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11 Cards in this Set

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Other Comprehensive Bases of Accounting (OCBOA)
-Non-GAAP presentations that have wide-spread understanding and support. Include:
1. The cash basis and modified cash basis of accounting*
2. The tax basis of accounting*
3. A definite set of criteria have substantial support that is applied to all material F/S elements, such as the price-level adjusted F/S's.
4. A regulatory basis of accounting.
*Most commonly used
General OCBOA Presentation Guidelines
1. F/S titles should differentiate the OCBOA F/S's from accrual basis F/S's.
2. The required F/S's are the equivalents of the accrual basis B/S and I/S.
3. The F/S's should explain changes in equity accounts.
4. A statement of CF's is not required.
5. Disclosures in OCBOA F/S's should be similar to the disclosures in GAAP F/S's.*
*Should Include:
1. A summary of significant accounting policies.
2. Informative disclosures similar to those required by GAAP for all F/S items that are the same as or similar to those in GAAP F/S's.
3. Disclosures related to items not shown on the face of the F/S's, such as related party transactions, subsequent events, and uncertainties.
Cash & Modified Cash Basis Financial Statements
-Entities that are not required to use the accrual basis of accounting may choose to present cash or modified cash basis F/S's b/c they are simple to prepare and easy to understand.*
*Cash basis F/S's are not feel-suited for entities that have complex operations.
Cash Basis Financial Statements
-Revenues are recognized when cash is received and expenses are recognized when cash is paid.
-Generally used by estates and trusts, civic ventures, and political campaigns and committees.
Cash Basis Financial Statements- Presentation
1. Statement of Cash and Equity: in pure cash basis F/S's, cash is the only asset, no liabilities are recorded, and equity is equal to cash.
2. Statement of Cash Receipts and Disbursements: Include- (1) Revenues received, (2) debt and equity proceeds, (3) proceeds from asset sales, (4) expenses paid, (5) debt repayments, (6) dividend payments, (7) payments for purchases of assets.
Modified Cash Basis Financial Statements
-Most for-profit and not-for-profit organizations that produce cash basis F/S's use the modified cash basis of accounting. It is a hybrid method that includes elements of both cash basis and accrual basis accounting. Modifications should not be so extensive that the modified cash basis F/S's become accrual basis F/S's.
Modified Cash Basis Financial Statements- Common Modifications
-Common modifications made to cash basis F/S's should have substantial support. Means that the modification is logical and equivalent to the accrual basis of accounting for that item.*
*Common modifications include:
1. Capitalizing and depreciating fixed assets
2. Accrual of income taxes
3. Recording liabilities for long-term and short-term borrowings and the related interest expense
4. Capitalizing inventory
5. Reporting investments at FV and recognizing unrealized gains and losses.
Income Tax Basis Financial Statements
-Well suited for entities that have complex operations.
-Accounting issues: prepared based on the methods and principles used to prepare the entity's tax return. Special accounting treatment must be given to nontaxable revenues and expenses not reported on the tax return.
Nontaxable Revenues and Expenses: must be recognized in tax basis F/S's in the period received or paid for cash-basis taxpayers and in the period accruable for accrual-basis taxpayers. Nontaxable revenues and expenses may be reported as:
1. Separate line items in the revenue and expense sections of the statement of revenues and expenses
2. Additions and deductions to net income
3. A disclosure in a note.
Personal Financial Statements
-F/S's or individuals or groups of related individuals (families) and are generally prepared to organize and plan financial affairs.*
*Such statement can be used for obtaining credit and for tax, estate, and retirement planning purposes.
Personal Financial Statements- Statement of Financial Condition
-Statement of Financial Condition (=B/S): the basic personal F/S and presents assets and liabilities at estimated current value rather than at historical cost. Assets and liabilities are recognized on the accrual basis versus the cash basis, and personal net worth is the difference between total assets and liabilities included in the statement.
1. Assets are reported at estimated current FV: (1) the PV of projected cash receipts is appropriate for estimating the current value of monetary assets, (2) life insurance loans payable are netted against the cash surrender value of life insurance, (3) A business interest that constitutes a large part of an individual's total assets should be presented as a single amount at estimated current value separately from other investments, (4) Vested pension plan benefits are reported at FV.
2. Liabilities are reported at estimated current amount: (1) This is generally GAAP presentation, however, some loans may have a PV that is less than cost (these would be disclosed at the lower PV), (2) A deferred tax liability is reported for estimated taxes due, as if all assets were sold at FV and all liabilities were paid at FV.
3. Net worth at FV is the difference between assets (at estimated current FV) and liabilities (at estimated current amounts): (1) The presentation of assets and liabilities is made in order of liquidity and maturity, with no current and noncurrent classifications.
Personal Financial Statements- Statement of Changes in Net Worth & Disclosure
-An optional personal F/S, shows sources of increases and decreases in net worth. That statement distinguishes between those changes that have been realized and those that are unrealized. Presentation of comparative F/S's is optional.
Disclosure: should include sufficient disclosures to make them adequately informative. The nature and type of information in either the body or notes of the F/S's might include: (1) individual covered, (2) individuals' assets and liabilities, (3) methods used in determining estimated current values, (4) descriptions of intangible assets, (5) face amount of life insurance policies owned, (6) nature of joint ownership assets held, (7) tax information, and (8) maturities, interest rate, and other pertinent details relating to receivables and debt.