Chapter 1 - Accounting Standards and Conceptual Framework Flashcards
Qualitative Characteristics of Useful Financial Information
Relevance
Faithful Representation
Authoritative Literature Included in the FASB Accounting Standards Codification
FASB Emerging Issues Task Force (EITF) Derivative Implementation Group Issues Accounting Principles Board Opinions Accounting Research Bulletins Accounting Interpretations AICPA
What makes up “relevant” financial information?
“Passing Confirms Money”
Predictive
Confirming
Materiality
What makes financial statements “faithfully represented”?
“Completely neutral is free from error”
Completeness
Neutrality
Freedom from Error
What are the enhancing qualitative characteristics?
"Compare & verify in time to understand" Comparability Verifiability Timeliness Understandability
Presentation Order of Major Components of Income and RE Statement
“IDEA”
Reported on Income Statement:
Income from Continuing Operations (before tax)
Income from Discontinued Operations (after tax)
Extraordinary Items (after tax)
Reported on Statement of RE:
Cumulative Effect of Change in Accounting Principle
Examples of Discontinued Operations
After tax
Impairment Loss
Gain/Loss from Actual Operations
Gain/Loss on Disposal
How to treat anticipated future gains and losses?
Not recognized until they occur
Examples of Exit or Disposal Costs
Involuntary Employee Termination Benefits
Costs to Terminate a Contract that is not a Capital Lease
Other costs associated with exit or disposal activities, including costs to consolidate facilities or relocate employees
What classifies an item to be “extraordinary”?
Unusual AND Infrequent
How to treat material unusual OR infrequent items?
Report as separate line item as part of income from continuing operations (before tax)
How are extraordinary items treated under IFRS?
Can’t be presented in statement of comprehensive income or separate income statement, or in notes to financial statements.
*Not reported
Treatment of changes in accounting estimates
Prospectively - current and future periods
Treatment of changes in accounting principle that is inseparable from change in estimate
Treat as change in estimate
Prospectively - current and future periods
Treatment of Changes in Accounting Principle
Retrospectively - prior periods
Adjust beginning RE in earliest period presented
Exceptions to Treatment of Changes in Accounting Principles
Effect of change in depreciation methods - Treat as change in estimate
Prospectively - current and future periods
Treatment of Changes in Accounting Entity
Restatement to reflect information for new entity
Treatment of Error Correction
Restate (prior period adjustment)
Adjust beginning RE of earliest period presented
What makes up Other Comprehensive Income?
"PUFER" Pension Adjustments Unrealized Gains and Losses Foreign Currency Items Effective Portion of Cash Flow Hedges Revaluation Surplus
Quantitative Requirements for Reportable Segments
- 10% “Size” Test (must only meet one)
- Revenue
- Reported Profit or Loss
- Assets
*75% “Reporting Sufficiency” Test
- If total external revenue reported is below 75%, additional segments need to be identified as reportable segments even if they don’t meet
the 10% “Size” Test
Presentation Requirements for First Time Adopters of IFRS
B/S - 3 years
Comprehensive Income - 2 years
Statement of Cash Flows
Changes in Equity
Form 10-K Annual Report Filing Deadlines for:
Large Accelerated Filers
Accelerated Filers
All Others
Large Accelerated Filers - 60 days
Accelerated Filers - 75 days
All Others - 90 days
Form 10-Q Quarterly Report Filing Deadlines for:
Large Accelerated Filers
Accelerated Filers
All Others
Large Accelerated Filers - 40 days
Accelerated Filers - 40 days
All Others - 45 days
