#1 Flashcards
Underlying concept of governing the recording of gain contingencies?
a. conservatism
b. reliability
c. relevance
d. consistency
Contingent upon something else means it’s uncertain, so we need to be conservative. Make sure it’s realized before recognizing it. So conservatism. Reliability, relevance, consistency, they all apply equally to all accounting information, not just gain contingencies.
According to the FASB conceptual framework, which of the following attributes would not be used to measure inventory?
a. Replacement cost
b. Net realizable value
c. Historical cost
d. Present value of future cash flows
Inventory is a short term asset, so it can be measured by replacement cost, net realizable value, and historical cost. Present value of future cash flows is used to value long-term receivables and payables, so inventory doesn’t apply.
Ingredients of faithful representation
Faithful representation means no omission, no bias, and no errors. So they are completeness, neutrality, and freedom from error
Ingredients of relevance
Relevance means the data predictive value, confirming value, materiality
Realization Principle is which:
a. Product unit costs were assigned to cost of goods sold when the units were sold
b. depreciated equipment was sold in exchange for a note receivable
Revenues and gains are realized when assets are sold or exchanged for cash, NOT assigned. Assigned is matching principle.
Net realizable value
balance of accounts receivable minus allowance for noncollectable accounts
Appropriate measurement basis for equipment if the company is ending operations and quickly (3 months) dispose of its assets
Net realizable value.
Appropriate measurement basis for equipment if the company is continuing operations
Historical cost
Enhancing qualitative characteristics according to the conceptual framework
Timeliness, understandability, comparability, and verifiability
The single source of U.S. GAAP
FASB Accounting Standard Codification.
Rule of conservatism
revenues and gains should be recognized when earnings process is complete. Expenses and loss are expensed immediately.
What is the name of the reporting concept for reporting in financial statements at amount of cash or its equivalent that would have to be paid if the same or equivalent assets were acquired currently.
Replacement cost, becuase it’s cost of ACQUIRING it. Current market value is the value of selling it.
According to the IASB conceptual framework, what are the two underlying assumption of financial statement preparation and presentation?
Going concern and accrual accounting.
Operating procedure for issuing a new international financial reporting standard
An exposure draft is issued after approval by at least nine members of the iASB
Documents typically issued as part of the due-process activities of the Financial Accounting Standards Board (FASB) for amending the FASB accounting standards codification?
Proposed accounting standards update
