F1 CONCEPTUAL FRAMEWORK AND FINANCIAL REPORTING Flashcards
NAME THE FUNDAMENTAL QUALITATIVE CHARACTERISTICS OF USEFUL FINANCIAL INFORMATION?
- RELEVANCE
2. RELIABLE (FAITHFUL REPRESENTATION)
NAME THE THREE ELEMENTS OF RELEVANCE
PREDICTIVE
CONFIRMING VALUE
MATERIALITY
NAME THE THREE ELEMENTS OF FAITHFUL REPRESNTATION
COMPLETE
NUTRAL
FREE FROM ERROR
NAME THE ENHANCING QUALITATIVE CHARACTERS OF FINANCIAL INFORMATION
COMPARABLITY
TIMELINESS
VARIFIABILTY
UNDERSTANDABLITY
ACCORDING TO SFAC NO. 5 WHAT SHOULD A FULL SET OF FINANCIAL STATEMENTS INCLUDE
INCOME STATEMENT (STATEMENT OF EARNINGS)
STATEMENT OF COMPREHENSIVE INCOME
BALANCE SHEET (STATEMENT OF FINANCIAL POSITION)
RETAINED EARNINGS (CHANGES IN OWNERS EQUITY)
CASH-FLOW
LIST THE 10 ELEMENTS OF FINANCIAL STATEMENTS ACCORDING TO SFAC NO. 6
REVENUE EXPENSE GAINS LOSS LIABLITY ASSESSETS EQUITY INVESTMENT DISTRIBUTIONS (CREG AND LALEID)
NAME THE FIVE ELEMENTS OF PRESNT VALUE MEASUREMENTS PER SFAC NO. 7
ESTIMATED FUTURE CASH FLUE
EXPECTATIONS ABOUT TIMING VARIATIONS OF FUTURE CASH FLOW
TIME VALUE OF MONEY (THE RISK-FREE RATE OF RETURN)
THE PRICE FOR BEARING UNCERTAINTY
OTHER FACTORS (LIQUIDITY ISSUES AND MARKET IMPERFECTIONS)
(EVTUO)
WHAT IS MEANT BY A “CLASSIFIED” BALANCE SHEET?
A CLASSIFIED BALANCE SHEET DISTINGUISHES CURRENT AND NON-CURRENT ASSETS AND LIABILITIES.
LIST THE FIVE STEPS ASSOCIATED WITH THE WITH REVENUE RECOGNITION?
- IDENTIFY
- SEPARATE PERFORMANCE OBLIGATION
- TRANSACTION PRICE
- ALLOCATE TRANSACTION PRICE WITH PERFORMANCE OBLIGATION
- RECOGNIZE REVENUE WHEN PERFORMANCE HAS BEEN SATISFIED.
WHAT CRITERIA MUST BE MET IN ORDER TO RECOGNIZE REVENUE ON A CONTRACT?
ALL THE PARTIES HAVE APPROVED THE CONTRACT AND AGREEMENT
THE RIGHTS OF EACH PARTY HAVE BEEN IDENTIFIED
PAYMENT TERMS HAVE BEEN IDENTIFIED
COMMERCIAL SUBSTANCE
PROBABLE WILL COLLECT ALL CONSIDERATION
WHAT CRITERIA MUST BE MET IN ORDER FOR A PERFORMANCE OBLIGATING TO BE CONSIDERED DISTINCT?
- GOODS/ SERVICE IS SEPARATELY IDENTIFIABLE
2. CUSTOMER CAN BENEFT FROM GOOD INDEPENDENTLY WHEN COMBINED FROM CUSTOMER’S OWN AVAILABLE RESOURCE.
DISTINGUISH BETWEEN THE TREATMENT OF COSTS INCURRED IN OBTAINING A CONTRACT AS ASSETS OR AS EXPENSE?
IF AN ENTITY EXPECTS TO RECOVER THESE COSTS THROUGH THE PERFORMANCE OF THE CONTRACT, THE ENTITY WILL TREAT THEM AS ASSETS. IF THE COSTS ARE INCURRED REGARDLESS OF WHETHER THE CONTRACT IS OBTAINED, THEY ARE TREATED AS EXPENSES.
HOW DO CONTROL AND REVENUE RECOGNITION DIFFER WHEN AN ENTITY ACTS AS A PRINCIPAL VERSUS WHEN IT ACTS AS AN AGENT?
A PRINCIPAL GROSS METHOD
AGENT NET METHOD. (FEE/ COMMISSIONS)
DESCRIBE THE ACCOUNTING TREATMENT FOR FORWARDS AND CALL OPTIONS RELATED TO REPURCHASE AGREEMENTS
REPURCHASE PRICE < ORGINAL PRICE (LEASE)
REPURCHASE PRICE > ORGINAL SELLING PRICE (FINANCE ARRANGEMENT)
DESCRIBE THE ACCOUNTING TREATMENT FOR PUT OPTIONS RELATED TO REPURCHASE AGREEMENTS?
PUT OPTIONS
REPHRASE PRICE < ORIGINAL SELLING PRICE
- CUST. SIGNIFICANT ECONOMIC INCENTIVE TO EXERCISE THE RIGHT (LEASE)
- CUST. NO SIG. ECO. INC. TO EXERCISE RIGHT (SALE WITH RIGHT OF RETURN)
REPURCHASE PRICE > ORIGINAL SELLING PRICE
- REPURCHASE PRICE > EXPECTED MARKET VALUE OF THE ASSET ( FINANCING ARRANGEMENT)
- REPURCHASE PRICE < EXPECTED MARKET VALUE OF THE ASSET ( SALE WITH THE RIGHT OF RETURN)
IDENTITY TWO METHODS OF REVENUE RECOGNITION FOR LONG-TERM CONSTRUCTION- TYPE CONTRACTS UNDER U.S. GAAP.
PERCENTAGE-OF-COMPLETION
COMPLETED CONTRACT METHOD
FOR LLONG0TERM CONSTRUCTION-TYPE CONTRACTS, WHEN ARE LOSSES RECOGNIZED?
BOTH METHODS RECOGNIZE LOSSES IMMEDIATELY WHEN DISCOVERED.
FORMULA FOR PERCENTAGE OF COMPLETION
ACTUAL EXPENSE / ESTIMATED TOTAL COST = % PERCENT COMPLETED
% PERCENT COMPLETED * GROSS PROFIT = INCOME EARNED
INCOME EARNED - PRIOR RECOGNIZED REVENUE = ACTUAL INCOME EARED FOR THE YEAR.
WHAT CONDITIONS MUST BE PRESENT FOR A DISPOSAL TO BE REPORTED IN DISCONTINUED OPERATIONS? ( WHAT WORDS ARE IMPORTANT)
“STRATEGIC SHIFT”
OR
“MAJOR EFFECT ON ENTITY’S OPERATIONS AND FINANCIAL RESULTS”
HOW DO WE ACCOUNT FOR SUBSEQUENT INCREASES IN THE FAIR VALUE OF A DISCONTINUED COMPONENT?
A GAIN IS RECOGNIZED FOR THE SUBSEQUENT INCREASE IN FAIR VALUE MINUS COSTS TO SELL ( BUT NOT IN EAXESS OF THE PREVIOUSLY RECOGNIZED CUMULATIVE LOSS). THE GAIN IS REPORTED IN THE PERIOD OF INCREASE.
HOW IS A CHANGE IN AN ACCOUNTING ESTIMATE REPORTED?
PROSPECTIVLY
HOW IS A CHANGE IN ACCOUNTING PRINCIPLE REPORTED?
RETROSPECTIVLY
CUMULATIVE EFFECT OF CHANGE IS INCLUDED IN THE RETAINED EARNINGS STATEMENT AS AN ADJUSTMENT OF THE BEGINNING RETAINED EARNINGS BALANCE OF THE EARLIEST YEAR PRESENTED PRIOR,
FINANCIAL STATEMENTS ARE RESTATED, IF PRESENTED.
WHAT ARE THE SPECIAL EXCEPTIONS TO THE GENERAL RULE FOR THE REPORTING OF CHANGES IN ACCOUNTING PRINCIPLE?
HOW ARE THESE EXCEPTIONS REPORTED?
CHANGES FROM LIFO TO ANOTHER INVENTORY
CHANGES TO DEPRECIATION METHDO
PROSPECTIVELLY
NAME THE THREE TYPES OF ACCOUNTING CHANGES
CHANGE IN ACCOUNTING PRINCIPLE - RETROSPECTIVELY
CHANGE IN ACCOUNTING ENTITY - RETROSPECTILVY
CHANGE IN ACCOUNTING ESTIMATE - PROSPECTIVLY
NOTE ERRORS - RETROSPECTIVELY
DEFINE COMPREHENSIVE INCOME (C.I)
ALL CHANGES IN NET ASSETS (EQUITY) THAT RESULTS FROM TRANSACTIONS AND OTHER EVENTS AND CIRCUMSTANCES FROM NON-OWNER SOURCES
IDENTIFY THE FOUR ITEMS INCLUDED IN OTHER COMPREHENSIVE INCOME
PUFI
PENSION AND ADJUSTMENTS
UNREALIZED GAINS AND LOSSES FROM AVAILABLE FOR SALE DEBT SECURITY
FORIGN TRANSLATION ADJUSTMENTS
INSTRUMENT SPECIFIC CREDIT RISK FOR LIABILITY (USING FV) AND THEIR CHANGES IN FV
WHAT ARE THE TWO WAYS FOR REPORTING COMPREHENSIVE INCOME?
SINGLE-STATEMENT APPROACH
TW0 STATMENT APPROACH
LIST FOUR DISCLOSURE REQUIREMENT FOR COMPREHENSIVE INCOME?
- TAX EFFECT
- SHOW CHANGES IN ACCUMULATED BALANCES OF COMPONENTS OF “O.C.I.”
- TOTAL ACCUMULATED O.C.I.
- RECLASSIFICATION ADJ BETWEEN O.C.I .AND N.I.
WHAT ARE THE THREE RULES FOR RECORDING ADJUSTING JOURNAL ENTRIES?
- ADJ. JOURNAL ENTIRES MUST BE RECORDED BY THE END OF THE ENTITY’S FISCAL YEAR, BEFORE THE PREPARATION OF FINANCIAL STATEMENTS.
- NEVER INVOLVE THE CASH ACCOUNT.
- MUST HIT ONE INCOME STATEMENT ACCOUNT AND ONE BALANCE SHEET ACCOUNT.
