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11/12/22 Accounting Standard, Financial Sta. Flashcards

1
Q

Conceptual Frame work - Enhancing Quality 4 CVTU

A

Comparability - compare information

Verifiability - observers who are knowledgeable can reach consensus

Timeliness - info available at a time when is useful

Understandability - clear and concise

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2
Q

FASB Standard Settings process I D D I A I A

A

identifies financial issues
decides if add the Project
deliberates at public
issue a discusion draft
analyzes comment & letters
issues an ASU - Accounting Standards Update
amendments incorporation

The Board identifies financial reporting issues based on request or recommendations by stakeholders or others

The board decides where to add the project to the technical agenda based on staff-prepared analysis of issues

The board deliberates at public meetings and may issue a discussion paper to obtain input

The board issue a discusion exposure draft to solicit stakeholder input and may hold round table meetings

The staff analyzes comment letters, public roundtable discussions, and all other information obtained through process activities. The Board redeliberates the proposal, carefully considering input received, at one or more public meetings.

The board issues an ASU describing the amendments to the accounting standards codification

The amendments are incorporated into the codification

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3
Q

SEC rulemaking steps Co Ru Ru

A

Concept Release - issued describing the area of interest and commission’s concern and identify different approaches to address the problem.

Rule Proposal - commission publishes a detailed formal rule proposal from public comment - 30 to 90 days to review

Rule Adoption - commission considers what they have learned

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4
Q

SEC three part mission Pr Mai Fac

A

Protect investors

Maintain fair, orderly and efficient markets

Facilitate capital formation

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5
Q

SEC was created by act

A

Act of 1934

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6
Q

Articulation is when

A

Financial Statement are dependent on each other

A change in the value of an asset cannot occur without a corresponding decrease (increase) in another asset or a corresponding increase (decrease) in a liability or equity (net assets).

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7
Q

FASB Statement 6
Revenues are:

A

Inflows of assets or settlements of its liabilities

(or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations.

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8
Q

Accounting information Qualities - Fundamental qualities

the two fundamentals: Rele Fai

A

Relevance - information can make a difference in a decision

Faithful representation - items reported match what really occured

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9
Q

Accounting information Qualities - Enhancing qualities

A

Comparability
Verifiability
Timeliness
Understandability

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10
Q

Current assets typically are:

A

cash & cash equivalent

Receivables

Inventories

Marketable Securities

Prepaid Expenses

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11
Q

Other comprehensive income include Fo Un Pe Di Fai

A

Foreign currency translation

Unrealized holding gains and losses available for sales debt security

pensions and other postretirement benefits gains and losses associated with

Dividends paid to shareholders

Fair value gain on cash flow hedges

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12
Q

Multi-step income statement format includes:

A

Sales

COGS

Gross profit

Selling, general & Admin Expenses

Operating Income

Non operating gain and losses

income from continued operations
**Interest and dividend income
**Interest Expense
***tax expense

gain/loss from discontinued operations

Net income

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13
Q

Operating income includes

A

sales revenue
cogs
selling, general and admin expense

no incluye:
tax expense
interes expense

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14
Q

Single step income statement includes income from continuing operations, true or false

A

True

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15
Q

Equity is calculated (formula) O N De P A

A

Opening balance
Net income/loss
Declared dividends
Paid-in capital (adition)
Accumulated other comprehensive income

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16
Q

Comprehensive income is

A

everything on the income statements plus things that do not appear on the income statement

Net income plus unrealized holding gain and losses (for example)
Recognition of prior service cost due to pension plan amendment

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17
Q

Accumulated Other comprehensive income is

A

3 of the most common sources are:

OCI reporting
foreign currency transaction of sta of a subsidiary in another country
unrealized gains and losses in fair value of investments available for sale debt securities
changes in the projected benefit obligation of defined benefit plan

However, the reporting of an investment classified as a trading security only affects net income and does not impact other comprehensive income.

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18
Q

Cash Flow - indirect method requires

A

adjustment to net income for gains and loses

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19
Q

Cash Flow - Financing activities are cash flows from

A

non-current liabilities and equity

dividend to stockholders is financing activities

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20
Q

Cash Flow - Operating activities are cash flows from

A

major and ongoing activities

purchase, sale, and maturity of trading securities will usually be classified as operating activities (bought and sold frequently to generate quick profit)

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21
Q

cash flow - direct method shows

A

shows each classification of items that affected the cash flow

essentially adjusts each line of the income statement to make it a cash number instead of a accrual number

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22
Q

cash flow - INdirect method shows

A

adjustments from net income for changes in balance sheet and noncash operating activities to arrive at cash flow from operating activities.

Begins with net income and adjusts the net income figure to remove any income or expense items that are investing or financing activities and present the cash flows form op instead of the accrual basis net income

two items should be disclosed:
Cash paid for interest
Cash paid for income taxes

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23
Q

Qualitative charasteristic of faithful representation: Co Ne Fr

A

Complete,
Neutral, and
Free from error

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24
Q

Other comprehensive income

A

interest income is included in Net Income but NOT in comprehensive income

Unrealized gains on debt securities available for sale and prior service pension benefit

Foreign currency translation adjustments

Unrealized holding gains and losses on available-for-sale debt securities

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25
Non current assets are:
Property, plant & equipment intangible assets restricted cash marketable securities with intent to hold for over one year
26
Form 8-K is used
Form 8-K is used by U.S. filers to report material events that are not reported in other Forms. within 4 business days
27
Form 10-Q must be filed with the SEC
within 40 days after the end of the first three fiscal quarters for both large accelerated filers and accelerated filers, and within 45 days for all others.
28
A large accelerated filer has a market value of common equity of
of $700 million or more. A large accelerated filer must file a 10-K with the SEC within 60 days after the end of the fiscal year. 75 days after the end of the fiscal year for accelerated filers (those with a market value of common equity of at least $75 million but less than $700 million).
29
Form 10-K is must be filed every
90 days after end of fiscal year (75 million or less) 60 days after the end of the fiscal year. A large accelerated filer (of $700 million or more. )
30
income statement order
revenue -cogs =gross profit -operating expenses =operating income plus interest income = income from continuing operations before taxes less income tax expense =income from continuing operations Creo que Other comprehensive income Total comprehensive income
31
statement of net assets available for benefits of the plan shall present amounts for all of the following:
Total assets Total liabilities Net assets reflecting all investments at fair value Net assets available for benefits.
32
Defined-contribution plan
An example of a defined contribution plan is a 401k.
33
Defined benefit plan
Employees receive an amount based on a plan formula age, earnings, and years of service. The financial statement of a defined benefit plan must contain information on the actuarial present value
34
CashFlow Direct Method - formula for Cash Paid to Suppliers is
Cost of Goods Sold + Beginning Accounts Payable – Ending Accounts Payable – Beginning Inventory + Ending Inventory – Beginning Prepaid Expenses + Ending Prepaid Expenses
35
The direct method always begins with
Revenues
36
The indirect method always begins with
Net income
37
how is controlling interest determined?
A VARIABLE interest entity (VIE) is a legal entity that is financially controlled by one or more entities that do not hold a majority voting interest es una entidad legal que está controlada financieramente por una o más entidades que no tienen una participación mayoritaria con derecho a voto. Under the VOTING interest entity model, ownership by one reporting entity, directly or indirectly, of more than 50% of the outstanding voting shares of an acquiree is required for control. se requiere la propiedad por parte de una entidad que reporta, directa o indirectamente, de más del 50% de las acciones con derecho a voto en circulación de una adquirida para el control.
38
Inventory - LIFO or Retail - Impairment loss Formula
NRV (selling price less cost to sell) NRV less normal profit margins Designated market value = middle Previous 2 and Replace cost Determine lower of Cost or Designated MV
39
Inventory - periodic system - identification of the cost
Identification of the cost of the items retained and the items sold is not made until end of the year
40
Inventory measured using LIFO should be evaluated at the: Pe
at the period end and recorded at the lower of cost or market Market value used is Designated market value
41
Inventory - Designated market value is the middle value of Ne Cu Ne
Net realizable value NRV Current replacement cost Net relizable value minus normal profit margin
42
Inventory FIFO - TABLE FORMAT steps 1- I CO S CO 2- SE P LE CO S 3- LO CO o NR 4- Q x LO CO o NR
Step 1) Inventory, COst, Sell price & COst to sell columns Step 2) SElling Price LEss COst to Sell (Net Relizable Value ) column Step 3) LOwer of COst or NRV column Step 4) QTY & Qty X Lower of cost or NRV
43
Inventory method using FIFO should be recorded at the Lo or Ne
at Lower of cost or Net Realizable Value
44
Net realizable Value is defined as Es
Estimated selling price in the ordinary course of business MINUS reasonably predictable cost of completition, disposal, and transportation.
45
COGS formula is:
Beg Inventory + Purchases - Ending Inventory
46
Lower of Cost or market (LCM) method - 3 components to analyze
Determine de middle of this 3 NRV (Net Realizable Value) NRV less Normal Profit Replacement Cost
47
Single Step income statement has only two grouping. They are: R E
Revenues Expenses
48
Accrual to Cash Conversion Formula
Add: Increases in Liab. Decrease in Assets Less: Decrease in Liab. INcrease in Assets
49
Asset impairment - Two step process - Definition
NO impairment if the total amount of expected future cash flow is Grater than BV Expected future cash flow is lower than BV, BV is reduced to the Fair Value and a loss is recognized
50
For buildings, capitalizable cost include: Pu Pe Ta In Ma La Ov
Purchase price Permits Taxes assumed insurance during constructions materials Labor overhead of construction
51
Exchange with NO commercial substance, New asset is recorded at
Book Value of previously owned asset is retained.
52
FASB Statement 6 Expenses are:
Outflows Using up of assets or Incurrences of liabilities Or a combination of both From: Delivering or producing goods Rendering services, or carrying out other activities that constitute the entity’s ongoing major or central operations.
53
Accounting information Qualities - Qualitative characteristics Relevance consist in: Pre Con Mat
Predictive Value - valuable input for an investor Confirmatory- confirms or changes previous expectation Material - misstatements can make a difference
54
Accounting information Qualities - Qualitative characteristics Faithful representation consist in: Co Neu Fr
complete - include all necesarry Neutral - is unbiased. Cannot leave out info like lawsuits Free of material errors- is not misleading
55
Form 10-K The annual report must be audited by
An independent auditor registered with the PCAOB
56
Discrete Presentation is
Aceptable method to present component units in its combined financial statements If a city government is the primary reporting entity, which of the following is an acceptable method to present component units in its combined financial statements?
57
Govermental Accounting - Government funds types are 5 Ge Sp Ca De Pe
General Fund Special Revenue Fund Capital Projects Fund Debt Service Fund Permanent Fund
58
Government Fund - The General Fund accounts for
All ongoing public service activities that are NOT in other fund
59
Government Fund - Special Revenue fund account for
Assets legaly restricted for operating purposes
60
Government Fund - Capital project funds account for
Acquiring or constructing facilities (schools, bridges)
61
Government Fund - Debt Service funds record
Record financial resourses to pay LT liabilities and related interest
62
Government Fund - Permanent Funds accounts for
Assets contributed by external donor with stipulation that principal can NOT be used
63
Encumbrances would appear in
Government Funds
64
Governmental Accounting categories are: Go Prp Fid
Government Funds Proprietary Funds Fiduciary Funds Government funds are:General Fund, Special Revenue Fund, Capital Projects Fund, Debt Service Fund, and Permanent Trust Fund Proprietary Funds are: Enterprise Funds and Internal Service Funds Fiduciary Funds are: Pension Trust Fund, Investment Trust Fund, Private-Purpose Trust Fund, and Custodial Fund
65
Proprietary funds are: En In
Enterprise Funds Internal Service Funds
66
Fiduciary Funds are: Pe In Tr Pr Cu
Pension Trust Fund Investment Trust Fund Private-Purpose Trust Fund Custodial Fund
67
Verifiability example
Observers who are knowledgeable can reach consensus
68
What is the objective of Present Value? Est
Estimate Fair Value
69
Comprehensive income - Interest rate swap changes - INEFFECTIVE
if INeffective then its included in Net Income and NOT in other comprehensive income
70
Accumulated Other comprehensive income is part of what financial statement
Statement of financial position (balance sheet) is part of the equity
71
Operating activities per GAAP that feels like investment are
Dividend Revenue Interest revenue interest expense
72
Also considered as Cash Equivalent Mo
Money Market accounts Money market funds are mutual funds that invest in short-term (up to one year) debt obligations.
73
Intangible assets - Marketing related intangible assets include: Tr Tr Lo In No
Trademarks Tradenames Logotypes Internet domain names Non-compete agreements
74
Intangible assets - Contract related intangible assets include: Fr Li Se
Franchises Licensing agreements Service contracts
75
Intangible assets - Limited life intangible asset is deemed to be impared if
undiscounted sum of future cash flows from the asset's expected use is less than the book value. If the asset is determined to be impaired, it should be written down to its fair value
76
Manufacturing inventory includes:
Direct Materials Direct Labor Manufacturing Overhead
77
Manufacturing Overhead
Indirect materials Indirect labor Insurance on manufacturing
78
To calculate the amortization of a held-to-maturity bond, the effective interest method is:
[Carrying value of bond at beginning of period × effective interest rate (or market rate) ] – [ Face value of bond × stated (contractual) interest rate ].
79
statement of activities revenues should be broken down into
program revenues and general revenues.
80
The introductory section of the comprehensive annual financial report (CAFR) includes
the table of contents, letter(s) of transmittal (similar to a cover letter) , and other material deemed appropriate by management.
81
Inventory weighted average
Los meses desde que se hace un pago entre los meses desde que comienza el proyecto mulplicado por la cantidad pagada ej 6/9 * 30,000
82
Debt securities investments are classified into three different categories:
Held-to-Maturity Available-for-Sale Trading
83
Equity securities investments are classified as follows
The investor does not have significant influence, usually indicated by up to 20% ownership of the voting stock: The investor has significant influence, usually indicated by between 20% and 50% ownership of the voting stock The investor controls the other entity, usually when the investor owns greater than 50% of the voting stock of the investee
84
types of fiduciary funds that exist within a state or local government
Pension trust funds ----account for monies held in connection with employee retirement plans. Custodial funds ------hold money, usually for a short period of time, for a specified outside party Investment trust funds ------hold monies to be invested for other governments in hopes of getting higher returns. Private-purpose funds -------hold money in an agency capacity, often for an indefinite period of time, for an external party
85
stock options to employees that are classified as compensatory The FASB has required any computer option pricing model to take into account the following six variables:
exercise price of the stock expected term of the option current market price of the stock expected dividends expected risk-free rate of return expected volatility of the stock.
86
Deferred tax liability-noncurrent
When the book income is higher than taxable income, a deferred tax liability is created. The expense is recorded but the taxes will not be paid until future years.
87
deferred tax asset.
When book income is lower than taxable income, more taxes are paid in the current year compared to the expense recorded. This will generate a deferred tax asset.
88
Non for profit. Revenue include:
Interest Income, Member Dues, and Fees for services provided
89
Non for profit. Public support include:
Contributions, Pledges and Gifts, and Special Events
90
LIFO - Retail method - lower of cost or market. Formula
In applying the LCM value to inventory, replacement cost is used unless it is above a ceiling value (sales price less estimated cost to sell) or below a floor value (sales price less estimated cost to sell and a normal profit).
91
Verifyability
Observers can find consensus
92
AAE = interest to capitalize=
(Total expenditures at beg of period + end of period) /2 AAE x interest rate
93
In Translation all assets & liabilities are reported at what exchange rate:
Current
94
In Remeasurement what is reported at current exchange rate?
Only monetary assets and liabilities (as well as any account reported at fair value)
95
Financial accounts are the following:
cash receivables payables accounts recorded at fair value
96
Special revenue funds account for
assets held by the government that have been legally restricted for operating purposes.
97
Capital projects funds account for
the costs incurred in acquiring or constructing government facilities such as bridges and high schools.
98
Permanent funds account for
assets contributed to the government by an external donor with the stipulation that the principal cannot be spent but any income can be used by the government.
99
The internal service funds account for
any services offered within a government but only for a user charge.
100
The presence of this user charge means that the activity must be included within
the proprietary funds rather than within the governmental funds.
101
Which funds are included within the governmental funds in the internal recording of a state or local government?
Special revenue funds Capital projects funds Permanent funds
102
The governmental funds report
public service activities such as the police department and focus on current financial resources the modified accrual method is used
103
The reporting for proprietary funds and the fiduciary funds tend to resemble
a for-profit enterprise and, consequently, recognition is based on accrual accounting.
104
Governmental Accounting has three categories of funds
Government Fund Propietary Funds Fiduciary Finds
105
Government Funds -
General Fund, Special Revenue Fund, Capital Projects Fund, Debt Service Fund, and Permanent Trust Fund
106
Proprietary Funds
Enterprise Funds and Internal Service Funds
107
Fiduciary Funds
Pension Trust Fund, Investment Trust Fund, Private-Purpose Trust Fund, and Custodial Fund

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