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Financial > F1-Conceptual Frameworks > Flashcards

F1-Conceptual Frameworks Flashcards

1
Q

Name the 7 sources of Authoritative Literature in the codification.
FEDPRIA

A 
Fin Acctg. Standards Board (FASB)
Emerging Issues task force (EITF)
Derivative Implementation group issues
Acctg. (P)rincipals Board Opinions
Acctg. (R)esearch bulletins
Acctg. (I)nterpretations
American Institute of CPA (AICPA) stmts of position, guidelines, practice bulletins and technical inquiry serve.
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2
Q

What are the required opening IFRS Statements?

A 
3 Balance sheets
2 Income statements
2 Comprensive Income,
2 Cash flow
2 Statement of Owner's Equity and Notes
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3
Q

What is the date of transition for first time IFRS users?

A

Date of transition is the opening balance sheet date. If more than 1 are presented then its the beginning (Jan 1) of the prior period.
Adjustments are needed to restate assets & liabilities in conformity w/IFRS s/b made directly to Retained Earnings.

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4
Q

Under SFAC#8, what are the Fundamental Qualitative Characteristics?

A

Relevance: Predictive Value, Confirming Value & Materiality.
Faithful Representation: Completeness, Neutrality & Free from error.

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5
Q

Under SFAC#8, what are the Enhancing Qualitative Characteristics?

A

Comparability
Verifiability
Timeliness
Understandability

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6
Q

Name the pervasive constraint on the information provided in financial reporting.

A

Cost Constraint: The benefits of reporting financial information must be greater than the costs of obtaining and presenting the information.

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7
Q

What is the single source of authoritative nongovernmental U.S. GAAP?

A

The FASB “Accounting Standards Codification” (ASC)

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8
Q

The term “International Financial Reporting Standards” includes what standards?

A

International Accounting standards (IAS)
International Financial Reporting Standards (IFRS)
IFRIC Interpretations
SIC Interpretations

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9
Q

Who are the primary users of general purpose financial reports?

A

Investors
Lenders
Other creditors

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10
Q

Under SFAC#5, Objectives of financial reporting for nonbusiness organizations, what are the characteristics of nonbusiness organizations?

A
  1. A significant portion of there resources come from contributions and grants.
  2. Their operating purposes are other than to provide goods or services for profit.
  3. They lack ownership interest that can be sold, transferred or redeemed or that allow a claim on the resources upon liquidation.
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11
Q

Under SFAC#5, What should a full set of financial statements include?

A
  1. Statement of Financial Position (balance sheet)
  2. Statement of Earnings (income statement)
  3. Statement of Comprehensive Income
  4. Statement of Cash Flows
  5. Statement of Changes in Owner’s Equity
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12
Q

What is the difference between realization and recognition?

A

Realization: When sold and converted to cash (or claims to cash.
Recognition: The process of formally recording or incorporating an item in the financial statements and classifying it as an asset, liability, equity, revenue or expense

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13
Q

Under SFAC#6, what are the 10 elements of financial statements? REGL ALE needs ID

A 
(R)evenues
(E)xpenses
(G)ains  :  Sales price >BV
(L)osses : Sales price <BV = impairment/write down
(A)ssets
(L)iabilities
(E)quity
(I)nvestment by owners
(D)istribution to owners
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14
Q

What are the 6 elements of financial statements according to the IASB Framework?

A
  1. Assets
  2. Liabilities
  3. Equity
  4. Income (revenue and gains)
  5. Expenses (expenses and losses)
  6. Capital maintenance adjustments
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15
Q

Under SFAC#7, what are the 5 elements of Present value measurement? UVOTE

A

The price for bearing (U)ncertainty
Expectations about timing (V)ariations of future cash flows
(O)ther factors (e.g. liquidity issues and market imperfections) of future cash flow
(T)ime value of money (the risk-free rate of interest)
(E)stimate of future cash flow

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16
Q

Describe the expected cash flow approach for present value computations.

A

Considers a range of possible cash flows and assigns a (subjective) probability to each cash flow in the range to determine the weighted-avg or “expected”, future cash flow.

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17
Q

What are the 2 present value computations and when are they used?

A

Traditional approach: Present Value of bonds-scheduled known payments
Expected cash flows approach (more complex cases): Present Value of warranties-uncertain value of future payments

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18
Q

According to FASB, what attributes are used to measure inventory?

A
  1. Replacement cost
  2. Net realizable value
  3. Historical cost
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19
Q

What is the definition of replacement cost?

A

…the amount of cash or its equivalent that would be paid to acquire or replace an asset currently

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20
Q

What are the measurement attributes for assets and liabilities?

A

Historical cost (PP&E)
Current cost (Inventory)
Net realizable value (AR Gross-allowance)
Current Market Value (Marketable securities)
Present value of future cash flows (LT debt “bonds”)

21
Q

Comparability (L)

A

Indicates that the information can be compared to other data in order to identify similarities and differences and allow users to make meaningful comparisons between enterprises.

22
Q

Reliability (L)

A

Investors, creditors and other users must be able to depend on accounting information to accurately represent the economic conditions or events that it purports to describe.

23
Q

Statement of Financial Accounting Concepts No. 1. (L)

A

Establishes and identifies three major objectives of general purpose external financial reporting.

24
Q

The International Accounting Standards Board (IASB) (L)

A

Its purpose is to write International Financial Reporting Standards (IFRS) which will establish an International GAAP.

25
Q

ASC 825 requires ________________. (L)

A

all entities to disclose the fair value of many financial instruments

26
Q

Separate Entity (L)

A

Information is reported as if the business were separate from its owners, customers, employees, and creditors.

27
Q

Revenue Recognition (L)

A

Revenue is recognized when it is earned, measurable and collectible, that is when the income earning process is complete and an exchange has taken place.

28
Q

Distributions to owners (L)

A

Decreases in net assets of a particular enterprise resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners.

29
Q

Liabilities (L)

A

Probable future sacrifices of economic benefits arising from present obligations of a particular enterprise to transfer assets or provide services to other enterprises in the future as a result of past transactions or events.

30
Q

Cost/Benefit of Accounting Information (L)

A

The cost/benefit pervasive constraint states that unless the benefits to be derived exceed the costs of providing that information, it should not be provided.

31
Q

Three Ingredients of Reliability: (L)

A

Verifiability, Representational faithfulness and Neutrality

32
Q

Relevance (L)

A

Accounting information must be capable of making a difference in a decision by helping users to form predictions about the outcomes of past, present, and future events or to confirm or correct expectations reducing uncertainty about future events.

33
Q

Financial Accounting Standards (FASB) (L)

A

Primary standard setting body in the US today.

34
Q

Governmental Accounting Standards Board (GASB) (L)

A

Primary standard setter for state, local governments and all public not for profit entities.

35
Q

Periodicity (L)

A

Because of the need for timely information, accounting information is reported for set time intervals.

36
Q

Unit of Measure (L)

A

Comparability and understandability of financial information are enhanced if it is presented in terms of a common denominator.

37
Q

ASC 220 requires ____________________. (L)

A

the disclosure of comprehensive income (L)

38
Q

Investments by owners (L)

A

Increases in net assets of a particular enterprise resulting from transfers to it from other enterprises of something of value to obtain or increase ownership interests (or equity) in it.

39
Q

Asset (L)

A

Probable future economic benefits obtained or controlled by a particular enterprise as a result of past transactions or events.

40
Q

Consistency (L)

A

A goal of this concept is comparison of one company’s information from one period to the next.

41
Q

Three Ingredients of Relevance: (L)

A

Predictive value, Feedback value and Timeliness

42
Q

Statement of Financial Accounting Concepts No. 2. (L)

A

Defines the characteristics which make accounting information useful.

43
Q

Securities and Exchange Commission (SEC) (L)

A

It has oversight over public companies that are listed on a stock exchange.

44
Q

Fair Value Definition ASC 820 (L)

A

“Fair value is the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.”

45
Q

Objectivity (L)

A

Information should be free from bias on the part of the individual who prepared the information.

46
Q

Matching (L)

A

Dictates that efforts and expenses be matched with the revenue of the period.

47
Q

Comprehensive Income (L)

A

The change in equity (net assets) of an enterprise, during a period, from transactions and other events and circumstances from non-owner sources.

48
Q

Equity (L)

A

Residual interest in the assets of an enterprise that remains after deducting its liabilities. In a business enterprise, the equity is the ownership interest.

49
Q

Materiality (L)

A

Is a consideration if it is probable that a person relying on certain information will be influenced in making investment or credit decisions by an error or omission.

Financial (26 decks)

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