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CPA FAR Review > F1 > Flashcards

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
Q

Under US GAAP comprehensive Income may be present in:

A
  • 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
Q

Summary of Significant Accounting policies is?

A

Required by both GAAP and IFRS

27
Q

Summary of Significant accounting policies must not include?

A
  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
Q

4

Disclosure of Risks and Uncertainties

F1-44

A
  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
Q

Interim Financial reporting addresses what enhancing characteristic?

A

Timeliness

30
Q

Interim Financial Report should be viewed as

A

An integral part of the annual Financial statements.

31
Q

Inventory Declines Permanent and Temporary?

A

Permanent: Recognize in the Quarterly Statement.

Temporary: Should not be recognized.

32
Q

Income Taxes in Interim Statements.

A

Use the Effective annual rate. Tax is YTD total income times effective rate less previously booked tax.

33
Q

Enacted or Substantially enacted

A

IFRS both.

GAAP - Only enacted!

34
Q

Segment Profit or Loss formula

A

Revenues
Less: Traceable Costs
Less: Reasonably Allocated Costs
= Operating profit (loss)

35
Q

The 10% size test rules for reporting segments

A

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
Q

Under Regulation S-X must report a minimum of 2

A

Balance Sheets

37
Q

10-Ks must be filed withing what time Frame?

A

60 days for large accelerated filers

75 days for accelerated filers

90 days for all other registrants.

38
Q

Form 6K

A

Filed semiannually by foreign private issuers. Similar to 10Q contains unaudited Financial Statements, interim period MD&A, certain disclosures.

39
Q

Form 11K

A

Annual report of company’s employee benefit plan(s)

40
Q

Forms 3, 4, 5

A

Required to be filed by

  • Directors
  • Officers
  • Beneficial owners with > 10% of a class of equity securities of the registered company
41
Q

Forms 20F, 40F

A

Filed annually by foreign private investors

20F - Other non-US registrants

40F - Canadian companies registered b SEC

42
Q

Form 8K

A

Reports major corporate events:

  • Corporate acquisitions
  • Disposals
  • Changes in securities & trading markets
  • Changes in corporate governance
  • Changes to accountants or Financial Statements
43
Q

Which statements are usually included in a set of personal financial statements?

A

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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