FAR 1-1: Accounting Standards & Conceptual Frameworks Flashcards
Name the single source of authoritative nongovernmental U.S. GAAP
The FASB “Accounting Standards Codification” (ASC)
The term “International Financial Reporting Standards” includes what standards?
- International Accounting Standards (IAS)
- International Financial Reporting Standards (IFRS)
- IFRIC Interpretations
- SIC Interpretations
What are 3 objectives of financial reporting by business enterprises?
To provide:
- Information useful in investment, credit, & similar decisions
- Information useful in assessing cash flow prospects
- Information about enterprise resources, claims to those resources, & changes in them
Who are the primary users of general purpose financial reports?
Existing & potential:
- Investors
- Lenders
- Other creditors
Name the pervasive constraints in the hierarchy of accounting qualities under the FASB concept statements & the IFRS framework
FASB concept statements:
- Benefit > Cost
- Materiality
IFRS framework:
- Timeliness
- Benefit > Cost
- Balance between qualitative characteristics
Name the pervasive constraint on the information provided in financial reporting
Cost constraint: the benefits of reporting financial information must be greater than the costs of obtaining & presenting the information
Name the 2 primary decision-specific qualities of useful accounting information
Relevance & reliability
Name the fundamental qualitative characteristics of useful financial information
Relevance & faithful representation
Name the 3 elements of relevance
PassMyCPAexam
- Predictive value
- Materiality
- Confirmatory value
Name the 3 elements of reliability
NRFV
- Neutrality
- Representational Faithfulness
- Verifiability
Name the 3 elements of faithful representation
Financials are not faithfully represented unless complete
- Neutrality
- Completeness
- Freedom from error
Name the enhancing qualitative characteristics of financial information
It is enhancing to CU on TV
- Comparability
- Understandability
- Timeliness
- Verifiability
Name the 2 secondary characteristics of accounting information
Comparability & consistency
According to SFAC #5, what should a full set of financial statements include?
- Statement of financial position (the balance sheet)
- Statement of earnings (the income statement)
- Statement of comprehensive income
- Statement of cash flows
- Statement of changes in owners’ equity
What is the difference between realization & recognition?
- Realization: When sold & converted to cash (or claims to cash)
- Recognition: When recorded in the financial statements
List the 10 elements of financial statements according to SFAC #6
CREG and LALEID
*Comprehensive Income
*Revenues
*Expenses
*Gains
and
*Losses
*Assets
*Liabilities
*Equity (of Net Assets)
*Investments by Owners
*Distributions to Owners
List the 6 elements of the financial statements according to the IASB Framework
ALEIEC
- Assets
- Liabilities
- Equity
- Income (revenue & gains)
- Expenses (expenses & losses)
- Capital maintenance adjustments
Name the 5 elements of present value measurement per SFAC #7
EVTUO
- ESTIMATE of future cash flows
- Expectations about time VARIATIONS of future cash flows
- TIME value of money (the risk-free rate of interest)
- The price for bearing UNCERTAINTY
- OTHER factors (e.g., liquidity issues & market imperfections)
Describe the expected cash flow approach for present value computations
Considers a range of possible cash flows & assigns a (subjective) probability to each cash flow in the range to determine the weighted-average, or “expected,” future cash flow
