FAR_Section_1

Question 1

General Purpose Financial Reporting

Answer 1

Set of principles and guidelines that were developed by the Financial Accounting Standards Board (FASB), who is authorized to establish accounting standards by the Securities and Exchange Commision (SEC)

Question 2

Financial Reporting Framework (FRF)

Answer 2

Recognition Criteria, Measurement Criteria, Presentation Criteria, Disclosure Criteria

Question 3

Recognition Criteria

Answer 3

Determine what will appear on financial statements and when it will appear

Question 4

Measurement Criteria

Answer 4

Determine the amount at which it will be reported

Question 5

Presentation Criteria

Answer 5

Determine where it will appear on the finanical statements

Question 6

Disclosure Criteria

Answer 6

Determine what information and how much information must be provided to financial statement users

Question 7

2 General Purpose Frameworks

Answer 7

Generally Accepted Accounting Principles (GAAP) & International Financial Reporting Standards (IFRS)

Question 8

Public entities

Answer 8

Entities that are required to submit their financial statements to the SEC prepared in accordance with a general purpose framework (GAAP & IFRS); reulated under the 1934 Security Echange Act; Issuing securities traded or have securities that are listed on exchange; reuired to apply GAAP and has securities that are restricted as to transfer

Question 9

Nonpublic entities

Answer 9

Can prepare financial statements using GAAP or IFRS; In addition, they may use special purpose framework aka Other Comprehensive Basis of Accounting (OCBOA)

Question 10

Special Purpose Framework (OCBOA)

Answer 10

Framework other than GAAP OR IFRS such as cash basis/modified cash basis,tax basis, contractual basis, and regulatory basis

Question 11

Cash basis

Answer 11

Revenues are recognized when they are received, regardless of when they are earned; and expenses are recognized when they are paid, regardless when they are incurred. Fixed assets are expensed and not capitalized

Question 12

Modified cash basis

Answer 12

Considered a sort of hybrid approach between cash and accrual, where assets could be capitalized and taxes and inventory could be accured

Question 13

Tax basis

Answer 13

Revenues and expenses are recognized for financial reporting purposes in the same periods and in the same amount as they are recognized when the entity is preparing its income tax return

Question 14

Contractual basis

Answer 14

Required to be used by a party to a contract and is generally designed to assist users in determining whether or not terms of the contract, and other requirements related it it are being adhered to.

Question 15

Regulatory basis

Answer 15

One that is imposed by a governmental regulatory agency to which the entity is required to report

Question 16

Private Company Council (PCC)

Answer 16

Charged with evaluating exisiting GAAP to determine if there are requriements, including disclusures, from which nonpublic entities should be exempt; or simplified accounting approaches that may be appplied to transactions or F/S elemtents that will reduce the cost of reporting without diminishing the relative value of the information provided

Question 17

Relevance [Roger is PC]

Answer 17

Predicitve value & Confirmatory value (Feedback value - confirm or changes)

Question 18

Faithful Representation [Roger is never on the FENCe]

Answer 18

Free from Error; Neutral (w/o bias); & Completeness

Question 19

Material

Answer 19

Capable of making a difference in the user’s decision making process if omiited or mistated (auditor’s judgement); Aan entity-specific aspect of Relevance that applies at the individual entity level - it’s omission or misstatement could influence a users decision

Question 20

Enhancing Qualitative Characteristics [CUT like a V]

Answer 20

(Enhance the usefulness of the info very desirable, but not required) - Comparability (Consistency), Understandability (classified/characterized & presented clearly), Timeliness; & Verifiability(direct or indirect verification)

Question 21

Cost/Benefit

Answer 21

Constraint thar overrides the usefulness of info; cost of obtaining and presenting the information shouldn’t exceed the benefit