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FARE1 > F-1Concepts > Flashcards

F-1Concepts Flashcards

1
Q

Since 1934 who have determine GAAP?-SCAF

A

SEC
CAP
APB
FASB

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2
Q

What mean SEC?

A

Security and Exchange Commission

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3
Q

What mean APB?

A

Accounting Principle Board

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4
Q

What mean CAP?

A

Committee on Accounting Procedure

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5
Q

Who was establish SEC and What Establish?

A
  • Was establish by Securities and Exchange Act of 1934
  • SEC has all reporting requirement for any company listed in US exchange
  • All companies that issue securities must be follow SEC rules and regulations
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6
Q

What happened on July 1 2009?

A

The FASB “Accounting Standard Codification” summarize in a single source of authoritative non-governmental GAAP.

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7
Q

Authoritative Standard Setters include in the codification? FEDPRIA

A 
Financial Accounting Standard Board
Emerging Issue Task Force
Derivative 
P- Accounting Principle Board Opinion
R- Accounting Research Bulletin
I- Accounting Interpretation
A- American Institute of Certified Public Accountant
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8
Q

Literature that include FASB? SITSSS

A

S- Statement of Financial Accounting Standards
I- Interpretations
T- Technical Bulletin
S- Staff Position
S- Staff Implementation Guides
S- Statement of Financial Accounting Concepts

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9
Q

Literature that include AICPA? SAPT

A

S-Statement of Position
A- Auditing and Accounting Guides
P- Practice Bulletin
T-Technical Inquiry Service

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10
Q

To increase the usefulness of the codification for public companies the SEC include in codification: (Authoritative Pronouncement)

A
  • Regulation S-X Regulation
  • Financial Reporting Releases for (FRR)
  • Accounting Series Releases Accounting (ASR)
  • Interpretative Releases I (IR)
  • Staff Accounting Bulletin S (SAB)
  • EITF Emerging
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11
Q

What is FAF and What create?

A
  • Is Financial Accounting Foundation

- Create the PCC - Private Company Council

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12
Q

What is the goal of the PCC?

A
  • the goal is to establish alternative GAAP to make the private financial statement:
  • More Relevant
  • Cost-Beneficial
  • Less Complex
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13
Q

What is an ASU, what provide and to what is serve?

A
  • Accounting Standard Update
    • Provide background information
    • Update the codification
    • Describe why is for the update
  • Serve to update the Accounting Standard Codification (ASC)
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14
Q

What is the IASB and when was establish?

A
  • International Accounting Standard Board

- Was establish on 2001 as part of the International Financial Accounting Standard Foundation

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15
Q

What is the purpose of the IASB?

A

-the purpose is to develop a single set of high qualitative global standards of accounting.

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16
Q

IFRS Foundation is Sponsor of?

A
  • IASB (International Accounting Standard Board)

- IFRIC (International Financial Reporting Committee)

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17
Q

What do IFRIC?

A
  • help IASB in establish and improve financial accounting and reporting
  • assist IASB for international convergence
  • provide guidance for new identified reporting issues
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18
Q

What is IFRS and what include?

A

-International Financial Reporting Standards
-Include:
= International Accounting Standars
= InternationalFinancial Reporting Standards
= Interpretations

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19
Q

What it call the FASB Conceptual Framework

A

Statement of Financial Accounting Concepts

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20
Q

What is the name of SFAC No. 8 and the chapter 1 & 3?

A
  • Conceptual Framework for Financial Reporting
  • Chapter 1- Objective of General Purpose Financial Reporting
  • Chapter 3- Qualitative Characteristics of Useful Information
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21
Q

What is the objective of general purpose financial reporting?

A
  • is to provide financial information of the reporting entity to primary users that is useful to make decision about how many resources provide to the reporting entity.
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22
Q

What are the primary users?

A
  • External Users:
  • Existing and Potential:
    • Investors
    • Lenders
    • Other Creditors
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23
Q

What reflects this financial reporting?

A
  • Entity resources
  • Claims against the entity
  • management and governing board performance
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24
Q

Fundamental Qualitative Characteristics?

A
  • Relevance

- Faithful Representation

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25
Q

What Relevance Means?

A

Means that the financial information is relevant when it capable to change the decision of the primary users.

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26
Q

What mean faithful representation?

A

That the reporting entity must faithfully represent the economic phenomena.

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27
Q

To the information be relevance, what are the characteristics to have?

A
  • Predictive Value
  • Confirming Value
  • Materiality
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28
Q

What is predictive value?

A

The information has predictive value when the user can predict the future outcomes.

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29
Q

What is confirming value?

A

The information has confirming value when it provides feedback about the evaluation previously made by users.

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30
Q

What is Materiality?

A

the information is material when the omission or misstatement could affect the decision made by users.

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31
Q

What characteristics require faithful representation?

A
  • Completeness
  • Neutrality
  • Free from Error
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32
Q

What mean completeness?

A

-when the financial information include all information necessary that the user can use to understand the economic phenomena. This include the financial statements and its notes.

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33
Q

What mean neutrality?

A

-When the financial information is free from bias in selection or representation.

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34
Q

What mean free from error?

A

-When the process of selection or application to creating financial statements have no errors or omissions in the description of economic phenomena.

35
Q

Steps to apply fundamental qualitative characteristics

A
  • identify the phenomena
  • identify the type of information that is relevant
  • -determine whether the information is available and can be faithfully represented.
36
Q

What is an enhancing characteristic?

A
  • enhance the usefulness of information that is relevant and faithfully represented.
  • are used to know how a phenomena is represented
37
Q

Which are the enhancing characteristics?

A
  • Comparability
  • Verifiability
  • Timeliness
  • Understandability
38
Q

What mean Comparability?

A

-the information is more useful when the user can compare same information but similar reporting entities in the same or other periods.

39
Q

Which characteristic helps to achieve comparability?

A

-Consistency- because is refer to use same method through the time for the same items

40
Q

What mean verifiability?

A

-To the information be more useful we need someone that must be independent to verify the information, to verify the consistency to compare it with other entity information.

41
Q

What mean timeliness?

A

-Means that the information is available in time so the users can be capable to made the correct decision.

42
Q

What mean understandability?

A

-the information is understandable if it is clearly presented, well classified, characterized and concisely.

43
Q

Which is the Principal Constraint for achieve that the information have all the characteristics?

A
  • Cost
  • Because the benefits of presented financial reporting must be greater than the cost of obtaining and presenting that information.
44
Q

What Concepts were replace by SFAC 8?

A
  • SFAC 1- Objective of Financial Reporting by Business Enterprise
  • SFAC 2 - Qualitative Characteristics of financial reporting
45
Q

SFAC 6 replace?

A

SFAC 3- Elements of financial statements of a business

46
Q

What is the SFAC No. 4?

A
  • Objective of Financial Reporting of Nonbusiness organizations.
  • Present the distinguish characteristics between business and nonbusiness.
47
Q

Characteristics of nonbusiness organization?

A
  • Their resources come from contributions and grants
  • Do not provide goods and services for profit
  • Do not transfer or redeemed the ownership because it not exist.
48
Q

Users of financial Information of Nonbusiness Organizations? 4 groups

A
  • Resources Providers such as lenders, suppliers, employees, members, contributors, taxpayers
  • The people who is benefit from the services provided
  • Governing and Oversight bodies
  • Manager
49
Q

Objectives of Financial Reporting of Nonbusiness Organization?

A
  • improve the Allocation of resources
  • Evaluate the services and the ability to provide services
  • Evaluate the performance and stewardship of the manager.
  • Information about liquidity, resources, obligation, inflows and outflows.
50
Q

SFAC NO. 5?

A
  • Recognition and Measurement in the Financial Statements.

- provide guidance on what and when the information should be incorporate in the financial statements.

51
Q

What mean recognition?

A

-Is the process of recording an item in the financial statement and classifying it as asset, liability, equity, revenue, or expense.

52
Q

Which are the Measurement Attributes for Assets and Liabilities?

A
  • Historical Cost- PP&E
  • Current Cost- Inventory
  • Net Realizable Value- A/R
  • Current Market Value- Marketable Securities
  • Present Value - Long-Term Debt (Bonds)
53
Q

Fundamental Assumptions?

A
  • Entity Assumption
  • Going Concern Assumption
  • Monetary Unit Assumption
  • Periodicity Assumption
  • Historical Cost Principle
  • Revenue Recognition Principle
  • Matching Principle
  • Accrual Accounting
  • Full Disclosure
  • Conservatism Principle
54
Q

What mean entity assumption?

A

-Company is a separate entity from the owner.

55
Q

What mean Going Concern Assumption?

A

-The company is continuing the operations infinite

56
Q

What mean Monetary unit assumption?

A
  • That all the financial information will be on a single currency.
  • Everything is measure as money
57
Q

What mean periodicity assumption?

A
  • that the financial information will be report quarterly, semiannually, or annually.
  • The time will be divided in periods.
58
Q

What is Historical Principle?

A

Financial information will be accounted for and based on cost not current market value.

59
Q

What is revenue recognition?

A

Revenue should recognize when it earned, realize or realizable not when it receive.

60
Q

What is Matching Principle?

A
  • When the expenses are matched against that revenue.

- Expenses incurred to generate a revenue.

61
Q

What is accrual accounting?

A
  • revenues are recognize when they are earned and expenses are recognize in the same period of related revenue.
  • Might record the revenue or expense without the exchange of cash.
62
Q

What mean Full Disclosure principle?

A
  • give user all necessary information so they can make a decision.
  • Example- footnotes on F/S . The footnotes are part of completeness requirements because explain the user the basis of why is that recording of that way.
63
Q

What mean conservatism principle?

A
  • Recognize revenues/Gains when the processing earned is complete and expenses/loss immediately.
  • Method that not overstate the assets and understate the liabilities.
64
Q

SFAC No. 6?

A

Elements of Financial Statements

65
Q

What is an element of financial statements?

A

-They are the components of financial statements. And should be measure and recognize following the SFAC No. 5.

66
Q

Which are the elements?

A
  • Revenue
  • Expense
  • Gain
  • Losses
  • Asset
  • Liability
  • Equity
  • Investment by owners
  • Distribution to Owners
67
Q

What is comprehensive income?

A

Net Income minus other comprehensive income (transaction with owners except Investment and distribution by owners)

68
Q

Element Revenue?

A
  • Revenues are inflows that compound the core of the business.
  • Serve to enhance the asset or reduct the liabilities.
69
Q

Element Expense?

A

-Are outflows that compound the core of the business that include uses of assets(depreciation), insurance of liabilities from delivering goods or services.

70
Q

Element Gains?

A

Are increases in Equity that is not part of the normal business operation

71
Q

Element Loss?

A

Are decrease in Equity that is not part of the normal operation. Example Impairments and Write-Off

72
Q

Element Asset?

A

are probable future economic benefits to be receive by the company as result of past operation.

73
Q

Element Liability?

A

are probable future sacrifices of economic benefits arising for a present transaction to transfer asset or provide services to other entities in the future as result of past transaction.

74
Q

Element Equity?

A

Residual interest of the company that remains after deducting its liabilities

75
Q

Element Investment by owners?

A

Increase in assets from transfer cash, property, or services to the company.

76
Q

Element Distribution to owners?

A

Decrease in assets from transfer cash, property, or services the owners

77
Q

SFAC No. 7?

A

Using Cash Flow Information and Present Value in Accounting

78
Q

For what is used SFAC 7? what provide?

A
  • provide a framework to when employ the future cash flow as measurement.
  • Also provide a set of use for present value when the timing or amount of cash flow are uncertain.
79
Q

Five elements of PV? EETPO

A
  • Estimate future cash flows
  • Expectations about timing variations of future cash flows
  • tima value money
  • price bearing for uncertainty
  • Other Factors- liquidity issues or market imperfections
80
Q

Two approaches for PV?

A
  • Traditional Approach

- Expected Cash flow Approach

81
Q

What is the traditional approach?

A

-Is focus on interest. This approach when the interest is fixed or the cash flow are not expect to vary.

82
Q

What is the Expected future cash flow approach?

A

-Not focus on interest rate , focus on risk-free rate of return as the discount rate taking in counts the uncertainty.

83
Q

According to the IASB, what is an underlying assumption of financial statement preparation and presentation?

A

Going Concern Assumption

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