going concern doubt - Substantial doubt about an entitys ability to continue as a going concern exists
when conditions and events, considered in aggregate, indicate that it is probable that the entity will be
unable to meet obligations as they become due within one year after the date the F/S are issued or
available to be issued
If the conditions and events in aggregate identified (within one year after the date of F/S are issued or
available to be issued) do NOT indicate any uncertainties - No disclosures are required
If the conditions and events in aggregate identified (within one year after the date of F/S are issued or
available to be issued) indicate any uncertainties Need to disclose
 Principal Conditions or events that raised substantial doubt
 Management's evaluation of those significant events
 Management's plans that alleviate significant doubt
 If Management's plan of action is not probable and may not mitigate uncertainties, notes need to
include statement indicating that there is substantial doubt regarding the entity's ability to
continue as a going concern

Liquidation Basis of Accounting [study with FAR-1.13]

Even when there is substantial doubt as to the ability of an entity to continue as a going concern, the
entity will still apply US GAAP for preparation of F/S and disclose going concern doubts in notes

However, need to use Liquidation Basis of Accounting if the entity has concluded that it is no longer a
going concern and that it needs to liquidate its assets, settle its liabilities, and distribute any remaining
resources to owners
Used when liquidation is imminent, possible in the following two conditions:
 An approved liquidation plan with remote likelihood of being blocked
 Imposed Plan (by an outside force)
Measurement
 Assets Present at expected cash proceeds
Include items which are sellable but may not have been previously recognized under US GAAP
(e.g., trademarks)
 Liabilities - Follow US GAAP guidance
 Accrual of expected liquidation period costs and income
Disclosure
 Liquidation Plan
 Methods & assumptions used
 Expected liquidation period costs & income
 Expected liquidation time frame

Private Company Standards [study with FAR-1.13]

Private Company Council (PCC) - Established in May 2012 to improve accounting standards for private
companies; first standard issued in Jan 2014
Private Co. - Entity other than public business entity, not -for-profit or employee benefit plan
PCC pronouncements are incorporated into the FASB ASC [therefore, it is still US GAAP!]
Major purpose - Reduce cost of financial reporting for private companies, and to bring it more in line
with the benefits derived by users of F/S
Private Company Decision Making Framework - Establishes guidelines for the use of alternative
standards for private companies on account of differences in information needs between public and
private companies
 Key differential factors between public & private companies
Number of primary users & their access to management
Investment strategies of primary users
Ownership & capital structure
Accounting resources
Learning about new financial reporting guidance
 Key guidelines to determine the need of a differential guidance for private companies
Recognition and Measurement
Disclosures
Display
Effective Date
Transition Method

Major differences in private company standards:
Public Business Entity
Private Company
Financial Investments
- Simplified hedge accounting not
- Simplified hedge accounting allowed for swaps that convert
allowed
a variable-rate borrowing to a fixed-rate borrowing
- Swaps measured at fair value
- Qualifying swaps may be measured at settlement value
- Hedges must be designated at
- May use the annual report to be issued date to designate a
inception date
hedge (instead of hedge inception date)
Intangible Assets
- Goodwill is NOT amortized; only
- Goodwill may be amortized using the straight-line basis
tested for impairment using a 2-step over 10 years (or less); test for impairment using a 1-step
approach
approach
Consolidated Financial Statements
- VIE (Variable Interest Entity) must
- VIE accounting may be ignored in a leasing arrangement if
be applied to all arrangements
all of the following conditions exist:
(i) lessee (private co.) & lessor under common control,
(ii) lease arrangement between lessee & lessor,
(iii) lessee & lessor mainly engaged in leasing activities only,
(iv) lessees guarantees/collaterals are lesser in value then
the asset leased by the lessee.
[disclosures are required]

Development Stage Enterprises [updates on pg F3-44]

Development Stage Enterprises (DSE) Start-ups in which principal operations have not yet
commenced OR have generated only an insignificant amount of revenue (or loss)
 Earlier guidance (effective upto Dec 14, 2014)
Prepare F/S as per GAAP. Therefore, no special treatment allowed relating to capitalization or
deferral of costs
Additional presentation/disclosure requirements:
- B/S - describe cumulative losses as deficit accumulated during development stage
- I/S - apart from the periods presented, also present a cumulative amount of revenues,
expenses and losses from the companys inception
- C/F - apart from the periods presented, also present a cumulative amount of cash inflows and
outflows from the companys inception
Disclose in the first fiscal year after development stage that the entity was previously in the
development stage
 Effective Dec 15, 2014, FASB has eliminated the concept of a development stage entity (DSE) in its
entirety from current accounting guidance. Amendments to the consolidation guidance may result
in more DSEs being considered variable interest entities (VIEs)