Study Unit 1: Financial Reporting Flashcards
What is the present value of future cash flows?
Valuation method - the current value of a future amount of money using a specific interest rate
What is historical cost?
How much an asset cost - (net of depreciation and amortization)
What is replacement cost?
How much it would cost to reacquire an asset today (Entrance Cost)
What is a market cost?
The sale price of an asset (Exit Cost)
What is Net Realizable Value?
Sale Price of an Asset - Selling/Disposal Fee
What is the primary objective of accounting?
To measure income
What is the most authoritative set of accounting pronouncements?
1) The FASB Codification 2) SEC Pronouncements (All pronouncements fall under the Codification umbrella)
What are the 2 Levels of Authority within the FASB codification?
Authoritative and Non-Authoritative
How does managerial accounting differ from financial accounting?
Managerial Accounting has a timeliness focusManagerial Accounting is not required to follow GAAP
Which financial reports are required to be filed with the SEC and the timing to file?
Form 10K - Annual and Audited - 60,75, or 90 days after FY endForm 10Q - Quarterly and Reviewed - 40 & 45 days after end of first 3 quarters
What is the focus of financial reports for individual companies?
Focus is on the needs of users to help them make decisions and assessments about the companyDoes not make assessments of the economy
What are the Primary Constraints of Financial Reporting?
Cost vs. BenefitMateriality
What are the Secondary Constraints of Financial Reporting?
Consistency - Year vs. YearComparability - Company vs. Company
What are the Qualitative Characteristics of Financial Reporting?
Relevance & Faithful Representation Relevance - Makes a difference to the userIncludes:Predictive Value - Future TrendsConfirming Value - Past PredictionsMateriality - Could affect User Decisions Faithful RepresentationIncludes:Completeness - Nothing omitted that would impact the decision-making of a userNeutrality - Information is presented is without biasFree from Error - No material errors or omissions
What are the Enhancing Qualitative Characteristics of Financial Reporting?
Comparability Verifiability Timeliness and Understandability Comparability - Allows users to compare different items among various periods Verifiability - Different people would reach a similar conclusion on the information presented Timeliness - Information is made available early enough to impact the decision making of users Understandability - Information is easy to understand
