Basic Concepts Flashcards
What is the PCC and when was it created?
PCC stands for The Private Company council. It was created in May 2012. It was created to help improve accounting standards for private companies. The standards are issued in conjunction with ASUs.
What are the five items that are considered significant factors to differentiate private companies from public?
- Number of primary users and their access to management
- Investment strategies of primary users
- Ownership and capital structure
- Accounting resources
- Learning about new financial reporting guidance.
What five items are to be used as a guide to determine if there should be differential guidance between private and public?
1) Recognition and measurement
2) Disclosures
3) Display
4) Effective Date
5) Transition Method
Under Statement of Financial Accounting Concepts 6, the term “recognized” is synonymous with the term…
Recorded. - SFAC 6 states that recognition is the process of formally recording or incorporating an item into the financial statements of an entity.
What is the pervasive constraint?
It is the cost-benefit constraint. Meaning the benefit needs to outweigh the cost.
What are the FUNDAMENTAL qualitative characteristics?
Relevance and Faithful Representation.
Relevance includes predictive value and confirmatory value. (and materiality)
Faithful representation includes complete, neutral and free from error.
What are the ENHANCING qualitative characteristics that interact with both relevance and faithful representation?
Comparability
Verifiability
Timeliness
Understandability.
The information provided by financial reporting pertains to
Individual business enterprises rather than industries, the economy as a whole, and consumers.
What is the threshold for recognition qualitative characteristic?
Materiality. Entity specific. Related to relevance.
What is historical cost?
It is when items are valued at the amount of cash or cash equivalent paid for the asset. Typically inventories and fixed assets are valued at cost.
What is the formula for COGS?
Beginning inventory + purchases - ending inventory.
What is the IASB definition of an asset?
An asset is a resource that is controlled by the entity from past events that will provide future economic benefit.
What is the IASB Definition of a liability?
A present obligation of the entity from past events that will cause a future outflow from entity resources with economic benefits.
What is the IASB definition of equity?
Equity is the residual interest in a company’s assets after deducting liability.
What is the IASB definition of income?
Increases in economic benefits during an accounting period in the form of an increase in assets, an inflow, a decrease of liabilities that results in an increase in equity other than those relating to investors.
