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FAR > FASB Stndrds/FS/Qual Charc/Assumptions/ > Flashcards

FASB Stndrds/FS/Qual Charc/Assumptions/ Flashcards

1
Q

3 aspects of GAAP?

A
  1. Recognition.= when recorded
  2. Measurement= how recorded
  3. Disclosure= not in fs #s in notes
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2
Q

How many FASB members?

A

7 members.. staggering 5 years…renewable one additional term

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3
Q

Who is FASB?

A

standard setting body. independent body. subject only to FAF.

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4
Q

Organizations Involved in Developing Accounting Standards?

A

FASB
SEC
AICPA

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5
Q

Three Parts of Current Accounting Standard Setting Mechanism in US?

A

FASB-
FAF
FASAC

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6
Q

What does FAF do?

A
  1. Appoints members of FASB & advisory councils
  2. Ensures adequate funding for FASB
  3. Exercises oversight over FASB
  4. Trust of FAF are appointed from organizations with interest in accounting stnds
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7
Q

Who is FASAC?

A
  1. Provides guiance on major policy issues
  2. project priorities
  3. Formation of task forces
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8
Q

4 FASB Facts?

A
  1. 7 full time members (staggering 5 year terms) (renewable 1 term)
  2. Subject to FAF policies & Oversight
  3. Members cannot have employment or investement ties with other entities
  4. Members need not be CPAS
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9
Q

What is Mission of FASB?

A
  1. Improve usefulness of Financial Rpt
  2. Maintain current accounting standards
  3. address deficiences in accounting standards
  4. Promote international convergence of accounting standards
  5. Improve common understanding of the nature & Purpose of information in financial reports
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10
Q

Principles applied by FASB?

A
  1. Accounting Stndrds - unbiased & not favor industry- the stndrds are for FS users
  2. Needs & veiws of econmic community considered- accounting profssion not precedence
  3. developing stndrd open to public & allow due process for views to be known
  4. benefits of accounting stndrds should exceed the cost
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11
Q

FASB Process Issuing a Accounting Standard ?

A
  1. add project to agenda- consult FAF - to address new financial reporting issues & Clarify Existing stndrds
  2. Ressearch
    3 Discussion Memrandum
    4 Holds public hearing
    5 Exposure Draft
    6 Finalized new guidance & approves with majority vote (4 or 7)
    7 Issue ASU (accounting Standards Update)
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12
Q

EITF (FASB Emerging Issues Task Force?

A

filter for FASB- (15 members) EITF pronouncements are included in GAAP. If EITF unable to reach consensus FASB becomes involved.

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13
Q

Negative economic consequences?

A

The inability to raise capital

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14
Q

Reported as investing activity CFS?

  1. collections of NP?
  2. Collection Note Recvbl Related Prty?
  3. Overdue AR Customer?
  4. Tax rfnd Government?
A

(2) Collection of Note Receivable from Related Party

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15
Q

U.S. GAAP includes a very large set of accounting guidance. Choose the correct statement.

  1. The FASB Accounting Standards Codification includes guidance about items that are not under the purview of the Generally Accepted Accounting Principles, such as the income tax basis of accounting.
  2. Authoritative guidance from FASB Statements adopted before the FASB Accounting Standards Codification does not appear in the Codification.
  3. There is an implied hierarchy within the FASB Accounting Standards Codification, with FASB Statements assuming the top level.
  4. International accounting standards are not included in the FASB Accounting Standards Codification.
A
  1. International accounting standards are not included in the FASB Accounting Standards Codification.
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16
Q

Primary Qulitative Characteristics?

A
  1. Relevance

2. Faithful Representation

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17
Q

Relevance primary characteristics?

A
  1. Predictive Value
  2. Confimatory Value
  3. Materiality
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18
Q

relevance definition?

A

it makes a difference to decision makers in their role as capital providers

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19
Q

predictive value def?

A

forming expectations about future events

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20
Q

Confirmatory value def?

A

confirms or changes past/present expecations based on previous evaluations.

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21
Q

Materiality def?

A

material impact on users decision.

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22
Q

Faithfule Representation Def?

A

Faithfully represnts economic condition/situation when reported measure and condition or situation are in agreement. Economic Substance.

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23
Q

Faithful Represenation primary Characteristics

A
  1. Completeness
  2. Neutral
  3. Free from error
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24
Q

Completeness Def

A

Info is complete/ includes all necessary data

25
Q

Neutral Def

A

Free from bias intent

26
Q

Free of Error

A

no omissions or error

27
Q

Enhancing Characteristics

A
  1. Comparability
  2. Understandability
  3. Timeliness
  4. Verifiability
28
Q

Comparability?

A
  • quality of info
  • edentify similarities & differences between set of info
  • application of recognition & meaurement methods over time
29
Q

Verifiability?

A

-different knowledge & independent observers could reach similary conclusions based on information.

30
Q

Understandability?

A
  • user comprehends within the decision context.
  • Users are assumed to have reasonable understanding of business & accounting - willing to study the information with reasonable diligence
31
Q

Timeliness?

A
  • enhances faithful representation of info.

- Received in time to make a difference to decision maker

32
Q

Conceptually, interim financial statements can be described as emphasizing:

1 .Timeliness over faithful representation.

  1. Faithful representation over relevance.
  2. Relevance over comparability.
  3. Comparability over neutrality.
A

Answer is #1
Interim reporting emphasizes timeliness over faithful representation. Interim reports are generally more aggregate and reflect estimates that are of a more approximate nature than those found in annual reports. The objective is to provide reasonable information in a timely fashion, rather than exact information. The cost to provide the latter would often be prohibitive on a quarterly basis.

33
Q

4 Accounting Assumptions?

A
  1. Entitiy Assumption
  2. Going Concern Assumption
  3. Unit of Measure Assumption
  4. Time Period Assumption
34
Q

Entity assumption?

A

separate accounting entity for each business org.

35
Q

Going Concern Assumption?

A
  • Indefinit life
  • supports historica cost principle for assets
  • Without going concer historical cost would not be appropriate valuation basis
36
Q

Unit of Measure Assumption

A
  • Assets/Liabilities/equities/rev/exp/gain.loss/cash flow are measured termos of montary unit.
  • Price level chngs cause assumption to weaken the relevance of certain disclosures
37
Q

Time Period Assumption

A

For accounting info to be relevant - it must be timely

38
Q

Accounting Principles

A

1 Measurment (NRV/Current Replacement Cost/ FV/Amortized/NPV)
2 Revenue Recogniation
3. Expense Recognition
4.Full Disclosure

39
Q

When a firm is in liquidation- Historical Cost for assets?

A

No. The going concern assumption supports the historical cost principle. The firm is no longer a going concern. The only amounts relevant are the amounts to be received on sale of the assets. Net realizable value is the net value to be received, after the costs of getting the asset ready for sale are deducted.

40
Q

Reporting inventory at the lower of cost or market is a departure from the accounting principle of

A

Lower Cost Market departs from historical cost because it provides an ending valuation below cost when market value is below cost

41
Q

A full set of financial statements should include the following?

A
  1. Financial Position at year-end (balance sheet)
  2. Earnings for the year (income statement)
  3. Comprehensive Income for the year—total nonowner changes (statement of comprehensive income)
  4. Cash Flows during the year (statement of cash flows)
  5. Investments by and Distributions to Owners during the year (statement of owner’s equity)
42
Q

Recognition and Measurement Criteria

A

Definition—The definition of a financial statement element is met.

  1. Measurability—There is an attribute to be measured, such as historical cost.
  2. Relevance—The information to be presented in the financial report is capable of influencing decisions. The information is timely, has predictive ability, provides feedback value, and is material.
  3. Faithful Representation—The information is complete, neutral and free from material error.
43
Q

Definition

A
  • Criteria for Recognition and Measurement Criteria

—The definition of a financial statement element is met.

44
Q

Measurability

A
  • Criteria for Recognition and Measurement Criteria

- There is an attribute to be measured, such as historical cost.

45
Q

Relevance

A

Criteria for Recognition and Measurement Criteria
- The information to be presented in the financial report is capable of influencing decisions. The information is timely, has predictive ability, provides feedback value, and is material.

46
Q

Faithful Representation

A

Criteria for Recognition and Measurement Criteria

-The information is complete, neutral and free from material error

47
Q

Elements of Financial Statements—Ten elements that appear in a financial report.

A

Assets—Resources that have probable future benefits to the firm, controlled by management, resulting from past transactions. Note the three aspects of this definition.

  1. Liabilities—Probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities as a result of past transactions or events.
  2. Equity—Residual interest in the firm’s assets, also known as net assets. Equity is primarily comprised of past investor contributions and retained earnings.
  3. Investments by Owners—Increases in net assets of an entity from transfers to it by existing owners or parties seeking ownership interest
  4. Distributions to Owners—Decreases in net assets of an entity from the transfer of assets, provision of services, or incurrence of liabilities by the enterprise to owners
  5. Comprehensive Income—Accounting income (transaction based) plus certain holding gains and losses and other items. It includes all changes in equity other than investments by owners and distributions to owners.
  6. Revenues—Increases in assets or settlements of liabilities of an entity by providing goods or services
  7. Expenses—Decreases in assets or incurrences of liabilities of an entity by providing goods or services. Expenses provide a benefit to the firm
  8. Gains—Increases in equity or net assets from peripheral or incidental transactions
  9. Losses—Decreases in equity or net assets from peripheral or incidental transactions. Losses provide no benefit to the firm.
48
Q

Assets

A

Resources that have probable future benefits to the firm, controlled by management, resulting from past transactions. Note the three aspects of this definition.

49
Q

Liabilities

A

Probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities as a result of past transactions or events.

50
Q

Equity

A

Residual interest in the firm’s assets, also known as net assets. Equity is primarily comprised of past investor contributions and retained earnings.

51
Q

Investments by Owners

A

Decreases in net assets of an entity from the transfer of assets, provision of services, or incurrence of liabilities by the enterprise to owners

52
Q

Distributions to Owners

A

Decreases in net assets of an entity from the transfer of assets, provision of services, or incurrence of liabilities by the enterprise to owners

53
Q

Comprehensive Income

A

Accounting income (transaction based) plus certain holding gains and losses and other items. It includes all changes in equity other than investments by owners and distributions to owners.

54
Q

Revenues

A

Increases in assets or settlements of liabilities of an entity by providing goods or services

55
Q

Expenses

A

Decreases in assets or incurrences of liabilities of an entity by providing goods or services. Expenses provide a benefit to the firm

56
Q

Gains

A

Increases in equity or net assets from peripheral or incidental transactions

57
Q

Losses

A

Decreases in equity or net assets from peripheral or incidental transactions. Losses provide no benefit to the firm

58
Q

Capture Economic Differences

A

A present value measurement that fully captures the economic differences between various estimates of future cash flows would include the following:

  1. An estimate of future cash flows
  2. Expectations about variations in amount or timing of those cash flows
  3. Time value of money as measured by the risk-free rate of interest
  4. The price for bearing the uncertainty inherent in the asset or liability
  5. Any other relevant factors

FAR (10 decks)

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