Basic Theory and Financial Reporting Flashcards
The single source for US GAAP for nongovernmental entities–did not change GAAP, but restrucctured the existing accounting standards to provide one cohesive set of accounting standards
Accounting Standards Codification (ASC)
Issued by the FASB to to provide a theoretical framenwork for accounting standards development and a basis for finanical reporting–8 of them–most recent attempt to develop accounting theory as a joint project between teh FASB and IASB
Concept statements–Statements on Accounting concepts (SFAC)—do NOT constitute GAAP, so not part of Codification
The part of the conceptual framework that provide an overall basis for financial reporting
Objectives
Part of the conceptual framework that establishes criteria for selcting and evaluating accounting alternatives which will meet the objectives–viewed as a hierarchy of accounting qualities
Qualtiative characteristics
Information that is capable of making a difference in a user’s decision–must have predictive value, confirmatitory value, or both
Relevant information
Information that is used to predict future outcomes
Predictive value
Information that is used to confirm or change prior evaluations
Confirmatory value
When information depicts what it purports to represent–should be complete, neutral and free from error
Faithful Representation
A basic view of earnings in which earnings are measured by the change in the net economci resources of an enterprise during a paeriod
Asset-liability view
A basic view of earnings in which earnings are a measure of an enterprise’s effectiveness in usuing its inputs to obtain and sell outputs
Revenue-expense view
Measurement method used to report PP&E and most inventories–at the amount paid to acquire the asset, commonly adjusted for depreciation/amortiazation
Historical cost
A measurement method that uses the amount of cash, or its equivalent, that would have to be paid if hte same or an equivalent asset were acquired currently–sometiems used for inventories
Current cost/ replacement cost method
A measurement method often used for investements in marketable securities and assets expected to be sold at prices lower that previosu carrying amounts–in which assets/liab are reported at the amount of cash, or its equivaloent, that could be obtained by selling an asset in orderly liquidation
Current market value
A measurement mehtod used to value short-term receivables and some inventories in which they are reported at the nondiscounted amount of cash, or its equivablent, into which an asset is expected to be converted in due course of business
Net realizeable (settlement) value
A measurement method often used with long-term receivables/payables in which tey are valued at the present value of future cash infolows into which an asset/liability is expected to be converted ind ue course of business
Present (discounted0 value of FCF
Earnings adjusted for cumulative accounting adjustments and other nonwoner changes in equity–also a measure of return on financial capital
Comprehensive income
Measurements in periods followingi ntitial recognition that establish a new carrying amount unrelated to previous amunts and accounting conventions
Fresh start measurements
A measure of managment’s efficiency in combining the factors of production into desired goods and serivces–measuring this is the primary objective of accounting
Income
Costs that can be associated with particular sales and attachto a unit of product and becme an expense onlyu when teh unit to which they attach is sold
Product cost
Costs that are not conveniently assignable to a product and become expenses due to the apssage of time
Period costs
A method of accounting for real estate sales in which payments received are recorded as a liability until the contract is canceled or a sale is achieved
Deposit method
A method of accounting for real estate sales in which the seller recognizes a portion of profit at the time of sale iwth the remaining portion recognized in future periods
Reduced profit method
Method of accounitng used for research or development arranagements in which the revenue to the vendor is contingent on achieving one or more substantive milestores related ot deliverables or units of accounting
Milestone method
The international framework used to establish sunderlying concepts for preparing financial statements–similary to Statements on Acc. Concepts in U.s.–not actual standards so do not override IFRS
IASB Framework for the Preparation and Presentaiton of Financial sTatemens
Increases in net assets (equity) from peripheral or incidental transactions of an entity and from all other trnasactiosn and other events and cirumstances affecting the entity except those that result from revenues or investents by owners
Gains
Inflows or other enhancements of assets of an entity or setllements of its liabiliteis from dlivering or producing goods, rendering services, or other activities hat constitute the entity’s ongoing operations
Revenue
A type of investment security that’s gains/losses are not reflected in net income, but are included in OCI
Available for sale securities
The process of revising previously issued financial statementsto correct an error
Restatement
The application of a different accounting principle to previously issued financial statemetns, as if that principle had always been used–required for changes in accounting principle and changes in reporting entity
Restrospective application
