FAR 1 Flashcards
Qualitative Characteristics
Relevance and Faithful representation
Relevance (Qualitative characteristics)
- Predictive value - allows investors to predict future outcomes
- Confirm Value - provides feedback about evaluations previously made by users
- materiality - info is material if an omission or misstatement of the information could affect the decisions
Faithful Representation
Qualitative Characteristics
- Completeness - complete depiction of F/S
- Neutrality - free from bias
- Freedom from erros
Realization
Converting noncash resources right into money
realize gain/loss
Recognition
Process of reporting an item
Enhancing Qualitative Characteristics
- Comparability
- Verfiability
- Timeliness
- Understandability
Elements of PV measurement
- Price for bearing Uncertainty
- Expectations about Timing Variations of Future cash flows
- Other Factors
- Time value of Money
- Estimate future cash flow
Rule of Conservatism
- Revenues and gains should be recognized when EARNING PROCESS IS COMPLETE
- Expense and losses recognize IMMEDIATELY
Replacement cost
Cash or equivalent that would be paid to acquire an asset currently
It is an ACQUISITION COST
Current market value, fair value
The value to sell an asset
Historical cost
The amount paid by the company purchase the asset
Net realizable value
selling price - cost of disposal
Accounting standards Update is issued only after…
A majority vote of the members of FASB
International Accounting Standard Board (IASB) Framework fundamental assumption
Going concern
Before issuing a new International Financial Reporting Standard, it must be…
approved by at least 9 members of IASB
According to the FASB conceptual framework, financial reporting to be useful, it must
Provide information useful for making business and investment decisions
Summary of significant accounting policies
- Should disclose policies
Example:
- Criteria for determine certain things
- basis of profit recognition
Info presented in Notes to F/S have the purpose of…
Providing disclosures by GAAP
Related Party disclosures
GAAP - only loans to officers
IFRS - include loans to officers and key management compensation
Significant estimates should be disclosed when it is…
Reasonable possible (NOT PROBABLE) that the estimate will change in the near future
Criteria to be included as reportable operating segments
- Operating segment ‘s revenue > 10% of total (combined) revenue
Revenue should be both intersegment sales and sales to unaffiliated customers
- segment’s assets constitute more than 10% of combined assets of all operating
- reported profit/loss > 10%
Step 1: Add all the income together
step 2: add all the loss together
step 3: pick the greater of income or loss x 10%
step 4: if the component income/loss is GREATER THAN amount in step 3, then it is a reportable segment
CPA - 05055
Operating profit by segments is based on measure of profit reported to…
Chief Operating Decision Maker
Anything not reported to chief operating decision maker is not included in segment operating profit
General expenses, income taxes, gain/loss from discontinued operation are not included in operating segment profit
To conform with GAAP, F/S for public business enterprise must report segment info about a company’s major customers if…
that customer provides 10% or more of the combined revenue of all opertaing segments
Which type of entity required to report on business segments
only publicly-traded companies
Which segment financial statement is not reported under IFRS
Statement of cash flow
Which segment F/S is not reported under GAAP
segment liabilities
Unaudited Financial statements
not required to be included in audited financial statements
- Form 6-K - filed semi-annually by foreign private issuers
2. Form 10-Q - filed quaterly by U.S registered companies
Audited Financial Statement
- 10-K - U.S. registered audited companies
- 40-F annual specific Canadian companies registered with SEC
- 20-F - filed annually by non-U.S registrants registered with SEC
Under Regulation S-X, audited F/S filed with SEC should include
Balance Sheet - 2 years
Income statement, Changes in owners’ equity and cash flow for 3 fiscal year
Maximum number of days for filing for 10-K
- Large accelerate filers - 60 days (700 million floats)
- accelerate filers - 75 days (> 75 million float)
- non-accelerated - 90 days
Statement of periods presented
- BALANCE SHEET - end of most recent fiscal quarter and as of the end of the preceding fiscal year (corresponding fiscal quarter for the preceding fiscal year is not required unless necessary to understand seasonal fluctuations)
INCOME STATEMENT - most recent fiscal quarter, period between the end of preceding fiscal quarter and the end of most recent fiscal quarter, and coressponding periods of the preceding fiscal year
May also include 12 month period
STATEMENT OF CASH FLOWS - end of the preceding fiscal year and end of most recent fiscal quarter corresponding period for preceding fiscal year
XBRL is required for
10-K, 20-F, 6-K
Present F/S, including B/S, statement of comprehensive income, and all footnotes, and any applicable F/S schedules be prepared using XBRL
Maximum filing period for 10-Q
- large accelerated filer - 40 days
2. small filer - 45 days
