Conceptual Framework and Standard Setting

Question 1

What is the purpose of financial reporting?

Answer 1

• Provide relevant information to decision makers

Question 2

What are the qualitative characteristics of useful financial information?

Answer 2

• Relevance and faithful representation

Question 3

What are the three elements of relevance?

Answer 3

• Predictive value
• Confirming value
• Materiality

Meghan predictions are relevant and later confirmed

Question 4

What are the three elements of faithful representation?

Answer 4

• Neutrality
• Completeness
• Freedom from error

Frank can’t be completely neutral or faithful

Question 5

What are the enhancing qualitative characteristics of financial information?

Answer 5

• Comparability
• Verifiability
• Timeliness
• Understandability

She got enhanced to be comparable and understood by others which was quickly and timely verified

Question 6

What are the due process steps followed by FASB to establish financial accounting and reporting standards?

Answer 6

• First issue for public comment in the form of exposure drafts
• Majority vote of board is required to approve exposure drafts
• At the end of the period, they review comments and then,
• An update is issued only after a majority vote by the members of FASB

Question 7

What is the 10k

Answer 7

• filed annually

Question 8

What is the 10Q

Answer 8

• filed quarterly

Question 9

What is included in the 10k

Answer 9

• summary of financial data
• MD&A
• Audited statements (using gaap)

Question 10

what is included in teh 10q

Answer 10

• Includes unaudited financial statements
• Interim MD&A
• Includes certain disclosures

Question 11

What are the guidelines for interim reporting?

Answer 11

• Use the same accounting principles that were used in the most recent annual report
• allocate expenses to the interim period benefited
• revenues are recognized in the period in which they are earned and realized
• a total for comprehensive income is condensed financial statements of interim periods

Question 12

What income tax rate is used for interim financial reporting

Answer 12

ETR

Question 13

What are the general guidelines for OCBOA financial statement presentation

Answer 13

• different titles from accrual basis financial statements
• required financial statements are the equivalent of the accrual basis balance sheet and income statement
• financial statements should explain changes in equity accounts
• A statement of cash flow is not required
• Disclosures should be similar to GAAP financial statement disclosures

Question 14

What are the four financial statements of a defined benefit plan that are required under US GAAP?

Answer 14

1. Statement of net assets available for benefits
2. Statement of changes in net assets available for benefits
3. statement of accumulated plan benefits
4. statement of changes in accumulated plan benefits

Question 15

What is the statement of net assets available for benefits

Answer 15

a statement that includes information regarding the net assets available for benefits at the end of the plan year

Question 16

What is the statement of changes in net assets available for benefits

Answer 16

A statement that includes information regarding the changes during the year in the net assets available for benefits

Question 17

What is the statement of accumulated plan benefits

Answer 17

Information regarding the acturial present value of the accumulated plan benefits as of either the beginning of the period or end of the plan year

Question 18

What is the statement of changes in accumulated plan benefits

Answer 18

Information regarding the significant effects of certain factors effecting the year-to-year change in the actuarial present value of accumulated plan benefits

Question 19

Is a statement of cash flow required for pension benefit information

Answer 19

No- but may be presented if it provides relevant information about the ability of the plan to meet future obligations

Question 20

What information does S-X contain by the SEC

Answer 20

Nonfinancial forms and disclosures required by the SEC

Question 21

How do you calculate retained earnings

Answer 21

Net income/loss
- dividends (including stock and declared dividends)
+ Prior period adjustments (net of tax)
+ accounting changes reported retrospectively)

Question 22

SFAC 4

Answer 22

For nonbusiness organizations
Suggests FR should meet the following objectives:
- Provide information about the performance of an organization during a period
- Periodic measurements of the changes in the amount and nature of the net resources
- provide information about how the organization spends cash
- FR should include explanation and interpretations to help users understand financial information provided

Question 23

What is the formula for day’s sales in inventory

Answer 23

(average inventory + cost of goods sold) x working days per year

Question 24

What is current cost

Answer 24

certain assets are reported in financial statements at the amount of cash or its equivalent that would be paid if the assets were acquired currently

Question 25

What is gross profit

Answer 25

Net sales- COGS

Question 26

How is a decrease in the unamortized bond discount account recorded in the indirect cash flow statement

Answer 26

As an addition to net income in the operating activities section

Question 27

what is true about modified cash basis

Answer 27

Modified cash basis financial statements are intended to provide more information to users than cash basis statements while continuing to avoid the complexities of GAAP and the modified cash basis does not comply with GAAP unless there are no material differences in the method and GAAP