Chapter 1 - Income Statements & Financial Reporting Flashcards
Who has legal authority to establish GAAP?
SEC
Who determines GAAP?
FASB
What is the single source of authoritative non-gov GAAP?
FASB codification
Fundamental qualitative characteristics?
Relevance & Faithful representation
What is relevance?
“Passing confirms money”
Predictive - confirming - materiality
What is faithful representation?
“Completely neutral & free from error”
Completeness - Neutral - freedom from error
Enhancing qualitative characteristics?
“Compare & verify in time to understand”
compare - verify - timeliness - understand
What makes up the full set of FS?
Statement of financial position (BS) statement of earnings (IS) statement of comprehensive income statement of cash flows statement of equity
What are the IFRS FS assumptions?
going concern & accrual accounting
What are the underlying elements of the FS?
“REGL ALE ID”
IS - revenues, expenses, gains, losses
BS - assets, liabilities, equity
Investment to owners
What is the presentation order of the IS?
"IDEA" Income from continuing operations Discontinued operations Extraordinary items Change is accounting principle
What’s included in inventory costs?
Purchase price
Freight-in
What’s included in selling expense?
Freight-out
Sales salaries & commissions
Advertising & marketing
What’s included in G&A expenses?
Officers salaries
Accounting
Legal
Insurance
What’s included in discontinued operations?
Impairment loss
G/L from operations
G/L from disposal
What are extraordinary items?
Infrequent, unusual, & material
Where do you report material infrequent OR unusual items?
Continuing operations as a separate line item (gross)
Does IFRS have extraordinary items?
NO
What are the accounting changes?
Change in estimate
Change in principal
Change is entity
Number of FS sections for a change in accounting (IFRS)?
3 B/S & 2 of everything else
Any exceptions to accounting principle change rules?
Change to LIFO and method of depreciation are changes in estimates
Does IFRS have a change in accounting entity?
NO
What makes up other comprehensive income (OCI)?
"PUFER" Pension adjustments Unrealized G/L of AFS security Foreign currency items Effective cash flow hedge Revaluation gain (IFRS only)
Comprehensive Income Formula?
CI = NI + OCI
What is AOCI?
Total of OCI for all periods
What is emphasized for interim reporting?
Timeliness over reliability (unaudited)
What are the interim reporting tax rates used for IFRS & GAAP?
GAAP - enacted tax rates only
IFRS - enacted & substantially enacted
Who is required to report a business segment?
publicly trade companies
What part of the FS is an enterprise not required to show?
Statement of Cash Flow
What makes up an operating segment?
Traceable costs to CF’s
Reviewed by CFO
has revenues & expenses
Which parts of enterprises are not operating segments?
Corporate headquarters
Pension plans
What are the tests for a reportable segments?
10% of revenues, P/L, assets
75% of total revenues
Walk through the multi-step I/S.
Operating activities - revenues & expenses
Non-operating activities - other revenues & expenses
Unusual OR infrequent items
Income taxes (current & deferred)
Walk through the single-step I/S.
Total Revenues - Total Expenses
What are the exit/disposal costs for discontinued operations?
Involuntary employee termination benefits
Costs to terminate contract (not capital lease)
Costs to relocate employees
What are the two comprehensive income approaches?
Single statement approach (starts with revenues)
2 statement approach (starts with Net Income)
Define with deadlines: 10K - 10Q
10K - filed annually by issuers (60 days large accelerated, 75 days accelerated, 90 days others)
10Q - filed quarterly by issuers (40 days large accelerated, 45 days all others)
Define: 11K - 20F & 40F
11K - annual report for EBP’s
40F - Foreign equivalent of 10K (Canada)
20F - Foreign equivalent of 10K (other countries)
Define: 6K - 8K - Forms 3 4 5
6K - foreign equivalent to 10Q (filed semi-annually NOT quarterly)
8K - major corporate events
Forms 3 4 5 - directors/officers own more than 10%
Under Regulation SX, how many BS, IS, etc must be included in the FS?
2 - B/S & 3 of everything else
What is a development stage enterprise?
Start up
Spending on R&D
Not a lot of P/L
What does the effective income tax rates for operations take into effect?
Foreign tax rates & credits
tax planning alternatives
anticipated tax credits
capital gains
What is the purpose of the notes to the financials?
Provide disclosures required by generally accepted accounting principles.
According to the FASB conceptual framework, for financial reporting to be useful, it must:
Provide information useful for making business and investment decisions.
