Reporting the Results of Operations Flashcards
Change in Accounting Estimates
A change in estimate based on new information
ASC 250 (Accounting Changes and Error Corrections) Definition
This statement defines various types of changes and the manner of reporting each type.
ASC 225 Definition of “Unusual” in relation to an Extraordinary Item
The underlying event or transaction should possess a high degree of abnormality and be of a type clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the entity, taking into account the environment in which the entity operates.
Other comprehensive income includes which three items (changes must happen in each item)?
1) Foreign currency translation adjustment2) Change in pension prior service cost and unrealized gains or losses3) Unrealized gains and losses on certain investments in debt and equity securities
The debtor’s accounting treatment fro troubled debt restructuring using the Transfer of Assets in Full Settlement method is described how?
The excess of the carrying value of the debt settled over the fair value of the assets transferred to the creditor should be recognized as a gain on debt restructuring.
Explain some of the differences from GAAP under IFRS for preparing income statements
Some of the differences are that the recording of extraordinary items is prohibited, comparative statements are required, and expenses may be reported by natural (object) or by function.
Income Statement Single-Step approach definition
A single-step approach lists all revenues together and then lists all expenses together regardless of the sources.
What are the three types of Accounting Changes discussed in ASC 250?
The three types of accounting changes are changes in accounting principals, changes in accounting estimates, and changes in reporting entity.
ASC 225 Definition of Extraordinary Item
Item must be both unusual and infrequent
ASC 225 Definition of Comprehensive Income
Comprehensive Income is net income plus other comprehensive income
Troubled Debt Restructuring Definition
A restructuring of a debt constitutes a “Troubled Debt Restructuring” when a creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession (by agreement or imposition of law or a court) to the debtor that it would not otherwise consider.
Describe what IFRS does allow for the reporting of comprehensive income?
IFRS allows the reporting of comprehensive income in one combined statement of income and comprehensive income or as two statements: an income statement and a statement of comprehensive income.
Income Statement Multi-Step Approach Definition
This approach is called multi-step because of the number of “steps” or sub-totals between the beginning net sales number and the calculation of income from continuing operations.
Give one example of a change in Accounting Principle
Changing from FIFO to LIFO inventory method.
Definition of discontinued operations according to ASC 225
The definition of a discontinued operation is a component unit with a set of operating and cash flows that are clearly distinguishable from the rest of the entity for operational and financial reporting purposes.
Does ASC 270 (Accounting Changes and Error Corrections) apply to interim financial statements?
ASC 270, Accounting Changes and Error Corrections apply to interim as well an annual financial statements.
What are the four basic financials statements?
A balance sheet, an income statement, a statement of cash flows, and a state of stockholder’s equity
Under IFRS, is comprehensive income allowed to be shown in the statement of owner’s equity?
IFRS does not allow comprehensive income to be shown as part of the statement of owners’ equity.
Give one example of a change in Accounting Entity.
A change in non-consolidated financial statements to consolidate financial statements.
Prior Period Adjustment Definition
A prior period adjustment is required for the correction of an error in the financial statement of a prior period.
What are the 3 Criteria for Treatment of Nonrecurring Adjustments Under ASC 250
1) The adjustment is material.2) The adjustment is specifically related to business activities of a specific prior interim period of the current year.3) The amount of the adjustment or settlement could not have been reasonably estimated prior to the current interim period but becomes “reasonably estimable” during the current interim period.
Financial Statements should present what according to ASC 225
Financial statements should present financial position, changes in financial position and results of operations in conformity with generally accepted accounting principles that apply to established operating enterprises.
ASC 405 Definition of impaired loan
ASC 405 states that a loan is impaired when it is probably that a creditor will be unable to collect all amounts due according to the contacted terms.
Give one example of an Accounting Estimate Change.
Changing of the percentage used in estimating uncollectable accounts.
Is a correction of a mathematical error on a financial statement considered an accounting change?
A correction of an error is not an accounting change and should be reported as a prior period adjustment.
Treatment of Nonrecurring Adjustments Under ASC 250
ASC 250 requires that prior interim periods be restated for nonrecurring adjustments due to adjustment or settlement of litigation, income taxes, renegotiation proceedings or rate-making for utilities.
Development State Enterprise Definition (ASC 225)
An enterprise is considered in the development stage if it is devoting substantially all of its efforts to establish a new business and either planned principal operations have not begun, or if operations have begun, there has been no significant revenue from there.
Loan impairment definition (different than debt restructuring)
Impairment does not involve a formal restructuring but is a conclusion by the creditor, based on its normal review procedures, that there is a problem with the collectability of the loan receivable.
Change in Accounting Principle
A change from one GAAP to another GAAP. Change must be justified.
What accounting period(s) should changes in accounting estimates affect?
Changes in accounting estimates should affect the period of change only or the period of change and future period if the change affects both.
General Rule of ASC 27 (Interim Financial Statements)
General Rule of ASC 27 (Interim Financial Statements). The results for each interim period should be based on the accounting principles and practices used by an enterprise in the preparation of its latest annual financial statements unless a change in an accounting practice or policy has been adopted in the current year.
ASC 815 - Accounting for derivatives and hedging activities added which three additional items to be included in comprehensive income?
1) Gains or losses on cash flow hedges.2) Gains or losses on hedges of forecasted foreign-currency-demoniated transactions.3) Gains or losses on hedging of a net investment in a foreign operation are reported in comprehensive income as part of the translation adjustment.
The creditor’s accounting treatment for troubled debt restructuring using the Transfer of Assets in Full Settlement method is described how?
The assets received are to be recorded at their fair market value when received, and the excess of the carrying value of the investment in the receivable (debt) satisfied over the fair value of the assets received should be recognized as a loss.
Change in Accounting Entity
A change in the composition of the reporting entity
How should a change in accounting principle be justified according to ASC250?
For a change in accounting principle, the entity should disclose the nature and reason for the change and the justification for the change.
ASC 225 Definition of “Infrequent” in relation to an Extraordinary Item
The underlying event or transaction should be a type that would not reasonably be expected to recur in the foreseeable future, taking into account the environment in which the entity operates.
How does the FASB permit disclosures of the comprehensive income?
The FASB permits four alternative disclosures of the components of the comprehensive income and a disclosure of accumulated other comprehensive income in the equity section of The Statement of Financial Position.
The debtor’s accounting treatment for troubled debt restructuring using the Grant of an Equity Interest in Full Settlement method is described how?
The excess of the carrying value of the debt settled over the fair value of the equity interest granted to the creditors should be recognized as a gain on debt restructuring. The equity interest granted is to be recorded at its fair value.
