F1 Flashcards
1
Q
Revenue
A
reported in the gross amount of consideration to which the entity expects to be entitled in exchange for the specified goods or services transferred
2
Q
expenses
A
(cost that benefit only the current period or the allocation of unexpired costs to the current period for the benefit received) are reported at their gross amounts
3
Q
gains
A
- reported at their net amount
- recognition of an asset either not in the ordinary course of business or without the incurrence of an expense
4
Q
Losses
A
- reported at their net amount
- a loss is cost expiration either not in the ordinary course of business or without the generation of revenue
5
Q
where should income or loss that are unusual or infrequent be reported
A
- separately as part of income from continuing operations
- the nature of the item and the financial statement effects should be disclosed on the face of the income statement or in the footnotes
6
Q
Multiple-Step income Statement
A
reports operating revenues and expenses separately from nonoperating revenues and expenses and other gains and losses
7
Q
what is the benefit of the multi-step income statement
A
to enhance user information
8
Q
single-step income statement
A
- income from continuing operations and total expenses are subtracted from total revenues
9
Q
what are the benefits of a single-step income statement
A
its simple design and the fact that the presentation of types of revenues or expenses do not appear to the user to be classified as more important than others
10
Q
discontinued operations are reported
A
separately from continuing operations in the income statement
11
Q
a discontinued operation may include
A
- a component of an entity
- a group of components of an entity
- a business or nonprofit activity
12
Q
items reported within discontinued operations can consist of
A
- an impairment loss
- a gain or loss from actual operations
- and gain or loss on disposal
- all of these amounts are included in discontinued operations in the period in which they occur
13
Q
the results of operations of a component of an entity or a group of components of an entity, or a business or nonprofit activity, will be reported in discontinued operations if it
A
- has been disposed of
- is classified as held for sale
14
Q
when are related costs recognized with discontinued operations
A
when the obligations to other exist, not necessarily in the period of commitment to plan
15
Q
when is a disposal of a component reported
A
if the disposal represents a strategic shift that has or will have a major effect on an entity’s operations and financial results
- disposal of major geographical area
- disposal of major equity method investment
- disposal of a major line of business
16
Q
what is a business or nonprofit activity that, on acquisition, meets the criteria to be classified as what
A
held of sale (discontinued operation)
17
Q
types of items included in results of discontinued operations
A
- results of operations of the component
- gain or loss on disposal of the component
- impairment loss (and subsequent increases in fair value) of the component
18
Q
where should a gain or loss recognized on the disposal be disclosed
A
on the face of the income statement or in the notes to the financial statement
19
Q
foreign currency direct method
A
domestic price of one unit of another currency. EX: one euro cost $1.47
20
Q
foreign currency indirect method
A
the foreign price of one unit of the domestic currency. EX: .68 euro buys $1
21
Q
comprehensive income
A
the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from nonowner sources
22
Q
Other comprehensive income
A
- pension adjustments
- unrealized gains and losses (AFS and hedges)
- Foreign currency items
- instrument specific credit risk
23
Q
pension adjustents
A
- must be recognized in OCI in the year the changes occur
- these G/L are included in OCI until recognized as pension expense on the IS
24
Q
unrealized G/L (AFS and Hedging)
A
reported as components of OCI until the securities are sold or until the cash flows associated with the hedged item are realized
25
Foreign currency items
remain in OCI until the sale or liquidation of the investment in the foreign entity
26
instrument specific credit risk
for liabilities for which the FV option is elected, changes in FV that are attributable to instrument specific credit risk are included in comprehensive income
27
reclassification adjustments
move OCI items from accumulated OCI to the income statement
28
Accumulated OCI
- a component of equity that includes the total of OCI for the current period and all previous period
- the current period is "closed" to this account, which is reconciled each period similar to the manner in which retained earnings are reconciled
29
all components of comprehensive income are closed to
the balance sheet
30
net income is closed to
retained earnings
31
OCI is closed to
accumulated OCI
32
the single-statement approach displays OCI items
individually and in total below the net income amount and totals them for comprehensive income
33
the two-statement approach displays OCI as
a separate statement that immediately follows the income statement
34
Form 10-K
- annual report
- 60 days for large, accelerated filers
- 75 days for accelerated filers
- 90 days for all other
35
large accelerated filer
issuers with equity of 700 million or more
36
accelerated filer
between 75 - 700 million
37
10-Q
- quarterly report
- 40 days for large accelerated and accelerated filers
-45 days for all others
38
8-K
filed to disclose changes whenever a material event occurs
39
Earnings per share
-required to present on the face of the income statement
40
simple capital structure
- only has common stock outstanding
- face of income statement
41
basic and diluted per-share amount
- on face of the income statement
- if reports discontinued operations
42
basic EPS formula
income available to common shareholders/ weighted average number of common shares outstanding
43
how ids income available to common shareholders detereminded
by deducting from the line-item income from continuing operations and net income
44
what do you do if there is a loss from continuing operations
the amount of the loss should be increased by the preferred shareholders' dividends or claims to determine income available to the common shareholders
45
weighted average number of common shares outstanding
the average of shares outstanding and assumed to be outstanding for EPS calculations. Shares sold or required during the period should be weighted for the portion of the period they were outstanding
46
when are stock dividends and stock splits treated
as though they occurred at the beginning of the period
47
what do you do with the shares outstanding when you have a stock split
they must be restated for the portion of the period before the stick dividend/split
48
complex capital structure
- when it has securities that can potentially be converted to common stock and would therefore dilute (reduce) EPS (of common stock).
- BOTH basic and diluted EPS must be presented
49
potentially dilutive securities
- convertible securities
- warrants and other options
- contracts that may be settled in cash or stock
- contingent shares
50
what method does the dilutive effect of option and warrants and the equivalents apply
treasury stock method
51
what does the treasury method assume
that the proceeds from the exercise of stock options, warrants, and their equivalents will be used by the company to repurchase treasury shares at market price
52
treasury stock method
- MP > exercise price (in the money)
- proceeds received are used to purchase common shares at the avg MP during the period
53
antidilution
use the results of each assumed conversion only if it results in a dilution (reduces EPS)
54
EPS disclosures
- cash flow per share should NOT be reported
55
Legal capital
the amount of capital that must be retained by the corporation for the protection of creditors
56
capital stock
the par or stated value of both preferred and common stock is legal and capital
57
par value
- preferred stock is issued with par value
- any excess of the actual amount received over the par or stated value of the stock is accounted for as APIC
58
common shareholders
- basic ownership
- bear the ultimate risk
- generally, control management
- right to vote
- right to share assets upon liquidation
59
preferred stock
- an equity security with preferences and features not associated with common stock
- no voting rights
60
cumulative preferred stock
provides that all or part of the preferred dividend not paid in any year accumulates and must be paid in the future before dividends can be paid to common shareholders
61
noncumulative preferred stock
- dividends not paid in any year do not accumulate
- the preferred shareholders lose the right to receive dividends that are not declared
62
participating preferred stock
preferred shareholders share (participate) with common shareholders in dividends in excess of specific amount
63
non-participating preferred stock
preferred shareholders are limited to the dividends provided by their preference
64
preference upon liquidation
if the liquidation preference is significantly greater than the par or stated value, the liquidation preference must be disclosed in the equity section of the balance sheet
65
convertible preferred stock
may be exchanged for common stock
66
callable (redeemable) preferred stock
- may be called (repurchased) at a specified price
disclosed either on the BS or in the footnotes
67
mandatorily redeemable preferred stock
- stock issued with a maturity date
- must be brought back by the company on maturity date
- must be classified as a liability, unless the redemption is required to occur only upon the liquidation or termination of the reporting entity
68
APIC
- excess of par or stated value
-seen on the BS as: sale of treasury stock at a gain, liquidating dividends, conversion of bonds, small stock dividends
69
retained earnings
- accumulated earnings during the life of the corporation that have not been paid out as dividends
- reduced by distributions to stockholders and transfers in paid in capital
- does not include treasury stock or accumulated OCI
70
appropriation of retained earnigns
may not be used to absorb costs or losses and may not be transferred to income
71
are OCI items included in net income
no
72
are OCI items included in retained earnings
no
73
treasury stock
- a corporation's own stock that has been issued to shareholder and subsequently reacquired (not retired)
- not entitled to any of the rights of ownership
74
two methods of accounting for treasury stock
- cost method
- legal (or par/state value) method
75
how are gains and losses recorded
as a direct adjustment to stockholders' equity and are not included in the determination of net income
76
cost method
treasury shares are recorded and carried at the reacquisition cost
77
legal method
treasury shares are recorded by reducing the amounts of par value and APIC received at the time of the original sale
78
donated stock
company's own stock received as a donation from a shareholder
79
stock subscriptions
contractual agreement to sell a specified number of shared at an agreed-upon price on credit is entered into
80
sale of subscriptions
subscriptions receivable account is debited, and capital stock is credited
81
collections of subscriptions
subscription account is credited, and cash is debited
82
issuance of stock previously subscribed
capital stock subscribed is debited and regular capital stock is credited
83
stock issued for outside services
should be recorded at the fair value
84
stock issued in a basket sale with other securities
should be allocated a portion of the sales proceeds based on the relative fair market values of the
85
date of declaration
- the date the board of directors formally approves a dividend
- a liability is created (dividends payable)
- retained earnings is reduced (debited)
86
date of reocrd
the date the board of directors specifies as the date the names of the shareholders to receive the dividend are determined
87
date of payment
the date on which the dividend is actually disbursed by the corporation or its paying agent
88
cash dividends
- distribute cash to shareholders and may be declared common or preferred stock
- paid from retained earnings
- only on authorized issued, and outstanding shares
- they are NOT treasury stock
89
scrip dividends
- a special form of notes payable whereby a corporation commits to paying a dividend at some later date
- may be used when there is a cash shortage
90
liquidating dividends
occur when dividends to shareholders exceed retained earnings
91
small stock dividend
when less than 20 to 25% of the shares previously outstanding are distributed, the dividend is treated as a small stock because the issuance is not expected to affect the market price of the stock
92
stock split
- occurs when a corporation issues additional shares of its own stock (without charge) to current shareholders and reduces the par value per share proportionately
- does not affect RE
93
reverse stock split
reducing the number of shares outstanding and increasing the par value proportionately
94
