FAR Volume 1

Question 1

Relevance

Answer 1

Capable of making a difference in a user’s decision-making process. Made up of Predictive value and Confirmatory value. Materiality should also be considered, which relates to relevance (Roger is PC)

Question 2

Predictive Value

Answer 2

Helping decision makers predict or forecast future results.

Question 3

Confirmatory Value (Feedback Value)

Answer 3

Confirm or correct prior predictions.

Question 4

Materiality

Answer 4

Its omission or misstatement could influence a user’s decision (How significant amount is in relation to the entire picture). This relates most closely to Relevance.

Question 5

Faithful Representation

Answer 5

Information depicts what it intends to represent. Consists of Free from Error, Neutrality and Completeness. FENCE

Question 6

Neutrality

Answer 6

Free from bias.

Question 7

Completeness

Answer 7

All information necessary to users is provided

Question 8

Enhancing Qualitative Characteristics of Accounting information include

Answer 8

Comparability, Understandability, Timeliness, Verifiability. Cut-V

Question 9

Comparability

Answer 9

Same principles are being used with business enterprises in similar industry

Question 10

Consistency

Answer 10

Same accounting methods in different periods

Question 11

Understandability

Answer 11

Classifying, characterizing and presenting info clearly and concisely.

Question 12

Timeliness

Answer 12

Information is available early enough to influence decisions.

Question 13

Verifiability

Answer 13

Independent knowledgeable observers would agree

Question 14

Cost/Benefit Constraint

Answer 14

Cost of obtaining and presenting information should not exceed the benefits.

Question 15

Physical Capital Maintenance Concept

Answer 15

An event is recognized when an asset is sold or a liability is settled.

Question 16

Financial Capital Maintenance Concept

Answer 16

An event is recognized as a change in the value of an asset or liability occurs. Recognizes holding gains and losses.

Question 17

Recognition

Answer 17

Reporting an item in the financial statements (booking it)

Question 18

Realization

Answer 18

Converting non-cash resources into cash or a claim to cash

Question 19

Principle Market

Answer 19

The market where the greatest volume and level of activity occurs

Question 20

Most Advantageous market

Answer 20

the market that maximizes price received for an asset or minimizes the price to transfer a liability

Question 21

Market Approach

Answer 21

a valuation technique that uses prices and relevant information from market transactions for identical or comparable assets/liabilities

Question 22

Income Approach

Answer 22

a valuation technique that converts future revenues and expenses or cash flows into a single current amount

Question 23

Cost Approach

Answer 23

a valuation technique that uses the current cost of replacing the service capacity of an asset

Question 24

Special Purpose Financial Reporting Framework

Answer 24

a financial reporting framework, other than GAAP or IFRS, used for the preparation of financial statements

Question 25

Generally Accepted Accounting Principles

Answer 25

a general purpose financial reporting framework set forth by the FASB to be used for the preparation and presentation of financial statetments

Question 26

Financial Accounting Standards Board (FASB)

Answer 26

The board that is responsible for maintaining the FASB Accounting Standards Codification, the only authoritative source of GAAP, through the issuance of Accounting Standards Updates (ASUs) and is responsible for issuing statements on financial accounting concepts (SFACs), the framework upon which GAAP is based

Question 27

Emerging Issues Task Force (EITF)

Answer 27

a board created by FASB to address new and unusual financial transactions

Question 28

International Financial Reporting Standards (IFRS)

Answer 28

a general purpose financial reporting framework that is comprehensive in nature, established and maintained by the International Accounting Standards Board (IASB) used for the preparation of financial statements in many counties outside of the United States and accepted, in many cases, for financial reporting within the US

Question 29

Current Asset

Answer 29

an asset that will be used up or converted into cash within one year or one operating cycle, whichever is LONGER. An asset is an economic resource with a probable future economic benefit that the entity obtained or controls as a result of an event or transaction that has already occurred

Question 30

Current Liability

Answer 30

A liability that will be settled within one year or one operating cycle, whichever is LONGER, or will require the use of current assets, A Liability is an economic obligation that is probable that will require the entity to transfer assets to provide services in the future as a result of an event or transaction that has already occurred

Question 31

A financial reporting framework includes:

Answer 31

Recognization criteria, measurement criteria, presentation criteria, disclosure criteri