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FAR Exam Review > FAR study > Flashcards

FAR study Flashcards

0
Q

The SEC requires that all registrants provide financial statements in accordance with

A

GAAP

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1
Q

The inability to raise capital is considered a

A

Negative economic consequence

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2
Q

Four of the seven members of FASB must vote in favor of a

A

Proposed standard

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3
Q

Managerial accountant doesn’t need to follow GAAP because it is for what type of use?

A

Internal use

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4
Q

GAAP should be neutral or

A

Unbiased

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5
Q

Financial info is disseminated in what ways??

A

News releases
Prospectus for future securities offerings
Filings with the SEC
Annual reports to shareholders

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6
Q

The rules for financial reporting for business enterprises is

A

GAAP

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7
Q

GAAP recolonizes what 3 aspects?

A
  1. Recognition - recorded in account and affects FS
  2. Measurement - concerns a dollar amt
  3. Disclosure - unrecognized amounts reported in the footnotes
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8
Q

Accounting updates to the codification are accomplished through the

A

Accounting standards update (ASU)

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9
Q

When cash is collected on accounts receivable the solution is determined by

A

Accts rec beg balance + sales - collections - write offs = ending balance

Cash basis sales equals cash collections

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10
Q

Reliable estimates of royalties should be recorded as earned no matter when the cash was

A

Received

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11
Q

When handling the balance of a prepaid expense you start with the beginning balance and

A

Amortize any payments that carry between periods and add additional payments to receive the end balance

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12
Q

Accounts receivable is recognized as earned before cash is received and payables are not reductions in income for what type of accounting

A

Accrual basis accounting

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13
Q

When handling insurance premiums for multiple years figure out the monthly costs and add

A

The expenses and subtract the premium remaining

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14
Q

The modified cash basis of accounting recognizes certain accruals and/or deferrals including

A

Capitalization and amortization of long lived assets and accrual for income taxes

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15
Q

what are the 3 parts of FASB?

A

FAF (financial accounting foundation) - appoints members to FASB funding and oversight
FASB - establishes financial accounting standards
FASAC (financial accounting standards advisory council) - provides guidance on policy issues project priorities and task forces

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16
Q

The mission of FASB is to

A

Improve usefulness of financial reporting
Maintain current acct standards
Promptly address deficiencies in accounting standards
Promote international convergence of standards
Improve common understanding of financial reports

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17
Q

FASB has how many members and for what term?

A

7 members 5 years

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18
Q

Members of FASB must gave the following characteristics

A

Can’t have employment or investment ties with other entities

Need not to be CPAs

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19
Q

Standards must have the following characteristics

A

Unbiased must benefit FS users
Consider needs and views of economic community
Development is open to public and undergoes due process
Benefits should exceed cost

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20
Q

What is the FASB process for issuing a new standard?

A
  1. Consideration of project - receives request fom SEC audit firms investors and reporting forms
  2. Conducts research and issue a discussion memo
  3. Holds hearings
  4. Evaluates research and comments issues exposure draft initial standard
  5. Solicits additional comments modifies draft if needed
    6 finalizes new acct guidance and approves with majority vote (4 of 7)
  6. Issues ASU
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21
Q

What is the EITF?

A

Emerging issues task force helps accelerate the process of establishing rulings on such issues

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22
Q

Components of a financial report are

A 
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in owners equity
Statement of cash flows
Footnote disclosures and supplementary schedules
Auditors opinion
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23
Q

Principles methods and procedures from the committee on acct procedure (cap) the acct principles board (apb) and FASB all make up the composition of

A

GAAP which can be found in the FASB codification. SEC has additional reporting guidance

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24
Q

NonGAAP matters are not included in GAAP such as

A

Other comprehensive basis of accounting
Cash basis
Income tax basis
Regulatory accounting principles

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25
Q

GAAP reflects what basis of accounting

A

Accrual

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26
Q

Revenues are recognized when earned regardless of the period cash collection in the

A

Accrual basis

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27
Q

The performance of the firm for the entire period is measured by the

A

Income statement

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28
Q

Prior period adjustments are corrections of errors affecting prior year income that is reported in the

A

Stmt of RE

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29
Q

Unrealized gains and losses on investments in securities fans pension costs adjustments foreign currency translation adjustments are included in

A

Comprehensive income

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30
Q

The balance sheet discloses the resources of the firm at a point of time. It is dated as a

A

Specific date

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31
Q

The balance sheet may be referred to as

A

The statement of financial position

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32
Q

Assets are in order by decreasing liquidity. Liability are shown by Oder of maturity and owners equity by

A

Order of permanence

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33
Q

Cash accounts rec short term investments inventory and prepaid assets are

A

Current assets

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34
Q

Accounts payable wages payable invoke tax payable unearned revenues and warranty liabilities and current liabilities are

A

Current liabilities (transfer of a current asset or the creation of another current liability)

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35
Q

Long term investments plant assets certain deferred charges intangible assets

Notes and bonds payable and mortgages payable are

A

Long term assists and liabilities

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36
Q

What are the measurement basis for balance sheet items?

  1. PPE
  2. Receivables
  3. Inventory
  4. Investments in marketable securities
  5. liabilities
  6. Owners equity
A
  1. Historical cost depreciated/amortized historical cost
  2. Net realized value
  3. Lower cost or market
  4. Market value
  5. Present value
  6. Historical value of cash inflows and residual valuation
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37
Q

The income statement is the major changes in

A

Cash (explain changes in cash and cash equivalents)

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38
Q

Cash equivalents are

A

Convertible into a known and fixed amount of cash

Have an original maturity to the purchaser of 3 months or less

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39
Q

Operating activities relate to activities that flow through the income statement.

A

Inflows - receipts from customers and interest

Outflows- payments to suppliers to employers and to taxing authorities

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40
Q

Investing activities - related to acquisition and disposal of long term assets and investments (other than cash equivalents and trading securities)

A

Outflow activities - purchases of plant assets and investments
Inflow - proceeds from the sale of these items

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41
Q

Financing activities - related to the liabilities and owner’s equity sections of the BS.

A

Inflows - issuing debt and equity securities

Outflows - retirement of debt and equity securities and dividend payments

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42
Q

Goals of the codification are

A

Simplify the structure and accessibility
Provide all authoritative literature in a single location
Reduce time and effort required to research issues
Reduce risk of noncompliance
Facilitate updating standards
Assist the FASB with research and convergence efforts

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43
Q

What is the codification structure?

A

Areas topics subtropics sections subsections and paragraphs

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44
Q

What are the two primary qualitative characteristics

A
  1. Relevance (predictive value, confirmatory, materiality)

2. Faith representation (completeness, neutrality, free from error

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45
Q

What are the four enhancing characteristics of the conceptual network?

A

Comparability verifiability timeliness understandability

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46
Q

Predictive value assists providers with forming expectations

A

About future events

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47
Q

Confirmatory value confirms or changes past or present expectations based on

A

Pervious evaluations

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48
Q

Faithful representation is when the reported measure and the condition or situation are

A

In agreement

It must be complete neutral and free from material error

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49
Q

What are examples of choosing relevance over faith representation?

A

Estimates depreciation bad debt expense pension estimates

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50
Q

What are examples of choosing faithful representation over relevance?

A

Historical cost

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51
Q

What are the four assumptions?

A

Economic entity - company separate from owners
Going concern - company has an indefinite life
Monetary unit - appropriate bassist for measurement
Time period assumption - business broken onto smaller periods (1 year)

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52
Q

Historical cost is assets recorded at the cash amount at the date of acquisition or

A

Origination. Some plant assets and intangibles are historical cost less accumulated depreciation or amortization

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53
Q

Value used to approximate liquidation value or selling price. (Cost deducted from current market value)

A

Net realizable value.

Lower cost or market for inventory valuation uses NRV

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54
Q

Historical cost less the accumulated depreciation of the asset

A

Amortized cost

Ex. Buildings and equipment

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55
Q

Value from discounting the expected future cash flows

A

Net present value

Ex. Capital budget decisions

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56
Q

The increase of assists or extinguishment of liabilities from a delivery of goods or services is

A

Revenue

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57
Q

Realization of revenues occurs when

A

Goods and services have been provided
Collectibility of cash is assured
Expenses of providing goods and services can be determined

58
Q

How are revenues measured?

A

At The cash equivalent amount if the good or service provided

59
Q

When to recognize expenses is addressed in the

A

Matching principle

60
Q

All info needed by an informed reader to make an economic decision n the financial statements is

A

Full disclosure

61
Q

The cost of information should not exceed it’s benefit is the

A

Cost benefit constraint

62
Q

The determination of fair value is based on

A

A hypothetical transaction and the exit price

63
Q

Through use and through exchange are determination of a fair vale of a no financial asset at the

A

Highest and vest use of the asset to market participants

64
Q

A standalone asset or a group of assets can be used for the determination of what measurement

A

Fair value

65
Q

The market based exit price of a instrument should be adjusted for

A

Transportation cost

66
Q

How the reporting entity would use the asset is not taken into account for the determination of

A

Fair value

67
Q

The price that would be received when selling an asset or paid when transferring a liability in an orderly transaction between market participants is

A

Fair value

68
Q

Fair value would not be used to determine

A

Legal services

69
Q

Fair value is used to increase consistency and comparability

A

C&c

70
Q

FV is nit for the purpose of establishing

A

A new measurement requirements fur financial instruments

71
Q

Fair value would not be used for inventory valued at

A

Lower of cost or market

72
Q

When recognizing income using fair value dividens should be

A

Added to the increase in revenue on the investment

73
Q

When items are acquired the company should report what measurement in its consolidated statements

A

Carrying value. In the books can report fair value

74
Q

The acquisition of an asset discounted at future cash flows uses what measurement approach

A

Income

75
Q

A change in fair value is reported as a change in

A

Accounting principle

76
Q

Expense approach us not a valuation technique under

A

Fair value

77
Q

Fair vale is best determined by the

A

Exit price

78
Q

Held to maturity assets are best valued at

A

Amortized cost

79
Q

Fair value must be elected at the date of

A

Transaction

80
Q

If an invested subsidiary I so be consolidated the fair value approach should not

A

Be used

81
Q

The amount required to replace the service capacity of the asset is

A

Cost approach

82
Q

The highest level in the hierarchy of inputs for valuation purposes is quote market prices on

A

A stock exchange for an identical asset

83
Q

The level of hierarchy for fair value is 1-

A

3

84
Q

Quoted market prices adjusted for blockage and not active prices are

A

Not used in determining FV

85
Q

In determining FV an entity may use uh observable inputs or the entity’s

A

Assumptions

86
Q

Observable inputs other than quoted prices in active markets for identical items are

A

Level 2

87
Q

The fAir value level that requires the greatest amount of disclosures is level

A

3

88
Q

Firms that eject fair value must make disclosures in both the FS

A

Interim and annual FS

89
Q

Disclosures for FV must be made in what statements

A

Balance sheet and income statement

90
Q

Combined disclosures about FV by all pronoun cements are not

A

Required but are encouraged

91
Q

Disclosures are required to show info for each major category of assets and liabilities and in interim and

A

Annual statements

92
Q

Fair value is different between non recurring and

A

Recurring basis

93
Q

The FV option is not intended to replace the kind and amount of onfo that would have been provided if the

A

FV option had not been used

94
Q

FV disclosures must be in what type of format

A

Tabular

95
Q

The IFRS foundation is responsible for

A

Fundraising for entire operations involving IASB

96
Q

The chair of the SEC is a member of the

A

Monitoring board

97
Q

The international federation of accountants is not part of the

A

IFRS foundation

98
Q

The IFRS foundation does not determine the

A

Agenda of the IASB

99
Q

The objective of the IASB is to take into account the needs of entities in a diverse

A

Economic settings

100
Q

The SEC is not included in the

A

IFRS

101
Q

The due process for the IFRS is

A 
Add item to working agenda
Discuss issue
Prepare discussion paper
Publish discussion paper
Issue the exposure draft
Analyze comments of the exposure draft
Issue the IFRS
102
Q

A entity that files FS with the sec or hold assess in a fiduciary capacity are included in the definition of

A

Public accountability

103
Q

Small medium size companies SMEs do not have public accountability and publishes general purpose

A

Financial statements for external users

104
Q

What Is the IFRS hierarchy?

A

Requirements in IFRS dealings with similar or related issues
Definitions recognition criteria and measurement concepts for assets liabilities income and expenses in the framework
Most recent pronouncements of other standard setting bodies that use a similar conceptual framework to develop accounting standards

105
Q

The IFRS FS does not assist with enforcing regulations because

A

The IASB has no enforcement authority

106
Q

Accrual basis and going concern are two

A

Assumptions in the IASB framework

107
Q

The essential characteristic of an assets is that it has

A

Future economic benefits

108
Q

Foreign private issuers in the auS can file their FS using

A

IFRS since 2008

109
Q

If a company has more than 50% of its outstanding voting securities owned by USA residents, business administered in US, 50% of assets located in US, and the majority of its executive officers or directors are US citizens or residents then it’s a

A

A foreign private issuer is any foreign issuer other than the foreign govt

110
Q

Financial reporting releases are main proud enemy’s published by the

A

sEC

111
Q

sEC ensures the investors are provided with adequate info to base it’s investment decisions through

A

Registering with SEC

112
Q

The division of Corporate finance oversees the compliance with the

A

Securities acts

113
Q

Th discussion of risk and uncertainties is required by what regulation of the SEC?

A

Regulation S-K

114
Q

The product market share is not a required component of which filing

A

10K

115
Q

Which SEC regulation governs the firm and content of FS disclosures?

A

regulation S-X

116
Q

A larger accelerated filer must file their 10Q with in

A

40 days of quarter end

117
Q

The balance sheet in a 10Q contains into from the end preceding

A

Fiscal year

118
Q

An accelerated filer is required to file a 10K in how many days

A

75 days

119
Q

A large accelerated filer is required to file its 10K in

A

60 days

120
Q

Acquired items should b reported at fair value at the

A

Date of transaction and carrying value in the consolidated statements

121
Q

The best determination of fair value is through the

A

Exit price

122
Q

Held to maturity securities can be measured by both

A

Amortized cost (best answer) and FV

123
Q

Accrual basis and going concern are two assumptions underlying the

A

Preparation and presentation of FS

124
Q

The conceptual framework establishes the objectives and concepts for use in developing standards of

A

Financial accounting and reporting

125
Q

In the issue of IFRS you discuss the issue before you

A

Prepare the discussion paper

126
Q

Contingencies are accrued and recognized as a liability when the event is

A

Probable and the amount reasonably estimated

127
Q

A treasury bill meets the definition of a cash equivalent.

A

Cash decrease but cash equivalents increase the same amount causing no effect

128
Q

Depicting the major cash receipts and disbursements during the period is what purpose of cash flow

A

Primary

129
Q

Cash flow per share is prohibited in the statement of cash flow because it can b confused with

A

Earnings per share

130
Q

Conversion of debt to equity would appear in the non cash disclosure schedule

A

As supplemental info in the statement of cash flows

131
Q

Retained earnings does not effect

A

Cash flows

132
Q

Cash flow balance is

A

Beg cash
+ operating
- investing
+ financing

133
Q

Operating activities come from adjustments to reconcile net income to cash flows from the change in

A

Current asset and liability accounts

134
Q

A property dividend is not a cash flow

A

Not a cash flow

135
Q

Payments on a note would be classified as a

A

Financing activity

136
Q

Dividends paid to shareholders are

A

Financing activities

137
Q

Interest on bonds is an

A

Operating activity

138
Q

Acquire shares of common stock is an

A

Investing activity

139
Q

Cash dividend payment and issuance of common stock to shareholders are

A

Financing activities

140
Q

When a firm lends money to other parties and collects the principle on loans.

A

Acting as an investor

141
Q

When a firm borrows money and pays it back it is acting as

A

Financing activities

142
Q

Borrowings and proceeds from stock issuance, retirements of debt, treasury stock purchases, and dividends paid are

A

Financing activities

143
Q

Financing activities are associated with how the company is financed such as

A

Borrowing or equity

FAR Exam Review (5 decks)

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