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