M1, M2, M3 Flashcards
What are the Characteristics of Faithful Responsiveness
Completeness, Neutrality, Free From Errors
What are the Characteristics of Relevance
Predictive Value, Confirmatory Value, Material
What are the fundamentals qualitative charateristics
Faithful Representation and Revelance
What are the Four Enhancing Characteristics
Comparability: info to compare to other companies in same industry; Verifiability: observers can reach the same conclusion; Timeliness: infor is not recent enough; Understandability: user with understand of business can draw conclusions
What is the primary objective of financial reporting?
Providing information that is useful for decision making
What is the purpose of Interim financial statements and what enhancing characteristic will it use?
Timeliness: Interim financial statements emphasize timeliness by providing financial information based on actual performance to date and estimates prior to year end.
When a contract contains multiple service related performance obligations how do you know if the service has a distinct obligation?
When the services are all similar in nature and provided in the same manner it means the services can be combined in a single performance obligation. Just know when everything is the same it keeps it from being distinct. If the each service can be performed and accounted for independently it is distinct.
What are the components of G&A?
Accounting and Legal Fees, Officers Salaries, Insurance, Property Tax, Rent
What type of expense is sales representative?
Selling Expense
True/False: Revenue should be recognized evenly over the contract year
True: As this is GAAP-accrual basis of accounting
Unearned revenue
Is an increase to liability (as a credit) and becomes increase to revenue once the service is performed
What are discounted operations? Meaning how is it defined.
Discontinued operations is an accounting term for parts of a firm’s operations that have been divested or shut down. They are reported on the income statement as a separate entry from continuing operations.
What is the purpose of FASB?
FASB develops principles and attributes that allow organizations to understand the necessary elements to ensure a robust system of internal control.
What are examples of discounted operations?
Closure of unprofitable division.
Redundancy due to merger.
Sale of a product line.
Discontinuation of outdated services.
How are discounted operations recognized?
A discontinued operation may still make a gain or loss in the accounting period it ceased operations in. These gains or losses must be reported. However, often a discontinued operation was operating at a loss, so there may be some money realized from taxes at tax time.
Income from operations
operating revenues and expenses - what is currently used to make your business run
Unusual or infrequent operations is what type of income?
non opertating income
Unusual or infrequent is what type of income? Non operating or operating?
non operating income; like selling assets for a gain or loss; and also gains or losses that are not part of your core business like sale of securities
How is discontinued operations reported?
net of tax; and reported separately after continuing operations
Why separate selling from g&a?
because we can see trends and what is happening with the business as it relates directly to this category
Income from continuing operations is shown before and after tax
income from continuing operations before tax/after income tax expense; and in income from continuing operations after tax
A balance sheet helps us assess what?
Financial risk; captial structure
Under US GAAP classified balance sheet means
it distinguishes current and non-current assets and liabilities
What does Internally generated mean in terms of other comprehensive income?
Accumulated other comprehensive income (means its income we generated within the company)
How do we get Preferred Stock and Common stock? How is it earned?
The business did not earn, it was capital given to us (contributed)
Selling a fixed asset is not
a component of other comprehensive income and it’s not a discontinued operation.
