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FAR > F1 Flashcards > Flashcards

F1 Flashcards

1
Q

Who are primary users of financial reports?

A

Investors, lenders, and creditors

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2
Q

What are the fundamental qualitative characteristics of useful information?

A

relevance and faithfulness

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3
Q

What is the objective of general-purpose financial reporting?

A

To provide useful financial information for users to make decisions

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4
Q

What does faithful representation include?

A

completeness, neutrality, and free from error

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5
Q

What does relevance include?

A

predictive value, confirming value, and materiality

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6
Q

What is recognition in accounting?

A

the process of recording an item on the financial statements of an entity

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7
Q

What are the enhancing qualitative characteristics?

A

timeliness, understandability, comparability, and verifiability

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8
Q

Define the elements of present value measurement with UVOTE

A

The price for bearing uncertainty, timing variation expectations from FCFs, Other factors (liquidity and market imperfections), Time value of money, and Estimated FCF

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9
Q

What are the key differences between managerial and financial accounting?

A

Managerial accounting does not need to follow GAAP, it is forward-looking, has a timeliness focus, and is less precise

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10
Q

What is replacement cost?

A

The cost of reacquiring an asset today

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11
Q

When IASB proposes new standards, how many members have to approve?

A

at least nine members have to approve

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12
Q

What does the 6_K contain and how often is it filed?

A

filed semiannually by foreign private issuers and contains audited financial statements just like a 10_Q

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13
Q

What does Regulation S_X require?

A

Companies filing with the SEC to include their balance sheet from the previous 2 years and statement of cash flows, owners equity, and income statement from previous 3 years

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14
Q

How long do accelerated filers have to file their 10-K?

A

75 days

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15
Q

No seasonal fluctuations tell us previous 10-Q needs to be filed when?

A

at the end of the preceding fiscal year

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16
Q

Why do forms 3, 4, and 5 not require XBRL?

A

They do not contain financial statement information

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17
Q

Interim financial statements filed with the SEC would not include what statement?

A

Statement of cash flow for the most recent fiscal quarter

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18
Q

When do large accelerated filers have to file their 10-Q?

A

Within 40 days of the quarter end

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19
Q

What does the IFRS require for loans to officers and key management compensation?

A

disclosure

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20
Q

What must be disclosed for related party transactions?

A

The amount due to the affiliate and dollar amount of purchases during the year must be disclosed

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21
Q

If heavily invested in a company with large influence, what are we required to disclose?

A

Company_s accounting policy for the investment

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22
Q

When do we record losses and how much do we record?

A

Record in full when they become probable and estimable

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23
Q

What accounting rules should be applied to interim financial statements unless change in principle was adopted in the current year

A

Previous GAAP used

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24
Q

When preparing interim financial statements, how are income tax expenses calculated?

A

Estimated each quarter using effective tax rate expected to apply to the entire year

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25
Q

How do we record permanent declines in inventory market value in the interim financial statements?

A

Reflected in the interim financial statements in the period they were incurred

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26
Q

How do we calculated interim statement tax expense?

A

(year-to-date income * effective tax rate) - income tax expense recorded in the previous quarter

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27
Q

What is the rule for reporting individual segments?

A

Must make up at least 10% of revenue, profit or loss, and assets

28
Q

How are unaffiliated customer sales and intercompany sales disclosed?

A

Separately

29
Q

Are interest expense, income taxes, and general corporate expenses are allocated to divisions for purpose of segment disclosures?

A

Nope

30
Q

Are sales to other segments used in determining a segment_s operating income?

A

Yes

31
Q

For each reportable segment of an enterprise, what should be disclosed under GAAP?

A

both profit and loss and total assets (side with more disclosure)

32
Q

How do we handle changes in accounting principle that are inseparable from a change in accounting estimate?

A

Handled as a change in estimate prospectively (no cumulative adjustment required)

33
Q

How do we handle changing from cash basis which is non-GAAP to accrual basis which is GAAP?

A

This is an error correction that requires a retrospective, prior period adjustments to retained earnings

34
Q

How is a gain or loss that is usual OR infrequent (not both) presented?

A

As income from continuing operations

35
Q

How do we show the cumulative effect of a change in accounting principle?

A

Adjustment to beginning retained earnings

36
Q

What does the IDEA acronym stand for?

A

The organization of the income statement: Income from continuing operations, Income from discontinued operations, Extraordinary items, Changes in Accounting Principle

37
Q

How do we handle a change in estimate? Change in principle? Change in entity?

A

Prospective, Retrospective, and Restate all previous financial periods we report retrospectively

38
Q

How are error corrections reported?

A

Net of tax in the current statement of retained earnings as an adjustment of the beginning balance

39
Q

How do we report the cumulative affect of an accounting change?

A

Beginning retained earnings is adjusted for earliest year presented

40
Q

With discontinued operations, what two things are required?

A

Decision must represent strategic shift or have a significant effect on its operations and financial results

41
Q

What is the criteria for “held for sale” ?

A

Management commits to plan to sell component, Component available for immediate sale and present condition, Active program to locate buyer has been initiated, Sale of component is probable and expected to be completed within one year, Sales component being actively marketed, and Unlikely that significant change to plan to sell will be made or withdrawn

42
Q

Under US GAAP, how are extraordinary gains reported?

A

directly to net income

43
Q

A liability is only recognized when the following criteria are met:

A

Obligating event has occurred, Event results and present obligation to transfer assets or services in the future, and Event has little or no discretion to avoid future transfer of assets or services

44
Q

IFRS _________ the reporting of gain or losses as extraordinary

A

Prohibits

45
Q

How do we handle errors in the financials?

A

Restate in the event of an error and cumulative effect of the error should be reflected in the carrying amounts of the assets and liabilities at the beginning of the current year

46
Q

When are extraordinary losses reported?

A

entirely in the quarter the loss occurs

47
Q

What is comprehensive income?

A

the change in equity of a business during a period from transactions and other events and circumstances from nonowner sources

48
Q

CI includes all charges in equity except what?

A

those resulting from investments by owners and distributions to owners

49
Q

Comprehensive income uses a PUFER acronym to remember important parts which are

A

Pension Adjustments, Unrealized gains and losses on AFS securities, Foreign currency translation adjustments, Effective portion of cash flow hedges, and (IFRS) Revaluation surpluses

50
Q

Where should income tax expense benefit allocated to components be disclosed?

A

Either on the face of the statement or in the notes the financial statements

51
Q

Where should comprehensive income be shown?

A

Combined statement of income and comprehensive income or in a separate statement of comprehensive income or as a component of the statement of changes of owners equity (US GAAP only)

52
Q

Why are reclassification entries necessary?

A

To avoid double counting an item previously reported as comprehensive income (such as an unrealized gain), which is now reported as part of net income (like a realized gain)

53
Q

What is the purpose of comprehensive income?

A

To summarize all changes in equity from nonowner sources

54
Q

When can an accounting principle be changed?

A

Only if required by GAAP or if the alternative is preferable and more fairly presents the information

55
Q

Reportable segments have 10% of at least one of the following criteria:

A

Revenue (includes both sales to outsiders and understatement sales), Profit or loss (absolute amount), Combined assets of all reporting segments

56
Q

What is the 75% reporting sufficiency test?

A

Makes sure the total external revenue of operating segments chosen constitute 75% of total external revenue, if not - we need to add more segments

57
Q

According to the FASB conceptual framework, where does the objective of financial reporting stems from?

A

The informational needs of the external users

58
Q

Define Revenues.

A

Inflows or other enhancements of assets and or settlements in liabilities resulting from the entitys ongoing major operations, not from incidental operations

59
Q

When a fixed asset is sold, how is the gain or loss recognized and at what amount?

A

Recognized as part of income from continuing operations. The amount calculated is the difference between proceeds (amt received) and carrying amount or fair market value (amt given up)

60
Q

How are corrections of errors of prior periods reported?

A

As an adjustment to beginning retained earnings

61
Q

When is a cumulative effect of a change in accounting principle reported as an adjustment to beginning retained earnings?

A

When impracticable to calculate the cumulative effect

62
Q

Where are changes in estimates recorded?

A

Income from continuing operations

63
Q

WHEN do we report extraordinary gain or loss or an unusual or in frequently occurring item?

A

Report entire amount in the period incurred

64
Q

If market prices initially result in a loss then turn around, how do we treat gains in subsequent periods?

A

Gains recognized only to the extent of the loss

65
Q

For segment reporting, a segment must be at least 10% of the following:

A

Combined revenues whether intersegment or unaffiliated customers, Operating income (loss) of all segments having an operating gain (loss), Identifiable assets

FAR (10 decks)

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