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Wiley CPA > FAR 1 > Flashcards

FAR 1 Flashcards

1
Q

Past Orgs

A

Committee on Accounting Procedure (CAP) - 1939
51 research bulletins
Accounting Principles Board (APB) - 1959
31 opinions

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2
Q

Three Prong: FASB, FAF, FASAC

A 
FASB - standard setter
FAF 
   Financial Accounting Foundation
   appoints members
   oversight
   funding
FASAC 
   Financial Accounting Standards Advisory Council
   Guidance on major policy issues
   Sets priorities
   Foundation of task forces
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3
Q

Standard Setting Process

A
  1. ) Consider adding project to agenda
  2. ) Researches, issues DM
  3. ) Public hearings
  4. ) Exposure Draft (ED)
  5. ) Public input, ED modified
  6. ) ASU issued
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4
Q

External F/S

A 
Income Statement
Statement of Comprehensive Income
Balance Sheet
 Statement of Changes in OE
Statement of Cash Flows
Footnote/Supplementary schedules
Auditor's opinion
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5
Q

Not in Codification

A

OCBOA
Cash basis
Income tax basis
Regulatory accounting principles

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6
Q

Nonauthoritative

Guidance

A

Widely recognized/industry guidance
FASB Concepts Statements
AICPA Issues Papers
IFRS

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7
Q

SEC

Guidance

A

Includes relevant SEC rules/interpretative releases

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8
Q

Convert to Cash Formula

A

Change in liabilities
Plus: Change in equity
Less: Change in other assets
Equals: Change in Cash

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9
Q

Codification

Structure

A 
Areas
     Topics
          Subtopics
               Sections
                    Subsections
                         Paragraphs
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10
Q

Areas

A 
100    General Principles
200   Presentation
300   Assets
400   Liabilities
500   Equity
600   Revenue
700   Expenses
800   Broad transactions
900   Industry practices
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11
Q

Sections

A 
00     Status
05     Overview & background
10      Objectives
15      Scope & scope exceptions
20     Glossary
25     Recognition
30     Initial measurement
35     Subsequent measurement
40     Derecognition
45     Other presentation matters
50     Disclosure
55     Implementation guidance/illustrations
60     Relationships
65     Transition & open effective date info
70     Grandfathered guidance
75     XBRL definitions
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12
Q

Primary
Qualitative
Characteristics

A 
Relevance
     Predictive value
     Confirmatory value
     Materiality
Faithful representation
     Completeness
     Neutrality
     Free from error
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13
Q

Enhancing
Qualitative
Characteristics

A

Comparability
Understandability
Timeliness
Verifiability

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14
Q

Accounting

Assumptions

A
  1. ) Entity Assumption
  2. ) Going Concern Assumption
  3. ) Unit of Measure Assumption
  4. ) Time Period Assumption
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15
Q

Capital maintenance

A

maintained if positive earnings assuming no change in price level.

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16
Q

Return of Capital

A

Replace all resources in generating income

17
Q

Return on Capital

A

Resources are left over after generating income

18
Q

Basis of GAAP

A

Financial capital maintenance

19
Q

Physical maintenance

A

Earnings aren’t recognized until firm has provided for physical count considering changes in price level

20
Q

Measurement Basis

A

Historic costs = actual price paid
Net Realizable Value (NRV)
Approximates liquidation value / selling pice
Current market value - (costs of sale)
Ex: LC-M
Current Replacement Cost
Cost to replace asset
Current market value from buyer’s perspective
Fair Value (FV)
aka current market value
Price to sell asset/settle liability
orderly transaction
market participant
at measurement date
Amortized Cost
historic cost - accumulated depreciation
Net Present Value (NPV)
Discounted expected cash flows
Used in capital budgeting decisions

21
Q

Revenue Recognition

A

Performance obligation is completed

Revenue is earned and realized (realizable)

22
Q

Revenue Recognition (5 Steps)

A
  1. ) identify contract
  2. ) identify PO
  3. ) Determine transaction price
  4. ) Allocate transaction price across PO
  5. ) Recognize revenue when each PO is satisfied
23
Q

Expense Recognition Principle

A

“matching principle”
Recognize expenses only when expenditures help to
produce revenue
3 Ways:
Directly - COGS
Allocate - Depreciation/amortization
When incurred - no relationship to revenue

24
Q

Full Disclosure Principle

A

Presents all info needed to make economic decision

25
Q

Cost Constraint

A

Limits recognition/disclosure if cost > benefit.

May not omit disclosures if material & mandated by GAAP

26
Q

Conservatism

A

aka prudence
Reporting of less optimistic amounts under conditions of uncertainty or when GAAP provides choice.

If estimates not equally likely preferred approach = most likely

27
Q

Elements of F/S

A 
Assets
Liabilities
Equity
Investments by Owners
Distributions to Owners
Comprehensive Income
Revenues
Expenses
Gains
Losses
28
Q

Capture Economic Differences

A
  • Estimate of future cash flows
  • Expectations about variations in amount or timing of those cash flows
  • Time value of money as measured by risk-free rate of interest
  • Price for bearing uncertainty inherent in asset/liability
  • Any other relevant factors

Wiley CPA (1 decks)

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