F1 Flashcards
Multi Income Statement
Separates operating (income from operations) and non- operating (Interest, G/L and Investments) revenues and expenses.
Benefit: Enhanced user info
Calculate various ratios
NI before & after tax
Accounting Principles Board (APB)
Part time committee of AICPA
Issued accounting principles board opinions (APBO) and APB interpretations
Determined GAAP from 1959-1973
Classified B/S
Distinguishes current vs non-current
Comprehensive Tax Reporting
If displayed net of tax, tax benefit/expense must be disclosed in footnotes
or
If before tax, then can be shown on statements
Comprehensive Income
Change in Equity from non owner sources
NI (Continuing and Discontinued operations)
+
OCI (PUFER)
Reported interim, not reported on Per Share Basis
Reportable Segment Profit (Loss)
Revenue (For segment, internal and external) - Directly traceable costs - Allocated costs (By CFO) = Operating Profit (EBIT)
Does not include General revenues or expenses income or interest.
Securities Exchange Commission
Legal authority to establish GAAP
Allows profession to self regulate
Formed by Securities exchange act of 1934
Literature in Codification
FEDPRIA
FASB Emerging issues task force Derivative implementation group issues APBO ARB Accounting Interpretations AICPA
GAAP vs IFRS (Notes to F/S disclosures)
IFRS - disclose judgements AND Estimates
GAAP - estimates only
GAAP Conceptual Frameworks Underlying Financial Accounting
Serves as basis for all FASB pronouncements
Provide basis for concepts
IFRS
Includes IFRS, IAS, Interpretations
Comprehensive Presentation
Single or 2 Statement Approach
Single - Rev to NI to CI
Two Statements- Rev to NI then NI to CI
GAAP or IFRS for both
Size Test
10% of
1. Assets 2. Revenue or 3. Profit (Loss)
Both External and Internal
Materiality test
Segment Reporting
Includes inter company transactions
Public companies only
Operating segments
Error Correction
non-GAAP to GAAP
PY Adj/Restate
- Comparative f/s
Correct error in prior statement
If year not presented, adjust RE - Not comparative
Adjust Beg RE net of tax
Operating Segments
Earn or incur own rev/expense
Discrete (Traceable) f/s info available
NOT 1. Corporate Headquarters 2. Pension Plan
Measurement/Valuation of Held for Sale
Lower of
- Carrying Value
or - FV less cost to sell (NRV)
Presentation order of I/S and R/E statement
IDA
Income from continuing operations (Before then after Tax)
Discontinued Operations (Net of Tax)
Accounting Principles Change (Cumulative effect on RE net of tax)
Reporting Sufficiency Test
75% of External Sales (Not Internal)
add up until 75% of all consolidated revenue
Held for Sale Requirements
- Commits plan to sell component
- Available for immediate sale as is
- Program to locate buyer
- Probable sale in one year
IFRS- Individual A’s and L’s measured for G/L
GAAP - Impairment analysis as a whole component
Other Comprehensive Income
Direct to equity - PUFE(R)
Excluded from NI
Pension Adjustment Unrealized G/L (AFS only) Foreign Currency G/L (Translation or effective) Effective cash flow hedges Revaluation Surplus (IFRS only)
Effective Tax Rate
(Yr to date income x estimated effective tax rate) minus provisions
Change in Estimates
Prospective approach
Current and future income from continuing operations
Change in principle inseparable from change in estimate
Major Customers
If one customer generates 10% or more revenue from customer then identification of segment receiving revenue must be disclosed.
Discontinued Operations Calculations
All year incurred
- Impairment loss (CV-NRV)
- G/L continuing operations (for whole year not sold)
- G/L sale/disposal (SP-NRV)
Net of Tax end of year
SEC Reporting Requirements
- Registration Statements
- 10-K (Annual audited US companies)
- 10-Q (Quarterly unaudited US companies)
- 11-K (Employee benefit)
- 20-F, 40-F (Annual foreign issuers in US)
- 6-K (Semiannual foreign issuers in US)
- 8-K (Major corporate events)
- 3,4,5 (Filed by directors, owners)
FASB
Established 1973, determined GAAP since
Issued EIFT, SFAC
SEC Literiture Standards included in Codification
Regulation for Accounting IS Emerging
- Regulation SX
- Financial Reporting Releases
- Accounting Series Releases
- Interpretive Releases (IR)
- Staff accounting bulletins (SAB)
- ETIF
Committe on Accounting Procedure (CAP)
Part-time committee of AICPA that released accounting research bulletins (ARB)
Determined GAAP from 1939-1959
AOCI
OCI is closed to this account
Imminent Liquidation
no longer going concern Basis
Discontinued Operations Req
Strategic shift or major effect on operations
AND
- Has been disposed or is classified as Held for Sale
Change in Accounting Entity
Retrospective/ Restate
Restate if comparative f/s are presented
IFRS does not include this
SFAC NO. 5 (Recognition Financial Statements)
Full Set of Statements
IFRS only assumption (Going Concern)
FASB Accounting Standards Codification
Single source of authoritative US GAAP
If not included, not a part of GAAP
Interim Reports
Not required by Gaap or IFRS
SEC requires reporting of interim
Timeliness over reliability (Unaudited)
Integral part of annual statements
Exit or Disposal Activities
Downsizing, closing a hub
requires recognition of a liability right now (PV) for costs associated with disposal
Reported in continuing operations if not discontinued activities
International Accounting Standards Board (IASB)
Established 2001 part of IFRS
Develop single set of high quality global standards
SFAC NO. 6 (Elements of F/S)
REGL AL needs ID
CI Rev Exp Gains Losses Assets Liability Invest owners Distributions
IFRS - Capital maintenance
Liability for exit or disposal activity recognized if…
- Obligating event has occured
- Results in present obligation to transfer assets
- Entity has little/no discretion to avoid future transfer of assets
Costs now (PV) Operating losses (Period they occur)
Private Company Council
formed by financial accounting foundation to improve standards setting for private companies
Provide alternate to GAAP to make statements more relevant/cost beneficial
SFAC NO. 8 (Chapter 1)
Disclose useful information to primary users (External)
investors, creditors, lenders
Info on assets, liabilities, effective and efficiency.
Change in AOCI by Component
Beg Bal + (OCI +/- Amounts reclassified)
Tax effects must be disclosed in footnotes
SE section of B/S
SFAC NO. 4 (Non- Business Orgs)
Lack ownership
non profit
SFAC NO. 8 Chapter 3 (Qualitative Characteristics)
Relevant and Faithful
- Relevance
a. Predictive
b. Confirming value
c. Materiality
2.
a. Completeness
b. Neutrality
c. Freedom from error
Reclassification Adjustments
Avoids double counting
Moves OCI from AOCI to I/S
B/C they have to hit I/S
Enhancing Qualitative Characteristics (SFAC No. 8 Chapter 3)
- Comparability
- Verifiability
- Timeliness
- Understandability
Going Concern Basis req
- No sub. Doubt - No disclosure
- Sub doubt alleviated through mgmt mitigation- Disclosure
- Sub doubt not alleviated - Disclosures
(NOT liquidation basis)
SFAC NO. 7 (CF Info)
- Estimated FCF
- Expectations about timing variations of FCF
- TVM
- Price of uncertainty
- Other factors
Single Step I/S
Total Rev- Total Exp (Including Tax)
Simple
Only net of tax
Statements of financial accounting concepts (SFAC)
Conceptual Framework
Accounting Changes (3)
- Change in estimate (Prospective)
- Change in principle (Retrospective)
if not discernible, treat as change in estimate - Change in entity (Restate)
Change in Accounting Principle
Retrospective
Should not be made for event that is non reoccurring
Adjust beg RE
PY Restated
Annual F/S Req
- Audited
- B/s (2 most recent)
- I/S, CF (3 most recent)
Summary of Significant Accounting Policies
GAAP and IFRS require description of policies be included as an integral part
1st or 2nd note
a. Depreciation method
b. Consolidation basis
c. Interperiod tax allocation
d. Inventory pricing
e. rev recognition
