Conceptual Framework

Question 1

what are the two primary qualitative characteristics

Answer 1

Relevance and Faithful Representation

Question 2

what are the components of Relevance and Faithful Representation

Answer 2

Relevance: Predictive Value, Confirmatory Value, Materiality (PCM); Faithful Representation: Completeness, Neutrality, Free from material errors or omission

Question 3

What are the enhancing qualitative characteristics

Answer 3

Comparability, Verifiability, Timeliness, Understandability (V CUT)

Question 4

What are the four accounting principles

Answer 4

Revenue Recognition; Expense Recognition, Measurement ( e.g. LIFO to FIFO) and Disclosure

Question 5

What are the 4 basic accounting assumptions

Answer 5

TUGE
1.Accounting Entity- separate from owner;
2.Going concern- continual life,
3-4. Unit of Measure and Time period or periodicity- can be reported in periods of time e.g. Quarterly

Question 6

what are the following forms used for and when used: 10K, 10Q, 8K

Answer 6

10K annual fililng for a large accelerated filer is required to be field within 60 days of the fiscal year end
10Q quarterly filing - reviewed by auditor filing usually done 40 days for large accelerated filers and accelerated filers; 45 days for non accelerated filers
8K report significant events

Question 7

According to FASB conceptual framework what is earnings

Answer 7

Per SFAC 5, earnings and comprehensive income have the same broad components–revenues, expenses, gains, and losses, but are not the same because certain classes of gains and losses are included in comprehensive income but are excluded from earnings.

Question 8

What are the different accounting changes and error corrections

Answer 8

1. Accounting principle changes e.g from FIFO to WA
2. Accounting estimate change e.g change the useful life of a plant asset
3. Changes in Reporting entity e.g change composition of the subsidiary group in a consolidated enterprise
4. Correction of errors in prior years financial statement e.g discover that an item exp in a prior period year should have been capitalized

Question 9

What are the Steps for implementing retrospective application?

Answer 9

1. Cumulative effect of the change on periods before those presented is reflected in the carrying amt of affected assets and liabilities as of the begin of the earliest period presented, along with an offsetting adjustment to the opening bal or RE for the period
2. The fin statement for the prior periods presented comparatively are recast to reflect the period specific effects of applying the new principle. Each account affected by the change is adjusted as if the new method had been used in those periods

Question 10

How is correction of error in prior financial Steiner accounted?

Answer 10

The term restatement is used instead of retrospective to distinguish voluntary principle changes from restatements due to error and to reduce potential confusion between the two.

Question 11

How is a change in depreciation adjusted in the records

Answer 11

Change in depreciation method is a change in accounting estimate effected by a change in accounting principle. Accounted for on a prospective basis in the current year and future periods

Question 12

What are the four financial reporting implications associated with the legally adopted annual budget.

Answer 12

(1) expression of public policy, (2) expression of financial intent, (3) form of control, and (4) it may provide a basis for evaluating performance (if the government established service efforts and accomplishment goals as part of its budget process)