Basic Concepts Flashcards
Fundamental Qualitative Characteristics
relevance and faithful representation
Relevance
capable of making a difference in a decision by helping users to form predictions about the outcomes of past, present, and future events or to confirm or correct prior expectations.
Hierarchy of Authoritative GAAP
the FASB Statements of Financial Accounting Standards (SFAS) has the highest authority.
the AICPA Statements of Positions and the Industry and Audit guides are the second level of GAAP pronouncements.
FASB Statements of Financial Accounting Concepts do not come under authoritative GAAP.
SEA Reporting
Measures of service accomplishments will focus on the outputs and outcomes. Measures that relate service efforts to service accomplishments may consider efficiency assessments or cost-outcome evaluations that report costs per unit of outcome or result.
FASB Accounting Standards Codification
FASB Statements, Technical Bulletins, and Interpretations are part of the FASB Accounting Standards Codification.
Reversal of Long-Lived Assets held for use
allowed under IFRS but not Under US GAAP.
Recognition of Goodwill under GAAP and IFRS
The following are required under Both US GAAP and IFRS:
a. Goodwill and intangible assets with indefinite lives to be reviewed at least annually for impairment, and more frequently if impairment indicators are present.
b. Require that an asset found to be impaired be written down and an impairment loss recognized.
c. Prohibit reversal of the impairment of goodwill.
IFRS Noncash Investing and Financing Activities (Disclosure)
IFRS requires that noncash investing and financing activities be disclosed in the Notes to the Financial Statement, not anywhere in the Statement of Cash flows or Statement of Financial Position.
Assets under GASB
must provide present service capacity and be controlled by the government.
IFRS Cost Model
Assets carried at cost (e.g., property, plant, and equipment) may be carried at their fair value at the opening IFRS balance sheet date. Fair value becomes the “deemed cost” going forward under the IFRS cost model.
Statement of Financial Accounting Concepts
intended by the FASB to set forth objectives and fundamentals that will be the basis for future development of financial accounting and reporting standards. SFACs do not establish, amend, supersede, or otherwise modify accounting standards
FASB Characteristics
- It is recognized as authoritative
- It establishes accounting concepts and standards for financial accounting and reporting and provides guidance on the implementation of standards.
- It provides a conceptual framework that helps to increase understanding of, and confidence in, financial information on the part of users of financial reports.
Foundation of SFAC Objectives
The SFAC objectives are designed to constitute a foundation for financial accounting standards. The framework is designed to prescribe the nature, function, and limits of financial accounting and to be used as a guideline that will lead to consistent standards.
Purpose of IASB Conceptual Framework
assisting, among others, the Board in the development of future IFRS, preparers of financial statements in applying IFRS, and auditors in forming an opinion on whether financial statements comply with IFRS.
Interperiod Equity
whether current-year revenues are sufficient to provide current services or whether future taxpayers are assuming the burden of previously provided services.
Realization
the process of converting a noncash resource or right into cash. The sale of equipment (a noncash resource) for a note (a claim to cash) conforms to the realization concept.
Accounting Standards Advisory Forum
advisory group to the IASB consisting of national accounting standard-setters and regional bodies with an interest in financial reporting and are selected by the Trustees.
Timeliness
enhances the usefulness of information that is relevant and faithfully represented. available to a decision maker before it loses its capacity to influence decisions.
Accounting Standards Update
marks the incorporation of amendments into the FASB Accounting Standards Codification.
First Step in IFRS Hierarchy of Guidance
determine if there is an IFRS that specifically applies to the transaction or event.
Operating Cycle
A one-year time period is to be used as a basis for the segregation of current assets in cases where there are several operating cycles occurring within a year.
Restricted Cash
Restricted cash is classified based upon the date of availability or disbursement.
Unusual in Nature or Infrequent in Occurrence
reported as a component of income from continuing operations. It cannot be shown as net of taxes
Life Insurance Proceeds
treated as income only to the extent they exceed the cash surrender value of the policy.
Cash Surrender Value
an asset that is recognized each time the life insurance premium increases the cash value of the policy. On death of the officer, cash surrender value is recouped and the balance is treated as income in its financial statements.
Reporting of Extraordinary Gains / Losses
part of Non-Operating gains/losses.
Insurance Expense for Life Insurance Policy
annual premium less (1) the increase in cash surrender value and (2) any dividends received.
