F1- Conceptual Framework and Financial Reporting Flashcards
Fundamental Qualitative Characteristics
Relevance and Faithful Representation
Elements for Relevance
Confirmatory Value, Materiality, Predictive Value
Elements of Faithful Representation
Completeness, Neutrality, Free from error
Nonbusiness organization financial statement users
resource providers, constituents, governing and oversight bodies, managers
Elements of recognition for financial statements
measurability, relevance, reliability
Recognition= R= RRM
Elements of assumptions for financial statements
entity, going concern, monetary unit, periodicity
End Going Cus My Uncle Payed
Elements of principles of financial statements
measurement, revenue recognition, expense recognition, full disclosure
Measure revenue right expense right fully
Unexpired Costs (Asset)
Inventory, prepaid insurance, nbv of fixed assets, unexpired cost of patents
Expired Costs (Expense)
COGS, insurance expense, depreciation expense, amortization
Gross
revenues and expense
Net
gains and losses
Consideration payable to the customer
reduce transaction price
In a transaction price and there is significant financing… it is recognized at?
- PV
- Less than 1 yr then discount is unncessary
Transaction price and noncash consideration is recognized at?
FV at contract inception
How is revenue recognized if there is multiple performance obligations?
As the entity satisfied each performance obligation
Satisfied over time: annual services, subscriptions
Revenue at a point of time has what characteristics?
right to payment, customer has legal title, transfer of possession of the asset, customer has significant rewards and risks of ownership, customer has accepted the asset
Deferred Revenue
paid but service not performed (liability until performed)
Accrued Revenue
did the service but haven’t been paid yet
Incremental costs of obtaining a contract
Capitalize if would not have occurred if contract was not obtained
Ex: legal fees to draw up the contract, sales commissions
Costs to fulfill a contract
Capitalize: DM, DL, MOH
Expense: Selling (advertising), general, administrative expenses
Warranties with revenue recognition when the customer has the option to purchase the warranty separately
allocate a portion of the overall transaction price when there is a distinct service and performance obligation satisfied
Warranties with revenue recognition when the customer doesn’t have the option to purchase the warranty separately
There is no performance obligation if:
Law requires warranty
Shorter coverage period
Must perform specific tasks
Refund liability
A liability that the entity does not expect to be entitled to receive
Long-term construction contracts- percentage of completion method (accounts)
construction in progress- inventory (asset)
progress billings- contra inventory (credit)
estimated loss- recognized immediately in the year it is discovered
