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Yaeger FAR > 9A: Video Cindy > Flashcards

9A: Video Cindy Flashcards

0
Q

What is topic 958 on the ASC?

A

Not for profit entities (in industry specific)

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1
Q

Organization of Codification 4

A

1 Topic
2 Subtopic
3 Section
4 Subsection

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2
Q

SFAC

Who are they issued by?

A

Statements for accounting financial concepts

Issued by FASB

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3
Q

What are the SFACS?

A

They are the rules for writing the rules

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4
Q

Codification is…

2) while SFAC is…

A

GAAP

2) not GAAP (not authoritative)

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5
Q

What were SFAC 1 and SFAC 2 superseded by?

A

SFAC 8

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6
Q

What is the chapter in SFAC 8 that replaces SFAC 1?

A

Chapter 1: The Objective of General-Purpose Financial Reporting

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7
Q

What is the chapter in SFAC 8 that replaces SFAC 2?

A

Chapter 3, Qualitative Characteristics of Useful Financial Information

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8
Q

The objective of general purpose financial reporting is to provide…

A

Financial info about the reporting entity that is useful to existing

And potential investors, lenders and other decision makers For providing resources to the entity

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9
Q

Not all information needs are met by…

A

Accounting and financial reporting

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10
Q

Objectives of general purpose financial reporting focus on…

A

Users of financial information

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11
Q

Who are the primary users of financial reporting? 3

A

1 investors
2 lenders
3 other creditors who must rely on other entities to provide info To them

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12
Q

Although management is also interested in financial information, management does not rely on general purpose reports because…

A

Information can be obtained internally

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13
Q

Who are not considered primary users of financial info according to SFAC 8? 2

A

1 Regulators

2 members of the general public (aren’t investors)

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14
Q

SFAC 8 Chapter 1, states that the objective of financial reporting is to provide: Information that is useful to…

A

Potential and existing investors, lenders, other creditors (Primary users)

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15
Q

SFAC 8 Chapter 1, states that the objective of financial reporting is to provide: Information about the reporting entity’s…

A

Economic resources and claims against the reporting entity

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16
Q

SFAC 8 Chapter 1, states that the objective of financial reporting is to provide: Changes in…

A

Economic resources and claims

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17
Q

SFAC 8 Chapter 1, states that the objective of financial reporting is to provide: Financial performance reflected by…

A

Accrual accounting

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18
Q

SFAC 8 Chapter 1, states that the objective of financial reporting is to provide: Financial performance reflected by…

A

Past cash flow

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19
Q

SFAC 8 Chapter 1, states that the objective of financial reporting is to provide: Changes in economic resources and claims…

A

Not resulting from financial performance

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20
Q

Primary users of accounting information

A

Existing and potential investors, lenders and other creditors

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21
Q

Hierarchy of accounting Qualities:

Pervasive Costraint

A

Benefits exceed costs

Ex. Its expensive to gather accounting info and produce financial
Statements

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22
Q

Relevance leads to…

A

Predictive value and confirmatory value

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23
Q

Faithful representation emphasizes the…

A

Substance of the transaction over the form

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24
Q

The bias on financial reporting is the bias of…

A

Conservatism (underlies all of US GAAP)

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25
Q

Financial information is relevant if it has…

A

Predictive value, confirmatory value or both

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26
Q

Predictive value

A

Requires info be used to predict future outcomes

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27
Q

Confirmatory value

A

Requires that info either confirms or changes prior evaluations

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28
Q

An item is material if…

A

Omitting it or misstating it could influence a user’s decision

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29
Q

Materiality threshold relates to the qualitative characteristic of…

A

Relevance

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30
Q

Information has the quality of faithful representation if the information depicts…

A

What it purports to represent

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31
Q

What 3 characteristics should faithful representation have?

A

1 complete

2 neutral

3 free from error

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32
Q

Completeness, requires that information is…

A

Presented or depicted in a way users can understand the item Being depicted

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33
Q

Neutrality requires that the item is depicted…

A

Without bias either favorably or unfavorably to users

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34
Q

Free from error

A

There are no errors or omissions in the information reported

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35
Q

4 enhancing qualitative characteristics of accounting information

A

1 comparability
2 verifiability
3 timeliness
4 understandability

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36
Q

Comparability

A

Enables users to identify and understand similarities and differences between items

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37
Q

Consistency

A

Use of same accounting methods in different periods

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38
Q

Consistency helps achieve comparability because it…

A

Helps the user make comparisons across different time periods

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39
Q

Verifiability

A

Different sources reach consensus or agreement on amount of representation of an item

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40
Q

Direct verification occurs through…

A

Direct observation

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41
Q

Indirect verification occurs by using techniques such as…2

A

1 checking formulas

2 recalculating amounts

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42
Q

Verifiability: although forward looking information can’t be verified, the underlying assumptions, methods, facts and circumstances can be…

A

Disclosed to help users determine if the info is useful

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43
Q

Timeliness

A

Requires info is available to a decision maker when it is useful To make the decision

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44
Q

Understandability

A

Classifying, characterizing and presenting info clearly and Concisely

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45
Q

Hierarchy of accounting Qualities:

Threshold for recognition

A

Materiality

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46
Q

Hierarchy of accounting Qualities:

Fundamental Qualitative characteristics 2

A

1 relevance (predictive value and confirmatory value)

2 faithful representation (complete, neutral, free from error)

47
Q

Hierarchy of accounting Qualities:

Enhancing qualitative characteristics 5

A 
1 comparability
2 consistency
3 verifiability
4 timeliness
5 understandability
48
Q

Substance over form

A

Substance = bought the asset (ex. capital lease)

Form = rental agreement (ex. Operating lease)

49
Q

Example of valuation account?

A

Discount on B/P is a contra valuation account of B/P

50
Q

FC

A

Foreign currency

51
Q

FC translation

A

Convert foreign currency financial statements to $’s

52
Q

Interim reporting

A

Less than 1 year

53
Q

Recognition vs. Reporting

A

Recognition: record on financial statements, write JEs

Reporting: includes footnotes with financial statements

54
Q

SFAC 6: Asset definition

A

Probable future economic benefits controlled by particular entity

As result of past transactions or events

55
Q

SFAC 6: 3 characteristics of assets

A

1 probable future benefit by contribution to future net cash inflows

2 entity can obtain and control access to benefit

3 transaction or event leading to control has already occurred

56
Q

SFAC 6:

Asset continues as an asset until…

A

Collected, transferred, used or destroyed

57
Q

SFAC 6: assets

Valuation accounts are part of…

A

Related assets

58
Q

SFAC 6:

Liabilities definition

A

Probable future sacrifices of economic benefits, arising from
Present obligations of particular entity

Result from past transactions/events

59
Q

SFAC 6:

3 characteristics of liabilities

A

1 legal, equitable or constructive duty to transfer assets in future

2 little or no discretion to avoid future sacrifice

3 transaction or event obligating enterprise has already occurred

60
Q

SFAC 6:

Liability remains a liability until…

A

Settled or discharged

61
Q

SFAC 6: liabilities

Valuation accounts are part of…

A

Related liability

62
Q

SFAC 6: Equity AKA Net Assets definition

A

Owner’s residual interest in the assets of entity that remains
After deducting liabilities

63
Q

SFAC 6: Business enterprises

3 characteristics of equity

A

1 source of distributions by enterprise to its owners
2 no unconditional right to receive future transfer of assets,
Depends on future profitability

3 inevitably affected by enterprise’s operation and circumstances
Affecting enterprise

64
Q

SFAC 6: business enterprises

Transactions or events that change owners’ equity include…5

A 
1 revenues and expenses
2 gains and losses
3 investments by owners
4 distributions to owners
5 changes within owners equity
65
Q

Changes within owners equity does not…

A

Change total amount

66
Q

SFAC 6: Revenues definition

A

Increases in assets or decreases in liabilities during period from
Delivering goods, rendering services

Or other activities constituting the entity’s major or central
Operations

67
Q

SFAC 6:

3 Characteristics of revenue

A

1 accomplishments of earning process

2 actual or expected cash inflows resulting from central operations

3 inflows reported gross

68
Q

SFAC 6:

Expenses definition

A

Decreases in assets or increases in liabilities

during period from delivery of goods, rendering of services or
Other activities constituting the entity’s major/central operations

69
Q

SFAC 6:

3 characteristics of expenses

A

1 sacrifices involved in carrying out earnings process

2 actual or expected cash outflows resulting from central operations

3 outflows reported gross

70
Q

SFAC 6:

Gains (losses) definition

A

Increases (decreases) in equity from peripheral transactions of entity excluding revenues (expenses)

and excluding investment/distribution of owners

71
Q

SFAC 6:

3 characteristics of gains and losses

A

1 result from peripheral transactions and circumstances that may
be beyond control
2 May be classified according to sources or as operating and
Non operating
3 change in equity reported net

72
Q

SFAC 6:

3 elements of financial statements exclusive to business enterprise

A

1 investments by owners

2 distributions to owners

3 comprehensive income

73
Q

SFAC 6:

investments by owners definition

A

Increases in net assets resulting from transfers by other entities
Of something of value to obtain ownership

74
Q

SFAC 6:

Distributions to owners definition

A

Decreases in net assets resulting transferring assets, rendering
Services, or incurring liabilities by the enterprise to owners

75
Q

SFAC 6:

Comprehensive income definition

A

Change in equity of entity during period from transactions
And other events of no owner sources

All equity amount changes except investments and distributions

76
Q

SFAC 6:

Term “comprehensive” income is used instead of net earnings (net income) because the board is…

A

Reserving “earnings” for component part of comprehensive

Income yet to be determined

77
Q

ASC definition of comprehensive income

A

Total of net income and other comprehensive income

78
Q

2 ASC approaches to presenting comprehensive income

A

1 present combined statement of income and comprehensive
Income with OCI at bottom

2 present second statement that directly follows income
Statement

79
Q

Old Hierarchy of GAAP:

What 4 pieces of literature had the highest level of authority?

A

1 FASB Statements of Accounting Standards and Interpretations
2 FASB Staff Postions
3 AICPA Research Bulletins
4 Accounting Principles Board Opinions not superseded by FASB

80
Q

Old Hierarchy of GAAP:

What 3 pieces of literature had the 2nd highest level of authority?

A

1 FASB Technical Bulletins

2 AICPA Industry Audit and Accounting Guides

3 Statements of position

81
Q

Old Hierarchy of GAAP:

What 3 pieces of literature had the 3rd highest level of authority?

A

1 AICPA Accounting Standards Executive Committee Practice
Bulletins cleared by FASB
2 consensus positions of FASB Emerging Issues Task Force (EITF)
3 topics discussed in appendix D of EITF Abstracts

82
Q

When is the statement of cashflows prepared?

2) what is the basis of accounting used in the statement of cashflows?

A

Last after other financial statements have been prepared

2) cash basis (not accrual)

83
Q

Closing journal entries close…

A

Temporary accounts (revenues, expenses, dividends)

84
Q

AFS

A

Available for sale (investments)

85
Q

In GAAP impairment losses can only be reversed in…

A

Held for sale investments

86
Q

SFAC 7: Using Cash Flow Information and Present Value in Accounting Measurements

Statement provides, a framework for using future cash flows as the basis of accounting measurements 3

A

1 at initial recognition

2 in fresh start measurements

3 for interest method of allocation

87
Q

SFAC 7 using future cash flows:

Fresh start measurements

A

Measurements in period following initial recognition that established
New carrying amount unrelated to previous amounts/accting conventions

88
Q

Interest method allocation, is a reporting convention that uses…

A

Present value techniques in absence of fresh start measurement

To compute changes in carrying amount of asset or liability
From 1 period to the next

89
Q

Interest method of allocation:

Like depreciation and amortization conventions, interest methods
Are grounded in…

A

Notion of historical cost

90
Q

General principle that governs use of present value?

2) what is not addressed by SFAS 7?

A

Guidance on measurement issues only

2) recognition issues aren’t addressed by SFAS 7

91
Q

SFAS 7 does not address when…

2) FASB expects to decide whether a particular situation requires fresh start measurement/accounting response on a…

A

Fresh start measurements are appropriate

2) project by project basis

92
Q

The techniques used to estimate future cash flows and interest rates will vary from one situation to another depending on…

A

Circumstances surrounding asset or liability in question

93
Q

Certain general principles govern any application of present value techniques measuring assets or liabilities:

Estimated cash flows and interest rates should reflect assumptions about future events and uncertainties that would be considered in deciding…

A

Whether to acquire an asset or group of assets in arm’s length
Transaction for cash

94
Q

Certain general principles govern any application of present value techniques measuring assets or liabilities:

Interest rates used to discount cash flows should reflect assumptions that are…

2) otherwise the effect of some assumptions will be…

A

Consistent with those inherent in estimated cash flows

2) double counted or ignored

95
Q

Certain general principles govern any application of present value techniques measuring assets or liabilities:

Estimated cashflows and interest rates should be free from both bias and factors…

A

Unrelated to the asset, liability or group of asset/liabilities

Ex. Deliberately understating estimated net cash flows to enhance apparent future profitability introduces bias into measurement

96
Q

Certain general principles govern any application of present value techniques measuring assets or liabilities:

Estimated cash flows or interest rates should reflect the…

A

Range of possible outcomes rather than single most likely min
Or max amount

97
Q

An accounting measurement that uses present value should reflect the…

2) otherwise items with different risks may appear…

A

Uncertainties inherent in estimated cash flows

2) similar

98
Q

Accounting applications of present value have typically used a…

A

Single set of estimated cash flows and single interest rate

99
Q

Which approach does SFAC 7 introduce?

A

Expected cash flow approach

100
Q

The expected cash flow approach focuses on…

A

Explicit assumptions about the range of possible estimated cash
Flows and their respective possibilities

101
Q

The traditional cash flow approach treats uncertainties…

A

Implicitly in selection of an interest rate

102
Q

By incorporating a range of possible outcomes, the expected cash flow approach accommodates the use of…

A

present value techniques when timing of cash flows is uncertain

103
Q

Multiple-deliverable revenue arrangements is another exception to…

A

The general revenue recognition principles

104
Q

Multiple deliverable revenue arrangements:If an entity has revenue generating activities to provide multiple products or services at different times, the arrangement should be evaluated to determine if…

A

There are separate units being delivered

105
Q

Multiple-deliverable revenue arrangements: 2 conditions must be met for an item to be considered a separate unit of accounting

A

1 delivered item has value on stand-alone basis

2 if arrangement includes right of return for delivered item, the Undelivered item must be substantially in control of vendor

106
Q

Multiple-deliverable revenue arrangements:
1 delivered item has value on stand-alone basis 2 if arrangement includes right of return for delivered item, the Undelivered item must be substantially in control of vendorIf both of the above requirements are met, the revenue arrangement is…

A

Divided into separate units based on relative selling prices

Revenue recognition criteria are then applied to each separate Unit

107
Q

Milestone method accounting may be used in accounting for…

A

Research and development arrangements where revenue (payments)To vendor

is contingent on achieving 1 or more substantive Milestones related to deliverables or units of accounting

108
Q

Substantive milestone

A

Uncertain event that can only be achieved based on vendors Performance and 3 additional criteria

109
Q

3 circumstances that must be met for vendor to recognize the contingent revenue in its entirety in the period in which the milestone was achieved

A

1 commensurate with vendors performance or enhancement of Value resulting from vendor’s performance
2 relates solely to past performance
3 it’s reasonably relative to all deliverables and payment terms

110
Q

Recognition of milestone payments, accounting policy should be disclosed in…

A

The notes of the financial statements

111
Q

Detail about the milestone method that should be disclosed: A description of…

A

The overall arrangement

112
Q

Detail about the milestone method that should be disclosed: A description of each milestone and…

A

Related contingent consideration

113
Q

Detail about the milestone method that should be disclosed: A determination of whether each milestone is…

A

Considered substantive

114
Q

Detail about the milestone method that should be disclosed: The factors considered in determining whether the milestones are…

A

Substantive

115
Q

Detail about the milestone method that should be disclosed: The amount of consideration recognized…

A

During the period for each milestone

116
Q

Recognition questions VS measurement issues

A

Measurement issues = how to measure

Recognition questions = when to measure

Yaeger FAR (59 decks)

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