FAR1 M1 - Standards & Conceptual Framework

Question 1

FASB Codification

Answer 1

Single source of authoritative nongovt. US GAAP Accounting and financial reporting practices not included in the codification are NOT GAAP.

Question 2

Statements of Financial Accounting Concepts (SFAC)

Answer 2

Basis for financial accounting concepts for business and non-business enterprises

Question 3

Qualitative Characteristics

Answer 3

“Relevant & Reliable (faithful representation)”
- Relevance - info is relevant if it is capable of making a difference in the decisions made by users
- Predictive Value - predict future outcomes
- Confirmatory Value - provides feedback about
the evaluations previously made by users
- Materiality - info is material if an omission or
misstatement of the info could affect decisions
made by users
- Faithful Representation - reliable
- Complete - includes all info necessary for the
user to understand
- Neutral - free from bias
- Free from error - does not require perfect
accuracy

Question 4

Enhancing qualitative characteristics

Answer 4

“Compare and verify in time to understand”

• Comparability - trend analysis /consistency
• Verifiability - independent observers can reach the same consensus that a particular depiction is faithfully represented
• Timeliness - available to users in time
• Understandability - presented clearly and concisely

Question 5

Recognition Criteria

Answer 5

• Measurability
• Relevance - capable of making a difference
• Reliability

Question 6

Entity Assumption

Answer 6

separate corporation or division

Question 7

Going Concern Assumption

Answer 7

Entity’s ability to operate in the future

Question 8

Monetary Unit Assumption

Answer 8

Money is the basis by which economic activity is measured

Question 9

Periodicity Assumption

Answer 9

Economic activity can be divided into meaningful time periods (qtrs, years)

Question 10

Measurement Principle

Answer 10

Allows assets and liabilities to be measured at various bases