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FAR 1 Flashcards

1
Q

1- Name the single source of authoritative nongovernmental U.S. GAAP?

A

The FASB “Accounting Standards Codification” (ASC)

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2
Q

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

A
  • International Accounting Standards (IAS)
  • International Financial Reporting Standards (IFRS)
  • IFRIC Interpretations
  • SIC interpretation
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3
Q

3- Who are the primary users of general Purpose Financial reports?

A

Existing and potential

  • Investors
  • Lenders
  • Other Creditors
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4
Q

4- Name the pervasive Constraint on the information provided in financial reporting?

A

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

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5
Q

5- Name the fundamental qualitative characteristics of useful financial information?

A

Relevance and Faithful Representation

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6
Q

6- Name the Three elements of Relevance?

A
  • Predictive Value
  • Confirming Value
  • Materiality
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7
Q

7- Name the three elements of Faithful Representation

A
  • Neutrality
  • Completeness
  • Freedom from Error
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8
Q

8- Name the enhancing qualitative characteristic of financial information?

A

-Comparability, Verifiability, Timeliness, and Understandability.

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9
Q

9- According to SFAC#5 what should a full set of financial statement include?

A
  • Statement of Financial Position (The Balance Sheet)
  • Statement of Earnings (The income statements)
  • Statement of Cash Flows
  • Statement of Changes in Owner’s Equity.
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10
Q

10- 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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11
Q

11- List the 10 elements of financial statements according to SFAC#6. “CREG and LALEID”

A

-comprehensive Income
-Revenues
-Expenses
-Gains
and
-Losses
-Assets
-Liabilities
-Equity(of Net Assets)
-Investments by Owners
-Distribution to Owners

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12
Q

12-List the six elements of financial statement according to the IASB Framwork.

A
  • Assets
  • Liabilities
  • Equity
  • Income(revenue and gains)
  • Expenses (expenses and losses)
  • Capital Maintenance adjustments.
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13
Q

13- Name the five elements of present Value measurements per SFAC #7. “EVTUO”

A
  • Estimate of future cash flow
  • Expectation about timing 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 and market imperfection.
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14
Q

14-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-Average, or “expected”, future cash flow.

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15
Q

15- What is the presentation order of the major components of an income and retained earnings statement? “IDEA”

A
  • Income Statement 1. Income or (loss) from continuing operations. 2- Income or (loss) form Discontinued operations. 3- Extraordinary Items.
  • Retained Earnings Statements. 1- Cumulative effect of a change in Accounting principle.
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16
Q

16- The gain (loss) from discontinued operation can consist of…

A

AN impairment loss, a gain (loss) from actual operation, and a gain (loss) on disposal.

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17
Q

17- In what period are the following reported:

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

All are reported in the period in which they occur.

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18
Q

18- In reporting discontinued operations, how is a “component’ of an entity defined under U.S. GAAP and IFRS?

A 
U.S.GAAP.
1-an operating segment.
2- A reportable segment.
3. A reporting Unit.
4- A subsidiary.
5- An Asset group.
IFRS:
1-A separate major line of business or geographical area of operation.
2-A subsidiary acquired exclusively with a view to resale.
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19
Q

19-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 costs to sell (but not in excess of the previously recognized cumulative loss). the gain is reported in the period of increase.

20
Q

20-What types of cost are associated with exit and disposal activities?

A
  • Involuntary employee-termination benefits.
  • Cost to terminate a contract that is not a capital lease.
  • Other costs associated with exit or disposal activities.
21
Q

21-Define Extraordinary items.

A
  • Material in nature.
  • Of a character significantly different form the typical or customary business activities(unusual).
  • Not expected to recur in the foreseeable future (infrequent).
  • Not normally considered in evaluating the ordinary operating results of an enterprise.
  • Key words(unusual and infrequent)
  • Remember. Extraordinary item are recognized under U.S CAAP but not IFRS.
22
Q

22-List some examples of extraordinary items?

A
  • The abandonment of, or damage to, a plant due to an infrequent earthquake or an infrequent food.
  • An expropriation of a plant by the the government.
  • A prohibition of a product line by a newly enacted law or regulation.
23
Q

23-Name the three types of accounting changes

A
  • Change in accounting principle(retrospective)
  • Change in accounting estimate(prospectively)
  • Change in accounting entity(retrospective)
  • Error Correction (prior period adjustment)
24
Q

24- How is a change in accounting principle reported?

A
  • Cumulative effect of change is included in the retained earnings statement as an adjustment of the beginning retained earning balance of the earliest year presented.
  • Prior-Period financial statement are restated, if presented.
25
Q

25- What are the special changes in an accounting principle?

-How are special changes in accounting principle reported?

A
  • A change to LIFO from another method of inventory pricing under U.S. GAAP.
  • Any other change in which a cumulative effect adjustment is considered impractical to calculate.
  • Special changes are reported prospectively (like a change in estimate)
26
Q

26- How is a change in an accounting estimate reported?

A
  • Prospectively
  • The effect is shown in the current and/or future periods that are affected by the change.
  • Financial statement are not restated.
27
Q

27- Under U.S GAAP, how is a change in the reporting entity reported?

A

All current and prior period financial statements presented are restated.

28
Q

28- How are error corrections reported?

A

Reported as prior period adjustments to retained earnings and all comparative financial statement presented are restated.

29
Q

29- Define comprehensive income?

A

change in equity (net assets) that results from revenue, expenses, gains, and losses during a period, as well as any other recognized changes in equity that occur for reasons other than investments by owners and distributions to owners.

30
Q

30- Identify five items included in other comprehensive income. “PUFER”

A
  • pension Adjustments.
  • Unrealized gains and losses on available -for-sale securities.
  • Foreign currency translation adjustments and gains/losses on foreign currency transactions that are designated as economic hedges of a net investment in a foreign entity.
  • Effective portions of cash flow hedges.
  • *Revaluation surpluses (IFRS Only)
31
Q

31

A

31

32
Q

32- List some disclosure requirements for comprehensive income?

A
  • Tax effects component included in current ‘Other comprehensive income”
  • Changes in the accumulated balances of components of “Other comprehensive income”
  • Total accumulated other comprehensive income.
  • Reclassification adjustment between other comprehensive income and net income.
33
Q

33- Identify the contents of the first note to the financial statements.

A

Summary of Significant Accounting Policies Identify and describe.

  • Measurement bases used in preparing the financial statement.
  • Principles and methods.
  • Criteria.
  • Policies.
  • Pricing.
34
Q

34-Describe the related party disclosures required under U.S. GAAP and IFRS.

A

-Material related party transactions.
-Related Party notes/accounts receivable.
-Control relationships.
Note:IFRS requires disclosure of key management compensation. U.S.GAAP does not require this disclosure.

35
Q

35-What are the U.S.GAAP disclosure requirements for risks and uncertainties?

A
  • Nature of operations.
  • Use of estimates in preparing the financial statements.
  • Significant estimates.
  • Current Vulnerability due to certain concentration.
36
Q

36- What are the guideline for interim reporting?

A
  • Use same accounting principles that were used in the most recent annual report.
  • Allocate expenses to the interim period benefited.
  • Revenues are recognized in the period in which they are earned and realized or realizable.
  • A total for comprehensive income in condensed financials statements of interim periods.
37
Q

37- What income tax rate is used in interim financial reporting?

A

Used best estimate of effective tax rate to be applicable for full fiscal year on quarterly statements.

38
Q

38- Name the four required disclosures for segments of an enterprise?

A
  • Operating segments.
  • Products and services.
  • Geographic areas.
  • Major customers.
39
Q

39- Define operating segment.

A

Distinct revenue-producing components of the enterprise about which separate financial information is produced internally, and whose operating results are regularly reviewed by the enterprise. “Determined using a “management approach”

40
Q

40- Name two quantitative thresholds used in identifying operating operating segments.

A
  • 10% “Size” Test

- 75 “Reporting Sufficiency” test.

41
Q

41- Describe the 10% test for identifying reportable segments?

A

Revenue. need pic

42
Q

42- What is the 75% test for identifying reportable segments?

A
  • Combined external (consolidated) revenue of all reportable segments must be at least 75% of the total consolidated revenue of the entity.
  • The practical limit is 10 segments, but not a precise limit.
43
Q

43- What are the disclosure requirements for reportable operating segments?

A
  • For each reportable segments, the entity must report.
  • Identifying factors.
  • Products or services.
  • Profit or loss details.
  • Asset details.
  • liabilities details(IFRS only).
  • Measurement criteria.
  • Reconciliations
44
Q

44- Define development-Stage enterprise.

A

Enterprise that devotes substantially all of its efforts to establishing a new business and either planned principal operations have not commenced or no significant revenue has been generated therefrom.

45
Q

45- Indicate any special accounting treatment for development-stage enterprises.

A

PIC

46
Q

46- What is the date of an entity’s transition to IFRS

A

The date of the opening balance sheet

47
Q

47- Describe the from 10-k and the Form 10-Q. what level of assurance must be provided with financial statements submitted in these forms.

A
  • Form 10-K:Filed annually by U.S registered companies. Includes a summary of financial data MD&A and audited financial statements prepared using U.S GAAP.
  • Form 10-Q: Filed quarterly by U.S. registered companies. includes Reviewed financial statements, Interim MD&A and certain disclosures.

FAR (3 decks)

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