chapter 1 standard setting and income statement Flashcards
GAAP self-regulated？
Yes
FEDPRIA
FASB Emerging issues Task Force Derivative implementation group issues Accounting Principles board opinions Accounting Research Bulletins Accounting Interpretations AICPA
SEC Standards
Regulation for accounting is emerging Regulation S-X Financial Reporting Releases Accounting series releases Interpretative Releases Staff Accounting Bulletins EITF topic D and SEC staff observer comments
Primary Users?
Existing and potential investors, lenders and other creditors. government sec X
Qualitative characteristics of useful financial information
Relevance and faithful
relevance
capable of making a difference in the decisions made by users passing confirms money Predictive value:predict future confirming value: provides feedback materiality:
Faithful
Reliable completely neutral is free from error completeness neutrality:free from bias freedom from error
enhancing qualitative charateristics
compare and verify in time to understand comparability verifiability timeliness understandability
revenue recognition principle
earned: entity has substantially accomplished realized
matching principle
expenses are necessarily incurred to generate revenue
Elements of Financial Statements
REGL AlE needs ID Comprehensive Revenue Expense Gain loss Assets Liability Equity Investments by owners Distributions to owners: these two excluded from comprehensive ubcine
IFRS Capital maintenance adjustments?
are increases and decreases in equity that arise from the revaluation or restatement of assets and liabilities.
Five elements of present Value measurement a. estimate of future cash flow b. expectations about timing variations of future cash flows c. time value of money( the risk-free rate of interest) d. the price for bearing uncertainty e. other factors( liquidity issues and market imperfections)
c d e impacts discount rate and future cash flow
Reported on Income Statement
IDEA Income from continuing:operating activities+non operating gross of tax then net of tax Discontinued net of tax Extraordinary items net of tax Reported on Statement of Retained earnings! cumulative effect of change in accounting principle net of tax
inventory cost
purchase price + freight in
selling expense
freight out, salaries and commissions, advertising
general administrative
officer’s salaries, accounting and legal, insurance
non-operating
auxiliary activities, interest expense
to LIFO and change in depreciation method
prospective
cost method to Equity method
restate
equity to cost method
prospective
retained earnings
Discontinued operation for IFRS
must be measured and component is reported at the lower of carrying value and fair value less costs to sell
anticipated future gains or losses for discountined segment
not recognized until they occur
Impariment loss+operating loss+gain/loss on disposal
=loss from discontined operation (before tax)
infrequent but not unusual
seperate item as income from continue operation
new estimate
prospective and in income from continue operation
when a fixed asset is sold, gain or loss is recognized as part of income from
continuing operations. the amount of the gain or loss is =proceeds from the sale and the carrying amount of the fixed asset sold
