FAR - Deck 5 Flashcards
Acquisition-related costs
Acquisition-related costs are costs the acquirer incurs to effect a business combination. Those costs include finder’s fees; advisory, legal, accounting, valuation, and other professional or consulting fees; general administrative costs, including the costs of maintaining an internal acquisitions department; and costs of registering and issuing debt and equity securities. The acquirer shall account for acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with one exception. The costs to issue debt or equity securities shall be recognized in accordance with other applicable GAAP.
Required disclosures for and entity that holds or issues derivative instruments
1 - Its objectives for holding or issuing those instruments
2 - Its context needed to understand those objectives
3 - Its strategies for achieving those objectives
Articulation
Articulation is the circular interrelation of financial statements, and the elements comprising them, such that statements that show elements describing levels or amounts at a moment in time depend on the information showing the effects of transactions, events, and circumstances during intervals of time in other statements, and vice versa (i.e., the statements show an algebraic relationship)
Revenue may result from
In concept, revenues increase assets rather than decrease liabilities, but a convenient shortcut is often to directly record reduction of liabilities.
Primary Characteristics of Government Structure
(1) The representative form of government and the separation of powers
(2) The federal system of government and the prevalence of intergovernmental revenues
(3) The relationship of taxpayers to services received
Asset Valuation Accounts
Valuation (contra) accounts are balance sheet items that increase or decrease the carrying value of assets and that are part of the related asset and are not assets, or liabilities, in their own right. Examples include allowance for doubtful accounts, premium and discount on bonds, and accumulated depreciation.
Interperiod Equity
Financial reporting should provide information to determine whether current-year revenues were sufficient to pay for current-year services.
Budgetary and fiscal compliance
Financial reporting should demonstrate whether resources were obtained and used in accordance with the entity’s legally adopted budget; it should also demonstrate compliance with other finance-related legal or contractual requirements.
Service efforts costs and accomplishments
Financial reporting should provide information to assist users in assessing the service efforts, costs, and accomplishments of the governmental entity
Capital Maintenance Concept:
The recovery of cost; separation of return on capital from return of capital.
Financial Capital Concept
The effects of price changes on assets held and liabilities owed are recognized as “holding gains and losses” and included in return on capital.
Physical Capital Concept
The effect of price changes are recognized as “capital maintenance adjustments” as a separate element of equity and would not be included in return on capital.
Interperiod Tax Allocation
Interperiod tax allocation is apportionment of the income tax expense for the current year between the tax payable in the current year and a deferred tax liability that may or may not become payable in future years.
Intraperiod Tax Allocation
Intraperiod tax allocation is apportionment of the income tax expense for the current accounting period (as determined by application of the liability method to achieve interperiod tax allocation) among the components of the income statement: operating income, income from discontinued operations, accounting changes, prior-period adjustments, and other direct adjustments to capital accounts. Intraperiod tax allocation affects only the reporting, not the recording, of income tax expense. The tax effect is reported along with the particular item which gives rise to the effect
