11/12/22 Accounting Standard, Financial Sta. Flashcards
Conceptual Frame work - Enhancing Quality 4 CVTU
Comparability - compare information
Verifiability - observers who are knowledgeable can reach consensus
Timeliness - info available at a time when is useful
Understandability - clear and concise
FASB Standard Settings process I D D I A I 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
SEC rulemaking steps Co Ru Ru
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
SEC three part mission Pr Mai Fac
Protect investors
Maintain fair, orderly and efficient markets
Facilitate capital formation
SEC was created by act
Act of 1934
Articulation is when
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).
FASB Statement 6
Revenues are:
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.
Accounting information Qualities - Fundamental qualities
the two fundamentals: Rele Fai
Relevance - information can make a difference in a decision
Faithful representation - items reported match what really occured
Accounting information Qualities - Enhancing qualities
Comparability
Verifiability
Timeliness
Understandability
Current assets typically are:
cash & cash equivalent
Receivables
Inventories
Marketable Securities
Prepaid Expenses
Other comprehensive income include Fo Un Pe Di Fai
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
Multi-step income statement format includes:
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
Operating income includes
sales revenue
cogs
selling, general and admin expense
no incluye:
tax expense
interes expense
Single step income statement includes income from continuing operations, true or false
True
Equity is calculated (formula) O N De P A
Opening balance
Net income/loss
Declared dividends
Paid-in capital (adition)
Accumulated other comprehensive income
Comprehensive income is
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
Accumulated Other comprehensive income is
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.
Cash Flow - indirect method requires
adjustment to net income for gains and loses
Cash Flow - Financing activities are cash flows from
non-current liabilities and equity
dividend to stockholders is financing activities
Cash Flow - Operating activities are cash flows from
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)
cash flow - direct method shows
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
cash flow - INdirect method shows
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
Qualitative charasteristic of faithful representation: Co Ne Fr
Complete,
Neutral, and
Free from error
Other comprehensive income
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
Non current assets are:
Property, plant & equipment
intangible assets
restricted cash
marketable securities with intent to hold for over one year
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
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.
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).
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. )
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
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.
Defined-contribution plan
An example of a defined contribution plan is a 401k.
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
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
The direct method always begins with
Revenues
The indirect method always begins with
Net income
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.
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
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
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
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
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
