F1 Flashcards
What’s the single source if authoritative nongovernmental US GAAP
FASB CODIFICATION BITCH
What are the 4 subsections under IFRS
International Accounting Standards (IAS)
International Financial Reporting Standards (IFRS)
IFRIC interpretations
SIC interpretations
What are the two fundamental qualitative characteristics of useful financial info
Relevance and Faithful representation
Yo what are the 3 elements of relevance (PCM)
PCM BITCH
Predictive
Confirming Values
Materiality
What’re the three components to ~faithful representation~
FuCkiN
(FCN)
Freedom from error
Completeness
Neutrality
What the fuck are the enhancing qualitative characteristics of financial information (CUT V)
Comparability
Understandability
Timeliness
Verifiability
What is included in a full set of financial statements
Statement of Financial Position (Balance Sheet) Statement of earnings (income statement) Statement of comprehensive income Statement of cash flows Statement of changes in owners equity
Each of these things becomes an expense when it expires, can you tell me what each one becomes?
- Inventory
- Prepaid insurance
- NBV of Fixed Assets
- Unexpired cost of patents
- COGS
- Insurance Expense
- Depreciation Expense
- Amortization Expense
How do control and revenue recognition differ when an entity acts as a principal as opposed to an agent
Principal has control over goods and service prior to transfer and revenue equal to the expected gross consideration is recognized
An agent does not have control and revenue equal to the agents fees or commission is recognized
What’s gotta happen for a customer to obtain control in a bill and hold agreement
Must be substantive reason for arrangement
Product is separately identifiable as belong to customer
Product is ready for transfer to customer
Entity can’t give product to another customer
When is a warranty considered a separate performance obligation
If customer has option to purchase warranty separately or if warranty provides a service which is beyond the assurance that the product works, then it is a separate obligation and a portion of warranty transaction price needs to be allocated to the warranty obligation
For construction projects when can revenue be recognized
At either a point in time or over time
For long term construction projects what losses are recognized immediately
When the loss represents an overall loss on the entire contract as of the completion of the contract
If you need to find the inventory cost, what two accounts are considered
Purchase Price and Freight in
If you need to find the Selling Expense, what three accounts are considered
Freight Out, Salaries and Commissions, advertising
If you need to find the General and Administrative expenses, what three accounts are considered
Officer Salaries, Accounting and Legal, and insurance
If you need to find the nonoperating Expense, what two accounts are considered
Auxiliary Activities and interest expense
what is the order of a multi step income statement
Net Sales Less COGS =Gross Margin LESS Expenses from Continuing Ops Other Revenue and Gains Other Expenses and Losses =Income from continuing ops Income tax expense Anything Discontinued (after tax) =Net Income
Under GAAP, a material transaction that is infrequent in nature and/or unusual in nature is presented how on the income statement
it is presented separately as a part of income from continuing operations whenever the transaction results in a Gain or Loss.
How do you handle the sale of a fixed asset in terms of the income statement
the gain or loss is recognized as part of income from continuing operations.
What are the 5 steps for revenue recognition
I STAR = “I am star”
Identify contract with customer
Seperate Performance Obligations identified
Transaction price determiend
Allocate transaction price to seperate performance obligations
Recognize Revenue when or as the entity satisfies each obligation
The gain or loss from discontinued operations can consist of what
impairment losses, a gain/loss from actual operations, anda gain or loss on disposal.
what is the term for how a change in accounting estimate (principle) is reported…
Prospectively
what is the term for how a change in accounting principle is reported
Retrospectively…the cumulative effect of change is included in retained earnings as a beginning adjustment in the earliest year presented..
the prior FS are restated if presented
What are the three types of accounting changes yo
Change in accounting principle, estimate, and entity
Under that GAAP shit how is a change in accounting entity reported in terms of FS
All current and prior FS are presented and restated.
So there are these things called error corrections,how are they reported
they are prior period adjustments to retained earnings and all comparative FS are presented and restated
If you could define comprehensive income…how would you define it
the change in equity which results from transactions and events/circumstances from NONOWNER sources
hey you, yes you, can you list the six items of OTHER comprehensive income (PUFIER)
Pension adjustment
Unrealized G/L for AFS debt securities
Foreign currency translation adjustments and g/l on foreign transactions
Instrument specific credit risk for liabilities and changes in FV
Effective portions of cash flow hedges
Revaluation surpluses (IFRS only)
What are the two ways of presenting other comprehensive income…are both methods accepted by IFRS and GAAP
the statement of comprehensive income (single statement)
and Statement of income followed by separate statement of comprehensive income (2 statement approach)
BOTH are accepted under GAAP and IFRS
There are 4 main accounts that can require adjusting entries, what are they
Deferred Revenue, Prepaid Expenses, receivables, and Accrued Expenses
What are the three BASIC rules to journal entries
they have to be recorded before the preparation of the FS
NEVER use cash account for an adjustment
EVERY adj entry will use an IS account and a BS account
How do you determine if something you entered into is a lease or financing option?
given the repurchase price and original price
Repurchase Price < Original Price = Lease
Repurchase Price > Original Selling Price = Financing Agreement
Looking at incremental costs…how would you define them?
Incremental costs are costs incurred that would not have been incurred had the contract never existed, and are recognized as an asset if the company expects to recover these costs. These costs will be expensed if the company would incur these costs regardless
can you give me an example of incremental costs im confusion
Yes little one. You have a company right, the company gets into contract and you earn commission of XXX, and printing fees of YYY to get the system ready for the contract.
Only the commission fees of XXX are considered incremental assets because you expect to re-coop that amount through the service being provided. BUT the YYY amount is goin to be expensed because its a cost of the sale of the contract.
In a Bill and Hold agreement, for revenue to be able to be recognized, the customer has to take control of the good/it has to be ready to send to the customer…what are the 4 ways they can ‘take control’ and revenue be recognized
There must be a substantive reason for the customer not to take control (like they dont have the room currently)
The product is specialized and thus is seperatly identified as belonging to the customer
The product is currently ready for transfer to the customer
The entity cannot use the product or direct it elsewhere
So youre a merchant right, if you cannot reasonably estimate the amount of returns when you sell the shit, when can you recognize the revenue
if you cant estimate how much will be returned, then what you gotta do, is fuck shit up, and wait to recognize until the return window is over.
How are discontinued operations presented on the IS?
They are seperate from continuing operations and are NET of tax
What conditions have to be present for discontinued rules to apply to a disposal
the disposal of the component, group, component, business activity, or nonprofit activity is reported if it represents a STRATEGIC SHIFT that has a MAJOR effect on operations and financial results.
What are the three types of discontinued operation calculations
Impairment Loss
G/L on disposal
Results of operations of the component
What is less than what to indicate an impairment loss
NRV < Book or Carrying Value
The NRV is the FV less costs to sell
When something is held for sale, what stops?
depreciation and amortization
List the four types of discontinued operations
sale of a segment, group of components, a business, or a nonprofit activity
A change in estimate is changed prospectively, meaning we dont go back and change shit we change the current and futttttture…what other two changes are inseperable from a change in estimate
a change from LIFO orrrr a change in Depreciation method
Is a change in estimate the same thing as an error????
fuck ass no
If you have a change in accounting principle (i.e. going from a gaap method to another gaap method) or a CHANGE in ENTITY how do you fix it..NOT prospectively but…
Retrospectively bitch
GO BACK AND UNDERSTAND THE CUMULATIVE EFFECT OF ACCT PRINCIPLE
F1-53
its the difference between the beg RE in the period of change and what the retained earnings would have been if the change had been retroactively applied to all prior affected periods.
Anytime you restate Retained earnings…what do you consider tax wise
the restatement is NET OF TAX
What two things do you add together to get the Comprehensive income
Net income and Other Comprehensive Income
what is the actual definition of Comprehensive Income
the change in equity (net assets) of a business during a period from transactions from NON-OWNER sources aka it includes all changes in equity except those from investments by owners and distributions to owners.
Accumulated Other Comprehensive income is reported on what financial statement
Balance sheet (Statement of Financial Position)
ok so there’s a contract, and there is an option to later repurchase the asset, whats that called
a repurchase agreement
What is the definition of a forward as it relates to contract obligations
an obligation to repurchase
What is the definition of a call option, how does that differ from a put option
call option is where there is a right to repurchase at an entitys option.
a put option is where the customer has the right to repurchase
