FARE. Introduction To Financial Statements Flashcards
What term is used for increases in equity from nonroutine/incidental transactions?
Gains
What transactions will never be part of a comprehensive income?
Investments by, and distributions two, owners
What is the order in which an income statement element after income from continuing operations should be presented?
- Discontinued operations
- Extraordinary item
- Cumulative changes in accounting principle
How should each element of income after income from continuing operations be shown?
Net of taxes
Where should corrections of errors be shown?
As an adjustment to opening balance of retained earnings, net of taxes (prior – period adjustment)
What are the two components of the discontinued operations caption?
- Income or loss from operations of a discontinued division
2. Gain or loss on disposal
What are the two criteria for extraordinary item?
- Unusual in nature
2. Infrequent and occurrence
How should the early retirement of your own debt be classified?
As an extraordinary item
What changes in accounting principle are considered special changes requiring retroactive restatement?
- Changing from LIFO to another method
2. Change in accounting for long-term construction contracts
How should a change in accounting estimate be reported?
Prospectively. (What is Likely or expected to happen.)
How should changes in reporting entity be reported?
Retroactive restatement approach
How should A change in accounting principle inseparable from a change in estimate be reported?
Like a change in estimate
How should a change from non-GAAP to GAAP be reported?
As a prior-period Adjustment
correction of an error
How should revenue be recognized for an interim financial statement?
In the same manner it is recognized for annual financial statements
What accounting policies must be disclosed?
When they are a choice from among alternative methods
Where should accounting policies be disclosed?
As the first footnote, or as a separate section preceding the notes
What is the main consideration for related party transactions?
Disclosure
What are the three possible “10% tests” to determine if a segment is reportable?
- Revenues are 10% or more of combined revenues
- Assets are 10% or more of combined assets
- Absolute amount of profit or loss is 10% or more of combined profits of all segments Earning a profit, or 10% of combined losses of all segment showing a loss – whichever is greater
True or false?
Sales to major customer should be disclosed.
True
What basis of accounting should be used for personal financial statements?
Accrual accounting
How should assets be reported on personal financial statements?
At current value
True or false?
Development – stage enterprises should use GAAP in the same way as established enterprises.
True
