FAR Deck 1 Flashcards
What are components of other comprehensive income?
-Unrealized gains or loss on available for sale investments
-foreign currency translation adjustments
-Certain unrecognized gains and losses on pension benefits
-Certain gains and losses on derivatives.

Two primary qualitative characteristics of financial reporting?
Faithful Representation
-completely neutral and free from error
Relevance
-predict and confirmatory your material value
Four Enhancing Characteristics
Comparability
Verifiability
Timeliness
Understandability
Three main aspects of GAAP
Recognition
Measurement
Disclosure
Equation for COGS
Beginning Inventory + Purchases - Ending Inventory = COGS
Gross Margin
Gross Profit/Net Sales
Profit Margin
Net Income/Net Sales
Earnings per Share
Net Income/ Weight average # of shares outstanding
A/R Turnover
Credit Sales/ Avg. A/R
Inventory Turnover
COGS/ Avg. Inventory
Days Sales in Inventory
365/Inventory Turnover
(Inventory Turnover = COGS/ Avg. Inventory)
Historical cost Inventory
You can principle of historical cost, requires assets as well as liabilities, to be recorded, and carried on the book at cost 
Historical cost Inventory
You can principle of historical cost, requires assets as well as liabilities, to be recorded, and carried on the book at cost 
Are governmental, financial reporting should provide information to assist…
- Making social and political decisions.
- Assessing whether current US citizens receive services, but shifted part of the payment burden to future years citizens.
When there is a change to the generally accepted accounting principles
Accounting standards update
Explain modified accrual method
When revenue is measurable and available for instance, when a government levy’s taxes, they don’t automatically recognize revenue because they have not collected on the taxes so they will only recognize revenue when they can measure how much they are collecting and see how much is actually available
Primary objective of financial reporting
To provide information that is useful for economic decision making
According to the fast, be conceptual framework, the process of reporting an item in the financial statements of an entity is…
Recognition
GASB’s  primary goal for the SEA concepts is…
Provide fundamental reporting characteristics to help prepare is develop consistent reporting
Accumulated Benefit Obligation
The actuarial present value of benefits, whether vested or non-vested attributed by the pension benefit formula to employee services rendered before a specific date, and based on employee services in compensation, prior to that date
If individual component units or consolidated, uncombined, governmental statements, the data, for the individual units must be presented in which of the following?
Notes to the financial statements, or in the combining statements
At the commencement date of an operating lease, a lessor should…
Defer initial direct cost
For state and local governmental units, generally accepted principles require that encumbrances outstanding at year end be reported as…
Reservations of fund balance
If no profit and loss, sharing an arrangement specified in the partnership agreement, the revised uniform partnership act requires?
Profit and loss should be shared equally
What accounting bases does GASB recommend that governmental fun budget be prepared?
Modified accrual basis of accounting
GASB Concepts Statement No. 4?
Must provide present service capacity and be controlled by the government
According to GASB concepts, statement number to measures of service accomplishments focus on?
Outputs and Outcomes
Which of the following describes GASB’s role for improving communications ( as described in statement No. 3) in governmental external financial reporting?
The boards independence supports government, credibility incomparability among governments’ financial statements
Discontinued Operations
The component of an entity that has been disposed of, or has been classified as held for sale is reported as a discontinued operations item that should be classified separately and the income statement, net of taxes after income (loss) from continuing operations
Life Insurance Premium and Expense
The purchase of life insurance of an officer can be a form of investment when it builds up cash value (cash, surrender value). Cash surrender value is the amount of an insurance company pays to the policyholder in the event the policy is surrendered before maturity. The portion of the premium that increases the cash value is accumulated as a noncurrent asset on the balance sheet and the rest of the premium is recognized as life insurance premium.
CSV 1/1 - 87,000
CSV 12/31 - 108,000
=increase of 21,000
Annual premium expense - 40,000
40,000-21,000 = 19,00 life Insurance expense
Comprehensive Income excludes…
Comprehensive income include all items of the income, statement and changes in equity during a period, except those resulting from investment by owners, distributions to owners (dividends paid to stockholders)
When acquiring treasury stock, what decreases 
Total Stock holders, equity decreases by the cost of the treasury shares, regardless of the method used to account for the treasury stock. The book value for a common chair is computed by dividing total stockholders equity, applicable to common stock by the number of common shares, outstanding
The par value method of accounting for treasury stock differs from the cost method in that
It will versus the original entry to issue the common stock with any difference between carrying value and purchase price adjusted through paid in capital, and or returned earnings in treats, a subsequent reinsurance, like a new issuance of common stock
Cash flow from financing activities include issuing debt or equity. Examples?
-proceeds from issuing or payments for retiring bonds
-Issuance or re-acquisition of stock or treasury stock
-Borrowing or repaying of loan
-Dividends paid to shareholders
Bank overdrafts which are excluded from cash
Notes to the financial statements for a government entity should include:
- Summary of accounting
- Description of reporting entity.
- Disclosures of cash in investments, capital, assets, long-term debt, pensions, commitments, and contingencies.
- Information on exceeding the budget at the legal level of control.
- Disclosure of individual funds with deficit fun balances.
- Risk related to deposit and investments.
- Description of the government wide statements.
- Policy for capitalizing fixed assets, and estimating useful lives.
- Send me information for enterprise funds.
- Policy for recording infrastructures.
- Disclosures about capital asset impairment.
Required disclosures in a summary of significant accounting policies:
- The basis of consolidation.
- Depreciation methods.
- Amortization of intangible assets excluding Goodwill.
- Inventory pricing.
- Recognition of profit on long-term construction type contracts.
- Recognition of revenue from franchising and leasing operations.
Inventory Evaluation
Ceiling = net realizable value = selling price - cost of disposal
Floor = Net realizable value - Normal Profit Margin
Replacement cost
During periods of inflation, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system, under which of the following inventory valuation methods
FIFO - YES
LIFO - NO
Under FIFO cost flow method, a perpetual system would result in the same dollar amount of ending inventory as a periodic inventory system. Under the LIFO cost flow method, however, a perpetual system would generally not result in the same dollar amount of ending inventory as a periodic inventory system.
During periods of inflation, a perpetual inventory system would result in the same dollar amount of ending inventory as a periodic inventory system, under which of the following inventory valuation methods
FIFO - under the FIFO cost flow method, perpetual system, result in the same dollar amount of ending inventory as a periodic inventory system. Under the LIFO COSTFLOW METHOD, HOWEVER, A PERPETUAL SYSTEM WOULD GENERALLY NOT RESULT IN THE SAME DOLLAR AMOUNT OF ENDING INVENTORY.
Cash to Accrual basis of accounting
Add increases in current assets
Subtract decreases in current assets
Add decreases in current liabilities
Subtract increases in current liabilities
