F1 Flashcards
What characteristics must be present for financial
information to be useful? AKA, Fundamental Qualitative Characteristics.
Relevance and Faithful representation.
For financial information to be relevant, it must have?
predictive value and/or confirming value, and must be material.
What does faithful representation require?
Completeness; neutrallity; and freedom from error.
What are the enhancing qualitative characteristics that should be maximized for the usefulness of financial information?
Comparibility (consistancy); Verifiability; Timeliness; Understandability.
Is interest expense operating or non- operating expense?
Non-operating– under other expenses and losses. Same with interest income.
What’s included in loss/gain from discontinued operations?
impairment loss (at “held for sale” time) +gain/loss from actual operation+gain/loss from disposal– all recognized in period actually happened, net of tax in income statement.
What’s the key word for reporting something in discontinued operations?
Strategic shift with mojor effect. e.g.–disposal of a major ( Geographical area, Equity method investment, or Line of business)
With discontinued operations, how is subsequent increase in FV reported, when impairment loss had been recognized?
Gain is recognized but not in excess of the previously recognized cumulative loss.
How is a component classified as “held for sale” measured?
The lower of carrying amount (NBV) or FV less cost to sell (NRV)
What are extraordinary items?
Material; not expected to recur (infrequent); significantly different from typical business and not considered in evaluating ordinary operating of business (unusual).
Extraordinary items are not specially presented under IFRS.
How is a change in accounting estimate applied? disclosed?
Prospectively– only affect current and future. If affect future (more than current), should be disclosed in the notes. Ordinary accounting estimates change not required to disclose (e.g. A/R, inventory)
If a change is due to both accounting principle and estimate, how is it applied?
Prospectively–same as estimates.
How is a change in accounting principle applied?
GR: Retrospectively– adjust begining retained earnings (net of tax), if prior period financial statements are presented, they should be restated.
Exception: prospectively for “to LIFO” and depreciation method (considered both principle and estimate).
How is a change in accounting entity applied?
Retrospectively– restate all statements presented.
How are errors in financial statement corrected?
Restate if the period is presented; if not presented, adjust begining retained earnings (net of tax).
