Research & Evidence-Based Practice Flashcards
7 cards from real Certified Public Accountant practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Research & Evidence-Based Practice flashcards as text
A CPA is determining whether a variable interest entity (VIE) must be consolidated. Under ASC 810, which party consolidates a VIE?
Answer: The primary beneficiary, who has the power to direct VIE activities and the obligation to absorb losses or right to receive benefits
ASC 810 requires the primary beneficiary — the entity with both the power to direct the VIE's most significant activities and the obligation/right to receive significant losses/benefits — to consolidate the VIE.
When performing tax research, what distinguishes a Treasury Regulation from an IRS Revenue Ruling in terms of authority?
Answer: Treasury Regulations are issued under specific Congressional authorization and generally carry greater weight
Treasury Regulations, especially legislative regulations issued under specific Code authority, generally carry greater legal weight than Revenue Rulings, which represent the IRS's position on a fact pattern but do not have the force of law.
A CPA is researching the appropriate hedge accounting model for a client's interest rate swap. Which ASC topic provides this guidance?
Answer: ASC 815
ASC 815 (Derivatives and Hedging) provides the comprehensive framework for derivative recognition, measurement, and hedge accounting qualification criteria.
Under the AICPA's SSVS No. 1 (now VS Section 100), a CPA performing a valuation engagement must issue which type of report for a conclusion of value?
Answer: A detailed report, a summary report, or a calculation report depending on engagement terms
VS Section 100 allows CPAs to perform valuation engagements resulting in a conclusion of value reported in a detailed or summary report, or a calculation engagement with a calculation report.
A CPA discovers that a client's prior-period financial statements contain a material error. Under ASC 250, how should this be corrected?
Answer: By restating the comparative prior-period financial statements and disclosing the error
ASC 250-10 requires correction of material prior-period errors by restating previously issued financial statements and providing appropriate disclosures.
Which of the following best describes a 'Private Letter Ruling' (PLR) in the context of tax research?
Answer: An IRS written determination that applies only to the taxpayer who requested it and cannot be cited as precedent by others
A PLR is issued by the IRS in response to a specific taxpayer's request and is binding only on that taxpayer for the transaction described; it cannot be used as precedent by other taxpayers.
A CPA is evaluating whether a lease qualifies as a finance lease under ASC 842. Which criterion, if met, would automatically classify it as a finance lease?
Answer: The present value of lease payments equals substantially all of the fair value of the underlying asset
Under ASC 842, if the present value of lease payments and any residual value guaranteed equals substantially all of the underlying asset's fair value, the lease is classified as a finance lease.