FAR 1 Flashcards

(21 cards)

1
Q

Name the single source of authoritative nongovernmental U.S. GAAP.

A

The FASB Accounting Standards Codification

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2
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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3
Q

Who are the primary users of general purpose financial reports?

A

Existing & Potential

  • Lenders
  • Investors
  • Other Creditors
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4
Q

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

A

Benefit versus Cost

The benefit of reporting financial information must be greater than the cost of obtaining and presenting the information.

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5
Q

Name the fundamental qualitative characteristics of useful financial information.

A

Relevance & Faithful Representation

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6
Q

Name the three elements of Relevance

A
  • Predictive Value
  • Confirming Value
  • Materiality
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7
Q

Name the three elements of faithful representation

A
  • Completeness
  • Neutrality
  • Freedom from error
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8
Q

Name the enhancing qualitative characteristics of financial information.

A
  • Comparability
  • Variability
  • Timeliness
  • Undesirability
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9
Q

List the 10 elements of financial statements according to SFAC #6

CREG and LALEID

A
  • Comprehensive Income
  • Revenue
  • Expenses
  • Gains
  • Losses
  • Assets
  • Liabilities
  • Equity
  • Investments by Owners
  • Distributions to Owners
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10
Q

According to SFAC #5, what should a full set if financial statements include?

A
  • Statement of Financial Position (Balance Sheet)
  • Statement of Earnings (Income Statement)
  • Statement of Comprehensive Income
  • Statement of Cash Flows
  • Statement of Changes in Owners Equity
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11
Q

What is the difference between realization and recognition?

A

Realization - When sold and converted to cash (or claims to cash)
Recognition - When recorded in the financial statements.

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12
Q

List the six elements of financial statements according to the IASB Framework.

A
  • Assets
  • Liabilities
  • Equity
  • Income (Revenue & Gains)
  • Expenses (Expenses & Losses)
  • Capital Maintenance Adjustments
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13
Q

Name the five elements of present value measurement per SFAC #7

             EVTUO
A
  • Estimations of Future Cash Flows
  • Time Variations of future cash flows
  • Time Value of Money (The Risk-Free Interest Rate)
  • Price for bearing Uncertainty of cash flows
  • Other Factors (Market Imperfections & Liquidity
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14
Q

Describe the expected cash flow approach to 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-average , or “expected” future cash flow.

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15
Q

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

A
  • Income from Continuing Operations (Income Statement)
  • Discontinued Operations (Income Statement)
  • Extraordinary Items (Income Statement)
  • Cumulative affect of a change in accounting principle (Retained Earnings Statement)
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16
Q

The gain (loss) from discontinued operations can consist of….

A
  • An Impairment Loss
  • Gain (Loss) from actual operations
  • Gain (Loss) on disposal
17
Q

In what period are the following reported:

  • An Impairment Loss?
  • A gain (loss) from actual operations?
  • A gain (loss) on disposal?
A

In the period in which they occur.

18
Q

In reporting discontinued operations, how is a”component” of an entity defined under U.S. GAAP & IFRS?

A

Under U.S. GAAP:

  • An Operating segment
  • A Reportable segment
  • A Reporting Unit
  • A subsidiary
  • An Asset Group

In IFRS:

  • A separate major line of business or a geographical area of operations.
  • A subsidiary acquired exclusively with the view of resale.
19
Q

How do we account for subsequent increases in the fair value of a discontinued component?

A

A gain is recognized for the subsequent increase in fair value minus cost to sell (but not in excess of the previously recognized cumulative loss). The gain is reported in the period of increase.

20
Q

What types of costs are associated with exit and disposal activities?

A
  • Involuntarily employee termination benefits
  • Costs to terminate a contract that is not a capital lease.
  • Any other cost associated with exit or disposal activities.
21
Q

Define extraordinary items.

A

An extraordinary item is one that is

  • Material in nature.
  • Of a character significantly different from the typical or customary business activities (unusual)
  • not expected to recur in the foreseeable future.
  • Not normally considered in evaluating the ordinary operating results of an enterprise.

Key words: Unusual & Infrequent

Remember: Extraordinary items are recognized under U.S. GAAP but not IFRS.