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FAR1 > FAR1 > Flashcards

FAR1 Flashcards

1
Q

Single source of authoritative nongovernmental US GAAP

A

FASB Codification

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2
Q

International Financial Reporting Standards includes what standards?

A
  • International Accounting Standards (IAS)
  • International Financial Reporting Standards(IFRS)
  • IFRIC Interpretations
  • SIC Interpretations
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3
Q

Primary users of general purpose financial reports

A

Existing and potential investors, lenders, and other creditors

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4
Q

Pervasive constraint on the information provided in financial reporting

A

Cost Constraint: the benefits of reporting financial info must be greater than the costs of obtaining and presenting.

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5
Q

Name the fundamental qualitative characteristics of useful financial information

A

Relevance and Faithful Representation

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6
Q

The 3 elements of Relevance

A

Predictive value, Confirming value and Materiality

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7
Q

The 3 elements of Faithful Representation

A

Neutrality, Completeness and Freedom from Error

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8
Q

Name the enhancing qualitative characteristics of financial information

A

Comparability, Verifiability, Timeliness, and Understandability

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9
Q

A full set of financial statements includes?

A
  • Statement of Financial Position (Balance sheet)
  • Statement of Earnings (Income Stmt)
  • Statement of Comprehensive Income
  • Statement of Cash Flows
  • Statement of Changes in Owners Equity
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10
Q

Difference between realization and recognition

A 
Realization = when sold and converted to cash
Recognition = when recorded in the financial stmts
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11
Q

List the 10 elements of financial stmts (CREG and LALEID)

A 
Comprehensive income
Revenues
Expenses
Gains            and 
Losses
Assets
Liabilities
Equity
Investments by owners 
Distributions to owner
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12
Q

List the 6 elements of financial stmts according to IASB Framework

A 
Assets
Liabilities
Equity
Income
Expenses
Capital maintenance adjustments
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13
Q

List the 5 elements of present value measurement (EVTUO)

A 
Estimate of future cash flows 
Variations of future cash flows 
Time value of money
Uncertainty price
Other factors (liquidity issues and market imperfections)
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14
Q

Describe the expected cash flow approach for present value computations

A

Consider a range of possible cash flows and assigns a probability to each cash flow in the range to determine the weighted-average of expected future cash flow

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15
Q

Presentation order of the major components of an income and retained earnings statement (IDEA)

A

Income from continuing operations
Income from Discontinued operations
Extraordinary items
Cumulative effect of a change in Accounting principle

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16
Q

The gain (loss) from discontinued operations can consist of…

A

An impairment loss, and gain (loss) from actual operations and a gain (loss) on disposal

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17
Q

In what period is an impairment loss recorded? gain/loss from actual operations? gain/loss on disposal?

A

All reported in the period in which they occur

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18
Q

In reporting discontinued operations, how is a “component” of an entity defined under US GAAP and IFRS?

A

US GAAP = an operating segment, a reportable segment, a reporting unit, a subsidiary, or an asset group

IFRS = a separate major line of business or geographical area of operation or a subsidiary acquired exclusively with a view to resale

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19
Q

How do we account for subsequent increase in the fair value of a discontinued operation?

A

A gain is recognized for the subsequent increase in fair value minus costs to sell (but not in excess of the previously recognized cumulative loss). The gain is reported in the period of increase.

20
Q

What types of costs are associated with exit and disposal activities?

A

Involuntary employee-termination benefits, costs to terminate a contract that is NOT capital lease, and other costs associated with exit or disposal activities.

21
Q

Define extraordinary items

A

Material in nature, unusual and infrequent.

Note: IFRS does not recognize them.

22
Q

Examples of extraordinary items

A
  • Abandonment of, damage to, a plant due to an infrequent earthquake of flood
  • Expropriation of a plant by the gov’t
  • Prohibition of a product line by a law or regulation
23
Q

List 3 types of accounting changes

A

Change in accounting principle, estimate, or entity

24
Q

How is a change in accounting principle reported?

A

Cumulative effect of change is included in the retained earning stmt as an adjustment to the beginning retained earnings balance of the earliest year presented. Prior-period financial statements are restated if presented.

25
Q

What are the special changes in an accounting principle and how are they reported?

A

A change to LIFO and any change that is impractical to calculate. They are reported prospectively like a change in estimate.

26
Q

How is a change in an accounting estimate reported?

A

Prospectively, shown in the periods effected, and the financial stmts are not restated.

27
Q

How is a change in the accounting entity reported?

A

All current and prior period stmts presented are restated.

28
Q

How are error corrections reported?

A

As prior period adjustments to retained earnings and all comparative financial stmts presented are restated.

29
Q

Define comprehensive income

A

Change in equity that results from revenue, expenses, gains, and losses during a period, as well as any other recognized changes in equity that occur for reasons other than investments by owners and distributions to owners.

30
Q

List 5 elements in other comprehensive income (PUFER)

A

Pension adjustments
Unrealized gains and losses on available-for-sale securities
Foreign currency translations and transactions
Effective portions of cash flow hedges
Revaluation surpluses (IFRS only)

31
Q

List 3 formats acceptable for reporting comprehensive income

A

Stmt of Comprehensive Income (single stmt OR two-stmt approach)
Component of the stmt of owners equity (US GAAP only)

32
Q

List disclosure requirements for comprehensive income

A

Tax effects, changes in accumulated balances, totals, and reclassification adjustments

33
Q

Components of the Summary of Significant Accounting Policies notes

A

Identify and describe measurement bases, principles and methods, criteria, policies, and pricing

34
Q

Related party disclosures required under US GAAP and IFRS

A

Material related party transactions, related party notes/accounts receivable, control relationships. IFRS discloses key management compensation also.

35
Q

US GAAP disclosure requirements for risks and uncertainties

A

Nature of operations, use of estimates, and current vulnerability due to certain concentrations

36
Q

Guidelines for interim reporting

A

Use same accounting principles used in the most recent annual report, allocate expenses to the periods benefited, revenues in period earned, and a total for comprehensive income in condensed stmts

37
Q

What income tax rate is used in interim financial reporting?

A

Best estimate of effective tax rate to be applicable for the full fiscal year on quarterly stmts

38
Q

List 4 required disclosure for segments of an enterprise

A

Operating segments, products and services, geographical areas, and major customers

39
Q

Define operating segment

A

Distinct revenue-producing components where separate financial information is produces separately internally and whose operating results are regularly reviewed. Determined using a management approach.

40
Q

List 2 quantitative thresholds used in identifying reportable operating segments

A

10% size test and 75% reporting sufficiency test

41
Q

Describe 10% test for identifying reportable segments

A

-10% or more of external and internal revenue of all operating segments
-10% or more of absolute amount of all profitable segments or all losses of losing segments
-10% or more of all assets
ONLY need to meet one above

42
Q

What is the 75% test for identifying reportable segments?

A

Combined external revenue of all segments must be at least 75% of the total consolidated revenue. 10 segments is practical limit

43
Q

Disclosure requirements for reportable operating segments

A

identifying factors, products/services, profit/loss details, asset details, liability details (IFRS only), measurement criteria, reconciliations

44
Q

Define development stage enterprise

A

One that devotes substantially all of its efforts to establishing a new business and either planned principal operations have not begun or no significant revenue has been generated.

45
Q

What are the special accounting treatment for development stage enterprises?

A

Same principles yet more disclosures which include cumulative totals on all stmts

46
Q

What is the date of an entity’s transition to IFRS?

A

Date of the opening balance sheet

47
Q

Describe the Form 10-K and the Form 10-Q along with their level of assurance required

A 
10-K = annual report audited 
10-Q = quarterly reports reviewed

FAR1 (1 decks)

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