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F1 Flashcards

Standard Setting, Income Statement, Reporting Requirements

1
Q

What is FEDPRIA? (Standard setters of authoritative liaterature.)

A
  • Financial Accounting Standards Board (FASB)
  • Emerging issues task force (ETF)
  • Derivative implementation group issues
  • Accouting [P]rinciples Board Opinions
  • Accounting [R]esearch bulletins
  • Accounting [I]nterpretations
  • American Institute of Certified Public accountants (AICPA)
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2
Q

Fundemental Characteristic of Useful Financial Information

A

Relevance and Faithful representation.

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3
Q

Passing Confirms Money

Factors that determine relevance

A

PCM

  • Predictive Value
  • Confirming Value
  • Materiality
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4
Q

Completely Neutral is Free from error

Factors that determine Faithful Representation

A

[CNF]

  • Completeness
  • Neutrality
  • Freedom from Error
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5
Q

Compare and Verify in Time to Understand

Enhancing Qualitative Characteristics

A

CVTU

  • Comparability
  • Verifiability
  • Timeliness
  • Understandability
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6
Q

SFAC No. 5 Recognition and measurement in the financial Statements: The 5 statements.

A
  1. Statement of Financial Position (Balance Sheet)
  2. Statement of Earnings (Income statement)
  3. Statement of Comprehensive Income
  4. Statement of Cash Flows
  5. Statement of Changes in Owner’s Equity
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7
Q

MR DR

The Fundemental Recognition Criteria

A

MR DR

  • Measurability
  • Reliability
  • Definitions
  • Relevance
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8
Q

Revenue Recognition Principle

A

Revenue is recognized when it is Earned, and realized or realizable.

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9
Q

Realization vs. Recognition (Revenue)

A

Realization - when entity obtains cash/right to receive cash (sale of asset) convert a noncash resource to cash

Recognition - actual recording of transactions and events in the Financial Statements

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10
Q

5, E Gc P Hc Rr

What are the Fundamental assumptions for Financial Statements? (GAAP)

A
  1. Entity: Economic activity can be accounted for when considering an identifiable set of Activities
  2. Going Concern: The entity will continue to operate in the foreseeable future-Monetary Unit Assumption: It is assumed that money is an appropriate basis be which to measure Economic activity
  3. Periodicity
  4. Historical Cost principle: As a General Rule, financial information is based cost, not current market value
  5. Revenue realization principle
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11
Q

IFRS has only 2 Fundamental assumptions

A
  1. Accrual Basis Accounting
  2. Going Concern
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12
Q

REGL ALE needs ID

Elements of Financial Statements?

A

REGL ALE needs ID

  • Revenue, Expenses, Gains, Loses
  • Assets, Liabilities, Equity
  • Investment by Owners, Distributions by Owners.
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13
Q

UVOTE

FASB SFAC no. 7 Defines 5 elements of present value Measure for Assets and Liabilities

A

UVOTE

  • Price for Bearing Uncertaintity (credit risk)
  • Expectations about timing Variations of Future Cash Flows
  • Other Factors (e.g. liquidity issues)
  • Time Value of Money (Risk-free Rate of Interest)
  • Estimate of Future Cash Flows
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14
Q

The process of putting Financial Information into a statement is to?

A

Recognize!

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15
Q

Examples of Extraordinary Items?

A
  1. Loss due to Infrequent Earthquake or Flood
  2. An Expropriation of an Asset by Government
  3. A prohibition of a product line by a newly enacted law or regulation
  4. Certain Gains or Losses from extinguishment long-term debt, provided that they are not a part of the entity’s recurring operations and, thus, meet the criteria of Unusual and Infrequent.
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16
Q

PEE

What are the 3 Accounting Changes?

A

PEE

  1. Changes In Accounting Principle
  2. Changes in Accounting Estimate
  3. Changes in Accounting Entity
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17
Q

Changes in Accounting Estimate are reported?

A

Prospectively. If the change in Estimate effects future periods (depreciation) it should be reported in a footnote.

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18
Q

Changes in Accounting Principle are Reported?

A

Retrospectively.

Prior period Financial Statements need to be Restated.

Rule: Reporting Changes should be recognized by adjusting the beginning Retained Earnings in the earliest period for the cumulative effect of the change in Accounting principle.

19
Q

Change in Accounting Principle? (IFRS)

A

Adjustment to prior year’s R/E.

Must present 3 Balance sheets and 2 of each other Financial Statements.

20
Q

An Error Correction is Reported?

A

Prior Period adjustment. If there are no comparative financial statements, adjustment to the opening balance of retained earnings net of tax.

21
Q

IDEA

The order of Income Statement Items is a Nice…?

A

IDEA

  • Income from Continuing Operations
  • Discontinued Operations
  • Extraordinary Items
  • Adjustment in Accounting Principle Change.
22
Q

Costs associated with Exit and Disposal Activities are?

A
  • Involuntary employee termination benefits
  • Costs to terminate a contract that is not a capital lease
  • Other costs associate with exit or disposal activities, including costs to consolidate facilities or relocate employees.
23
Q

PUFE-R

Other Comprehensive income is?

A

PUFE-R

  • Pension Adjustments
  • Unrealized Gains and Losses
  • Foreign currency Items
  • Effective portion cash flow hedges
  • Revaluation Surplus.
24
Q

Revaluation Surplus is?

A

IFRS only. Gains recognized in OCI when intangible assets and fixed assets are revalued in IFRS.

25
Under US GAAP comprehensive Income may be present in:
* Single statement of comprehensive income (GAAP, IFRS) * Income statement followed by a separate statement of comprehensive income that begins with net income (GAAP, IFRS) * Statement in changes in Equity (GAAP)
26
Summary of Significant Accounting policies is?
Required by both GAAP and IFRS
27
Summary of Significant accounting policies must **_not_** include?
1. **Composition** of accounts and **amounts** in dollars of account balances 2. **Details** relating to **changes** in accounting principle 3. **Dates of maturity** and **amounts** of long-term debt 4. **Yearly computation** of depreciation, depletion and amortization.
28
# 4 Disclosure of Risks and Uncertainties F1-44
1. Nature of **Operations** (Concentration exists at F/S date) 2. Use of **Estimates** in Preparation of Financial Statements 3. Certain **Significant Estimates** 4. Current **Vulnerability** due to *Certain Concentrations* near-term severe impact
29
Interim Financial reporting addresses what enhancing characteristic?
Timeliness
30
Interim Financial Report should be viewed as
An integral part of the **annual** Financial statements.
31
Inventory Declines Permanent and Temporary?
**Permanent:** Recognize in the Quarterly Statement. **Temporary:** Should not be recognized.
32
Income Taxes in Interim Statements.
Use the Effective annual rate. Tax is YTD total income times effective rate less previously booked tax.
33
Enacted or Substantially enacted
IFRS both. GAAP - Only enacted!
34
Segment Profit or Loss formula
Revenues Less: Traceable Costs _Less: Reasonably Allocated Costs_ = Operating profit (loss)
35
The 10% size test rules for reporting segments
Meet ANY of the tests to qualify as reportable segment 1. **Revenue** - A segment (including sales to External and Intercompany customers, but excluding interest income, on advances and loans to other segments 2. **Profit or Loss** - Only if the combined entity profit is not a loss, and Combined loss of all segments did not report a loss 3. **Assets** - Assets of segment must report to or are review by the CEO.
36
Under Regulation S-X must report a minimum of 2
Balance Sheets
37
10-Ks must be filed withing what time Frame?
60 days for large accelerated filers 75 days for accelerated filers 90 days for all other registrants.
38
Form 6K
Filed **_semiannually_** by foreign private issuers. Similar to 10Q contains unaudited Financial Statements, interim period MD&A, certain disclosures.
39
Form 11K
Annual report of company's employee benefit plan(s)
40
Forms 3, 4, 5
Required to be filed by * Directors * Officers * Beneficial owners with **\> 10%** of a class of equity securities of the registered company
41
Forms 20F, 40F
Filed annually by foreign private investors **20F** - Other non-US registrants **40F** - Canadian companies registered b SEC
42
Form 8K
Reports major corporate events: * Corporate acquisitions * Disposals * Changes in securities & trading markets * Changes in corporate governance * Changes to accountants or Financial Statements
43
Which statements are usually included in a set of personal financial statements?
A statement of financial condition and a statement of changes in net worth. An income statement and a statement of cash flows are normally **_not_** included in a set of personal financial statements.

CPA FAR Review (10 decks)

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