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FAR-BECKER NOTES > F1-NOTES > Flashcards

F1-NOTES Flashcards

1
Q

What is the single source of authoritative nongovermental US GAAP?

A

FASB Accounting Standards Codification

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2
Q

What is the goal of IFRS and GAAP?

A

Single Set of high-quality international accounting standards that companies can use for both domestic and crossboard financial reporting.

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3
Q

Under Conceptual Framework-

Who are the primary users of Financial reporting?

A

External- Investors, Lenders, and other creditors

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4
Q

What are the fundamental qualitative characteristics?

A

Relevence and Faithful Representation

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5
Q

What are the characteristics of relevence?

A

Predictive Value

Confirming Value

Materiality

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6
Q

What are the characteristics of Faithful Representation?

A

Completeness

Neutrality

Freedom from Error

“Completely Neutral is free from error”

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7
Q

What are the enhancing qualitative characteristics?

A

Comparability

Verifiability

Timeliness

Understandability

“Compare & Verify in Time to Understand”

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8
Q

What is a full set of F/S?

A

Statement of Financial Position (B/S)

Statement of earnings (I/S)

Statement of Comprehensive Income

Statement of Cash Flows

Statement of Changes in Owners’ Equity

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9
Q

What GAAP method is least lilely to overstate assets and understate liabilitiies?

A

Conservatism Principle

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10
Q

What are the elements of F/S?

A

Comprehensive Income

Revenues

Expenses

Gains

Losses

Assets

Liabilities

Equity

Investments by Owners

Distributions by Owners

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11
Q

What are the 2 fundamental assumptions according to the IASB?

A

Accrual Basis Accounting

Going Concern

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12
Q

What are the five elements of Present Value Measurement?

A
  1. Estimate of future cash flows
  2. Expectations about timing variations of future cash flows
  3. Time value of money
  4. Price of bearing uncertainity
  5. Other factors (liquidity issues and market imperfections)
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13
Q

What is historical costs?

A

Is the actual exchange value in dollars at the time of the transaction

Example: PP&E

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14
Q

What is current cost?

A

is the cost athat would be incurred at the present time to replace an asset, the replacement cost or the lower recoverable amount.

Example: Inventory

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15
Q

What is Net Realizable Value?

A

the net realizable value of accounts receivable is the balance of the accounts receivable account less the allowance for uncollectible accounts.

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16
Q

What is the presentation order of the major componenets of an income and retained earnings statement

A

Income from Continuing Operations

Income from Discontinued Operations

Extraordinary Items

Cumulative Effect of change in Accounting Principle

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17
Q

What are the normal losses from discontinued operations?

A

Impairment loss

A g/l from actual operations

A g/l on actual disposal

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18
Q

Under GAAP-

a componenet of an entity may be

A

Operating Segment

Reportable Segment

Reporting Unit

Subsidiary

Asset Group

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19
Q

Under IFRS-

a component of an entity may be-

A

Major line of business or geographical area of operations

A subsidiary acquired exclusively with a view to resale

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20
Q

What is the critieria to be held for sale under GAAP and IFRS?

A
  1. Managmenet commits to a plan to sell the component
  2. The componenet is available for immediate sale in its present condition
  3. An active program to locate a buyer has been initiated
  4. The sale of the component is probable and the sale is expected to be complete within one year
  5. The sale of the component is being actively marketed
  6. Actions required to complete the sale make it unlikely that significant changes to the plan will be made or that the plan will be withdrawn
    - Under IFRS- before a componenet can be classified as held for sale, the individual assets and liabilites of the component must be measured in accordance with applicable standards and any resulting gains and losses must be recognized.
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21
Q

When are the future operating losses expected to be incurred as part of an exit or disposal activity recognized?

A

In the period they occur

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22
Q

What is the definition of extraordinary items?

A

Material in Nature

Unusual and Infrequent

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23
Q

How are Non-extraordinary items presented?

A

As a separate component of “continuing operations”

Gross-Before Tax

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24
Q

What are some examples of Non-extraordinary items?

A

G/L from slae or abandonment of PP&E used in the business

Large Write downs or writeoffs

G/L from foreign currency transactions or translation

Losses from major strike

LTD extinguishments that are part of a common management stategy

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25
Q

Under IFRS - How are extraordinary items recorded?

A

They are not. Extraordinary items don’t exist in IFRS.

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26
Q

What are the 3 types of accounting changes?

A
  1. Changes in accounting estimate
  2. Changes in accounting principle
  3. Changes in accounting entity
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27
Q

How are changes in accounting principle accounted for?

A

Prospective- Implement in current period and continue in future periods

28
Q

What happens if a change in accounting priniciple is inseparable from change in estimate?

A

Treat as a change in accounting estimate

Affects current and future income from continuing operations

29
Q

How are changes in accounting principle accounted for?

A

GR: Retrospective Application

Direct effects of a change in accounting principle are adjustments that would be necessary to restate the F/S of prior periods.

30
Q

What is the cumulative effect if non-comparative financial statements are presented for the change in accounting principle?

A

The cumulative effect of a change in accounting principle is equal to the difference between the amount of beginning RE in the period of change and what the RE would have been if the accounting change had been retroactively applied to all prior affected periods.

31
Q

What is the cumulative effect if comparative FS are being presented of a change in accounting principle?

A

The cumulative effect is equal to the difference between beginning RE in the first period presented and what RE would have been if the new principle had been applied to all prior periods.

32
Q

What are the exceptions to the GR for accounting for change in accounting pinciple?

A
  1. Impractible to Estimate- Ex LIFO - too difficult to recalculate layers of inventory
  2. Change in depreciation method
33
Q

How do you account for a chang in accounting entity?

A

Retrospective Application

-If comparative FS are presented - Restatement to reflect information for the new entity

34
Q

How do you account for an Error Correction?

A

RESTATE

35
Q

What is included in OCI?

A

“PUFER”

P-Pension adjustments

U- Unrealized gains and losses (available-for-sale securities)

F-Foreign currency items

E-Effective portion cash flow hedges

R- Revaluation surplus (IFRS only)

36
Q

What is comprehensive income?

A

Is the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

37
Q

What is a reclassification adjustment?

A

Move OCI items from AOCI to the I/S.

38
Q

What is AOCI?

Accumulated Other Comprehensive Income-

A

Is a component of equity that includes the total of OCI for the period and previous Periods.

39
Q

Under GAAP and IFRS - how can CI be presented?

A

Single Statement of CI

Two-Statement Approach - an income statement followed by a separate statement of CI that begins with net income

US GAAP ONLY - A statement of changes in equity

40
Q

What does both US GAAP and IFRS require as an integral part of the F/S?

A

Description of all significant policies

41
Q

What accounting policies are commonly described in the description of significant policies?

A

Basis of consolidation

Depreciation Method

Amortizaton of intangibles

Inventory Pricing

Accounting for Recognition of profit on LT construction contracts

Recognition of revenue from franchising or leasing operations

42
Q

What are some items not included in the footnote of accounting policies?

A

Composition of accounts and amounts in dollars of account balances

Details relating to changes in accounting principles

Dates of maturity and amounts of LTD

Yearly computation of depreciation, depletion and amortization

43
Q

What are some of the other notes to the F/S not presented in the body of the F/S or the Summary of Significant Accounting Policies?

A

Changes in Stockholders equity

Required marketable securities (carrying value & gross unrealized G/L)

Contingency Losses

Contractual Obligations (including restrictions on specific assets or liabilities)

Pension Plan Descriptions

Post-Balance Sheet Disclosures

44
Q

What are some examples of Related Party Transactions?

A

Sales, puchases and transfers of real or personal property

Services received or furnished - such as acccounting, management, engineering and legal

Use of property and equipment by lease or otherwise

Borrowings, ledings and guarantees

Maintenance of compensating bank balances for the benefit of a related party

Intra-entity billings based on allocations of common costs

Filings of consolidated tax returns

45
Q

Iterim Fiancial Reporting

-Just some information

A
  • Not required under US GAAP or IFRS
  • Public companies must file with the SEC
  • Timeliness over Reliability (Unaudited)
  • An integral part of Annual F/S
  • Income tax expense is estimated each quarter
46
Q

How does Segment Reporting help users of F/S?

A
  • Better understand the enterprises’s performance
  • better assess its prospects for future net cash flows
  • Make more informed judgements about the enterprise as a whole
47
Q

What are the required disclosures for all Public Enterprises?

A
  1. Operating Segments (annual and interim)
  2. Products and Services
  3. Geographic Areas
  4. Major Customers
48
Q

What accounting principles do you use for segment reporting?

A

Use the same accounting principles as the Main F/S

49
Q

What is the Quantitative Thresholds for Reportable Segments?

A

1. 10% “Size” Test

a. Revenue- Segment’s reported revenue is 10% or more of the combined revenue, internal and external, of all operating segments
b. Reported P&L - 10% more of profit or loss of combinted operating segments
c. Assets - Segment’s assets are 10% more of combined assets
2. 75% “Reporting Sufficiency” Test - If the total of external (consolidated) revenue reported by operating segments constitutes less than 75% of external (consolidated) revenue, additional operating segments need to be identified as reportable segments, even if they do not meet the above 3 tests, until at least 75% of external (consolidated) revenue is included in reportable segments

50
Q

What happens during a development stage?

A

A company devotes most of its activities and resources toward establishing the business -

Start-up, Organizational Costs=expense immediately under GAAP

51
Q

What happens at the first time adoption of IFRS?

A

An entity’s first IFRS F/S are the first annual F/S in which the entity adopts IFRS and makes an explicit and unreserved statement in those F/S of compliance with IFRS.

52
Q

What must the entity’s first IFRS F/S include?

A

3 B/S

2 Statements of CI

2 I/S

2 Statement of Cash Flows

2 Statements of Changes in Equity

Related Notes

53
Q

What should an entity dislcose?

A

How the transitition from previouse GAAP to IFRS affected its reported financial position, financial performance, and cash flows.

54
Q

When a company issues new securities, it is required to submit a registration statement to the SEC that includes:

A
  1. Disclosures about the secuitities being offered for sale
  2. The relationship of the new securities to the company’s other securities
  3. Information similar to that filed in the annual filing
  4. Audited F/S
  5. A description of business risk factors
55
Q

What is the form 10-K?

A

Must be filed annually by US registered companies.

The filing deadline for Form 10-K is 60 days after the end of the fiscal year for large accelerated filers, 75 days after the end of the fiscal year for accelerated filers, and 90 days after the end of the fiscal year for all other registrants.

These forms contain financial disclosures, including cummary of financial datat, management’s discussion and analysis (MD&A), and audited F/S prepared using GAAP.

56
Q

What is the form 10-Q?

A

Form 10-Q must be filed by US Registered companies (issuers). The filing deadline for Form 10-Q is 40 days after the end of fiscal quarter for large accelerated fileres and acceleraged filers, and 45 days after the end of the fiscal quarter for all other registrants.

This form contains unaudited F/S prepared using US GAAP, interim period MD& A and certain disclosures

57
Q

What is form 11-K?

A

This is the annual report of a company’s employee benefit plan(s).

58
Q

What are forms 20-F and 40-F?

A

These forms must be filed annually by foreign private issuers.

Form 40-F is filed by specific Canadian companies registered witht he SEC and Form 20-F is filed by other non-US Registrants.

These forms are similar to Form 10-K and contain financial disclosures, including a summary of financial data, managements discussion and analysis (MD&A), and audited F/S.

The F/S may be prepared using GAAP, IFRS or a comprehensive body of accounting principles other than GAAP or IFRS.

59
Q

What is Form 6-K?

A

This form is filed semi-annually by foreign private issures. This form is similar to the Form 10-Q and contains unaudited F/S, interim period MD&A, and certain disclosures.

60
Q

What is Form 8-K?

A

This form is filed to report major corporate events such as corporate asset acquisitions or disposals, changes in securities and trading markets, changes to accountants or FS, and changes in corporate governance or management.

61
Q

What are Forms 3, 4 and 5?

A

These forms are required to be filed by directors, officers, or beneficial owners of more than 10% of a class of equity securities of a registered company.

62
Q

What is the Regulation S-X?

A

The SEC sets forth the “form and content” of and requirements for interim and annual FS to be filed with the SEC.

63
Q

What are XBRL?

A

XBRL is a royalty free, open specification for software that use XML (Extensible Markup Language) data tags to describe financial information for business and fnancial reporting.

64
Q

What is an XBRL Tag?

A

A machine readable code that gives a standard definition for each line in an IS, cash flow statement, BS or other financial or non-financial data, including data contained in the notes to the FS.

Recognized and processed by software

65
Q

What is taxomony?

A

A taxonomy defines the specific tags used for individual items of business and financial data.

66
Q

What is the SEC Interactive Data Rule?

A

The SEC’s Interactive Data Rule requires US public companes and foreign private issuers to present FS and any applicable FS schedules in an exhibit prepared using XBRL.

67
Q
A

FAR-BECKER NOTES (3 decks)

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