FAR Module 9 Misc. Flashcards
SFAC 8, Chapter 1 covers what? (List of 6)
The objectives of general-purpose financial reporting. These include:
1) Information that is useful to primary users
2) information about the reporting entities assets and liabilities
3) changes in assets and liabilities
4) financial performance reflected by accrual accounting
5) financial performance reflected by past cash flow
6) changes in assets and liabilities not resulting from financial performance
What is the single source of US GAAP for non-governmental entities
The FASBs Accounting Standards Codification
SFAC 8, Chapter 3 covers what?
Qualitative characteristics of useful financial information (this is the chart outlining the pervasive constraint, fundamental qualitative characteristics, enhancing qualitative characteristics, and the threshold for recognition)
SFAC 6 covers what?
Elements of financial statements
What are the 10 Elements of Financial Statements outlined under the FASB SFAC 6
Assets Liabilities Equity/Net Assets Revenues Expenses Gains Losses Investments by owners Distributions to owners Comprehensive Income
What are the 4 basic assumptions regarding a business in accounting?
Economic Entity Assumption
Going concern assumption
monetary unit assumption
periodicity assumption
Under this assumption economic activity can be identified with a particular unit of accountability
Economic entity assumption
Under this assumption the business enterprise will have a long life.
The going concern assumption
Under this assumption money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis
The monetary unit assumption
Under this assumption the economic activities of an enterprise can be divided into artificial time periods. We report financial information periodically to apprise users of performance and economic status
The periodicity assumption
What are the four basic principles of accounting
The historical cost principle, the revenue recognition principle, the matching principle, the full disclosure principle
Under this principle GAAP requires that most assets and liabilities be accounted for and reported on the basis of acquisition price because it is the most reliable valuation
The historical cost principle
Under this principle revenue is generally recognized when realized or realizable, or earned.
Revenues are realizable when assets received or held are readily convertible into cash or claims to cash.
Revenues are considered earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues.
The revenue recognition principle
Under this principle expenses are to be matched to the revenues whenever it is reasonable and practicable to Do so
The matching principle
Under this principle accountants use their judgment in deciding what gets reported on the financial statements. If something does not appear on the statements then it may appear in the footnotes or in supplementary information.
The full disclosure principle
These generally amplify or explain the items in the main body of the statements
Footnotes
this contains other information that may be highly relevant but less reliable
Supplementary information
What are the three constraints in accounting
Cost-benefit relationship
materiality
conservatism
This constraint says that information is expensive. The costs of providing information must not outweigh the benefits that can be derived from using the information
Cost-benefit relationship
This constraint says that an item is material if it’s inclusion or omission would influence or change the judgment of a reasonable person
Materiality
This constraint says that when in doubt choose the solution that will be least likely to overstate assets and income
Conservatism
What section of the FASB ASC covers GAAP presentation
100
What section of the FASB ASC covers presentation of financial statements
200
What section of the FASB ASC covers assets
300
What section of the FASB ASC covers liabilities
400
What section of the FASB ASC covers equity
500
What section of the FASB ASC covers revenue
600
What section of the FASB ASC covers expenses
700
What section of the FASB ASC covers broad transactions
800
What section of the FASB ASC covers industry
900
What section of the FASB ASC covers not for profit
This falls under industry, 900
List the elements under the IASB framework
Assets Liabilities Equity Income Expenses
T/F
The IASB framework is an accounting standard and overrides any accounting treatment otherwise required
False
The IASB framework merely exists to assist in the development of future international accounting standards and to assist in areas that do not have guidance in an existing standard.
What are the two chapters called that the IASB did jointly with the FASB
SFAC 8, chapters 1 & 3
What ASC topic # discusses Accounting Changes & Error Correction?
250
T/F
IFRS does not allow extraordinary gains/losses
TRUE
In regards to a recognized subsequent event, when are gains and losses recognized?
Gains are not recognized until realized. A loss should immediately be recorded in the current year financial statements
Define the principal market for establishing the fair value of an asset
This will be the market that has the greatest volume and level of activity for the asset
What qualifications are there to be a market participant in determining fair value
Market participants are buyers and sellers in the principal market or most advantageous market for the asset or liability. Market participants should be independent, knowledgeable, able to transact for the asset, and willing to transact. They should be motivated but not compelled to transact.
What is an assumption used in fair value measurements
The asset is in its highest and best use. A fair value measurement assumes the highest and best use of the asset that is physically possible, legally permissible, and financially feasible.
Valuation techniques for fair value that include the Black Scholes Merton formula, a binomial model, or discounted cash flows are examples of what valuation technique
The income approach
A company wishing to disclose information about the effect of changing prices should report this information where
In the supplementary information to the financial statements
When valuing nonmonetary items, what are the two exceptions that use the recoverable amount if it is lower than the current cost
Property plant and equipment & inventory
How is the CURRENT cost of goods sold computed
By multiplying the average cost of units produced or purchased during the year times the number of units sold
T/F
Quarterly financial information is audited
FALSE
It is reviewed but not audited
Identify the balance sheet requirements under form 10 Q
The SEC requires that a form 10 Q contain:
1) interim balance sheet as of the end of the most recent fiscal quarter.
2) a balance sheet as of the end of the preceding fiscal year.
3) An interim balance sheet for the fiscal quarter of the preceding year is required for understanding the impact of seasonal fluctuations. If the industry has no seasonal fluctuations this last requirement is not necessary.
What is the basis of accounting on the financial statements of a trust
Accrual
What is the measurement method of assets on the financial statements of a trust
Fair value
What are the minimum required disclosures on the income statement under IFRS (8)
Income, finance costs, share of profits and losses using the equity method, tax expense, discontinued operations, profit or loss, noncontrolling interest in profit and losses, and the net profit or loss attributable to equity holders of the parent
Under IFRS where can finance costs be presented in the statement of cash flows
Either the operating or financing section of the statement of cash flows
IFRS requires that significant non-cash transactions be reported where? How is this different from US GAAP?
In the notes to the financial statement
For US GAAP if there are only a few significant non-cash transactions then they can be reported at the bottom of the statement of Cash flows or in a separate schedule in the notes to the financial statements
IFRS requires cash advances and loans from bank overdrafts to be classified how on the statement of cash flows
Operating activities
If newly acquired assets are depreciated using a different method than previously recorded assets use, what kind of change is that
This is not an accounting change
How do you treat write down of inventory due to obsolescence
This is part of net income before extraordinary items
Changing from the gross profit method for determining ending inventory balances to dollar value LIFO is what kind of change
This is a correction of an error
The excess of cash paid over the carrying value to extinguish bonds is dealt with how
This is part of net income before extraordinary items
What ASC Topic # covers extraordinary items
225
An increase in the unrealized excess of cost over market value of marketable equity securities classified as trading type securities is part of what financial statement category
This is income from continuing operations and must have a separate disclosure
The accumulated amount of the unrealized excess of cost over market value of available-for-sale marketable equity securities is part of what financial statement category
This is a separate component of stockholders equity
A gain on remeasuring a foreign subsidiaries financial statements from the local currency into the functional currency is part of what financial statement category
This is income from continuing operations and must have a separate disclosure
A loss on translating a foreign subsidiaries financial statements from the functional local currency into the reporting currency during this period is part of what financial statement category
This is part of other comprehensive income for that period
If you are given two numbers that are within the same level (1,2,3) which number do you choose
The larger one
