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
