Conceptual Framework and Financial Reporting Flashcards
Fundamental Qualitative Characteristics
Relevance and Faithful Representation
Relevance Characteristics
- Predictive Value
- Confirmatory value
- Materiality
confirmatory value does what?
provides feedback about evaluations previously made by users
Materiality
information is material if an omission or misstatement of the information could affect the decisions made by users based on financial information. Materiality is an entity-specific aspect of relevance. The FASB has not specified a uniform quantitative threshold for materiality and has not specified what would be material in specific situations
Faithful Representation Characteristics
- Complete
- Neutral
- Free from error
Neutral
A neutral depiction of financial information is free from bias in selection or presentation
Free from error
free from error mean that there are no errors in the selection or application of the process used to produce reported financial information and that there are no errors or omissions in the description of economic events. Free from error does not require perfect accuracy because, for example, it is difficult to determine the accuracy of estimates.
What is included in Comprehensive income
Includes all changes in equity during a period except those resulting from owner investments and distributions to owners
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 equal to the difference between the proceeds from the sale and the carrying amount of the fixed asset sold.
Percentage of completion formula
Total cost to date / Total estimated cost of contract
In Completed Contract- when is the revenue recognized?
revenue is recognized when the job is completed, not when progress billings are collected or when they exceed recorded costs
percentage of completion
engineering estimates of completion or costs incurred to date vs. total estimated costs is the basis for recognizing revenue, not progress billing
items that are both unusual and infrequent are reported where?
are reported as a separate component of income from continuing operations
The FASB has made an amendment to GAAP when the FASB issues
A stmt on standards for attestation engagements
What is the objective of financial reporting
To report on managements consistency
