Principles Flashcards
1
Q
From Accrual to Cash
A
^Cash = ^L + ^E - ^OA
2
Q
From Cash to Accrual
A
^E = ^A - ^L
3
Q
Relevance
A
- Predictive Value
- Confirmatory Value
- Materiality
4
Q
Faithful Representation
A
- Completeness
- Neutrality
- Free From Error
5
Q
Enhancing Qualitative Charactertistics
A
- Comparability
- Verifiability
- Timeliness
- Understandability
6
Q
Replacement Cost
A
- Amount required to be paid currently for an asset you already have
- Entry Price
7
Q
Historical Cost
A
- Original cost of an asset
- Entry Price
8
Q
Net Realizable Value
A
- Equals estimated selling price less cost to complete & sell
- Exit Price
9
Q
Measurement Basis for firm that is liquidating
A
Net Realizable Value
10
Q
Discounted Cash Flows - Risk Adjusted Rate
A
Multiply Cash flow by its present value factor
11
Q
Discounted Cash Flows - Risk Free Rate - Weighted Average
A
- Multiply total cash flows by probability then by present value factor
- Add if there are multiple years
12
Q
Principal vs most advantageous market
A
If there is a principal market use that one, but if there isn’t, then use the most advantageous market
13
Q
Market Participants
A
- Independent
- Acting on own interest
- Knowledgeable
- Able & willing
14
Q
FV assumes highest & best use
A
- Physically possible
- Legally allowed
- Financially possible
15
Q
FV Measurement Techniques
A
- Market Approach: Uses prices and other information generated by market transactions involving assets & liabilities that are identical or comparable
- Income Approach: Converts future amounts into a single present amount.
- Cost Approach: Uses amount that would currently be required to replace an asset. Replacement cost
