FAR 1.03 Flashcards
1.03 - Full set of Financial Statements
- Statement of Financial Position (Balance Sheet)
- Statement of Earning Financial & Comprehensive Income (Income Statement)
- Statement of Cash Flows
- Statement of Changes in Owners’ Equity (Statement of Investments by and Distributions to Owners)
1.03 - 10 Key elements that make up all the Financial Statements
Assets, Liabilities, Equity, Investments by owners, Distribution to owners, Comprehensive Income, Revenue, Expenses, Gains and Losses
1.03 - Assets
an economic resource that has a probable future benefit, one can obtain the benefit, and the transaction creating the benefit has already occurred
1.03 - Liabilities
an economic obligation in which one needs to use or transfer an asset, it can’t be avoided and the transaction has already occurred
1.03 - Equity (Net Assets)
assets left over after deducting liabilities
1.03 - 3 Elements of Equity
- Contributions/ Investments by owners
- Distributions to owners - (Dividends)
- Comprehensive Income - all changes in equity other than “owner” sources. These items affect. Comp Inc. but not net Income (DENT) NI - DENT = Comp Income
1.03 - DENT
- Derivative Cash Flow Hedges
- Excess adjustment of PBO and FV of plan assets at year end
- Net unrealized gains or losses on “available-for-sale” securities
- Translation adjustments for foreign currency
1.03 - Physical capital maintenance concept
only recognize an event when an asset is sold or a liability is settled (measures the effect of price changes in nominal or constant dollars)
- use for fixed assets which are not adj to market value
1.03 - Financial Capital maintenance concept
recognize an event as a change in the value of an asset or liability occurs (Recognize holding gains and losses - current GAAP)
- use for most marketable securities which are reported at market value, except in limited cases.
- meets the Enhancing Qualitative Characteristics of Verifiability
- 03 - Accounting Rules and Concepts (that go along with the key elements:
- Consistency
Same principle each year
- 03 - Accounting Rules and Concepts (that go along with the key elements:
- Conservatism
Considering all risks inherent in the business (accruing a contingent loss)
- 03 - Accounting Rules and Concepts (that go along with the key elements:
- Cost/Benefit
Costs don’t exceed benefits to be derived
- 03 - Accounting Rules and Concepts (that go along with the key elements:
- Matching
recognize a cost as an expense in the same period as the benefit (usually a revenue) is recognized
- 03 - Accounting Rules and Concepts (that go along with the key elements:
- Allocation
spreading a cost over more than one period
- 03 - Accounting Rules and Concepts (that go along with the key elements:
- Full Disclosure
providing all useful info in the financial statements
- 03 - Accounting Rules and Concepts (that go along with the key elements:
- Recognition
booking an item in the financial statements
- 03 - Accounting Rules and Concepts (that go along with the key elements:
- Realization
Converting non-cash resources into cash or a claim to cash
1.03 - 4 elements of Comprehensive Income
Revenues
- Revenues, Expenses, Gains, Losses
- Revenues - inflows from an entity’s primary operation
1.03 - 4 elements of Comprehensive Income
Expenses
- Revenues, Expenses, Gains, Losses
- Expenses - outflows due to an entity’s primary operation
1.03 - 4 elements of Comprehensive Income
Gains
- Revenues, Expenses, Gains, Losses
- Gains - increases in equity from incidental transactions
1.03 - 4 elements of Comprehensive Income
Losses
- Revenues, Expenses, Gains, Losses
- Losses - decreases in equity from incidental transactions
1.03 Recognition and Measurement
When to recognize a financial statement element and how to measure it
- Meets the definition of an element (asset, liability, etc.
- Element is capable of being measured in monetary terms
- The item is Relevant and Faithful Representation (useful)
1.03 To measure in Monetary Terms
Historical Cost
amount you paid for it
1.03 To measure in Monetary Terms
Replacement Cost
Element is capable of being measured in monetary terms
1.03 To measure in Monetary Terms
Fair Market Value
(FMV) - Per ASC 820, “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”
1.03 To measure in Monetary Terms
Net realizable value
(NRV) - amount expected to be converted to (A/R)
1.03 To measure in Monetary Terms
Present Value
(PV) - discounted cash flows due to the time value of money (Notes/Receivable, Bonds/Payable, Leases)
