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2009 F-2 Class Notes

2009 F-2 Class Notes - Becker CPA Review Financial 2 Class...

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Becker CPA Review – Financial 2 Class Notes 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. FINANCIAL 2 CLASS NOTES Financial 2 includes the following: I. TIMING ISSUES: MATCHING CORRECTING AND ADJUSTING A. Assets are probable future economic benefits obtained as a result of past events and liabilities are probable future sacrifices of economic benefits. Revenue is recognized when earned and expenses when incurred and these two need to be matched in their appropriate period. B. Deferrals , such as unearned or prepaid accounts, push recognition of revenue and expense to future periods ( after the related cash flow). Accruals ( receivables and payables ) recognize revenues and expenses before the related cash flow. C. Franchise fees , initial and continuing, are revenues to the franchisor and expenses to the franchisee. The initial franchise fee is recorded as an asset by the franchisee and expensed over the period benefited. It is revenue to the franchisor when earned. Continuing franchise fees are revenue to the franchisor and expense to the franchisee in the period incurred. II. INTANGIBLE ASSETS A. Some intangibles are identifiable [copyrights and patents, e.g.] while one is unidentifiable [goodwill]. Purchased identifiable intangible assets should be recorded at cost plus additional expenditures necessary to purchase. B. Amortizing identifiable intangibles with finite lives is done over the shorter of the estimated economic life and the legal life. Goodwill and identifiable intangibles with indefinite lives are not amortized and are subject to impairment testing.
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