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48 Cards in this Set
- Front
- Back
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Authoritative Literature Included in the Codification |
(FEDPRIA) -FASB -Emerging Issues Task Force (EITF) Abstracts and Topic D -Derivative Implementation Group Issues -Accounting Principles Board Opinions -Accounting Research Bulletins -Accounting Interpretations -AICPA |
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SEC Standards Included in the Codification |
(Regulation For Accounting IS Emerging) -Regulation S-X -Financial Reporting Releases (FRR) -Accounting Series Releases (ASR) -Interpretative Releases (IR) -Staff Accounting Bulletins (SAB) -EITF Topic D and SEC Staff Observer Comments |
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How Conceptual Framework applies to specific accounting issues GAAP vs IFRS |
IFRS- must consider the applicability GAAP- CF cannot be applied to specific accounting issues |
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Fundamental Qualitative Characteristics of financial information |
Relevance >Capable of making difference in the decisions made by users (Passing Confirms Money) -Predictive Value -Confirming Value -Materiality Faithful Representation >Reliable (Completely Neutral is Free From Error) -Completeness (Primary FS and Notes) -Neutrality (Free from bias) -Freedom From Error |
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Enhancing Qualitative Characteristics of financial information |
(Compare and verify in time to understand) -Comparability (Consistency) -Verifiability -Timeliness -Understandability |
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The Cost Constraint |
The benefit of reporting financial information must be greater than the cost of obtaining and presenting the information |
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List Full Set of Financial Statements |
Financial Position (the balance sheet) Earnings (income statement) Comprehensive Income Cash Flows Changes in owners' equity |
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Measurement Attributes for Assets and Liabilites |
Historical Cost (PP&E) Current cost (Inventory) Net realizable value (A/R) Current market value (Marketable securities) Present value of future cash flows (LT debt) |
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IFRS Fundamental Assumption |
Going Concern |
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Fundamental Assumptions of U.S. GAAP |
Entity Assumption Going concern Monetary unit Periodicity Historical Cost Revenue Recognition Matching Accrual Accounting Full disclosure principle Conservatism Principle |
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Elements of Financial Statements |
(REGL ALE needs ID) -Revenue, Expenses, Gains, Losses -Assets, Liability, Equity -Investment and Distributions to and by Owners(excluded from comprehensive income) |
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Comprehensive Income |
Net Income + Other comprehensive income |
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Recognition |
-process of recording an item in the financial statements of a entity |
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Realization |
-Process of converting non cash resources and rights into money
-Revenue and gains are realized when assets are exchanged for cash or claims to cash |
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Five Elements of Present Value Measurement |
(UVOTE) -The price for bearing uncertainty -Time value of money -Other factors -Expectations about timing variations of FCF -Estimate of future cash flow |
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When can a franchise fee be recognized as revenue |
onlyupon substantial performance of initial service obligation (can do percentage if substantial) |
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Point Delivery Method |
recognize profit today (no question of collectibility) |
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Installment sales method |
-Deferred gross profit -Realize GP by % (GP/Sale) |
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Cost recovery method |
Don't recognize any profit until cost is covered |
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When can an Accounting Standard Update be issued |
after a majority vote by the members of the FASB |
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FASB's due process for setting accounting standards |
Proposed FASB amendments to the Accounting Standards Codification are issued for public comment in the form of exposure drafts. At the end of the comment period, the FASB will analyze all comment letters and position papers. When the board members of the FASB are satisfied that all reasonable alternatives have been considered, the FASB staff will prepare an Accounting Standards Update for approval by the board (majority vote is required).
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Uses of the income statement |
determining profitability value for investment purposes credit worthiness |
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Order of presentation on income statement |
(IDA) Income (or loss) from continuing operations -gross of tax and net of tax Income (or loss) from discontinued operations -net of tax Cumulative effect of change in Accounting Principle (ST. Retain E.) -net of tax (FIFO to weighted average) |
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What is included in continuing operations |
operating activities -revenue, COGS, selling expenses, admin expenses non operating activities -other revenues, gains, other expenses, losses income taxes |
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When can we change from one acceptable principle of accounting to another |
when the new method presents the financial information more fairly then the old method |
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What is included in inventory cost |
purchase price freight in |
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What is included in selling expense |
freight out salaries and commissions advertising |
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What is included in general and administrative expenses |
officer's salaries accounting and legal insurance |
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What is found in the non operating section of the income statement |
auxiliary activities interest expense |
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What gains/losses make up discontinued operations |
Impairment loss Gain/loss from actual operation (year of sale) Gain/loss on disposal -all amounts are from the period in which they occur (not before) |
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Under GAAP a component of an entity may be a: |
operating segment reportable segment reporting unit subsidiary asset group |
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When is a component of a business classified as "held for sale" |
1. Management commits to a plan to sale 2. Component is available for immediate sale in its present condition 3. An active program to locate a buyer has been initiated 4. Sale is probable and expected within one year 5. Sale of the component is being actively marketed 6. Unlikely that plan will be changed or withdrawn |
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"Held for Sale" GAAP vs. IFRS |
IFRS -individual assets and liabilities of the component must be tested for impairment GAAP -impairment analysis of the component as a whole |
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When do the discontinued operation rules kick in |
disposed of (OR) classified as held for sale |
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What conditions must be present for discontinued operations to be in effect |
(GEL) Strategic shift or major effecton opperations Disposal of a major geographical area Disposal of a major equity method investment Disposal of a major line of business |
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Types of Items included in results of discontinued operations |
results of operation of the component (loss/gain) gain or loss on disposal (upon sale) impairment loss of the component (U.S) |
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A component classified as "held for sale" is measured how? |
lower of its CV or NRV (fair value - cost to sale) |
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Discontinued operation vs exit or disposal activity |
Strategic shift or major effect Downsizing/Closing hub Disposal need obligating event (plan is not enough) Operating losses booked when they occur for disposal |
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How to recognize the liability associated with an exit or disposal activity |
PV of future payments for the costs to close -employee termination benefits -cost to terminate a contract -employee relocation |
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Events resulting in Change in estimate |
(Prospective) (no seperate line item) (if significent then in notes) changes in lives of fixed assets adjustments of year end accrual of officers salaries and/or bonuses write downs of obsolete inventory material nonrecurring IRS adjustment Settlement of litigation change in accounting principle that is inseparable from change in estimate (fixed asset, change in depr method) |
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Changes in accounting principle |
(Retro) GAAP to GAAP non comparative comparative (current year vs prior year) -restate the earliest period presented |
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Types of accounting changes |
changed in estimate (prospective) -a component of income from continuing operations change in accounting principle (retro) change in entity (retro) (not in IFRS) Error correction (restate) (own line item) |
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Changing from cash basis to accrual is what type of change |
error (GAAP requires accrual) |
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Where is correction of error reported |
R/E, adjustment to opening balance |
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Changes in "available for sale" investments are reported where |
other comprehensive income |
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Changes in trading investments are reported where |
net income |
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What type of accounting change is a change in depreciation method considered |
treated as a change in estimate subtract the depreciation and work forward from new carrying value |
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Net Concept |
Proceeds - CV |
