All Units Flashcards
What are the components of each qualitative characteristics and their enhancing characteristics?
- Relevance &
a. Predictive Value
b. Confirmatory Value
c. Materiality - Faithful Representation
a. Completeness
b. Neutrality
c. Freedom from error
Enhancing Chacteristics
a. Comparability
b. Verifiability
c. Timeliness
d. Understandability
Explain all the S regulations
S-X: Interim & annual financial statement presentation including notes
S-K: Disclosure standards. - Also covers certain aspects of corporate annual reports
S-B: Small business issues and non-accelerated filers.
S-T: Electronic Documents
What are FRRs and SABs?
FRR: Financial Reporting Releases - Announce accounting and auditing matters of general interest (from SEC)
SAB: Staff Accounting Bulletins - are issues as interpretations to be followed by SEC staff in administering disclosure requirements
What are the elements of financial statements?
- Statement of financial Position
a. Investments by Owners
b. Distributions to owners - Income Statement
a. Revenues
b. Gains
c. Expenses
d. Losses
NB: Notes are not an element of the financial statements
When do all three categories of filers, file the 10-K and 10-Q
700mil Large Acc Filer: 60 & 40
Acc Filer 75mil to 700mil: 75 & 40
Non-accel: <75mil: 90 & 45
Which of the following items is not classified as other comprehensive income (OCI)?
A. Foreign currency translation adjustments.
B. Prior service cost adjustment resulting from amendment of a defined benefit pension plan.
C. Unrealized gains for the year on available-for-sale marketable debt securities.
D. Infrequent in occurrence gains from extinguishment of debt.
Answer (D) is correct.
The components of comprehensive income are net income and other comprehensive income (OCI). Under existing accounting standards, OCI includes, among others, (1) unrealized gains and losses on investments in debt securities classified as available-for-sale securities (except those that are hedged items in a fair value hedge); (2) gains and losses on derivatives designated, qualifying, and effective as cash flow hedges; (3) certain amounts associated with recognition of the funded status of postretirement defined benefit plans; (4) certain foreign currency items, including foreign currency translation adjustments; and (5) changes in fair value attributable to instrument-specific credit risk of liabilities for which the fair value option is elected. But gains from extinguishment of debt are included in earnings.
A newly acquired plant asset is to be depreciated over its useful life. What is the basis for this accounting method? A. Materiality. B. Going-concern assumption. C. Economic-entity assumption. D. Monetary-unit assumption.
Answer (B) is correct.
A basic feature of financial accounting is that the business entity is assumed to be a going concern in the absence of evidence to the contrary. The going-concern concept is based on the empirical observation that many entities have indefinite lives. The reporting entity is assumed to have a life long enough to fulfill its objectives and commitments and therefore to depreciate wasting assets over their useful lives.
In Dart Co.’s Year 2 single-step income statement, as prepared by Dart’s controller, the section titled “Revenues” consisted of the following: Sales $250,000 Purchase discounts 3,000 Recovery of accounts written off 10,000 Total revenues $263,000 In its Year 2 single-step income statement, what amount should Dart report as total revenues? A. $253,000 B. $260,000 C. $263,000 D. $250,000
Answer (D) is correct. $250,000
The single-step income statement provides one grouping for revenues and gains and one for expenses and losses. The single step is the one subtraction necessary to arrive at net income. Revenues include all sales of goods, services, and rentals. Purchase discounts reduce net purchases and therefore cost of goods sold. The recovery of accounts written off is accounted for first by reversing the write-off (debit accounts receivable, credit the allowance for doubtful accounts) and second by recording the receipt of cash (debit cash, credit accounts receivable). Thus, purchase discounts and collection of written off accounts do not affect revenues.
Which of the following should be included in general and administrative expenses?
Interest
Advertising
Neither.
General and administrative expenses are incurred for the entity as a whole and are not related entirely to a specific function, e.g., selling or manufacturing. They are included in the determination of operating income. Interest expense is a nonoperating item usually included under other expenses. Advertising expenses are operating items included in the selling expenses category.
The objective of present value when used to determine an accounting measurement for initial recognition purposes is to
A. Estimate value in use.
B. Capture the value of an asset or liability in the context of a given entity.
C. Calculate the effective-settlement amount of assets.
D. Estimate fair value.
D. Estimate fair value.
According to the FASB’s conceptual framework, an entity’s revenue may result from a(n)
A. Decrease in a liability from primary operations.
B. Increase in an asset from incidental transactions.
C. Increase in a liability from incidental transactions.
D. Decrease in an asset from primary operations.
Answer (A) is correct.
Revenues are inflows or other enhancements of assets or settlements of liabilities from activities that constitute the entity’s ongoing major or central operations. Thus, a revenue may result from a decrease in a liability from primary operations, for example, by delivering goods that were paid for in advance.
Palmyra Co. has net income of $11,000, a positive $1,000 net cumulative effect of a change in accounting principle, a $3,000 unrealized loss on available-for-sale debt securities, a positive $2,000 foreign currency translation adjustment, and a $6,000 increase in its common stock. What amount is Palmyra’s comprehensive income? A. $10,000 B. $4,000 C. $11,000 D. $17,000
Answer (A) is correct.
Comprehensive income includes all changes in equity of a business during a period except those from investments by and distributions to owners. It includes all elements of (1) net income and (2) other comprehensive income (OCI). Comprehensive income thus includes net income of $11,000, the unrealized loss on available-for-sale debt securities of $3,000 (component of OCI), and the $2,000 foreign currency translation adjustment (component of OCI). Thus, total comprehensive income is $10,000 ($11,000 – $3,000 + $2,000).
What are Statements of Financial Accounting Standards, Accounting Statements of Position and Accounting Standard Updates?
SFAS: Statements of Financial Accounting Standards were issued by the FASB prior to the effective date of the Codification (not GAAP)
ASP: Accounting Statements of Position were once issued by the AICPA. They are not authoritative unless reflected in the ASC.
ASU: The FASB issues Accounting Standards Updates (ASUs) as part of the process of amending the Codification. ASUs are not authoritative until they are included in the Codification. However, ASUs include materials (e.g., background information and basis for conclusions) not included in the Codification. Prior to issuing updates, the FASB follows due process procedures
What is the main objective of all governmental financial reporting? What are the sub objectives?
Accountability is the primary objective of all governmental financial reporting. It is based on the public’s right to know.
Fiscal accountability is the responsibility of a government to justify that its actions comply with public decisions about obtaining and expending public resources in the short term.
Operational accountability is the responsibility to report the extent to which accounting objectives have been met efficiently and effectively using available resources.
It is also the responsibility to report whether those objectives can be met for the foreseeable future.
Interperiod equity is a significant part of accountability. Financial resources received during a period should suffice to pay for the services provided during that period. Moreover, debt should be repaid during the period of usefulness of the assets acquired.
What are the types of activities do SPG engage in and what kind of funds does each type of activity result from?
SPG: Special-Purpose Governments (e.g. school systems or fire departments)
Fiscal accountability is the responsibility of a government to justify that its actions comply with public decisions about obtaining and expending public resources in the short term.
Operational accountability is the responsibility to report the extent to which accounting objectives have been met efficiently and effectively using available resources.
It is also the responsibility to report whether those objectives can be met for the foreseeable future.
Interperiod equity is a significant part of accountability. Financial resources received during a period should suffice to pay for the services provided during that period. Moreover, debt should be repaid during the period of usefulness of the assets acquired.
