Standard Setting, Income Statement, and Reporting Requirements

Question 1

What is the single most authoritative nongovermental source of US GAAP?

Answer 1

FASB Accounting Standards Codification

Question 2

What is the purpose of the International Accounting Standards Board (IASB)? What have the IASB and FASB been working towards?

Answer 2

To develop a single set of high-quality, global accounting standards. Convergence.

Question 3

What is the FASB’ conceptual framework called?

Answer 3

Statements of Financial Accounting Concepts (SFAC)

Question 4

What is the purpose of general financial reporting?

Answer 4

To provide financial information to the primary users. (investors, lenders, and other creditors)

Question 5

What are the fundamental qualitative characteristics of useful financial information?

Answer 5

Relevance and Faithful Representation.

“Relevant that they stay faithful”

Question 6

What are the characteristics of Relevance? Fundamental or Enhancing?

Answer 6

Predictive value, confirming value, and materiality
“Passing Confirms Money”
Fundamental

Question 7

What are the characteristics of Faithful representation?

Fundamental or Enhancing?

Answer 7

Completeness, neutrality, freedom from error.
“Completely neutral is free from error”
Fundamental

Question 8

What are the enhancing qualitative characteristics of useful financial information?

Answer 8

Comparibility/consistency, verifiability, timeliness, understandability
“Compare & Verify in time to understand”

Question 9

What is considered a full set of financial statements?

Answer 9

Statement of Financial Position (Balance Sheet), Statement of Earnings (Income Statement), Statement of Comprehensive Income, Statement of Cash Flows, and Statement of Changes in Owners’ Equity

Question 10

When should Revenue be recognized?

Answer 10

When it is earned and when it is realized or realizable.

Question 11

IASB only two fundamental assumptions?

Answer 11

Accrual basis and Going Concern

Question 12

What is Comprehensive Income?

Answer 12

CI includes all differences between beginning equity and ending equity other than transactions with owners (ie NI plus other comprehensive income)

Question 13

Five element of Present Value Measurement

Answer 13

Est. of Cash Flow
Expectations about timing variations of future cash flows
Time value of money (risk-free rate of interest)-gma rate
Price for bearing uncertainty- not gma
Other Factors

Question 14

Presentation of major components of Income

Answer 14

Income (loss) from Cont. Ops (gross then net)
Income (loss) from Disc. Ops (net)
Extraordinary items (net)
Cumulative effect of change in Acct’ Principles (net- R/E stmnt)

IDEA

Question 15

True or False: Under IFRS, Extraordinary items exist under income.

Answer 15

False. IFRS does not recognize Extraordinary Loss.

Question 16

List the types of accounting changes and how they are accounted for.

Answer 16

1. Change in Acct Estimate (prospective) *A change in Acct Princ that is inseperable from a change in Acct Est. is handled prospectively
2. Change in Acct Principle (retrospective-net of tax against Beg. RE)
3. Change in Acct Entity (retrospective)
4. Error Correction (Prior period adjustment)
5. Change in Depreciation Method (prospective)

Question 17

What comprises comprehensive income?

Answer 17

PUFER
Pension Adjustments
Unrealized gains and losses (avail for sale securities)
Foreign Currency items
Effective portion cash flow hedges
Revaluation surplus (IFRS only)

Question 18

In order for a segment to be reportable, it must meet what criteria?

Answer 18

10% “Size” test. Revenue is 10% or more of combined revenue of all operating segments. Or If absoulte amount (profit or loss) is 10% or more of all profitable reporting segments.

Question 19

What is the developmental stage?

Answer 19

Principal ops have not yet commenced or have generated an insignificant amount of revenue (or loss).

Question 20

First-time adopters of IFRS must present:

Answer 20

at least 3 balance sheet dates, and two of each other statement.

Question 21

Filing deadlines: 10K, 10Q

Answer 21

10K = 60 days after YE for large accelerated, 75 for accel, 90 for all others
10Q= 40 days for large accel, 45 for all others