FAR_Section_1 Flashcards
General Purpose Financial Reporting
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)
Financial Reporting Framework (FRF)
Recognition Criteria, Measurement Criteria, Presentation Criteria, Disclosure Criteria
Recognition Criteria
Determine what will appear on financial statements and when it will appear
Measurement Criteria
Determine the amount at which it will be reported
Presentation Criteria
Determine where it will appear on the finanical statements
Disclosure Criteria
Determine what information and how much information must be provided to financial statement users
2 General Purpose Frameworks
Generally Accepted Accounting Principles (GAAP) & International Financial Reporting Standards (IFRS)
Public entities
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
Nonpublic entities
Can prepare financial statements using GAAP or IFRS; In addition, they may use special purpose framework aka Other Comprehensive Basis of Accounting (OCBOA)
Special Purpose Framework (OCBOA)
Framework other than GAAP OR IFRS such as cash basis/modified cash basis,tax basis, contractual basis, and regulatory basis
Cash basis
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
Modified cash basis
Considered a sort of hybrid approach between cash and accrual, where assets could be capitalized and taxes and inventory could be accured
Tax basis
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
Contractual basis
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.
Regulatory basis
One that is imposed by a governmental regulatory agency to which the entity is required to report
Private Company Council (PCC)
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
Relevance [Roger is PC]
Predicitve value & Confirmatory value (Feedback value - confirm or changes)
Faithful Representation [Roger is never on the FENCe]
Free from Error; Neutral (w/o bias); & Completeness
Material
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
Enhancing Qualitative Characteristics [CUT like a V]
(Enhance the usefulness of the info very desirable, but not required) - Comparability (Consistency), Understandability (classified/characterized & presented clearly), Timeliness; & Verifiability(direct or indirect verification)
Cost/Benefit
Constraint thar overrides the usefulness of info; cost of obtaining and presenting the information shouldn’t exceed the benefit
