Question 1 :

March Shopify sales are $220,000 with 30-day returns. Historical returns are 6%, but a new product issue makes management's current 8% estimate supportable. Which March reserve conclusion should be approved?

$13,200, with documentation that historical rates remain the only objective basis

$0, with monitoring of April returns because the obligation depends on future customer behavior

$17,600, with support for the updated 8% estimate, constraint assessment, and refund liability

$220,000, with all revenue deferred until the return window closes

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Question 2 :

Under the copier contract, the supplier can replace the customer’s machine at any time with similar-capacity equipment and has historically swapped units during maintenance without customer approval. What conclusion would support excluding the arrangement from the lease population?

Exclude it because every substitution clause prevents the customer from controlling an asset

Include it because receiving copier output is enough to control the equipment

Exclude it if the supplier has a substantive substitution right with practical ability and economic benefit

Include it as a short-term lease because copiers are commonly replaced within 12 months

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Question 3 :

Archer Supply has a material DTA from inventory reserves. The tax director says realization is assured because the reserves will reverse through sales, but the inventory is obsolete and expected to be scrapped with limited tax benefit. What should the reviewer require?

Reevaluate the DTA using the expected manner of recovery and the tax consequences of sale or scrap

Keep the DTA because inventory reserves always reverse into future tax deductions

Convert the DTA to a DTL because obsolete inventory has declined in value

Remove all tax effects because inventory reserves are operational estimates rather than tax items

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Question 4 :

During year-end reporting, the probability of payout on acquisition-date contingent consideration increased materially. The controller says the liability should not change because the earnout was part of the purchase price. Which treatment is correct?

Leave the liability unchanged because acquisition accounting freezes contingent consideration

Adjust goodwill each period for expected payout changes until the earnout is settled

Remeasure the contingent consideration liability at fair value through earnings unless a specific exception applies

Record changes only when the earnout is paid because fair value is fixed at acquisition

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Question 5 :

Northgate Foods LLC’s IFRS-to-GAAP opening balance memo keeps plant assets at prior IFRS deemed cost because the company used an IFRS 1 exemption years ago. The file includes no separate GAAP basis for the opening carrying amounts. What prevents sign-off on this conversion position?

Use the IFRS 1 deemed-cost layer only if the team can reconcile it to a supportable GAAP cost basis and depreciation trail

Establish supportable opening GAAP carrying amounts instead of treating the IFRS 1 exemption as the conversion basis

Retain deemed cost for opening GAAP and record only prospective depreciation differences after the conversion date

Carry the amount temporarily if management documents why reconstructing original cost would be impracticable

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Technical Accounting, Reporting & FP&A Judgment

March Shopify sales are $220,000 with 30-day returns. Historical returns are 6%, but a new product issue makes management's current 8% estimate supportable. Which March reserve conclusion should be approved?

MCQ

0

5

Under the copier contract, the supplier can replace the customer’s machine at any time with similar-capacity equipment and has historically swapped units during maintenance without customer approval. What conclusion would support excluding the arrangement from the lease population?

MCQ

0

5

Archer Supply has a material DTA from inventory reserves. The tax director says realization is assured because the reserves will reverse through sales, but the inventory is obsolete and expected to be scrapped with limited tax benefit. What should the reviewer require?

MCQ

0

5

During year-end reporting, the probability of payout on acquisition-date contingent consideration increased materially. The controller says the liability should not change because the earnout was part of the purchase price. Which treatment is correct?

MCQ

0

5

Northgate Foods LLC’s IFRS-to-GAAP opening balance memo keeps plant assets at prior IFRS deemed cost because the company used an IFRS 1 exemption years ago. The file includes no separate GAAP basis for the opening carrying amounts. What prevents sign-off on this conversion position?

MCQ

0

5