SU2: FINANCIAL STATEMENTS Flashcards
SPECIAL PURPOSE FRAMEWORKS
Other Bases of Accounting (other than GAAP) - Comprehensive basis of accounting
(common examples)
1) Cash basis or modified cash basis
2) Basis for tax purposes
3) Basis to comply with regulatory agency (government)
LIABILITY and EQUITY CLASSIFICATION
Preferred stock
Capital stock
Preferred stock’s par or stated value for shares issued is classified as capital stock
LIABILITY and EQUITY CLASSIFICATION
Direct costs of issuing common stock
Additional paid-in capital
Direct costs of issuing stock reduce both the net proceeds received and additional paid-in capital
LIABILITY and EQUITY CLASSIFICATION
Treasury stock (at cost)
Other classification
Treasury stock recorded at cost is a reduction of total equity (a debit)
LIABILITY and EQUITY CLASSIFICATION
Appropriation for contingencies
Retained earnings
Amounts may be appropriated (restricted) to disclose that earnings are to be used for purposes other than dividends.
LIABILITY and EQUITY CLASSIFICATION
Bonds payable issue costs
Noncurrent liabilities
Costs to issue debt securities are reported in the balance sheet as a direct deduction from the face amount of the debt.
ASSET CLASSIFICATION
Trading securities
Current Asset
Trading securities are acquired with the intent to sell them in the near term. They are held only for a short period of time. Trading securities are generally classified as current on the balance sheet.
ASSET CLASSIFICATION
Cash restricted to payment of pension obligations
Investments and funds
These noncurrent assets include nonoperating items intended to be held beyond the longer of 1 year or the operating cycle, e.g., funds restricted as to withdrawal or use for other than current operations, for example, to (a) retire noncurrent debt, (b) satisfy pension obligations, or (c) pay for the acquisition or construction of noncurrent assets
CURRENT and NON-CURRENT LIABILITIES
Unearned revenues
Current liability
Current liabilities are obligations whose liquidation is reasonably expected to require the use of existing current assets or the creation of other current liabilities. Unearned revenues are current liabilities arising from collections in advance of delivering goods or performing services. Since Cogburn Company had earned $50,000 of the $150,000 unearned revenues received during the year, Cogburn has a current liability at December 31, Year 4, of $100,000 ($150,000 – $50,000) for unearned revenues
CLASSIFICATION OF TRANSACTION
Increase in the unrealized holding loss for trading securities
It is income from continuing operations, with separate disclosure.
An unrealized holding loss (a decline in fair value) on trading securities must be recognized in earnings. The change in net unrealized holding gain or loss included in earnings for the period must be disclosed.
CLASSIFICATION OF TRANSACTION
Increase in the fair value of an investment in debt securities that are classified as held-to-maturity
An investment in debt securities that are classified as held-to-maturity is reported at amortized cost. Accordingly, an increase in the fair value of these securities has no effect on the financial statements.
