Term
| Name the single source of authoritative nongovernmental U.S. GAAP. |
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Definition
The FASB "Accounting Standards Codification" (ASC).
F1-1 |
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Term
| The term "International Financial Reporting Standards" includes what standards? |
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Definition
- International Accounting Standards (IAS)
- International Financial Reporting Standards (IFRS)
- IFRIC Interpretations
- SIC Interpretations
F1-2 |
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Term
| Who are the primary users of general purpose financial reports? |
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Definition
Existing and Potential:
- Investors
- Lenders
- Other creditors
F1-3 |
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Term
| Name the pervasive constraint on the information provided in financial reporting. |
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Definition
Cost Constraint:
The benefits of reporting financial information must be greater than the cost of obtaining and presenting the information.
F1-4 |
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Term
| Name the fundamental qualitative characteristics of useful financial information. |
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Definition
Relevance and Faithful Representation
F1-5 |
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Term
| Name the three elements of relevance. |
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Definition
- Predictive value
- Confirming value
- Materiality
F1-6 |
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Term
| Name the three elements of faithful representation. |
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Definition
- Neutrality
- Completeness
- Freedom from error
F1-7 |
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Term
| Name the enhancing qualitative characteristics of financial information. |
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Definition
Comparability, Verifiability, Timeliness, and Understandability.
F 1-8 |
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Term
| According to SFAC #5, what should a full set of financial statements include? |
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Definition
-Statement of Financial Position (the balance sheet)
-Statement of Earnings (the income statement)
-Statement of Comprehensive Income
-Statement of Cash Flows
-Statement of Changes in Owners' Equity
F 1-9 |
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Term
| What is the difference between realization and recognition? |
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Definition
Realization: When sold and converted to cash (or claims to cash)
Recognition: When recorded in the financial statements
F 1-10 |
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Term
List the 10 elements of financial statements according to SFAC #6.
CREG and LALEID |
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Definition
Comprehensive Income
Revenues
Expenses
Gains
and
Losses
Assets
Liabilities
Equity (of Net Assets)
Investments by Owners
Distributions to Owners
F 1-11 |
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Term
| List the six elements of financial statements according to IASB Framework. |
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Definition
Assets
Liabilities
Equity
Income (revenue and gains)
Expenses (expenses and losses)
Capital maintenance adjustments
F 1-12 |
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Term
Name the five elements of present value measurement per SFAC #7.
EVTUO |
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Definition
Est. of future cash flows
Expectations about timing Variation of future cash flows
Time value of money (the risk-free rate of interest)
The price for bearing Uncertainty
Other factors (e.g., liquidity and marker imperfections)
F 1-13 |
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Term
| Describe the expected cash flow approach for present value computations. |
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Definition
Consider a range of possible cash flows and assigns a (subjective) probability to each cash flow in the range to determine the weighted-average, or "expected," future cash flow.
F 1-14 |
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Term
What is the presentation order of the major components of an income and retained earnings statement?
IDEA |
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Definition
Income Statement:
-Income (or loss) from continuing op's
-Income (or loss) from Discontinued op's
-Extraordinary items
Retained Earnings Statement:
-Cumulative effect of a change in Accounting principle
F 1-15 |
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Term
| The gain (loss) from discontinued operations can consist of... |
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Definition
An impairment loss, a gain (loss) from actual operations, and a gain (loss) on disposal.
F 1-16 |
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Term
In what period are the following reported:
-An impairment loss?
-A gain (loss) from actual operations?
-A gain (loss) on disposal? |
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Definition
All are reported in the period in which they occur.
F 1-17 |
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Term
| In reporting discontinued operations, how is a "component" of an entity defined under U.S.GAAP and IFRS? |
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Definition
U.S. GAAP
1. An operating segment
2. A reportable segment
3. A reporting unit
4. A subsidiary
5. An asset group
IFRS
1. A separate major line of biz or geographical area of operations.
2. A subsidiary acquired exclusively with a view to resale.
F 1-18 |
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Term
| How do we account for subsequent increases in the fair value of a discontinued component? |
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Definition
A gain is recognized for the subsequent increase in fair value minus costs to sell (but not in excess of the previously recognized cumulative loss). The gain is reported in the period of increase.
F 1-19 |
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Term
| What types of costs are associated with exit and disposal activities? |
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Definition
-Inventory employee-termination benefits
-Costs to terminate a contract that is not a capital lease.
-Other costs associated with exit or disposal activities.
F 1-20 |
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Term
| Define extraordinary items. |
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Definition
-Material in nature
-Of a character significantly diff from the typical or customary business activities (unusual)
-Not expected to recur in the foreseeable future (infrequent)
-Not normally considered in evaluating the ordinary operating results of an enterprise
KEY WORDS: UNUSUAL & INFREQUENT
REMEMBER: Extraordinary items are recognized under U.S.GAAP but not IFRS.
F 1-21 |
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Term
| List some examples of extraordinary items. |
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Definition
-The abandonment of, or damage to, a plant due to an infrequent earthquake or an infrequent flood.
-An expropriation of a plant by the government.
-A prohibition of a product line by a newly enacted law or regulation.
F 1-22 |
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Term
| Name the three types of accounting changes. |
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Definition
-Change in an accounting principle
-Change in accounting estimate
-Change in accounting entity
F 1-23 |
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Term
| How is a change in accounting principle reported? |
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Definition
-Cumulative effect of change is included in the retained earnings statement as an adjustment of the beginning retained earnings balance of the earliest year presented.
-Prior-period financial statements are restated, if presented.
F 1-24 |
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Term
What are the special changes in an accounting principle?
How are special changes in accounting principle reported? |
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Definition
-A change to LIFO from another method of inventory pricing under U.S. GAAP.
-Any other change in which a cumulative effect adjustment is considered impractical to calculate.
Special changes are reported prospectively (like a change in estimate).
F 1-25 |
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Term
| How is a change in an accounting estimate reported? |
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Definition
-Prospectively
-The effect is shown in the current and/or future periods that are affected by the change
-Financial statements are not restated.
F 1-26 |
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Term
| Under U.S. GAAP, how is a change in the accounting entity reported? |
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Definition
All current and prior period financial statements presented are restated.
F 1-27 |
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Term
| How are error corrections reported? |
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Definition
Reported as prior period adjustments to retained earnings and all comparative financial statements presented are restated.
F 1-28 |
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Term
| Define comprehensive income. |
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Definition
Change in equity (net assets) that results from revenue, expenses, gains, and losses during a period, as well as any other recognized changes in equity that occur for reasons other than investments by owners and distributions to owners.
F 1-29 |
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Term
Identify five items included in other comprehensive income.
PUFER |
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Definition
-Pension adjustments
-Unrealized gains & losses on AFS securities
-Foreign currency translation adjustments and gains/losses on foreign currency transactions that are designated as economic hedges of a net investment in a foreign entity
-Effective portions of cash flow hedges
-Revaluation surpluses (IFRS only)
F 1-30 |
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Term
| List the three formats acceptable for reporting comprehensive income. Which format is prohibited under IFRS? |
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Definition
-Statement of Comprehensive Income (single-statement approach)
-Statement of Income followed by separate Statement of Comprehensive Income (two-statement approach)
Component of the Statement of Owners' Equity (prohibited under IFRS, will be prohibited under U.S. GAAP for public companies as of 12/15/11 and for nonpublic companies as of 12/15/12).
F 1-31 |
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Term
| List some disclosure requirements for comprehensive income. |
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Definition
-Tax effects of each component included in current "Other Comprehensive Income"
-Changes in the accumulated balances of components of "Other Comprehensive Income"
-Total accumulated other comprehensive income
-Reclassification adjustments between other comprehensive income and net income
F 1-32 |
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Term
| Identify the contents of the Summary of Significant Accounting Policies note to the financial statements. |
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Definition
Summary of Significant Accounting Policies
Identify & describe:
-Measurement bases used in preparing the financial statements
-Principles & methods
-Criteria
-Policies
-Pricing
F 1-33 |
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Term
| Describe the related party disclosures required under U.S. GAAP and IFRS. |
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Definition
-Material related party transactions
-Related party notes/accounts receivable
-Control relationships
NOTE: IFRS requires disclosure of key management compensation. U.S. GAAP does not require this disclosure.
F 1-34 |
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Term
| What are the U.S. GAAP disclosure requirements for risks and uncertainties? |
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Definition
-Nature of operations
-Use of estimates in preparing the financial statements.
-Significant estimates
-Current vulnerability due to certain concentrations.
F 1-35 |
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Term
| What are the guidelines for interim reporting? |
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Definition
-Use same accounting principles that were used in the most recent annual report.
-Allocate expenses to the interim period benefited.
-Revenues are recognized in the period in which they are earned & realized or realizable.
-A total for comprehensive income in condensed financial statements of interim periods.
F 1-36 |
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Term
| What income tax rate is used in interim financial reporting? |
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Definition
Use best estimate of effective tax rate to be applicable for full fiscal year on quarterly statements.
F 1-37 |
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Term
| Name the four required disclosures for segments of an enterprise. |
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Definition
- Operating segments
- Products & services
- Geographic areas
- Major customers
F 1-38 |
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Term
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Definition
Distinct revenue-producing components of the enterprise about which separate financial information is produced internally, and whose operating results are regularly reviewed by the enterprise.
Determined using a "management approach."
F 1-39 |
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Term
| Name two quantitative thresholds used in identifying reportable operating segments. |
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Definition
- 10% "Size" test
- 75% "Reporting Sufficiency" test
F 1-40 |
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Term
| Describe the 10% test for identifying reportable segments. |
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Definition
-Revenues
Reported rev, including both sales to external customers & intersegment sales or transfers, is 10% or more of the combined rev, internal & external, of all operating segments.
-Reported profit or loss
The absolute amt of its reported profit or loss is 10% or more of the greater, in absolute amt, of
-The combined reported profit of all operating segments that did not report a loss, or
-The combined reported loss of all operating segments that did report a loss
-Assets
Assets are 10% or more of the combined assets of all operating segments.
NOTE: Must meet only one of the above.
F 1-41 |
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Term
| What is the 75% test for identifying reportable segments? |
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Definition
Combined external (consolidated) revenue of all reportable segments must be at least 75% of the total consolidated revenue of the entity.
The practical limit is 10 segments, but this is not a precise limit.
F 1-42 |
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Term
| What are the disclosure requirements for reportable operating segments? |
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Definition
For each reportable segment, the entity must report:
- Identify factors
- Products or services
- Profit or loss details
- Asset details
- Liability details (IFRS only)
- Measurement criteria
- Reconciliations
F 1-43 |
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Term
| Define development-stage enterprise |
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Definition
Enterprise that devotes substantially all of its efforts to establishing a new biz & either planned principal operations have not commenced or no significant revenue has been generated therefrom.
F 1-44 |
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Term
| Indicate any special accounting treatment for development-stage enterprises. |
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Definition
Same GAAP as established operating enterprises with additional disclosures:
-Identify statements as those of a development-stage enterprise.
-Accumulated losses identified as "deficit accumulated during development stage"
-In the Income Statement, show revenue & expenses, & cumulative total of both amounts from company's inception.
-In the statement of cash flows, include cumulative amts of cash inflows & outflows from enterprise's inception & current amts of cash inflows & outflows for each period presented.
-Issue a separate statement of stockholders' equity, indicating shares issued, date of issuance, dollar amts assigned, and noncash consideration, if any.
F 1-45 |
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Term
| What is the date of an entity's transition to IFRS? |
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Definition
The date of the opening balance sheet.
F 1-46 |
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Term
| Describe the Form 10-K & the Form 10-Q. What level of assurance must be provided with the financial statements submitted in these forms? |
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Definition
Form 10-K: Field annually by U.S. registered companies. Includes a summary of financial data, MD&A, and audited financial statements prepared using U.S. GAAP.
Form 10-Q: Filed quarterly by U.S. registered companies. Includes unaudited (reviewed) financial statements, interim MD&A, and certain disclosures.
F 1-47 |
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