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Advanced Financial Accounting > Final > Flashcards

Final Flashcards

1
Q

Six reasons for worldwide accounting diversity

A 
Legal system 
taxation 
political and economic ties 
culture 
inflation 
financing systems
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2
Q

What is harmonization?

A

Reducing differences in accounting practices across countries

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3
Q

IASB is solely responsible for establishing

A

IFRS

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4
Q

IFRS has NO what?

A

enforcement authority

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5
Q

In 2002 at the Norwalk Agreement, FASB and IASB agreed to…

A

use their best efforts to make existing financial reporting standards compatible as soon as practicable and to coordinate efforts to ensure that once achieved, compatibility is maintained

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6
Q

The idea behind convergence is to…

A

have similar but not necessarily identical standards

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7
Q

convergence has resulted in

A

changes made to us gaap, ifrs, or both

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8
Q

What do you have to do to adopt IFRS?

A

Company would prepare an opening balance sheet at the “transition date” and present re-stated comparative statements also prepared under iFRS

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9
Q

differences between International GAAP & US GAAP

A

Recognition, presentation, disclosure, measurement, etc. see slides

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10
Q

5 facts of the SEC

A
  • Independent agency of the fed. Govt
  • Est. by SEA of 1934
  • Direct authority applies to publicly held companies
  • Major influence on the development of US GAAP
  • Mandate is to ensure that complete and reliable information is available to investors
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11
Q

Securities Act 33

A

regulates the initial offering of securities by a company or underwriter

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12
Q

Securities Act 34:

A

regulates the subsequent trading of securities through brokers and exchanges

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13
Q

SARBOX

A
  • Designed as a response to the corporate accounting scandals
  • Established the public company accounting oversight board
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14
Q

PCAOB is in charge of:

A
  • Establishing auditing, quality control, and independence standards
  • Performing periodic inspections of registered public accounting firms
  • Could potentially replace the auditing standards board of the aicpa
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15
Q

how many members are in the PCAOB? And what stipulations are behind them?

A

5
Only 2/5 can be CPAs, past or present
Remaining 3 must NOT be accountants

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16
Q

how is the PCAOB funded?

A

funded through mandatory fees levied on all publicly traded companies
Accounting firms, domestic and foreign, must register with the board and pay fees

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17
Q

SEC authority

A

-Congress has assigned GAAP-setting authority to the SEC, this authority only extends to publicly traded companies, the SEC allows the FASB to set GAAP, FASB’s standards can be overridden by the SEC

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18
Q

S-1

A

usually used by new registrants when no other form is prescribed

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19
Q

S-3

A

used by large companies with a significant following in the stock market; has reduced disclosure requirements

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20
Q

S-4

A

used for securities issued in connection with business combination transactions

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21
Q

S-8

A

used for employee stock plans

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22
Q

S-11

A

used by certain real estate companies

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23
Q

involuntary bankruptcy

A

creditors file petition with the court, can force company into liquidation under chapter 7 or receiving protection under chapter 11

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24
Q

voluntary bankruptcy

A

company files a petition with courts requesting bankruptcy, when facing prospect of severe losses or a difficult operating environment, companies will seek voluntary chapter 11

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25
Q

net realizable value of the collateral exceeds the amount of the obligation. These creditors are completely protected by the pledged property

A

fully secured creditors

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26
Q

the value of the collateral covers only a portion of the obligation. The remainder is considered unsecured.

A

partially secured creditors

27
Q

all other liabilities are unsecured; creditors have no legal right to any of the debtor’s specific assets. They are entitled to share only in any funds that remain after all secured claims have been settled.

A

unsecured creditors

28
Q

Prioritization of unsecured creditors

A

Administrative costs related to liquidation, debts arising between the filing date and the issuance of an order of relief, employee claims for wages earned and/or benefit plan contributions earned during the 180 days prior to filing, customer deposits(lmtd to $2,775/customer), govt. claims for unpaid taxes

29
Q

liquidation

A

under chapter 7, the debtor’s assets will be liquidated and the proceeds distributed to creditors

30
Q

reorganization

A

under chapter 11, the debtor will be permitted to reorganize and continue operations

31
Q

1) interim trustee is appointed by court, 2) a committee of 3-11 unsecured creditors is appointed to help protect the group’s interest

A

chapter 7

32
Q

company is temporarily protected from its creditors, control is normally maintained by the owners(debtor in possession), creditors are encouraged to negotiate new terms with the company and may take over as new owners, workers keep their jobs, suppliers keep their customers, customers maintain their source of supply

A

chapter 11

33
Q

liquidation financial reporting

A

must include a stmt of changes in net assets in liquidation to investors and other claimants, an income stmt or a stmt of comprehensive income serves little purpose

34
Q

what statement must a liquidating company issue to allow all interested parties the same information before distribution?

A

statement of net assets

35
Q

FASB’s ASCT 852 requires FS to be prepared:

A

during the reorganization and when entity emerges from reorganization

36
Q

IS during reorganization

A

gains, losses, revenues and expenses of the reorganization are reported separately from normal ops on the IS; interest doesn’t usually accrue on the debt owed as of the date of reorganization; interest revenue that wouldn’t have been earned except for bankruptcy is reported separately as a reorganization item

37
Q

BS during reorganization:

A

assets are still reported at BV, current versus noncurrent classification not applicable for liabilities subject to reduction by the court’s acceptance of the plan, these liabilities should be reported separately at the amount of the claims; liabilities not subject to reduction(secured) are all shown as current versus non-current

38
Q

When a company emerges from chapter 11, GAAP permits fresh start reporting if what two conditions are met?

A

1) The reorganization(or market) value of the assets are less than the total of the allowed claims as of the date of the order for relief plus any subsequent liabilities
2) The original owners are left with less than 50% of the voting stock

39
Q

How are assets and liabilities and retained earnings reported in fresh start accounting?

A
  • Assets are restated to individual current value
  • Liabilities (except deffered income taxes) are stated at the present value of future cash payments
  • retained earnings is set to 0
40
Q

Created in 1984, serves as the public sector counterpart of FASB

A

GASB

41
Q

List the users of governmental accounting information

A

citizenry, legislative and oversight bodies, investors and creditors

42
Q

accounting for business-type activities; assess a user fee; user charges help recover some of the costs; accounting resembles that of a for-profit- activity-accrual accounting is used to recognize assets and liabilities

A

proprietary funds

43
Q

proprietary funds are broken into what two divisions?

A

enterprise funds and internal service funds

44
Q

accounting for financial resources held for others as trustee; money cannot be used to support govt’s own programs; use the economic resources measurement focus and accrual accounting; funds are omitted entirely from govt-wide financial statements;

A

fiduciary funds

45
Q

what four separate statements are are included within the fund financial statements?

A

investment trust, private-purpose trust, pension trust, agency funds

46
Q

Report on financial affairs as a whole, assess operating accountability, help users evaluate government’s financial decisions and long-term stability

A

government-wide FS

47
Q

Government-wide FS permit stakeholders to:

A

determine the govt’s overall financial position, understand cost of services, see how programs are financed, see extent govt has invested in capital assets; focus on all economic resources; utilizes accrual accounting

48
Q

indicates the amount of capital assets being reported less relate debt, legal or external restrictions on the use of any assets or resources, and the total unrestricted amount

A

statement of net position

49
Q

provides details about revenues and expenses separated into governmental activities and business-type activities

A

statement of activities

50
Q

governments may provide improvements or services that benefit particular properties; they may assess the costs, in total or in part, to the property owners for paving and constructing certain things; usually financed by debt issuance and liens on the benefited property

A

special assessments

51
Q

commonly used, particularly monetary transfers from the general fund; normally reported as “other financial source” an “other financing use” within the fund-based financial records;

A

interfund transactions

52
Q
  • Leases must be identified as either
A

capital or operating

53
Q

GASB has adopted the same 4 criteria applied by FASB to identify a capital lease

A

1) the lease transfers ownership at the end of the lease term; 2) the lease has a bargain purchase option; 3) the lease term >= 75% of the asset’s estimated useful life; 4) the minimum lease payments >=90% of the PV of the asset

54
Q

Expected closing costs of landfills

A

-Record a portion of the expected closing costs, pro-rated as a percentage of capacity used, each year as an expense and a liability

55
Q

Govts should _ works of art, historical treasures, and similar assets at their _ or _ at date of donation

A

capitalize
historical cost
fair value

56
Q

Capitalization of works of art is optional if what 3 criteria are met?

A

1) Item is held for public exhibition, education, or research in furtherance of public service, rather than financial gain
2) Item is protected, kept unencumbered, cared for, and preserved, and
3) Item is subject to an organizational policy that requires the proceeds from sales of collection items to be used to acquire other items for collections

57
Q

Long-lived capital assets that normally are stationary in nature and can be preserved for a significantly greater number of years than most capital assets

A

infrastructure assets

58
Q

How are infrastructure costs recorded in government-wide FS?

A

as assets

59
Q

How are infrastructure costs recorded in fund FS?

A

acquisition is recorded as an expenditure

60
Q

The CAFR has what 3 distinct sections?

A

1) Management’s discussion and analysis
2) Financial statements: govt-wide FS, fund FS, and Notes to the FS
3) Required supplementary information

61
Q

govt-wide and the fund FS are most often presented to the public as part of a

A

CAFR(comprehensive annual financial report)

62
Q

must include all funds, activities, organizations, agencies, offices and departments that are not legally separate from it

A

primary government

63
Q

any unit legally separate from the primary govt, but where financial accountability still exists, must be included; legally separate activities closely connected to the primary govt must be included if omission from the FS would be misleading

A

component units

64
Q
  • Differences in measurement basis and form of FS for private and public colleges or universities:
A

1) Private colleges and universities follow FASB accounting standards codification
2) Public colleges and universities follow the same guidelines as state and local govts(GASB)
3) Public universities may operate similarly to businesses but they are special purpose govts and accountable to the citizenry
4) Most public schools only need to prepare a single set of stmts equivalent to those of an enterprise fund

Advanced Financial Accounting (1 decks)

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