10/22/2019 CMA Exam Review - Part 1

1
FC.rev.rec.FC001_1802

Identify the contract with a customer.

List the steps in the revenue recognition Identify performance obligations in the
process. contract.
Determine the transaction price.
Allocate the transaction price to the
performance obligations in the
contract.
Recognize revenue as, or when, the
performance obligations are satisfied.

2
FC.fin.inc.FC002_1802

Shareholders and prospective

investors: To determine their return on
investment.
Financial institutions: Assess the ability
List some external users of the financial to pay on loans and keep debt
statements and briefly discuss why each party covenants.
uses them. Suppliers: Assess the ability of their
customers to pay bills on time.
Customers: Assess whether the
suppliers will remain in business.
Competitors: Compare their
performance to others in the industry.
Regulators: Assess whether public
organizations have adhered to
accounting and reporting requirements.

3
FC.ifrs.FC005_1802

Under U.S. GAAP, impairment is

reviewed at the individual asset level;
What are the differences in impairment under IFRS, an organization should
testing under IFRS vs. U.S. GAAP? review for impairment at the cash-
generation unit (CGU) level.
Under IFRS, a one-step impairment test
is used rather than the two-step model
used for U.S. GAAP.
Recognizing reversals of prior
impairment losses is prohibited under
U.S. GAAP, but allowed under IFRS.

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10/22/2019 CMA Exam Review - Part 1

4
FC.ifrs.FC006_1904

Under IFRS, leases are accounted for

What is the difference between lease
similar to finance leases under US
accounting in IFRS and U.S. GAAP?
GAAP, similar to the purchase of an
asset with debt.
Payments on leases with a term shorter
than 12 months or for leases of small
value (immaterial) assets are expensed
as incurred.

5
FC.inv.oe.FC004_1802

If an investor has significant influence over an

How do companies record dividend
distributions and net income related to
investments where significant influence is
obtained?
investee, the investment is accounted for
using the equity method. Under the equity
method, companies record the investment at
cost, then increase/decrease the investment
by their pro-rata share of the net income/loss
of the investee. The investment is decreased
by their pro-rata share of the dividends
declared by the investee.

6
FC.inv.FC005_1802

FIFO generally reflects the actual

What are some factors that might influence
the choice of inventory costing method?
physical flow of goods better.
LIFO is not allowed under International
Financial Reporting Standards.
If there is an inflationary environment,
LIFO will have higher cost of sales, so
the gross margins and net income will
be lower, but the income tax liability
will also be lower.
If there is a deflationary environment,
LIFO will have lower cost of sales, so it
will have higher gross margins, net
income, and income tax liability.

7
FC.acc.inc.tax.FC003_1905

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10/22/2019 CMA Exam Review - Part 1

Deferred Tax Asset: When taxable

Describe what causes a deferred tax asset
income is recognized before book
(DTA) and describe how DTAs are calculated.
income due to timing differences in the
recognition of revenue or expense
items. The DTA is calculated using
enacted tax rates from the future
periods when the timing differences are
expected to reverse.

8
FC.lta.FC001_1802

The asset's expected useful life, or

period over which the asset is expected
What are some of the judgments or estimates
to provide benefit to the organization.
that need to be made by management when
The expected salvage value at the end
determining depreciation calculations?
of the asset's useful life. The asset
should not be depreciated below
salvage value.
The depreciation method must be
selected and should reflect the asset's
usage pattern.

9
FC.ifrs.FC003_1802

Under U.S. GAAP, intangible assets are

carried at amortized cost; under IFRS,
intangible assets may be carried at
amortized cost or revalued to fair value.
What are the differences in accounting for
Under IFRS, development costs for
intangible assets under IFRS vs. U.S. GAAP?
internally developed intangible assets
may be capitalized once the
technological feasibility of the project
has been established and certain
conditions are met; under U.S. GAAP, all
development costs are expensed as
incurred, except for software
development once technological
feasibility has been established.

10
FC.inv.FC002_1802

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10/22/2019 CMA Exam Review - Part 1

How is Cost of Goods Sold calculated under

Beginning Inventory + Transportation
the periodic inventory valuation method?
In + Purchases − Purchase Returns and
Allowances − Purchase Discounts = 
Goods Available for Sale
Goods Available for Sale − Ending
Inventory = Cost of Goods Sold

11
FC.rev.rec.FC005_1802

The entity has an enforceable right to

payment.
If revenue does not meet the requirements to
Title to the asset has transferred to the
be recognized over time, what are some of the
customer.
indicators that control has transferred at a
Physical possession of the asset has
point in time for purposes of revenue
transferred to the customer.
recognition at that time?
Risks and rewards of ownership have
transferred to the customer.
The customer has formally accepted the
good or service.

12
FC.cf.fsa.FC003_1802

Indirect Method: The most common

method used. It begins with net income
then reconciles to operating cash flow
by adjusting non-cash expenses and
Describe the Indirect and the Direct Method
changes in operating assets and
for the Operating Cash Flow section.
liabilities from accrual accounting to
cash basis accounting.
Direct Method: Shows actual gross cash
inflows from their sources derived and
cash outflows for each purpose. The
FASB prefers this method, but it is rarely
used because the organization is still
required to reconcile net income to
cash flows from operations.

13
FC.cf.fsa.FC004_1802

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10/22/2019 CMA Exam Review - Part 1

Cash paid for interest (when the indirect

Name the supplemental disclosures that are
method is used)
required for the statement of cash flows.
Cash paid for taxes (when the indirect
method is used)
Significant non-cash investing and
financing transactions. One example of
this would be the issuance of bonds for
the purchase of a building.

14
FC.cf.fsa.FC005_1802

Net income and other comprehensive

income from the income statement
appear in the statement of changes in
What are some ways that the financial equity.
statements articulate if they are properly Equity balances from the statement of
prepared? changes in equity appear in the equity
section of the balance sheet.
Net income, non-cash gains and losses,
beginning and ending cash, and
changes in the the balances of the
operating assets and liabilities flow to
the statement of cash flows when using
the indirect method.

15
FC.lta.FC004_1802

Step 1 Recoverability Test: Compare the

book value of an asset to the sum of the
future undiscounted cash flows. If the
What is the process for calculating
FCF exceed the BV, the asset is
impairment losses on long-term tangible
considered recoverable and no
assets?
impairment exists. Otherwise, an
impairment loss must be calculated and
recognized (Step 2).
Step 2 Impairment Loss: Management
must estimate the asset's fair value. A
loss will be recognized for the difference
between BV and FV.

16
FC.leases.FC004_1904

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10/22/2019 CMA Exam Review - Part 1

There is a transfer of ownership to the

lessee at the end of the lease term.
There is a bargain purchase option—an
option to purchase the asset
significantly below expected market
List the five criteria to determine if a lease value at the end of the lease term.
should be recorded as a finance lease. The lease term exceeds a major part
(75% guideline) of the remaining useful
Note: Only one of these criteria must be met life of the asset.
to classify a lease as finance. The present value of the minimum lease
payments exceeds substantially all
(90% guideline) of the fair value of the
asset.
The leased asset is so specialized that it
has no alternative future use to the
lessor.

17
FC.acc.inc.tax.FC002_1802

A temporary difference occurs when revenue

Describe what a temporary difference
or expenses are recorded in different periods
between tax accounting and financial
for book purposes compared to tax purposes.
accounting is and list some examples of
Some examples include: depreciation that is
temporary differences.
accelerated for tax purposes but straight-line
for GAAP, and estimated expenses not
deducted until paid for tax but accrued before
payment under GAAP.

18
FC.rev.rec.FC003_1802

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10/22/2019 CMA Exam Review - Part 1

When revenue is recognized over time,

revenue to date is calculated by
multiplying the total transaction price
by a ratio determined under an input or
output method.
Describe the differences between the input Under the input method, the
method and the output method of accounting organization recognizes revenue based
for revenue recognized over time. upon the ratio of the amount of effort or
cost expended to date divided by the
total amount of effort or cost required
to satisfy the performance obligation.
Under the output method, the
organization recognizes revenue based
upon the ratio of the results achieved to
date divided by the total output
required to satisfy the performance
obligation.

19
FC.inv.oe.FC005_1809

Generally, ownership above 50% is

presumed to create control.
The investor presents the financial
statements as though the parent and
the subsidiary are a single entity.
List some key characteristics of the
The subsidiary assets and liabilities are
consolidation method of accounting.
recognized at fair value at the time of
purchase in the consolidated financial
statements. Any resulting goodwill is
also included in the consolidated
financial statements.
Any amount of ownership that is not
held by the investor, the non-
controlling interest, will be reflected in
the equity section of the consolidated
balance sheet.

20
FC.soc.FC001_1802

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10/22/2019 CMA Exam Review - Part 1

Preferred Stock
Which accounts are typically presented in the
Common Stock
statement of changes in equity?
Additional Paid-in Capital
Treasury Stock
Retained Earnings
Accumulated Other Comprehensive
Income
Non-Controlling Interest

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