Chapter 1 Flashcards
Enhancing Qualitative Characteristics
- Comparability (Are the F/S easy to make comparisons?)
- Verifiability (can we easy verify the accuracy of the F/S
- Timeliness (Can we grab F/S information in a timely manner?)
- Understandability (Are the F/S easy to understand?)
Fundamental Qualitative Characteristics
- Relevance (Is this information relevant?)
2. Faithful Representation (Is this information reliable?)
Fundamental Qualitative Characteristics - Relevance:
- Predictive Value
- Confirmation Value
- Materiality
Fundamental Qualitative Characteristics - Faithfull Representation :
- Completeness: Continue Operating Income Assets classification events
- Neutrality: The information is free from bias
- Freedom from errorInfo doesnβt contain any material errors
Misstatement error on the F/S will relate to which of the fundamental qualitative characteristics?
Since this mistake belong to MATERIALITY which is component of RELEVANCE.
Other Comprehensive Income (FUPIE)
- Foreign currency transaction gains and losses
- Unrealized holdings gains or losses on available-for-sale securities
- Pension gains or losses
- Instrument specific credit risk
- Effective portion of flow hedges
Consignement Sale Relationship
1) Revenue is not recorded until consignee sells to third-party (Customer)
2. Consignor will record inventory and cost of goods sole when sold by consignee.
3. Consignor will report commission expense when consignee sells inventory to third party (customer).
Audited Annual Reports for Public Traded Companies
- Form 10-K (U.S. Companies)
- Form 40-F (Canadian companies)
- Form 20-F (Other non- US companies)
Unaudited Reports for Public Traded Companies
- Form 10-Q (US companies quarterly)
2. Form 6-K (Foreign private issuers semiannually)
Change from LIFO to FIFO, how to record it
The change in accounting principles will be recorded retrospectively. It will be recorded as an adjustment to beginning retained earnings
Accounting Changes Types
- Change of estimate (prospectively)
- Change in accounting principle (retrospective)
- Change in reporting entity (retrospectively)
- Error correction (Restatement of prior periods)
Continue Operating Income Assets classification events
- Frequently happens
- Recur
- Occurs each year
Non-Operating Income Assets classification events
- Infrequently happens
- Nonrecurring
- Occurs every 5 years.
Selling Expenses categories
- Advertising
- Freight-out
- Rent for office (selling dep only)
- Sales salaries and commission
Current cost
Asset reported at the amount of cash or its equivalent that would have to be paid if the same or equivalent asset were acquired currently. (fair market
Large Accelerated Filer
- Over $700 million or more
- 10-K report within 60 days
- 10-Q report within 40 days
Accelerated Filer
- Sales ($75-$700 million)
- 10-k report within 75 days
- 10-Q report within 40days
Other Filer
- Less $75 million
- 10-k report within 90 days
- 10-Q report within 45 days
Components of COGS
- Raw/Direct material
- Direct Labor
- Factory Overhead
AP roll forward from accrual to cash basis
Beg AP
+Material Purchase
-Cash Payments
Ending AP
Investing Section of Cash Flow Statement
- Purchase or sale of fixed assets
- Loans made to other entities
- Purchase of sale of available-for-sale securities or held-to-maturity securities
- Acquisition of subsidiary or business unit under the equity or acquisition method
πΆπ’πππππ‘ π ππ‘πo
πΆπ’πππππ‘ π΄π π ππ‘π /
πΆπ’πππππ‘ πΏπππππππ‘πποΏ½
ππ’πππ π ππ‘πo
(πΆπ’πππππ‘ π΄π π ππ‘π β πΌππ£πππ‘πππ¦)/
πΆπ’πππππ‘ πΏπππππππ‘πππ
π·πππ‘ π‘π πΈππ’ππ‘y
πππ‘ππ πΏπππππππ‘πππ /
πβπππβππππππ
β²πΈππ’ππ‘y
COGS formula
inventory + purchases - ending inventory =
Gross margin
Gross profit / net sales.
Profit margin
Net income / net sales
Earnings per share
Net income / weighted avg. # of common shares
outstanding
Other Comprehensive Incomeβ items
- Unrealized gains or losses on AFS securities
- Unrecognized gains or losses from pension costs
- Foreign currency translation adjustments
- Unrealized gains or losses from certain derivative transactions
Dividends received are part of
Net income and an operating activity
Dividends paid
will be part of financing activity on cash flow stmt
Time Interest Earned
Income before interest expense and taxes / interest expense
Account Receivable Turnover
Sales (Net) / AR (Net)
FOB Destination
Title passes when goods received by the buyer and all shipping , packaging and handling cost covered by seller
FOB Shipping point
Title passes when good leave sellerβs location and shipping cost covered by buyer.
FIFO: First in, first out.
When prices are rising using FIFO, COGS is the lowest and provides the highest net income, also the highest ending inventory.
LIFO: Last in, first out.
When prices are rising using LIFO, this gives the highest COGS and lowest net income, and lowest ending inventory
COGS
Beg Inv + Purchases - End Inv
Net Realizable Value
Selling Price - Cost to sell
NRV - profit margin
(Selling Pr - Cost to sell) - (Selling Pr * profit margin)
