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CONCEPTUAL FRAMEWORK, STANDARD SETTING & FINANCIAL REPORTING Flashcards

1
Q

OBJECTIVE OF FINANCIAL STATEMENTS

A

TO PROVIDE INFORMATION THAT IS USEFUL TO USERS

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2
Q

RELEVANCE

A

INFORMATION IS RELEVANT IF IT HAS THE POTENTIAL TO MAKE A DIFFERENCE IN THE DECISION MAKING PROCESS

PREDICTIVE
CONFIRMORY
MATERIAL

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3
Q

PREDICTIVE

A

INFORMATION IS PREDICTIVE IF IT ASSISTS USERS IN FORMING EXPECTATIONS ABOUT FUTURE EVENTS

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4
Q

CONFIRMATORY

A

INFORMATION HAS CONFIRMATORY VALUE IF IT CONRIMS OR CHANGES PAST OR PRESENT EXPECTATIONS BASED ON PREVIOUS EVALUATIONS

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5
Q

MATERIALITY

A

INFORMATION IS MATERIAL IF IT WILL IMPACT A USERS DECISION. THIS IS ENTITY SPECIFIC

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6
Q

FAITHFUL REPRESENTATION

A

INFORMATION IS:
COMPLETE
NEUTRAL
FREE FROM ERROR

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7
Q

COMPLETE

A

INFORMATION IS COMPLETE IF IT INCLUDES ALL DATA NECESSARY TO BE FAITHFULLY REPRESENTATIVE

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8
Q

NEUTRAL

A

INFORMATION IS NEUTRAL WHEN IT IS FREE FROM BIAS INTENDED TO ATTAIN A PRESPECIFIED RESULT, OR TO ENCOURAGE OR DISCOURAGE CERTAIN BEHAVIOR

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9
Q

FREE FROM ERROR

A

INFORMATION IS FREE FROM ERROR IF THERE ARE NO OMISSIONS OR ERRORS

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10
Q

QUALITATIVE CHARACTERISTICS

A

RELEVANCE
FAITHFUL REPRESENTATION

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11
Q

ENHANCING QUALITIES

A

COMPARABLE
UNDERSTANDABLE
TIMLY
VERIFIABILE

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12
Q

COMPARABILITY

A

SIMILARITY OR CONSISTENCY THAT ENABLES COMPARISONS BETWEEN ENTITIES

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13
Q

VERIFIABILITY

A

INDEPENDENT PARTIES USING THE SAME MEASUREMENT METHODS WILL ACHIEVE SIMILAR RESULTS

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14
Q

TIMELINESS

A

INFOTMATION IS AVAILALE FOR DECISION MAKING

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15
Q

UNDERSTANDABILITY

A

CLASSIFYING INFORMATION CLEARLY AND CONSISTENTLY

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16
Q

ASSUMPTIONS

A

GOING CONCERN
ECONOMIC ENTITY
MONETARY UNIT
PERIODICITY

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17
Q

GOING CONCERN

A

PRESUMES THE FIRM TO HAVE AN UNLIMITED LIFE

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18
Q

ECONOMIC ENTITY

A

PRESUMES THAT TRANSACTIONS CAN BE IDENTIFIED WITH A PARTICULAR FIRM, SEPERABLE FROM OTHER ENTITIES

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19
Q

MONETARY UNIT

A

PRESUMES US FIRMS & THEIR USE OF US DOLLARS IS JUSTIFIED BECAUSE IT IS RELEVANT, EASY TO USE, UNIVERSALLY AVAILABLE, UNDERSTANDABLE, AND STABLE

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20
Q

PERIODICITY

A

ALLOWS FOR ECONOMIC POSITIONS AND RESULTS TO BE DIVIDED INTO ATRIFICIAL TIME PERIODS

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21
Q

PRINCIPLES

A

HISTORICAL COST
REVENUE RECOGNITION
MATCHING
FULL DISCLOSURE

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22
Q

HISTORICAL COST

A

GAAP REQUIRES THAT MOST ASSETS & LIABILITIES BE ACCOUNTED FOR AND REPORTED AT HISTORICAL COST. (AT ACQUISITION HISTORICAL COST & FMV ARE PRESUMES TO BE EQUAL)

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23
Q

REVENUE RECOGNITION

A

REVENUE IS RECOGNIZED WHEN EARNED, NOT DEPENDANT ON CASH RECIEPTS & MEASURES AT FMV

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24
Q

FULL DISCLOSURE

A

REQUIRES THAT NOTES OR FOOTNOTES AND SUPPLEMENTAL INFORMATION BE PROVIDED IN ADDITION TO BASIC FINANCIAL STATEMENTS

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25
MEASUREMENT ATTRIBUTES OTHER THAN HISTORICAL COST THAT ARE USED TO REPRESENT ITEMS REPORTED ON THE FINANCIAL STATEMENTS
1. NET REALIZABLE VALUE 2. CURRENT REPLACEMENT COST 3. FAIR VALUE 4. AMORTIZED COST 5. NET PRESENT VALUE
26
NET REALIZABLE VALUE
THE NET VALUE TO BE RECEIVED AFTER THE COSTS OF THE SALE ARE DEDUCTED FROM THE CURRENT MARKET VALUE. USED TO APPROXIMATE LIQUIDATION VALUE
27
CURRENT REPLACEMENT COST
HOW MUCH YOU WOULD HAVE TO PAY TO REPLACE AN ASSET
28
FAIR VALUE
AKA CURRENT MARKET VALUE THE PRICE THAT WOULD BE RECEIVED TO SELL AN ASSET (OR SETTLE A LIABILITY).
29
AMORTIZED COST
HISTORICAL COST LESS THE ACCUMULATED AMORTIZATION OR DEPRECIATION OF AN ASSET
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NET PRESENT VALUE
THE VALUE DETERMINED FROM DISCOUNTING THE EXPECTED FUTURE CASH FLOWS
31
FASB STANDARD SETTING PROCESS
1. IDENTIFY TOPIC 2. CONDUCT PRE-RESEARCH AGENDA 3. MAKE AGENDA DECISION 4. DELIBERATE AT PUBLIC MEETING 5. ISSUE EXPOSURE DRAFT FOR PUBLIC COMMENT 6. HOST PUBLIC HEARINGS 7. REDELIBERATE BASED ON COMMENTS AND RESEARCH 8. ISSUE FINAL ASU 9. EDUCATION 10. IMPLEMENTATION
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WHICH INVENTORY ERRORS CARRY FORWARD
ENDING
33
DISCONTINUED OPERATIONS
STRATEGIC SHIFT/MAJOR EFFECT ON OPERATIONS "GEL" DISPOSAL OF MAJOR GEOGRAPHIC AREA DISPOSAL OF MAJOR EQUITY METHOD INVESTMENTS DISPOSAL OF MAJOR LINE OF BUSINESS
34
STATEMENT OF CASH FLOWS 3 SECTIONS
OPERATING - DAY TO DAY OPERATING INCOME AND EXPENSE INVESTING - ACQUISITION AND DISPOSAL OF NON-CURRENT ASSETS FINANCING - METHODS OF RAISING CAPITAL
35
COMPONENTS OF EXTERNAL FINANCIAL REPORT
I CAN BUY EMILY CANDY FOR ONE INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME BALANCE SHEET STATEMENT OF CHANGES IN EQUITY STATEMENT OF CASH FLOWS FOOTNOTES & DISCLOSURES & SUPPLEMENTARY SCHEDULES AUDITORS OPINION
36
ASC DOES NOT INCLUDE GUIDANCE FOR NON-GAAP MATTERS INCLUDING:
1. OTHER COMPREHENSIVE BASIS FOR ACCOUNTING 2. CASH BASIS 3. INCOME TAX BASIS 4. REGULATORY ACCOUNTING PRINCIPLES 5. GOVERNMENTAL ACCOUNTING STANDARDS
37
NON-AUTHORITATIVE GUIDANCE
1. WIDELY PREVELANT PRACTICES 2. FASB CONCEPT STATEMENTS 3. AICPA ISSUE PAPERS
38
GAAP AKA ACCOUNTING STANDARDS
THE RULES OF FINANCIAL REPORTING FOR BUSINESS ENTERPRISES GAAP ADDRESSES: 1. RECOGNITION 2. MEASUREMENT 3. DISCLOSURES ASSOCIATED WITH FINANCIAL REPORTING
39
RECOGNITION
A RECOGNIZED ITEM IS RECORDED IN AN ACCOUNT AND ULTIMATELY AFFECTS THE FINANCIAL STATEMENTS
40
MEASUREMENT
CONCERNS THE DOLLAR AMOUNT ASSIGNED TO AN ITEM
41
DISCLOSURE
UNRECOGNIZED AMOUNTS REPORTED INTHE FOOTNOTES TO COMPLETE THE PORTRAYAL OF THE FIRMS FINANCIAL POSITION AND PERFORMANCE
42
FASB
FINANCIAL ACCOUNTING STANDARDS BOARD - CURRENT STANDARD SETTING BODY IN THE US
43
SEC
SECURITIES & EXCHANGE COMMISSION FEDERAL GOVT AGENCY THAT ADMINISTERS THE SECURITIES LAWS TO FIRMS THAT ISSUE DEBT AND EQUITY SECURITIES TO THE PUBLIC. CONGRESS HAS GRANTED THE SEC THE AUTHORITY TO ESTABLISH GAAP, BUT GENERALLY HAS CEDED TO FASB.
44
FAF
FINANCIAL ACCOUNTING FOUNDATION PARENT BODY THAT APPOINTS MEMBERS TO THE FASB & ITS ADVISORY COUNCIL. ENSURES ADEQUATE FUNDING FOR THE FASB & EXERCISES OVERSITE OVER FASB.
45
FASAC
FINANCIAL ACCOUNTING STANDARD ADVISORY COUNCIL PROVIDES GUIDANCE ON MAJOR POLICY ISSUES, PROJECT PRIORITIES, AND THE FORMATION OF TASK FORCES
46
AICPA
THE NATIONAL PROFESSIONAL ORGANIZATION FOR PRACTICING CPA'S. THEIR MISSION IS TO PROVIDE ITS MEMBERS WITH RESOURCES, INFORMATION AND LEADERSHIP SO THAT THEY MAY IN TURN PROVIDE VALUABLE SERVICES FOR THE BENEFIT OF THEIR CLIENTS.
47
10 ELEMENTS OF FINANCIAL STATEMENTS
1. ASSETS 2. LIABILITIES 3. EQUITY 4. INVESTMENTS BY OWNERS 5. DISTRIBUTIONS TO OWNERS 6. COMPREHENSIVE INCOME 7. REVENUES 8. EXPENSES 9. GAINS 10. LOSSES
48
ASSETS
RESOURCES THAT HAVE PROBABLE FUTURE BENEFITS TO THE FIRM, CONTROLLED BY MANAGEMENT, RESULTING FROM PAST TRANSACTIONS
49
LIABILITIES
PROBABLE FUTURE SACRIFICES OF ECONOMIC BENEFITS ARISING FROM PRESENT OBLIGATIONS OF AN ENTITY TO TRANSFER ASSETS OR PROVIDE SERVICES TO OTHER ENTITIES AS A RESULT OF PAST TRANSACTIONS OR EVENTS
50
EQUITY
RESIDUAL INTEREST IN THE FIRMS ASSETS, (AKA NET ASSETS FOR NFP ORGANIZATIONS). PRIMARILY COMPRISED OF PAST INVESTOR CONTRIBUTIONS AND RETAINED EARNINGS *CAPITAL STOCK *ADDITIONAL PIC * RETAINED EARNINGS *ACCUM OCI *TREASURY STOCK
51
INVESTMENTS BY OWNERS
INCREASES IN THE NET ASSETS OF AN ENTITY FROM TRANSFERS TO IT BY EXISTING OWNERS OR PARTIES SEEKING OWNERSHIP INTEREST
52
DISTRIBUTIONS TO OWNERS
DECREASES IN NET ASSETS OF AN ENTITY FROM THE TRANSFERS OF AN ASSET, PROVISION OF SERVICES, OR INCURRENCE OF LIABILITIES BY THE ENTERPRISE OWNERS
53
COMPREHENSIVE INCOME
ACCOUNTING INCOME PLUS CERTAIN HOLDING GAINS AND LOSSES & OTHER ITEMS. IT INCLUDES ALL CHANGES IN EQUITY OTHER THAN INVESTMENTS BY OWNERS AND DISTRIBUTIONS TO OWNERS *PENSION ADJUSTMENTS *UNREALIZED GAINS/LOSSES (AVAILABLE FOR SALE SECURITIES) *FOREIGN EXCHANGE GAINS/LOSSES *EFFECTIVE PORTION OF CASH FLOW HEDGE *REVALUATION OF ASSETS
54
REVENUES
INCREASES IN ASSETS OR SETTLEMENTS OF LIABILITIES OF AN ENTITY BY PROVIDING GOODS OR SERVICES
55
EXPENSES
DECREASES IN ASSETS OR INCURRENCES OF LIABILITIES OF AN ENTITY BY PROVIDING GOODS OR SERVICES. EXPENSES PROVIDE BENEFIT TO THE FIRM
56
GAINS
INCREASES IN EQUITY OR NET ASSETS FROM PERIPHERAL OR INCIDENTAL TRANSACTIONE
57
LOSSES
DECREASES IN EQUITY OR NET ASSETS FROM PERIPHERAL OR INCIDENTAL TRANSACTIONS. PROVIDES NO BENEFIT TO THE FIRM
58
CODIFICATION AREAS
GEORGIE PORGIE ATE LEAHS & EMILYS RED EARRINGS BEFORE I COULD STOP HIM GENERAL PRESENTATON ASSETS LIABILITIES EQUITY REVENUES EXPENSES BROAD TRANSACTIONS INDUSTRY
59
EQUITY
CAROT CAPITAL STOCK ADDITIONAL PIC RETAINED EARNINGS ACCUMULATED OCI TREASURY STOCK
60
ENHANCING QUALITIES
CUT LIKE A V COMPARABLE UNDERSTANDABLE TIMLINESS VERIFIABILITY
61
ACCOUNTING ASSUMPTIONS
EMILY GOT ME TACOS! ENTITY GOING CONCERN MEASUREMENT TIME PERIOD ASSUMPTION
62
GOODWILL
THE EXCESS OF PURCHASE PRICE PAID FOR ANOTHER BUSINESS OVER THE MARKET VALUE OF ITS NET ASSETS.
63
COMPREHENSIVE INCOME DOES NOT INCLUDE
1. RETROSPECTIVE EFFECTS OF CHANGES IN ACCOUNTNG PRINCIPLES 2. PROIOR PERIOD ADJUSTMENTS
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NET INCOME AND OCI
NET INCOME IS CLOSED TO RETAINED EARNINGS AND OCI IS CLOSED TO AOCI EACH YEAR (OE ACCOUNTS)
65
CASH EQUIVALENTS
SHORT TERM HIGHLY LIQUID INVESTMENTS THAT ARE READILY CONVERTABLE TO KNOWN AMOUNTS OF CASH. (SUFFICIENTLY CLOSE (3 MONTHS) TO MATURITY)
66
SCF METHOD PREFERED BY FASB
DIRECT METHOD
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ADDITIONAL REQUIREMENTS TO INDIRECT SCF
DISCLOSURE OF THE AMOUNT OF CASH PAID FOR INTEREST AND INCOME TAXES
68
ADDITIONAL REQUIREMENTS TO DIRECT SCF
SCHEDULE TO RECONCILE NET INCOME TO CASH FLOW FROM OPERATING ACTIVITIES
69
PRIOR PERIOD ADJUSTMENTS ARE SHOWN
ON THE STMT OF RETAINED EARNINGS AS ADJUSTMENTS TO THE BEG BALANCE OF RE IN THE YEAR THE ERROR IS DISCOVERED.
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INCOME STATEMENT
MEASURES THE PERFORMANCE OF THE FIRM FOR THE PERIOD
71
STATEMENT OF COMPREHENSIVE INCOME
REPORTS ALL NON-OWNER CHANGES IN EQUITY OVER A PERIOD OF TIME
72
BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)
DISCLOSES THE RESOURCES OF THE FIRM AT A POINT IN TIME
73
STATEMENT OF STOCKHOLDERS EQUITY
PRESENTS THE CHANGES IN THE OWNERS EQUITY OVER A PERIOD OF TIME. PRESENTS CHANGES IN CONTRIBUTED CAPITAL, ADDITIONAL PAID IN CAPITAL AND RETAINED EARNINGS. THESE CHANGES ARISE FROM THE PURCHASE OF SALE OF SHARES OF THE ENTITIES STOCK, THE CHANGES IN COMPREHANSIVE INCOME AND THE PAYMENT OF DIVIDENDS.
74
STATEMENT OF CASH FLOWS
DESCRIBES THE MAJOR CHANGES IN CASH BY MEANINGFUL CATEGORY
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CASH EQUIVALENTS
SHORT TERM INVESTMENTS THAT ARE CONVERTIBLE INTO A KNOWN AND FIXED AMOUNT OF CASH AND HAVE AN ORIGINAL MATURITY TO THE PURCHASER OF THREE MONTHS OR LESS
76
ACCOUNTING INCOME
REVENUES LESS EXPENSES PLUS GAINS LESS LOSSES
77
ECONOMIC INCOME
THE CHANGE IN THE NET WORTH OF A BUSINESS ENTERPRISE DURING AN ACCOUNTING PERIOD
78
INC STATEMENT FORMAT
NET SALES (LESS COGS) =GROSS MARGIN (LESS OPERATING EXPENSES) PLUS MISC REVENUES AND GAINS (LESS MISC EXPENSES AND LOSSES) +- UNUSUAL OR INFREQUENT ITEMS = INCOME FROM CONTINUING OPERATIONS BEFORE TAX (LESS INCOME TAX EXPENSE) = INCOME FROM CONTINUING OPERATIONS +- INCOME FROM DISCONTINUED OPERATIONS (NET OF TAX) = NET INCOME

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