FAR1 Flashcards
SEC
Legal authority to establish U.S. GAAP (established in 1934)
Committee on Accounting Procedure (CAP)
Part time committee of the AICPA: 1939 - 1959
Accounting Principles Board (APB)
Part time committee of the AICPA: 1959 - 1973
Financial Accounting Standards Board (FASB)
Independent full time organization to determine GAAP: 1973 - present
FASB Codification
Effective July 1, 2009, the FASB Accounting Standards Codification became the single source of “authoritative” nongovernmental U.S. GAAP
Private Company Council (PCC)
The goal of the PCC is to establish alternatives to U.S. GAAP, where appropriate, to make private company financial statements more relevant, less complex, and cost-beneficial.
Accounting Standards Updates
FASB’s updates to the codification
IASB and FASB Convergence
Single set of high-quality, international accounting standards that companies could use for both domestic and cross-border financial reporting. (eliminate the differences between two sets) NOT HAPPENING
Conceptual Framework (U.S.)
Basis for all FASB pronouncements - basic reasoning (based on rules)
Fundamental Qualitative Characteristics
Relevance and Faithful
Relevance
PCM (passing confirms money)
Predictive Value, Confirming Value, Materiality
Faithful Representation
Completeness (primary FS and notes), neutrality, and freedom from error: reliable
Enhancing Qualitative Characteristics
Compare and verify in time to understand (comparability = consistency):
Timeliness, understandability, comparability and verifiability
Cost Constraint
Benefit > Cost
Measurement Attributes for Assets and Liabilities
Historical Cost - PP+E
Current Cost - Inventory
Net realizable Value - A/R
Current market Value - Marketable Securities
Present Value of future cash flows - LT Debt “bonds”
Revenue Recognition Principle
Revenue should be recognized when it is “earned” and when it is “realized (already paid) or realizable (to accrual for)”
Conservatism Principle
Revenues/gains when complete “wait”
Expenses/loss recognize “now”
5 Elements of Present Value Measurement
- Estimate of future cash flow
- Timing variations of future cash flows
- Time value of money (risk-free rate)
- Uncertainty (credit risk)
- Other factors (liquidity issues and market imperfections)
Income Statement
Useful in determining profitability, value for investment purposes, and credit worthiness (for period of time)
Discontinued operations
Has been disposed of and/(or) is classified as held for sale
represents strategic shift/major effect on operations
Strategic shift/major effect on operations
Disposal of a major geographical area, equity method investment, or line of business (GEL)
Subsequent Increases in Fair Value
A gain is recognized for any subsequent increase in fair value minus the costs to sell (but not in excess of the previously recognized cumulative loss)
Changes in Accounting Estimate
Prospective - affects current and future income from continuing operations
Changes in Accounting Principle
Retro: Non-comparative vs. Comparative
Non-comparative: restate B. RE in period of change
Comparative: restate B. RE in first period presented
Exception to General Rule from Change in Accounting Principle
Change to LIFO and Change in Depreciation method = prospective (like a change in estimate)
Changes in Accounting Entity
Restate - from earliest period presented (error correction). If presented = correct the data, If NOT presented = B. RE of earliest year presented
Comprehensive Income
Net Income + Other Comprehensive Income (OCI)
PUFE(R) or PUFE likes to Revalue his income
Pension adjustments Unrealized gains and losses (available-for-sale securities) Foreign currency items Effective portion cash flow hedges Revaluation surplus (IFRS only)
Changes in AOCI
Beginning Balance
OCI (current year)
- Amounts reclassified (to account for double counting)
= Net current-period OCI
Beg. Balance + Net current = Ending Balance
Going Concern
Reasonable period not to exceed one year beyond F.S. date both quantitative and qualitative (interim too)
Interim Financial Reporting
Timeliness over Reliability (unaudited), integral part of annual F.S.
Interim Income Taxes
Multiply the year-to-date income by the estimated effective tax rate and subtract the result from the provision included in the previous quarter
Quantitative Thresholds for Reportable Segments
10% “Size” Test (internal and external)
Revenue, Profit/Loss, Assets
75% “Reporting Sufficiency” Test
At least 75% of external (consolidated) revenue is included in reportable segments
Form 10-K
Filed annually by U.S. registered companies (issuers) (audited)
60 days = large accelerated filers,
75 days = accelerated filers,
90 days = all other registrants
Form 10-Q
Filed quarterly by U.S. registered companies (issuers) (unaudited)
40 days = (large) accelerated filers,
45 days = all other registrants
Form 11-K
Annual report of a company’s employee benefit plan(s).
Forms 20-F and 40-F
Filed annually by foreign private issuers
Form 6-K
Filed semi-annually by foreign private issuers
Form 8-K
Filed to report major corporate events/significant events
Forms 3, 4, and 5
Filed by directors, officers, or beneficial owners of more than 10% of a class of equity securities of a registered company (does not have XBRL/XML)
Regulation S-X
SEC sets forth the “form and content” of and requirements for interim and annual f.s. to be filed with the SEC
Interim - unaudited (U.S. - Q)(Foreign - Semi)
Annual - audited (B.S. 2 yrs, I.S./C.F. 3 yrs)
