Ch 1 - Intro to Accounting Flashcards
What accounting standards can private and public companies follow?
Private: ASPE/IFRS; Public: IFRS
ASPE is typically for smaller companies, while IFRS is for larger, more complex businesses.
Are private companies required to prepare audited financial statements? What about public?
Private: No
Public: Yes
Public companies must prepare audited financial statements.
Who are the typical investors or owners of private companies? What about public?
Private: Founders, angel investors, venture capital, private equity firms
Public: Public shareholders
Public companies have public shareholders.
What is the availability of information for private vs. public companies?
Private: Not publicly available;
Public: Publicly available.
Do private or public companies have to have a Board of Directors?
Private: No, they can choose to have one or not
Public: Yes
Public companies must have a Board of Directors.
What are the fundamental qualitative characteristics of the IFRS Conceptual Framework?
Relevance, faithful representation
Faithful representation is reliability under ASPE.
What are the enhancing qualitative characteristics outlined in the IFRS Conceptual Framework?
Comparability, understandability, verifiability, timeliness.
What is the main difference between ASPE and IFRS in terms of company size?
ASPE for smaller companies; IFRS for larger, more complex businesses.
What are the three universal components of accounting standards?
Recognition, measurement, disclosure.
How does IFRS refer to the balance sheet?
Statement of financial position.
How is the statement of financial position different?
(Assets and liabilities, depreciation, revenues and expenses)
- Assets and liabilities are not necessarily presented as current vs. non-current. In liabilities: leases > 12 months
- Reevaluation model, the exception to historic cost assumption
- Depreciable amt: Asset cost less residual value
- Component separation & depreciation: Significance of costs relative to the total
Example: Air Canada
Depreciating engines separately from the plane body. Not all in one under “Plane”. - Incidental revenues & expenses:
Would be recognized in the Statement of Comprehensive Income under IFRS for incidental revenue (land cant be used b/c delays prevent construction from starting, so business temporarily uses it as a paid parking lot = incidental revenues). NOT part of asset cost in IFRS.
ASPE would reduce the asset’s cost.
What is an Income Statement called under IFRS?
Statement of Profit or Loss
What are the steps in revenue recognition under IFRS?
- Identify contract 2. Identify performance obligations 3. Determine transaction price 4. Allocate transaction price 5. Recognize revenue.
What is the classification requirement for expenses in IFRS?
Must be presented by nature or by function.
What is the name of the statement showing changes in equity under IFRS?
Statement of Changes in Equity.
How does IFRS treat interest and dividends paid and received in the cash flow statement?
Two options:
Option #1 all operating;
Option #2 alternating between financing/investing (int/div paid = financing, int/div rec = investing).
What is required about comparative information in IFRS?
Will always require a prior period restatement to compare to current numbers.
What is the significance of the three major components of accounting standards?
Ensures comparability across different countries’ tax laws and legal standards.
