CPA Canada Core 1 flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Revenue recognition five-step model

Identify contract with customer, identify performance obligations, determine transaction price, allocate transaction price to performance obligations, recognize revenue when or as each obligation is satisfied.

IFRS 16 lessee recognition

Lessee recognizes a right-of-use asset and lease liability at present value of lease payments for leases longer than 12 months unless the underlying asset is low value.

Impairment recoverable amount

Recoverable amount is the higher of fair value less costs of disposal and value in use; impairment loss arises when carrying amount exceeds recoverable amount.

IFRS 9 debt classification

Debt instruments are measured at amortized cost if held to collect and cash flows are solely payments of principal and interest; FVOCI if held to collect and sell; otherwise FVTPL.

Consolidation control criteria

Control exists when the investor has power over the investee, exposure to variable returns, and ability to use its power to affect those returns; consolidation is required.

IAS 21 translation method

Foreign operation assets and liabilities translate at closing rate, income and expenses at transaction-date or average rate, equity at historical rate; differences go to other comprehensive income.

IAS 37 provision criteria

Recognize a provision when a present obligation from a past event exists, an outflow of resources is probable, and a reliable estimate can be made; measure at best estimate.

Diluted EPS treasury stock method

For options and warrants, add incremental shares equal to shares assumed issued minus shares that could be repurchased at average market price with proceeds; include if dilutive.

COSO ERM components

Governance and culture; strategy and objective-setting; performance; review and revision; information, communication, and reporting. These five components support enterprise risk management.

COSO internal control components

Control environment, risk assessment, control activities, information and communication, and monitoring activities; 17 principles underpin the 2013 framework.

Porter's Five Forces

Threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, and intensity of rivalry; used to assess industry attractiveness.

SWOT and TOWS

SWOT identifies internal strengths and weaknesses and external opportunities and threats; TOWS pairs them into SO, ST, WO, and WT strategies.

Agency theory

Separation of ownership and control creates agency costs; governance mitigates through board independence, audit committees, performance-linked pay, and transparent disclosure.

Audit committee role

Oversees financial reporting, internal controls, external auditor independence and appointment, and whistleblower processes; members should be independent and financially literate.

Balanced scorecard perspectives

Financial, customer, internal business process, and learning and growth; translates strategy into objectives, measures, targets, and initiatives with leading and lagging indicators.

Stakeholder vs shareholder primacy

Shareholder primacy maximizes shareholder value; stakeholder model considers employees, customers, suppliers, communities, and environmental impacts in governance decisions.

Break-even point formula

Break-even units equal fixed costs divided by contribution margin per unit; break-even sales equal fixed costs divided by contribution margin ratio.

Relevant cost criteria

Relevant costs are future costs that differ between alternatives; exclude sunk costs and allocated fixed costs that do not change; include opportunity costs.

Absorption vs variable costing

Absorption costing includes fixed manufacturing overhead in product cost; variable costing expenses it as period cost; income difference equals inventory change times fixed overhead rate.

Material price variance

Material price variance equals actual quantity purchased times the difference between actual price and standard price; favorable when actual price is below standard.

Labour efficiency variance

Labour efficiency variance equals standard rate times the difference between actual hours and standard hours allowed for actual output; favorable when actual hours are lower.

Minimum transfer price

Minimum transfer price equals variable cost plus opportunity cost per unit when capacity is constrained; if idle capacity exists, minimum is variable cost.

Special order decision rule

Accept a special order if incremental revenue exceeds incremental costs and the order does not reduce regular sales or violate capacity constraints.

Production budget formula

Production units equal budgeted sales units plus desired ending finished goods inventory minus beginning finished goods inventory.

Residual income

Residual income equals operating income minus the required rate of return multiplied by average operating assets; it encourages investments earning above the required rate.

Audit risk model

Audit risk equals inherent risk times control risk times detection risk; detection risk is controlled by the nature, timing, and extent of substantive procedures.

Materiality determination

Overall materiality uses benchmarks such as 5% of profit before tax, 1% of revenue, or 1% of total assets; performance materiality is set lower to reduce aggregation risk.

Qualified audit opinion

Issued when misstatements are material but not pervasive, or sufficient appropriate evidence is unavailable but possible effects are material and not pervasive.

Adverse audit opinion

Issued when misstatements are both material and pervasive to the financial statements; the auditor concludes the statements are not fairly presented.

Fraud risk presumption

The auditor presumes a risk of fraud in revenue recognition and management override of controls; required procedures include journal entry testing and reviewing estimates.

Significant deficiency reporting

Significant deficiencies and material weaknesses in internal control are reported in writing to management and those charged with governance; material weaknesses also communicated to the board.

Ethical threats conceptual framework

Identify threats (self-interest, self-review, advocacy, familiarity, intimidation), evaluate their significance, and address them with safeguards or decline the engagement; document conclusions.