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FAR > CONCEPTUAL FRAMEWORK, STANDARD SETTING & FINANCIAL REPORTING > Flashcards

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
Q

MEASUREMENT ATTRIBUTES OTHER THAN HISTORICAL COST THAT ARE USED TO REPRESENT ITEMS REPORTED ON THE FINANCIAL STATEMENTS

A
  1. NET REALIZABLE VALUE
  2. CURRENT REPLACEMENT COST
  3. FAIR VALUE
  4. AMORTIZED COST
  5. NET PRESENT VALUE
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26
Q

NET REALIZABLE VALUE

A

THE NET VALUE TO BE RECEIVED AFTER THE COSTS OF THE SALE ARE DEDUCTED FROM THE CURRENT MARKET VALUE.

USED TO APPROXIMATE LIQUIDATION VALUE

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27
Q

CURRENT REPLACEMENT COST

A

HOW MUCH YOU WOULD HAVE TO PAY TO REPLACE AN ASSET

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28
Q

FAIR VALUE

A

AKA CURRENT MARKET VALUE

THE PRICE THAT WOULD BE RECEIVED TO SELL AN ASSET (OR SETTLE A LIABILITY).

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29
Q

AMORTIZED COST

A

HISTORICAL COST LESS THE ACCUMULATED AMORTIZATION OR DEPRECIATION OF AN ASSET

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30
Q

NET PRESENT VALUE

A

THE VALUE DETERMINED FROM DISCOUNTING THE EXPECTED FUTURE CASH FLOWS

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31
Q

FASB STANDARD SETTING PROCESS

A
  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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32
Q

WHICH INVENTORY ERRORS CARRY FORWARD

33
Q

DISCONTINUED OPERATIONS

A

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
Q

STATEMENT OF CASH FLOWS 3 SECTIONS

A

OPERATING - DAY TO DAY OPERATING INCOME AND EXPENSE
INVESTING - ACQUISITION AND DISPOSAL OF NON-CURRENT ASSETS
FINANCING - METHODS OF RAISING CAPITAL

35
Q

COMPONENTS OF EXTERNAL FINANCIAL REPORT

A

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
Q

ASC DOES NOT INCLUDE GUIDANCE FOR NON-GAAP MATTERS INCLUDING:

A
  1. OTHER COMPREHENSIVE BASIS FOR ACCOUNTING
  2. CASH BASIS
  3. INCOME TAX BASIS
  4. REGULATORY ACCOUNTING PRINCIPLES
  5. GOVERNMENTAL ACCOUNTING STANDARDS
37
Q

NON-AUTHORITATIVE GUIDANCE

A
  1. WIDELY PREVELANT PRACTICES
  2. FASB CONCEPT STATEMENTS
  3. AICPA ISSUE PAPERS
38
Q

GAAP AKA ACCOUNTING STANDARDS

A

THE RULES OF FINANCIAL REPORTING FOR BUSINESS ENTERPRISES

GAAP ADDRESSES:
1. RECOGNITION
2. MEASUREMENT
3. DISCLOSURES ASSOCIATED WITH FINANCIAL REPORTING

39
Q

RECOGNITION

A

A RECOGNIZED ITEM IS RECORDED IN AN ACCOUNT AND ULTIMATELY AFFECTS THE FINANCIAL STATEMENTS

40
Q

MEASUREMENT

A

CONCERNS THE DOLLAR AMOUNT ASSIGNED TO AN ITEM

41
Q

DISCLOSURE

A

UNRECOGNIZED AMOUNTS REPORTED INTHE FOOTNOTES TO COMPLETE THE PORTRAYAL OF THE FIRMS FINANCIAL POSITION AND PERFORMANCE

42
Q

FASB

A

FINANCIAL ACCOUNTING STANDARDS BOARD - CURRENT STANDARD SETTING BODY IN THE US

43
Q

SEC

A

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
Q

FAF

A

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
Q

FASAC

A

FINANCIAL ACCOUNTING STANDARD ADVISORY COUNCIL

PROVIDES GUIDANCE ON MAJOR POLICY ISSUES, PROJECT PRIORITIES, AND THE FORMATION OF TASK FORCES

46
Q

AICPA

A

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
Q

10 ELEMENTS OF FINANCIAL STATEMENTS

A
  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
Q

ASSETS

A

RESOURCES THAT HAVE PROBABLE FUTURE BENEFITS TO THE FIRM, CONTROLLED BY MANAGEMENT, RESULTING FROM PAST TRANSACTIONS

49
Q

LIABILITIES

A

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
Q

EQUITY

A

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
Q

INVESTMENTS BY OWNERS

A

INCREASES IN THE NET ASSETS OF AN ENTITY FROM TRANSFERS TO IT BY EXISTING OWNERS OR PARTIES SEEKING OWNERSHIP INTEREST

52
Q

DISTRIBUTIONS TO OWNERS

A

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
Q

COMPREHENSIVE INCOME

A

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
Q

REVENUES

A

INCREASES IN ASSETS OR SETTLEMENTS OF LIABILITIES OF AN ENTITY BY PROVIDING GOODS OR SERVICES

55
Q

EXPENSES

A

DECREASES IN ASSETS OR INCURRENCES OF LIABILITIES OF AN ENTITY BY PROVIDING GOODS OR SERVICES.

EXPENSES PROVIDE BENEFIT TO THE FIRM

56
Q

GAINS

A

INCREASES IN EQUITY OR NET ASSETS FROM PERIPHERAL OR INCIDENTAL TRANSACTIONE

57
Q

LOSSES

A

DECREASES IN EQUITY OR NET ASSETS FROM PERIPHERAL OR INCIDENTAL TRANSACTIONS.

PROVIDES NO BENEFIT TO THE FIRM

58
Q

CODIFICATION AREAS

A

GEORGIE PORGIE ATE LEAHS & EMILYS RED EARRINGS BEFORE I COULD STOP HIM

GENERAL
PRESENTATON
ASSETS
LIABILITIES
EQUITY
REVENUES
EXPENSES
BROAD TRANSACTIONS
INDUSTRY

59
Q

EQUITY

A

CAROT

CAPITAL STOCK
ADDITIONAL PIC
RETAINED EARNINGS
ACCUMULATED OCI
TREASURY STOCK

60
Q

ENHANCING QUALITIES

A

CUT LIKE A V

COMPARABLE
UNDERSTANDABLE
TIMLINESS
VERIFIABILITY

61
Q

ACCOUNTING ASSUMPTIONS

A

EMILY GOT ME TACOS!

ENTITY
GOING CONCERN
MEASUREMENT
TIME PERIOD ASSUMPTION

62
Q

GOODWILL

A

THE EXCESS OF PURCHASE PRICE PAID FOR ANOTHER BUSINESS OVER THE MARKET VALUE OF ITS NET ASSETS.

63
Q

COMPREHENSIVE INCOME DOES NOT INCLUDE

A
  1. RETROSPECTIVE EFFECTS OF CHANGES IN ACCOUNTNG PRINCIPLES
  2. PROIOR PERIOD ADJUSTMENTS
64
Q

NET INCOME AND OCI

A

NET INCOME IS CLOSED TO RETAINED EARNINGS AND OCI IS CLOSED TO AOCI EACH YEAR (OE ACCOUNTS)

65
Q

CASH EQUIVALENTS

A

SHORT TERM HIGHLY LIQUID INVESTMENTS THAT ARE READILY CONVERTABLE TO KNOWN AMOUNTS OF CASH. (SUFFICIENTLY CLOSE (3 MONTHS) TO MATURITY)

66
Q

SCF METHOD PREFERED BY FASB

A

DIRECT METHOD

67
Q

ADDITIONAL REQUIREMENTS TO INDIRECT SCF

A

DISCLOSURE OF THE AMOUNT OF CASH PAID FOR INTEREST AND INCOME TAXES

68
Q

ADDITIONAL REQUIREMENTS TO DIRECT SCF

A

SCHEDULE TO RECONCILE NET INCOME TO CASH FLOW FROM OPERATING ACTIVITIES

69
Q

PRIOR PERIOD ADJUSTMENTS ARE SHOWN

A

ON THE STMT OF RETAINED EARNINGS AS ADJUSTMENTS TO THE BEG BALANCE OF RE IN THE YEAR THE ERROR IS DISCOVERED.

70
Q

INCOME STATEMENT

A

MEASURES THE PERFORMANCE OF THE FIRM FOR THE PERIOD

71
Q

STATEMENT OF COMPREHENSIVE INCOME

A

REPORTS ALL NON-OWNER CHANGES IN EQUITY OVER A PERIOD OF TIME

72
Q

BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)

A

DISCLOSES THE RESOURCES OF THE FIRM AT A POINT IN TIME

73
Q

STATEMENT OF STOCKHOLDERS EQUITY

A

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
Q

STATEMENT OF CASH FLOWS

A

DESCRIBES THE MAJOR CHANGES IN CASH BY MEANINGFUL CATEGORY

75
Q

CASH EQUIVALENTS

A

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
Q

ACCOUNTING INCOME

A

REVENUES LESS EXPENSES PLUS GAINS LESS LOSSES

77
Q

ECONOMIC INCOME

A

THE CHANGE IN THE NET WORTH OF A BUSINESS ENTERPRISE DURING AN ACCOUNTING PERIOD

78
Q

INC STATEMENT FORMAT

A

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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