CPALE cheat sheet

Under IFRS (IAS 2), inventory is measured at the lower of cost and net realizable value; NRV equals estimated selling price less costs to complete and costs to sell.

FIFO and weighted average are permitted cost formulas under IAS 2; LIFO is prohibited under IFRS but allowed under US GAAP.

Under IAS 16, PP&E is initially at cost; subsequent measurement uses the cost model or revaluation model, with revaluation surplus recognized in OCI.

Depreciation methods under IAS 16 include straight-line, diminishing balance, and units of production; the method must reflect the pattern of consumption of benefits.

Under IFRS 15, revenue is recognized in five steps: identify the contract, identify performance obligations, determine transaction price, allocate the price, and recognize revenue when obligations are satisfied.

Under IAS 37, a provision is recognized when there is a present obligation from a past event, a probable outflow, and a reliable estimate; a contingent liability is only disclosed.

Under IAS 36, an impairment loss is the excess of carrying amount over recoverable amount, where recoverable amount is the higher of fair value less costs of disposal and value in use.

Under IAS 12, deferred tax is computed using the temporary difference approach and the tax rates expected to apply when the asset is realized or the liability is settled.

Under IAS 7, interest paid and dividends paid may be classified as operating or financing cash flows; interest and dividends received may be operating or investing, with disclosure required.

Under IFRS 3, goodwill equals consideration transferred plus non-controlling interest plus previously held interest, minus the fair value of identifiable net assets acquired.

A bargain purchase gain arises when the fair value of identifiable net assets acquired exceeds the aggregate of consideration, NCI, and previously held interest; it is recognized in profit or loss.

Under IFRS 10, control exists when the investor has power over the investee, exposure to variable returns, and the ability to use power to affect those returns.

Under IAS 28, the equity method recognizes the investment at cost and adjusts it for the investor's share of post-acquisition profit or loss and OCI.

Under IAS 21, foreign currency monetary items are translated at the closing rate, non-monetary items at historical rate, and exchange differences are recognized in profit or loss.

Under IAS 21, the financial statements of a foreign operation are translated using the closing rate for assets and liabilities and the transaction-date rate for income and expenses.

Under IFRS 16, a lessee recognizes a right-of-use asset and a lease liability at the present value of lease payments; short-term and low-value leases are exempt.

Under IFRS 9, financial assets are classified at amortized cost, FVOCI, or FVTPL based on the business model and contractual cash flow characteristics.

In a partnership, the admission of a new partner by purchase of an existing interest transfers capital between partners without changing total partnership capital; admission by investment increases total capital.

Under ISA 200, reasonable assurance is a high but not absolute level of assurance; inherent limitations of an audit include the use of judgment and sampling.

The audit risk model is AR = IR x CR x DR; detection risk is inversely related to the assessed risks of material misstatement.

Under ISA 315, the auditor identifies and assesses risks of material misstatement at the financial statement level and at the assertion level.

Assertions about classes of transactions and events include occurrence, completeness, accuracy, cut-off, classification, and presentation.

Under ISA 500, audit evidence must be sufficient and appropriate; appropriateness relates to relevance and reliability, and external evidence is generally more reliable than internal.

Under ISA 700, the auditor's report includes an opinion section, a basis for opinion, key audit matters (for listed entities), and responsibilities of management and the auditor.

Under ISA 705, a modified opinion is either qualified, adverse, or a disclaimer; the choice depends on the nature of the matter and its pervasiveness.

Under ISA 240, the auditor is responsible for obtaining reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error.

Independence under the IESBA Code requires both independence of mind and independence in appearance; a self-interest, self-review, or advocacy threat may impair independence.

Under ISA 530, sampling risk is the risk that the auditor's conclusion based on a sample differs from the conclusion based on the whole population; non-sampling risk arises from human error.

Attribute sampling is used for tests of controls; variables sampling and monetary unit sampling are used for substantive tests of details.

Under ISA 505, external confirmations are more reliable when received directly by the auditor, and non-responses require alternative procedures.

Under ISA 501, the auditor attends physical inventory counts when inventory is material and obtains evidence about litigation and claims through inquiry and review of minutes.

Under ISA 560, subsequent events are those occurring between the date of the financial statements and the date of the auditor's report; the auditor has no obligation to perform procedures after that date.

Under ISA 570, going concern assumes the entity will continue in operation for at least twelve months; if material uncertainty exists, the auditor includes an emphasis of matter or a modified opinion.

Under ISA 620, the auditor may use the work of an auditor's expert but remains responsible for the audit opinion and must evaluate the expert's competence and objectivity.

Under ISA 550, related party transactions require the auditor to identify relationships and transactions and to assess whether they are properly disclosed.

Under ISA 265, significant deficiencies in internal control are communicated in writing to those charged with governance on a timely basis.

Under the Philippine Tax Code, individual income tax rates are graduated from 0% to 35% on net taxable income, with the first P250,000 exempt for pure compensation earners under TRAIN.

Resident citizens are taxed on worldwide income; non-resident citizens and resident aliens are taxed on income from sources within the Philippines.

The corporate income tax rate is 25% for domestic corporations, with a reduced rate of 20% for qualified small corporations with net taxable income not exceeding P5,000,000 and total assets not exceeding P100,000,000.

Value-added tax in the Philippines is 12% on the sale of goods, properties, and services; certain transactions are zero-rated or exempt.

The VAT threshold for mandatory registration is P3,000,000 in gross sales over a 12-month period; below the threshold, the 8% optional flat tax or the graduated rates may apply.

The estate tax rate in the Philippines is 6% of the net taxable estate; the donor's tax rate is also 6% on net gifts.

The documentary stamp tax on the sale of real property is P15 for every P1,000 of the consideration or fair market value, whichever is higher.

The capital gains tax on the sale of real property classified as a capital asset is 6% of the gross selling price or fair market value, whichever is higher.

The local business tax is imposed by local government units based on gross sales or receipts, with graduated rates depending on the type of business.

Under the Revised Corporation Code (RA 11232), a corporation may be formed by at least one natural person, and a one-person corporation is expressly permitted.

The minimum authorized capital stock for stock corporations is P50,000, except when a higher amount is required by special law; at least 25% must be subscribed and 25% of the subscription paid.

Under the Securities Regulation Code (RA 8799), securities must be registered with the SEC before they are offered or sold to the public, unless an exemption applies.

Under the Data Privacy Act (RA 10173), personal information must be collected for a declared and legitimate purpose, processed fairly and lawfully, and protected by appropriate security measures.

Under the E-Commerce Act (RA 8792), electronic documents and electronic signatures have the same legal effect as written documents and handwritten signatures.

Under the Anti-Money Laundering Act (RA 9160), covered institutions must report covered transactions and suspicious transactions to the Anti-Money Laundering Council.

Under the Foreign Investments Act, the Foreign Investment Negative List specifies industries where foreign ownership is limited or prohibited.

Under the Labor Code, an employee may be dismissed for just cause (serious misconduct, willful disobedience, gross negligence) or authorized cause (retrenchment, redundancy, closure).

Under the Consumer Act (RA 7394), consumers have the right to safety, information, choice, representation, redress, and education.

Under the Civil Code, an obligation may arise from law, contract, quasi-contract, delict, or quasi-delict; a contract requires consent, object, and cause.

Under the Civil Code, a sale is a contract where one party obligates himself to deliver a thing and the other to pay a price; the price must be certain and in money.

Under the Negotiable Instruments Law, a negotiable instrument must be in writing, signed by the maker or drawer, contain an unconditional promise or order to pay a sum certain in money, be payable on demand or at a fixed time, and be payable to order or bearer.

Under the NIL, a holder in due course takes the instrument for value, in good faith, and without notice of any defect; he takes free from personal defenses but not real defenses.

Under the Insurance Code, insurable interest in life insurance must exist at the time the policy is taken; in property insurance, it must exist at the time of loss.

Under the Insurance Code, a contract of insurance requires an insured, an insurer, a premium, and a subject matter; concealment or misrepresentation may avoid the policy.

Under the Revised Corporation Code, the board of directors must be elected by the stockholders and must hold office for one year; the board exercises corporate powers.

Under the Revised Corporation Code, a derivative suit may be brought by a stockholder on behalf of the corporation when the board refuses to file an action.

Under the Truth in Lending Act, creditors must disclose finance charges and the effective cost of credit in writing before a transaction is consummated.

Cost-volume-profit analysis uses the contribution margin ratio: contribution margin divided by sales; the break-even point in units equals fixed costs divided by contribution margin per unit.

The margin of safety equals actual or budgeted sales minus break-even sales, expressed in pesos or as a percentage of actual sales.

The degree of operating leverage equals contribution margin divided by operating income; it measures the sensitivity of operating income to changes in sales.

Under variable costing, product cost includes direct materials, direct labor, and variable overhead; fixed overhead is treated as a period cost.

Under absorption costing, product cost includes direct materials, direct labor, variable overhead, and fixed overhead; it is required for external reporting.

The high-low method estimates fixed and variable costs using the highest and lowest activity levels; variable cost per unit equals the change in cost divided by the change in activity.

A standard cost variance for materials is price variance (actual quantity times the difference between actual and standard price) plus quantity variance.

The net present value of a project equals the present value of cash inflows minus the present value of cash outflows; a positive NPV indicates acceptance.

The internal rate of return is the discount rate at which NPV equals zero; a project is acceptable when the IRR exceeds the cost of capital.

The law of demand states that, all else equal, quantity demanded falls as price rises; the law of supply states that quantity supplied rises as price rises.

Price elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price; demand is elastic when the absolute value exceeds 1.

Gross domestic product measures the market value of all final goods and services produced within a country in a given period.

Nominal GDP is measured at current prices; real GDP is measured at constant prices and adjusts for inflation using the GDP deflator.

The consumer price index measures the change in the price of a fixed basket of goods and services; inflation is the percentage change in the CPI.

The money multiplier equals 1 divided by the reserve requirement ratio; an increase in the reserve requirement reduces the money supply.

In the Keynesian model, equilibrium output occurs where aggregate expenditure equals aggregate output; the multiplier equals 1 divided by (1 minus the marginal propensity to consume).

A tariff is a tax on imports; a quota is a quantitative limit on imports; both reduce the volume of trade and raise domestic prices.

The balance of payments records a country's transactions with the rest of the world and consists of the current account, the capital account, and the financial account.