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Från översiktsmindmap Flashcards

1
Q

Which are the criteria for recognition of a good?

A

1 .Reliable measurement of amount and costs

  1. It is probable that the economic benefits will be received
  2. The entity has transferred to the buyer the significant risks and rewards of ownership of the goods
  3. No continuing effective control over the goods sold
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2
Q

What is the income statement?

A

The entity’s net income (profit /loss) during

a specific period

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3
Q

Define income

A

Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants.

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4
Q

Define expense

A

Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.

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5
Q

Define revenue

A

Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an enterprise when those inflows result in increases in equity, other then increases relating to contributions from equity participants

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6
Q

When and how is revenue from service recognized

A

When the outcome of the transaction can be estimated reliably. Revenue is measured by reference to the stage of completion.

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7
Q

Which are the criteria for recognition of a good?

A

Reliable measurement of amount and costs

It is probable that the economic benefits will be received

Control/ownership:
• The entity has transferred to the buyer the significant risks and rewards of ownership of the goods
• No continuing effective control over the goods sold

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8
Q

When is revenue for a good typically recognized?

A

Revenue is normally recognised when the buyer accepts delivery, and installation and inspection are complete

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9
Q

In which situations is revenue for a good recognized immediately?

A

If the installation process is simple in nature, or…

The inspection is performed only for purposes of final determination of contract prices

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10
Q

What is the disposition of the income statement?

A 
Sales profit
    Sales revenue
    Cost of sales
        (Cost of materials/services)
        (COGS)
Operating expenses
    Personnel expenses
    Depreciation/amortization/impairment
    Other operating expenses
Operating profit
Profit for the year
    Non-operating income
    Non-operating expenses
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11
Q

What is a cash flow statement?

A

The entity’s cash flows (inflows and outflows)

during a specific period

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12
Q

Which are the components of the cash flow statement?

A

Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities

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13
Q

Which variables are taken into account when calculating cash flows with the indirect method?

A 
\+ Operating profit
± Adjustment for non-cash items, e.g. depreciation
± Change in working capital (excl. cash)
    Inventory
        Increase in inventory
            – cash
        Decrease in inventory
            \+ cash
    Trade receivables
        Increase in trade receivables
            – cash
        Decrease in trade receivables
            \+ cash
    Trade payables
        Increase in trade payables
            \+ cash
        Decrease in trade payables
            – cash
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14
Q

Which are my three tips for calculating cash flows with the indirect method?

A

Recievables/payables
…är motsatsen till det man tror
Payables blir plus (konstigt nog!)
Recievables blir minus (konstigt nog!)
…och “minus” innebär att man vänder tecknet
Är år-till-år-skillnad…
…snarare än absoluta siffror
Net income och depreciation är absolut siffror…
…eftersom siffrorna “nollställs” vid årsskiftet
Vänd tecknet på depreciation (som man kanske först förväntar sig ska vara negativt)

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15
Q

What do income statements show?

A

The entity’s ability to…
…generate positive cash flows
…meet payment requirements
…to distribute dividends
…the entity’s investments
…the entity’s need for external financing
…the relationship between net income and cash in-and outflows (cash conversion)

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16
Q

What does the statement of financial position do?

A

The entity’s assets and how they have been financed at a given point in time

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17
Q

What does the balance sheet equation look like?

A

Standard layout
Assets = equity + liabilities
Alternative layout
Assets - liabilites = equity

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18
Q

Define an asset

A

An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

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19
Q

What is a current asset?

A

An asset that the entity…

…expects to realize, sell or consume in its normal operating cycle

…holds primarily for the purpose of trading

…expects to realize within twelve months after the reporting period

Or the asset is cash or a cash equivalent

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20
Q

What is a non-current asset?

A

Assets that are not current assets

Held for use in production or supply of goods or services, for rental to others, or for administrative purposes

Expected to be used during more than one period

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21
Q

Give six examples of financial assets

A

Cash

Equity instruments of another entity

Contractual right
To receive cash or another financial asset from another entity
To exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity…

Contract that will or may be settled in the entity’s own equity instruments

Debt

Derivative

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22
Q

What is goodwill?

A

Goodwill is the residual part of the acquisition cost of a subsidiary that cannot be allocated to separately identifiable and recognizable assets and liabilities of the subsidiary at the time of the acquisition (measured at fair value).

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23
Q

What is the equation for goodwill?

A

= cost - net assets

= cost - (fvA-fvL)

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24
Q

How can goodwill become an expense?

A

When an impairment test is performed, and the intangible non-current asset “goodwill” is written down

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25
At what value is inventory reported in the statement of financial position?
Lowest of… Cost Net realizable value
26
What is "net realizable value"?
The estimated selling price, or fair value, of the inventory once it has all been manufactured into finish products, minus the costs to finish and sell the goods.
27
Name nine examples of assets
``` Inventories Prepaid expense Trade Receivables Deferred tax Investment property Pensions PPE Financial instruments Intangible ```
28
What is equity?
Equity is the residual interest in the assets of the entity after deducting all its liabilities.
29
How can equity be seen as a security?
Equity serves as a "risk-buffer" for losses
30
Name six examples of equity
``` Financial liabilities Leases Contingent liabilities Pensions Deferred tax Provisions ```
31
What is a liability?
A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
32
Name six examples of liabilities
``` Financial liabilities Leases Contingent liabilities Pensions Provisions Deferred tax ```
33
What is a provision?
A provision is a liability of uncertain timing or amount.
34
When is a provision recognized?
1. Probable (more likely than not) outflow of economic benefits 2. Reliable estimate can be made
35
What amount is stated when recognizing a provision?
Amount = best estimate at end of reporting period
36
Name five examples of provisions
``` Retirement obligations Warranties Clean-up costs Restructurings Deferred taxes ```
37
What is a current liability?
A liability that the entity… Expects to settle in its normal operating cycle Holds primarily for the purpose of trading Expects to settle within twelve months after the reporting period Does not have an unconditional right to defer settlement of for at least twelve months after the reporting period
38
What is a non-current liability?
A liability that doesn't meet the requirements of a current liability
39
What is the purpose of financial reporting?
Provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity
40
Which are the two fundamental characteristics of financial reports?
Relevance | Faithful representation
41
What does the fundamental characteristic of "faithful representation" imply?
Complete Neutral Free from error
42
Which are the four enhancing characteristics of financial reports?
Comparability Verifiability Timeliness Understandability
43
When should an item be recognized in the financial reports?
When: It is probable that any future economic benefit associated with the item will flow to or from the entity The item has a cost or value that can be measured with reliability
44
Which are the five fundamental accounting conventions?
``` Business entity convention Historic cost convention Going concern convention Prudence convention Dual aspect convention ```
45
What is the formula for calculating WACC?
(1-tax) * interest on debt * (debt / (dept + equity)) + interest on equity * (equity / (debt + equity))
46
Which are the three basic steps when making capital budgeting decisions?
Identify available alternatives Identify conzequences of each alternative Identify decision rule
47
What is the main question of the payback time method?
How long does it take before you get the invested capital back?
48
What is the main decision rule of the payback time method?
Make the investment if the payback time is shorter than a choosen cut-off point
49
Name three shortcoming with the payback time method
Not concerned with cash flows beyond payback --> not concerned with profitability Does not take into account investment opportunity cost, i.e. the value of having money now
50
Which four assumptions underlie a Net Present Value calculation?
All numbers are accurate Revenue and costs are cash flow All payments at end of financial year Projekt risk = company's average risk
51
What is the formula for NPV?
Year's cashflow * (1/(1+ cost of capital) ^ year number)
52
What is the Net Present Value decision rule?
Större än 0 = bra investering | Mindre än 0 = dålig investering
53
What is the Internal Rate of Return decision rule?
Make the investment if IRR is at least as high as the entity’s cost of capital
54
For which four purposes can costing be good?
Cost control Pricing Profitability Product/service choice
55
Hur ser min förenkling av Full Costing ut?
``` What to allocate? Täljare On what? Nämnare Allocation rate? Kvot ```
56
Vilka är mina förenklade kriterier för att kapitalisera R&D?
To complete: Intention/technical feasibility Resources (technical/financial/other) To use or sell: Resources (technical/financial/other) Ability Generate future economic benefit Measure expenditure reliably
57
What is the operating cycle?
The average time require to make an initial outlay of cash to produce goods, sell goods and receive cash from the customer
58
Why shouldn't the value of one's own brand be recognized in financial statements?
Because it does not meet the asset recognition criteria of having come into control from a past transaction or event.
59
Where are cancelled invoice payments recognized in the income statement?
Operating expenses
60
Dividends are payed from a subsidiary. Where is this recognized in the income statement?
Operating expenses
61
Where in the cash low statement is investment in a another company recognized?
Cash flow from investing activities
62
Where are invoiced and not-yet-invoiced sales recognized as assets?
Invoiced --> trade recievables | Not yet invoiced --> accrued income
63
Where in the cash flow statement are installments on loans recognized?
Cash flow from financing activities
64
Where in the cash flow statement are interest payments on loans recognized?
Cash flow from operating activities
65
How are clean-up costs recognized in the financial statements?
Clean-up cost läggs till den asset som är kopplad till städningen och depreciate:ar varje år tills det är dags att städa. Då blir det cash outflow (operations) som balanseras av att provisions stryks.
66
Where in the income statement are dividends payments recognized?
Nowhere (equity transaction)
67
When inventory goods are sold, where is this recognized in the financial statements?
+ revenue - COGS + cash from operating activities - inventory (COGS) (+ cash) (+ net income)
68
Why may trade payables and accrued expenses be confused, and how can this be avoided?
They are both used for money which has not yet been payed. Invoiced --> trade payables Not yet invoiced --> accrued expenses Expense recognized immediately in both cases (prudence)
69
Nämn tre saker att alltid kontrollera i financal statements
Kontrollera alltid: Cash flow infört i balance sheet? Income infört i balance sheet? Inget slarv med cash/credit?
70
Equipment is sold. Where is this recognized in the income statement?
Other operating income
71
There are share payments above nominal value. Where in the income statement is this "extra money" shown?
Nowhere. Share payments above nominal value are "additional paid-in capital" (balanced by incease in cash from financing).
72
When inventory is destroyed, where is this shown in the income statement?
Cost of sales
73
Is depreciation included in a NPV-calculation?
No
74
Revenue is offset to cover potential warranty - when is it recognized?
When the period for the warranty is over
75
How the revenue amount from a service calculated?
According to stage of completion, which is thought to correspond to the recognized percentage of total service cost.
76
Where are provisions shown in the income statement?
For non-current assets: Depreciation/Amortization/Impairment For current assets: Other operating costs
77
Where is "impairment in fair value of equity held in another entity" recognized?
Financial expenses
78
How is inventory cost determined?
Average cost or first in first out (FIFO)
79
Under which label do prepaid expenses and accrued income show up in the balance sheet?
Other current assets
80
What is recognized as "other paid-in capital"?
The difference between nominal value and paid in capital
81
If money has been received but the good/service is not yet rendered, where is this obligation recognized in liabilities?
Current liabilities
82
You have 30% voting shares in Ericsson. How do you reflect its performance in the asset-side of the balance sheet?
Cost + (PoL x share%) – dividend payments

Accounting I (6 decks)

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