Basic Concepts

Question 1

Fundamental Qualitative Characteristics

Answer 1

relevance and faithful representation

Question 2

Relevance

Answer 2

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.

Question 3

Hierarchy of Authoritative GAAP

Answer 3

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.

Question 4

SEA Reporting

Answer 4

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.

Question 5

FASB Accounting Standards Codification

Answer 5

FASB Statements, Technical Bulletins, and Interpretations are part of the FASB Accounting Standards Codification.

Question 6

Reversal of Long-Lived Assets held for use

Answer 6

allowed under IFRS but not Under US GAAP.

Question 7

Recognition of Goodwill under GAAP and IFRS

Answer 7

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.

Question 8

IFRS Noncash Investing and Financing Activities (Disclosure)

Answer 8

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.

Question 9

Assets under GASB

Answer 9

must provide present service capacity and be controlled by the government.

Question 10

IFRS Cost Model

Answer 10

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.

Question 11

Statement of Financial Accounting Concepts

Answer 11

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

Question 12

FASB Characteristics

Answer 12

• 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.

Question 13

Foundation of SFAC Objectives

Answer 13

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.

Question 14

Purpose of IASB Conceptual Framework

Answer 14

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.

Question 15

Interperiod Equity

Answer 15

whether current-year revenues are sufficient to provide current services or whether future taxpayers are assuming the burden of previously provided services.

Question 16

Realization

Answer 16

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.

Question 17

Accounting Standards Advisory Forum

Answer 17

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.

Question 18

Timeliness

Answer 18

enhances the usefulness of information that is relevant and faithfully represented. available to a decision maker before it loses its capacity to influence decisions.

Question 19

Accounting Standards Update

Answer 19

marks the incorporation of amendments into the FASB Accounting Standards Codification.

Question 20

First Step in IFRS Hierarchy of Guidance

Answer 20

determine if there is an IFRS that specifically applies to the transaction or event.

Question 21

Operating Cycle

Answer 21

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.

Question 22

Restricted Cash

Answer 22

Restricted cash is classified based upon the date of availability or disbursement.

Question 23

Unusual in Nature or Infrequent in Occurrence

Answer 23

reported as a component of income from continuing operations. It cannot be shown as net of taxes

Question 24

Life Insurance Proceeds

Answer 24

treated as income only to the extent they exceed the cash surrender value of the policy.

Question 25

Cash Surrender Value

Answer 25

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.

Question 26

Reporting of Extraordinary Gains / Losses

Answer 26

part of Non-Operating gains/losses.

Question 27

Insurance Expense for Life Insurance Policy

Answer 27

annual premium less (1) the increase in cash surrender value and (2) any dividends received.