Special Purpose Frameworks Flashcards
Explain cash basis
Financial statements that are based solely on cash receipts and disbursements.
What are the types of OCBOA statements
Cash basis Modified cash basis Income tax basis Regulatory basis Other basis with substantial support
Explain the modified cash basis
Statements that result from using a combination of elements of cash basis accounting and accrual basis accounting
Explain the income tax basis of financi statements
Results from using the federal income tax rules and regulations that a firm uses in filing it’s income taxes
What is a permanent difference?
Items of economic and accounting consequence to an entity that are never recognized for tax purposes
Does the basis of reporting need to be indicated in the notes to the financial statements?
Yes
Who is able to produce personal financial statements?
Individual, husband and wife or a family unit
What forms make up a set of personal financial statements?
Statement of Financial Condition (required)
Statement of Changes in Net Worth (optional)
What basis do Personal Financial Statements use?
Accrual using current value
How is life insurance valued on a personal financial stmt?
Cash surrender value minus loans against it
What is personal net worth?
Difference between assets and liabilities (at current estimated amount)
What is the Private Company Council (PCC)?
an organization that will assist in setting accounting standards for private companies. Developed in 2012
What are the 2 responsibilities of the PCC?
To work with the Financial Accounting Standards Board (FASB) to identify places within existing Generally Accepted Accounting Principles (GAAP) where there are opportunities for alternative accounting for private companies.
To serve in an advisory capacity to the FASB on the appropriate treatment of items under consideration for new GAAP and how those items may impact private companies.
What is the purpose of the PCC Framework?
The framework provides direction to evaluate the tradeoff between user-relevance and cost-benefit for private companies
What does the new PCC standard for goodwill include?
This ASU allows a private entity to amortize goodwill on a straight-line basis over 10 years, or less than 10 years if it is more appropriate.
The private entity must complete impairment testing when a triggering event occurs
What does the new PCC standard for interest rate swaps include?
This simplified hedge accounting applies only to interest rate swaps for variable rate debt to fixed rate debt (cash flow hedge).
When certain criteria are met, the private entity can assume the swap is 100% effective
When these criteria are met the private entity can use the practical expedient of settlement value to measure the value of the swap versus measuring the swap at fair market value. Settlement value excludes the adjustment for performance risk and is generally viewed to be a simpler valuation.
Does IFRS have a form of other comprehensive basis of accounting statements?
No, nor do they have personal financial statements
Why is IFRS for SMEs important?
In many of these countries (but not the U.S.) incorporated companies are required to have audited financial statements regardless of whether they are a public company with publicly traded equity or debt.
What is IFRS for SMEs?
a modification and simplification of the full IFRS and is designed to be used primarily by private companies
Is IFRS for SMEs an OCBOA?
No, its a form of GAAP
Who is able to use IFRS for SMEs?
Firms that do not have public accountability
Which firms have public accountability?
a. Entities that are required to file financial statements with a securities commission or other regulatory body for the purpose of issuing instruments in a public market, such as equity or debt securities;
b. Entities that hold assets in a fiduciary capacity for a broad group of outsiders, including:
i. Banks;
ii. Insurance companies;
iii. Brokers and dealers in securities;
iv. Pension funds;
v. Mutual funds.
c. In addition, IFRS for SMEs are not intended for use by not-for-profit or governmental entities.
