Term
| GAAP Primary Qualitative Characteristics |
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Definition
-Must be USEFUL
-Must have Relevance & Faithful Representation |
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Term
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Definition
Roger is PC
RELEVANCE
+Predictive
+Confirmatory
--Materiality |
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Term
| GAAP Faithful Representation |
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Definition
FENCe
FAITHFUL REPRESENTATION
+(Free from) Error
+Neutrality
+Completeness |
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Term
| GAAP Enhancing Qualitative Characteristics |
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Definition
Relevance & Faithful Representation
CUT like V
+Comparability (Consistency)
+Understandability
+Timeliness
+Verifiability |
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Term
| GAAP Constraint - Primary Qualitative Characteristics |
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Definition
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Term
| GAAP Comprehensive Income |
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Definition
All changes in equity other than "owner" sources.
DENT
+Derivative Cash Flow Hedge
+Excess adjustment of Pension PBO and FV of plan assets at year-end
+Net unrealized gains or losses on available-for-sale securities
+Translation adjustments for foreign currency |
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Term
| Physical Capital Maintenance Concept |
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Definition
Only recognize an event when an asset is sold or a liability is settled
- Current accounting methods emphasize this concept for fixed assets |
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Term
| Financial Capital Maintenance Concept |
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Definition
recognize an event as a change in the value of an asset or liability occurs
- Current accounting methods emphasize this concept for marketable securities |
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Term
| GAAP Comprehensive income elements |
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Definition
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Term
| When recognize an element? |
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Definition
+Meets definition of an element (asset, liability)
+Element is capable of being measured in monetary terms
+The item is useful (Relevant & Faithful Representation) |
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Term
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Definition
| Amount you paid for it (PP&E) |
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Term
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Definition
| What it would cost to replace an item (inventory) |
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Term
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Definition
| The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date |
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Term
| NRV (Net Realizable Value) |
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Definition
| Amount expected to be converted into (A/R) |
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Term
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Definition
| Discounted cash flows due to the time value of money (Notes/Receivable, Bonds/Payable, Leases) |
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Term
| Fair Value: Fair value option for reporting |
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Definition
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date at exit price
+An orderly transaction is a transaction that allows for normal marketing activities that are usual and customary (Not Forced transaction)
=Exit price (Not Entry price) |
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Term
| Fair Value: Applying FV measurement approach |
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Definition
1) Identify ASS or LIAB
2) Determine principle or most advantageous market
3) Determine the valuation premise
4) Determine appropriate valuation technique
5)Levels - Obtain inputs for valuation
6) Calculate FV of asset |
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Term
| Fair Value: Principle Market |
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Definition
| Greatest Volume and level of activity occurs |
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Term
| Fair Value: Most advantageous market |
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Definition
| Maximizes price received for the asset or minimizes amount paid to transfer the liability |
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Term
| Fair Value: Valuation premise |
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Definition
Assume the highest and best use premise to determine the fair value
+in-use - if maximizes value by using it with other assets as a group
+in exchange - if asset provides maximum value on a stand-alone basis |
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Term
| Fair Value: Market approach |
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Definition
| uses prices and relevant information from market transactions for identical or comparable ASS/LIAB |
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Term
| Fair Value: Income approach |
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Definition
| uses PV techniques to discount cash flows or earnings |
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Term
| Fair Value: Cost approach |
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Definition
| uses current replacement cost - change in method is considered a change in accounting estimate |
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Term
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Definition
| must be used to prioritize the inputs to valuation techniques |
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Term
| Fair Value: Hierarchy: Level 1 |
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Definition
| quoted prices from active markets |
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Term
| Fair Value: Hierarchy: Level 2 |
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Definition
direct/ indirect observable inputs
(yield curves, bank prime rates, interest rates, credit risks, default rates on loans) |
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Term
| Fair Value: Hierarchy: Level 3 |
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Definition
unobservable inputs if level 1 or 2 are not available
(financial forecasts or expected cash flow estimates) |
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Term
| Fair Value Option Applies to |
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Definition
+ Availible-for-sale
+ Held-to-Maturity
+ Equity Method
+ Certain financial LIAB, firm commitments that involve financial instruments, written loan commitments, non-financial insurance contracts settled by 3rd-party, warranties for 3rd party, host financial instrument, ect. |
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Term
| Company elects to measure the asset or liability |
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Definition
+ At the date the item is first recognized
+ election is irrevocable
+ made on instrument-by-instrument basis
+ report unrealized gains and losses in earnings on income statement |
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Term
| Using cash flow info & PV in accounting measurements - The factors that must be considered |
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Definition
| risk, timing, interest, amount of cash flows |
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Term
| Cash flow info & PV: Risk |
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Definition
| the probability that the cash will actually be paid or received |
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Term
| Cash flow info & PV: Timing |
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Definition
| the periods in which the payments are expected to be received |
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Term
| Cash flow info & PV: Interest |
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Definition
| the interest rates that would be appropriate for market rates and credit standing |
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Term
| Cash flow info & PV: Amount of cash flows approaches |
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Definition
Amount of cash flows approachs (look at credit standing of entity)
+Traditional - use most likely cash flow
+Expected - use weighted avg. of different possibilities |
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Term
| REV & EXP recognition: Earned |
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Definition
| earnings process is complete |
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Term
| REV & EXP recognition: Realizable |
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Definition
| collect cash or a claim of cash |
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Term
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Definition
+Signed Contract
+Services rendered or delivery
+Fixed or determinable price
+Collection is reasonably assured |
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Term
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Definition
+Economic benefit is consumed or asset uses future benefit
*EXP can be matched to REV (COGS)
*EXP can be matched to period (depreciation)
*EXP expensed as incurred (salaries of admin employees) |
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Term
| Risk and uncertainties that require disclosures in financial statements |
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Definition
1) Nature of operations
2) Use and extent of estimates
3) Significant estimates and potential impact
4) Current Vulnerability b/c of:
*Customers, suppliers, lenders, grantors or contributors
*REV from products, services or fund-raising
*Available sources of materials/labor
*Market/Geography of entity's operations |
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Term
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Definition
Accounting Standards Codification
Single source of authoritative US GAAP |
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Term
| Notes to the FS under GAAP |
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Definition
+Summary of significant accounting policies
+Summary of significant assumptions (for prospective FS)
+Other Notes |
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Term
| IASB Framework: 4 principal qualitative characteristics |
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Definition
1) Relevance
2) Reliability
3) Understandability
4) Comparability (Corresponding information ins previous periods) |
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Term
| IASB Relevance - attributes |
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Definition
The information must be useful
-Predictive value
-Confirmatory value
-Materiality |
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Term
| IASB Reliability - characteristics |
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Definition
-Neutrality
-Faithful representation
-Substance over form
-Prudence
-Completeness |
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Term
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Definition
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Term
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Definition
1)ASS
2)LIAB
3)LIAB
4)Equity
5)EXP |
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Term
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Definition
| a resource controlled by the entity - a result of past events and from which economic benefits are expected to flow to the entity |
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Term
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Definition
| an obligation - a result of past events and settlement of which is expected to result in an outflow from resources |
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Term
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Definition
| residual interest in assets after deducting liabilities |
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Term
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Definition
increases in economic benefits
*REV - ordinary activities like sales, interest, rent
*Gains
*GAAP = Net Income / IFRS = profit |
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Term
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Definition
decreases in economic benefits
*EXP - ordinary activities
*Losses |
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Term
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Definition
Recognition is:
+Probable
+Cost or Value can be measured |
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Term
| IASB Bases of measurement |
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Definition
+Historical cost
+Current cost
+Realizable value
+Present Value |
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Term
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Definition
| Amount to acquire currently |
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Term
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Definition
| Amount to sell asset in orderly disposal |
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Term
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Definition
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