FAR study Flashcards
0
Q
The SEC requires that all registrants provide financial statements in accordance with
A
GAAP
1
Q
The inability to raise capital is considered a
A
Negative economic consequence
2
Q
Four of the seven members of FASB must vote in favor of a
A
Proposed standard
3
Q
Managerial accountant doesn’t need to follow GAAP because it is for what type of use?
A
Internal use
4
Q
GAAP should be neutral or
A
Unbiased
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
6
Q
The rules for financial reporting for business enterprises is
A
GAAP
7
Q
GAAP recolonizes what 3 aspects?
A
- Recognition - recorded in account and affects FS
- Measurement - concerns a dollar amt
- Disclosure - unrecognized amounts reported in the footnotes
8
Q
Accounting updates to the codification are accomplished through the
A
Accounting standards update (ASU)
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
10
Q
Reliable estimates of royalties should be recorded as earned no matter when the cash was
A
Received
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
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
13
Q
When handling insurance premiums for multiple years figure out the monthly costs and add
A
The expenses and subtract the premium remaining
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
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
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
17
Q
FASB has how many members and for what term?
A
7 members 5 years
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
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
20
Q
What is the FASB process for issuing a new standard?
A
- Consideration of project - receives request fom SEC audit firms investors and reporting forms
- Conducts research and issue a discussion memo
- Holds hearings
- Evaluates research and comments issues exposure draft initial standard
- Solicits additional comments modifies draft if needed
6 finalizes new acct guidance and approves with majority vote (4 of 7) - Issues ASU
21
Q
What is the EITF?
A
Emerging issues task force helps accelerate the process of establishing rulings on such issues
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
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
24
NonGAAP matters are not included in GAAP such as
Other comprehensive basis of accounting
Cash basis
Income tax basis
Regulatory accounting principles
25
GAAP reflects what basis of accounting
Accrual
26
Revenues are recognized when earned regardless of the period cash collection in the
Accrual basis
27
The performance of the firm for the entire period is measured by the
Income statement
28
Prior period adjustments are corrections of errors affecting prior year income that is reported in the
Stmt of RE
29
Unrealized gains and losses on investments in securities fans pension costs adjustments foreign currency translation adjustments are included in
Comprehensive income
30
The balance sheet discloses the resources of the firm at a point of time. It is dated as a
Specific date
31
The balance sheet may be referred to as
The statement of financial position
32
Assets are in order by decreasing liquidity. Liability are shown by Oder of maturity and owners equity by
Order of permanence
33
Cash accounts rec short term investments inventory and prepaid assets are
Current assets
34
Accounts payable wages payable invoke tax payable unearned revenues and warranty liabilities and current liabilities are
Current liabilities (transfer of a current asset or the creation of another current liability)
35
Long term investments plant assets certain deferred charges intangible assets
Notes and bonds payable and mortgages payable are
Long term assists and liabilities
36
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
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
37
The income statement is the major changes in
Cash (explain changes in cash and cash equivalents)
38
Cash equivalents are
Convertible into a known and fixed amount of cash
| Have an original maturity to the purchaser of 3 months or less
39
Operating activities relate to activities that flow through the income statement.
Inflows - receipts from customers and interest
| Outflows- payments to suppliers to employers and to taxing authorities
40
Investing activities - related to acquisition and disposal of long term assets and investments (other than cash equivalents and trading securities)
Outflow activities - purchases of plant assets and investments
Inflow - proceeds from the sale of these items
41
Financing activities - related to the liabilities and owner's equity sections of the BS.
Inflows - issuing debt and equity securities
| Outflows - retirement of debt and equity securities and dividend payments
42
Goals of the codification are
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
43
What is the codification structure?
Areas topics subtropics sections subsections and paragraphs
44
What are the two primary qualitative characteristics
1. Relevance (predictive value, confirmatory, materiality)
| 2. Faith representation (completeness, neutrality, free from error
45
What are the four enhancing characteristics of the conceptual network?
Comparability verifiability timeliness understandability
46
Predictive value assists providers with forming expectations
About future events
47
Confirmatory value confirms or changes past or present expectations based on
Pervious evaluations
48
Faithful representation is when the reported measure and the condition or situation are
In agreement
It must be complete neutral and free from material error
49
What are examples of choosing relevance over faith representation?
Estimates depreciation bad debt expense pension estimates
50
What are examples of choosing faithful representation over relevance?
Historical cost
51
What are the four assumptions?
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)
52
Historical cost is assets recorded at the cash amount at the date of acquisition or
Origination. Some plant assets and intangibles are historical cost less accumulated depreciation or amortization
53
Value used to approximate liquidation value or selling price. (Cost deducted from current market value)
Net realizable value.
| Lower cost or market for inventory valuation uses NRV
54
Historical cost less the accumulated depreciation of the asset
Amortized cost
| Ex. Buildings and equipment
55
Value from discounting the expected future cash flows
Net present value
| Ex. Capital budget decisions
56
The increase of assists or extinguishment of liabilities from a delivery of goods or services is
Revenue
57
Realization of revenues occurs when
Goods and services have been provided
Collectibility of cash is assured
Expenses of providing goods and services can be determined
58
How are revenues measured?
At The cash equivalent amount if the good or service provided
59
When to recognize expenses is addressed in the
Matching principle
60
All info needed by an informed reader to make an economic decision n the financial statements is
Full disclosure
61
The cost of information should not exceed it's benefit is the
Cost benefit constraint
62
The determination of fair value is based on
A hypothetical transaction and the exit price
63
Through use and through exchange are determination of a fair vale of a no financial asset at the
Highest and vest use of the asset to market participants
64
A standalone asset or a group of assets can be used for the determination of what measurement
Fair value
65
The market based exit price of a instrument should be adjusted for
Transportation cost
66
How the reporting entity would use the asset is not taken into account for the determination of
Fair value
67
The price that would be received when selling an asset or paid when transferring a liability in an orderly transaction between market participants is
Fair value
68
Fair value would not be used to determine
Legal services
69
Fair value is used to increase consistency and comparability
C&c
70
FV is nit for the purpose of establishing
A new measurement requirements fur financial instruments
71
Fair value would not be used for inventory valued at
Lower of cost or market
72
When recognizing income using fair value dividens should be
Added to the increase in revenue on the investment
73
When items are acquired the company should report what measurement in its consolidated statements
Carrying value. In the books can report fair value
74
The acquisition of an asset discounted at future cash flows uses what measurement approach
Income
75
A change in fair value is reported as a change in
Accounting principle
76
Expense approach us not a valuation technique under
Fair value
77
Fair vale is best determined by the
Exit price
78
Held to maturity assets are best valued at
Amortized cost
79
Fair value must be elected at the date of
Transaction
80
If an invested subsidiary I so be consolidated the fair value approach should not
Be used
81
The amount required to replace the service capacity of the asset is
Cost approach
82
The highest level in the hierarchy of inputs for valuation purposes is quote market prices on
A stock exchange for an identical asset
83
The level of hierarchy for fair value is 1-
3
84
Quoted market prices adjusted for blockage and not active prices are
Not used in determining FV
85
In determining FV an entity may use uh observable inputs or the entity's
Assumptions
86
Observable inputs other than quoted prices in active markets for identical items are
Level 2
87
The fAir value level that requires the greatest amount of disclosures is level
3
88
Firms that eject fair value must make disclosures in both the FS
Interim and annual FS
89
Disclosures for FV must be made in what statements
Balance sheet and income statement
90
Combined disclosures about FV by all pronoun cements are not
Required but are encouraged
91
Disclosures are required to show info for each major category of assets and liabilities and in interim and
Annual statements
92
Fair value is different between non recurring and
Recurring basis
93
The FV option is not intended to replace the kind and amount of onfo that would have been provided if the
FV option had not been used
94
FV disclosures must be in what type of format
Tabular
95
The IFRS foundation is responsible for
Fundraising for entire operations involving IASB
96
The chair of the SEC is a member of the
Monitoring board
97
The international federation of accountants is not part of the
IFRS foundation
98
The IFRS foundation does not determine the
Agenda of the IASB
99
The objective of the IASB is to take into account the needs of entities in a diverse
Economic settings
100
The SEC is not included in the
IFRS
101
The due process for the IFRS is
```
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
A entity that files FS with the sec or hold assess in a fiduciary capacity are included in the definition of
Public accountability
103
Small medium size companies SMEs do not have public accountability and publishes general purpose
Financial statements for external users
104
What Is the IFRS hierarchy?
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
The IFRS FS does not assist with enforcing regulations because
The IASB has no enforcement authority
106
Accrual basis and going concern are two
Assumptions in the IASB framework
107
The essential characteristic of an assets is that it has
Future economic benefits
108
Foreign private issuers in the auS can file their FS using
IFRS since 2008
109
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 foreign private issuer is any foreign issuer other than the foreign govt
110
Financial reporting releases are main proud enemy's published by the
sEC
111
sEC ensures the investors are provided with adequate info to base it's investment decisions through
Registering with SEC
112
The division of Corporate finance oversees the compliance with the
Securities acts
113
Th discussion of risk and uncertainties is required by what regulation of the SEC?
Regulation S-K
114
The product market share is not a required component of which filing
10K
115
Which SEC regulation governs the firm and content of FS disclosures?
regulation S-X
116
A larger accelerated filer must file their 10Q with in
40 days of quarter end
117
The balance sheet in a 10Q contains into from the end preceding
Fiscal year
118
An accelerated filer is required to file a 10K in how many days
75 days
119
A large accelerated filer is required to file its 10K in
60 days
120
Acquired items should b reported at fair value at the
Date of transaction and carrying value in the consolidated statements
121
The best determination of fair value is through the
Exit price
122
Held to maturity securities can be measured by both
Amortized cost (best answer) and FV
123
Accrual basis and going concern are two assumptions underlying the
Preparation and presentation of FS
124
The conceptual framework establishes the objectives and concepts for use in developing standards of
Financial accounting and reporting
125
In the issue of IFRS you discuss the issue before you
Prepare the discussion paper
126
Contingencies are accrued and recognized as a liability when the event is
Probable and the amount reasonably estimated
127
A treasury bill meets the definition of a cash equivalent.
Cash decrease but cash equivalents increase the same amount causing no effect
128
Depicting the major cash receipts and disbursements during the period is what purpose of cash flow
Primary
129
Cash flow per share is prohibited in the statement of cash flow because it can b confused with
Earnings per share
130
Conversion of debt to equity would appear in the non cash disclosure schedule
As supplemental info in the statement of cash flows
131
Retained earnings does not effect
Cash flows
132
Cash flow balance is
Beg cash
+ operating
- investing
+ financing
133
Operating activities come from adjustments to reconcile net income to cash flows from the change in
Current asset and liability accounts
134
A property dividend is not a cash flow
Not a cash flow
135
Payments on a note would be classified as a
Financing activity
136
Dividends paid to shareholders are
Financing activities
137
Interest on bonds is an
Operating activity
138
Acquire shares of common stock is an
Investing activity
139
Cash dividend payment and issuance of common stock to shareholders are
Financing activities
140
When a firm lends money to other parties and collects the principle on loans.
Acting as an investor
141
When a firm borrows money and pays it back it is acting as
Financing activities
142
Borrowings and proceeds from stock issuance, retirements of debt, treasury stock purchases, and dividends paid are
Financing activities
143
Financing activities are associated with how the company is financed such as
Borrowing or equity
