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FARE1 > F-1I/S > Flashcards

F-1I/S Flashcards

1
Q

The purpose of Income Statement?

A
  • provide information about the uses of fund
  • uses of funds that will never be use to earn income
  • funds created by those expenses
  • funds not associate with the earning process.
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2
Q

usefulness of Income Statement?

A
  • determine profitability
  • value for investments and credit worthiness
  • predict information about future cash flows
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3
Q

What mean cost?

A

-Amount paid for something (asset, services, and merchandise)

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4
Q

What mean unexpired cost?

A

-Those cost that will expire in a future and be charge against revenues from future periods.

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5
Q

What includes income from continuing operations?

A
  • Operating Activities (Revenues, CGS, Selling and Administrative Expenses)
  • Non-Operating Activities (Other revenues and gains, other expenses and losses)
  • Income Tax
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6
Q

Major components of I/S and Retained Earning

A
  • Income from continuing operations
  • Income from discontinued operations
  • Cumulative Effect of change in accounting principle
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7
Q

What is the cumulative effect of change in accounting principle?

A

-Is the cumulative effect in the period of change from one acceptable accounting method to other acceptable accounting method because present the financial information more fairly.

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8
Q

Multiple Step Income Statement reports?

What is the benefit?

A
  • Operating Activities
  • Non-Operationg Activities
  • Taxes
  • Enhanced the user information
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9
Q

What is presented in single step income statement?

A

-Total Revenues and Total Expenses(include income taxes)

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10
Q

What is the benefits of single step income statement?

A

All the items are presented below one classification and do not appear to be classified as more important than the others.

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11
Q

Three calculations of discontinued operations?

A
  • Impairment Loss
  • Gain/Loss from Actual Operations
  • Gain/Loss on disposal
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12
Q

The three calculation is include in what period?

A

In the period in which they occur.

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13
Q

What mean discontinued operation?

A

-That the operation is a component of the entity.

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14
Q

What is a component of an entity?

A
  • Is part of the company that can be distinguished both operationally and for financial reporting.
  • Have its own inflows and outflows, assets, and liabilities.
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15
Q

Under GAAP, a component of an entity can be? ORRSA

A
  • Operating Segment
  • Reportable Segment
  • Reporting Unit
  • Subsidiary
  • Asset Group
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16
Q

What is an asset group?

A

Group of asset that will be dispose or transfer together in a single transaction and liabilities directly associated with those assets.

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17
Q

Under IFRS, a component of an entity can be? SGS

A
  • Separate major lines of business
  • Geographical Area of Operations
  • Subsidiary to resale
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18
Q

Discontinued Rules is going to apply if we have?

A
  • Business- set of activities that s conducted for the purpose of providing benefit to the investors, owners, members, or participants
  • Nonprofit Activity- provide benefits other than goods and services for a profit.
  • Held for Sale-
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19
Q

Criteria for classified as Held for Sale?

A
  • Management commits a plan to sell
  • The component is available for immediate sale in its present conditions
  • active program to locate a buyer
  • sale component is probable and expected to sale within a year or less
  • is being actively marketed
  • significant changes to the plan will made
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20
Q

When the rule of discontinued operation take place?

A
  • Has been dispose

- Is classified as held for sale.

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21
Q

when we report a discontinued activity?

A
  • represent strategic shift

- major effect on Entity’s Operation

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22
Q

Example of strategic shift ? GEL

A
  • Disposal of a major geographical area
  • disposal of a major equity method investment
  • disposal of a major line of business
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23
Q

Types of items include in results of discontinued operations?

A

1- Gain/Loss as results of operations of the component
2-Gain/Loss on disposal of the component (upon sale)
3-Actual impairment gain or loss

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24
Q

Formula to calculate an impairment loss?

A

(SP/NRV - BV)- Cost of sell

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25
Q

When we recognize the anticipate gain or loss?

A

at the date of the sale.

26
Q

When do we recognize subsequent adjustments to amounts previously reported?

A

-should be directly related to the disposal and are classified in the current period in discontinued operations.

27
Q

what mean directly related?

A
  • demonstrate cause-and-effect relationship

- occur no later than one year after the date of disposal

28
Q

Measurement and valuation of discontinued operations?

A

-at the lower of its carrying amount or fair value less costs of sell.

29
Q

what mean cost of sale?

A

incremental direct costs to transact the sale.

30
Q

how its reported the discontinued operation?>

A

-separate component of income (net of tax)

31
Q

What are the cost associate with exit and disposal activities?

A
  • Involuntary employee termination benefits
  • cost to terminate a contract that is not a capital lease. (rental agreement)
  • other cost such as cost to consolidate facilities or relocate employees
32
Q

What mean exit or disposal activities?

A
  • Downsizing

- Closing a hub

33
Q

what GAAP require about exit or disposal activities?

A

-recognition of a liability for the costs associated with an exit or disposal activity.

34
Q

Criteria for liability recognition?

A

1- An obligation event has occurred
2-The event results in a present obligation to transfer assets or to provide services in the future
3-The entity has little or no discretion to avoid the future transfer of assets or providing services

35
Q

Disclosure items in the notes as part of exit or disposal activity?

A

1- a description of the exit or disposal activity, including the circumstances leading to the expected activity and expected completion date.
2- for major costs:
-total amount expected to be incurred in the period and cumulative in the period.
-reconciliation of the liability from the beginning to the ending balances showing the changes during a period for costs incurred.
3- the line item in the I/S in which the costs are aggregated.
4- total amount expected to be incurred in the period and period to date, net of any adjustments with an explanation of the reasons.
5- if a liability for cost associated with the activity is not recognized because fair value cannot be reasonably estimated, that fact and reason should be disclosed.

36
Q

Accounting Changes are broadly classified as:

A
  • change in accounting estimate
  • change in accounting principle
  • changes in accounting entity
37
Q

when do we use change in accounting estimate?

A

-occurs when it is determined that the estimate previously used by the company is incorrect.

38
Q

Events resulting in Estimate Changes:

A
  • changes in the lives of fixed assets
  • adjustments of year-end accrual of officers salaries and/or bonuses
  • write-downs of obsolete inventory
  • material nonrecurring IRS adjustments
  • settlement of litigation
  • changes in accounting principle that are inseparable from a change in estimate.
39
Q

the reporting a change in estimate is?

A

prospectively

40
Q

the reporting of Changes in accounting principle is?

A

retrospectively

41
Q

Rule of preferability change in accounting principle?

A

an accounting principle may changed only if required by GAAP/IFRS or if the alternative principle is preferable and more fairly presents the information.

42
Q

types of Effects of a change in principle?

A

-Direct Effects- are adjustment that would be necessary to restate the F/S
-Indirect Effects- effects in items base on earnings
Cumulative Effect

43
Q

What is the cumulative effect and what include?

A

Non comparative F/S is presented:
-Is the difference between Beg. R/E and the R/E if would have been if the accounting change had been retroactively applied to all period.
Comparative F/S presented:
-is equal to the difference between beg. R/E in the first period and what R/E have been if the new principle had been applied to all prior period.
-include:
direct effects and only those indirect effects that are entered in the accounting records.

44
Q

Where do we recognize change in accounting principle?

A

Adjusting beginning retained earnings in the earliest period presented.

45
Q

Exception to the general rule of change in principle?

A
  • Impracticable Estimate

- Change in depreciation method

46
Q

IFRS include the change in accounting entity concept?

A

NO

47
Q

How we do the changes in accounting entity?

A
  • retrospectively.
  • We must restate all the prior F/S that are presented (If comparative are presented)
  • We should disclose in full all the changes include in continuing from operation, net income, and retained earnings.
48
Q

What mean Error Correction in Accounting?

A
  • error in recognition, measurement, presentation or disclosure from mathematical mistakes, mistakes in application of US GAAP
  • Change from No GAAP to GAAP (Specific correction of an error)
49
Q

when the gain/loss is presented separately of Income from continuing operation?

A

a material transaction that is “infrequent in occurrence” but not “unusual in nature” should be presented separately as a component of “income from continuing operations” when the transaction results in a gain or loss.

50
Q

The cumulative effect of a change in accounting estimate should be shown separately:

A

It should not be recorded separately on any financial statement.

51
Q

To what retained earning we adjust? beginning or ending?

A

beginning

52
Q

What Include General & Administrative?

A

-Accounting and Legal fees
-Insurance
Officer Salaries

53
Q

What include inventory cost?

A
  • Purchase price

- Freight in

54
Q

What include Selling Expense

A
  • -Freight out
  • salaries and commissions
  • advertising
55
Q

What include non-operation?

A
  • Auxiliary activities

- interest

56
Q

Cash Basis is an US GAAP?

A

NO

57
Q

A liability is only recognized when all of the following criteria are met?

A
  • An obligating event has occurred.
  • The event results in a present obligation to transfer assets or to provide services in the future.
  • The entity has little or no discretion to avoid the future transfer of assets or providing of services.
58
Q

The net gain/loss on discontinued an operation include?

A
  • gain/loss from the sale of the division,
  • the operating gain/loss,
  • the employee termination benefits and
  • the cost to terminate the operating lease
59
Q

IFRS Accept the gain/losses on extraordinary items?

A

NO

60
Q

All prior period adjustment are reflected on?

A

Beginning Balance in Retained Earnings

61
Q

When we can not differentiate in accounting estimate and accounting principle what we do?

A

Is a change in accounting estimate treated as change in accounting principle accounted prospectively.

62
Q

Formula of double declining method?

A

No cuenta salvage value

  • Straight line * 2
  • (1/depreciation years)*2

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