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37 Cards in this Set
- Front
- Back
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What's a development stage enterprise?
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An enterprise that's in the development stage if "substantially all" of its efforts are devoted to establishing a new business & either principal operations have not begun or has begun & revenue produced is insignificant.
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What RPT's disclosures are not req'd?
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Compensation arrangments, expense allowances & similar items in the ordinary course of business
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What's a definition of a deferral?
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A deferral represents a transaction that has been reflected in the cash accts of the period but has not yet affected the determination of income for that period.
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What are 4 things that RPT disclosures should include?
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1) Nature of the relationship (s) involved
2) a description of the trans, including trans to which no amts or nominal amts were abscribed, for each of the periods for which f/s are presented. 3) Dollar amts of the trans 4) Amts due from or to related parties as of B/S date. |
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What are six examples of RPT's?
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1. Sales, purch & trasfers of realty & personal property
2. Svc received or furnished 3. Use of property & equip by lease or otherwise 4. Borrowings, lendings & guarantees 5. Intercompany billings based on allocations of common costs 6. Filings of consolidated tax returns |
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What's a change in reporting entity basically?
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a) presenting consolidated f/s
b) changing specific sub's that make up the group of for consolidated f/s. c) changing the entities included in combined f/s |
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What's a change in accting estimate?
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A change that has the effect of adjusting the carrying amt of an existing asset or liab or altering the subsequent accting for existing or future assets or liab.
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What's an indirect effect of a change in Accting principle?
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Any changes to current or future cash flows of an entity that result from making a change in accting principle that is applied retrospectively.
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How are prior period adjustments handled?
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As adjustments to the beg bal of R/E.
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What's a direct effect of a change in Accting prin?
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Those recognized changes in A or L's necessary to effect a change in accounting principle. An ex. is an adj to an inventory balance to effect a change in inventory valuation method.
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Give an example of a change in accounting estimate affected by a change in accting principle.
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Change in method of depr, amort, or depletion for long-lived, nonfinancial assets.
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What's an accting change?
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1) Change in an accting prin.
2) Change in an acctin est. 3) Change in a reporting entity. |
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What are the 2 concepts of income?
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Current oper concept - normal recurring operations in evaluating the performance of the entity.
All inclusive concept - F/S should include unusual & nonrecurring items in order to measure the long range operating performance of the enterprise. Method req'd now reflects a compromise btw the two. |
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What's basically comprehensive income.
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All changes in equity during a period except those resulting from investments by owners & distributions to owners.
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Where are extraordinary items reported on I/S?
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If mat'l, presented net of related inc tax after discontinued operations.
Also, has to be BOTH unusual & infrequent of occurrence. |
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Are assets classified as Held for Sale depreciated or amortized?
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No!
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How are non-component assets reported?
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Income from continuing operations includes G or L's from an asset that is classifed as held for sale.
If disposal will not occur for more than 12 months, costs to sell are discounted to PV. |
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Who doesn't comprehensive income apply to?
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Entities that have no items of other OCI in any period presented nor to not for profits!
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What's the rule for recognizing lease termination costs & specified employee severance plan costs?
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SFAS 146 requires recognizing lease termination costs & specified employee severance plan costs related with exit or disposal activities in periods in which obligations to others exists, not necessarily in the period of commitment to a plan.
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Do you record a liab for future oper losses?
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No!
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How would unusual or infrequent items be reported?
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As a seperate component of income from continuing operations.
Nature & financial effects should be disclosed. These items should NOT be reported net of income taxes. |
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Define errors in F/S!
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Errors in F/S result from mathematical mistakes, mistakes in the application of accting principles, or the oversight or misuse of facts that existed at the time the f/s were prepared.
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How should a change in estimate be disclosed?
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The effects of the change in est on inc b4 extra items, NI, & related per share amts s/b disclosed in the period of the change or in future periods if the change affects those periods.
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When a change in estimate is inseparable from the change in principle how should the change be accted for?
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As a change in estimate.
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What's the rule with accumulated balance of OCI?
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An entity is req'd to display the accumulated balance of OCI seperately from RE, Capital Stk & APIC.
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How do you account for a change in reporting entity?
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By retrospectively applying the change to the f/s of all prior periods presented to reflect the financial info for the new reporting entity for the periods.
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What are 4 examples of changes in estimate?
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1) Useful lives & salvage value of depreciable assets.
2) Recovery periods benefited by a deferred cost. 3) Expected losses on receivables. 4) Warranty costs. |
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What 4 disclosures are needed when a change in accting principle is made?
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1) Nature & reason for the change & method of applying the change.
2) A description of prior period info that has been retrospectively adj, if any. 3) The effect of the change on income b4 extras, NI & the related per share amts. 4) Cumulative effect of the change on RE or other components of equity or net assets. |
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What's a brief explanation of OCI?
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Items that are included in the equity section as a seperate component of owners equity.
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What's the 4 groups of RPT's?
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1) Parent co & it's sub's
2) Sub's of common parent 3) Enterprise & it's principal owners, mngmt or members of immediate families 4) Affiliates |
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What is a counterbalancing error?
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Errors that will "correct" themselves over 2 consecutive accting periods.
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What disclosures are req'd when restating prior periods?
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SFAS 154 requires an entity to disclose as of the beg of the earliest period presented that previously issued f/s have been restated along with a desc of the nature of the error, the effect of the correction on each f/s & the per share amts effected, the cum effect of the change on RE & other components of equity of net assets. F/S of subsequent periods need not repeat the disclosures.
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What are 5 errors commonly found f/s?
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1) Estimates based on unreasonable assumptions, ex. unrealistic depr rate
2) Recording erroneous amts for assets & equities, ex. incorrect footing of inventory totals 3) Failure to record PPD & accrued expenses 4) The improper classification of assets as expenses and vice versa. 5) The change from an accting prin that is NOT accepted to one that is, is viewed as a correction of an error. |
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How are errors classified?
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By time of discovery or according to their effect on the B/S, I/S or both.
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What is a non-counterbalancing error?
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Errors that cause successive B/S amounts & NI to be incorrectly stated until the errors are discovered & corrected.
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How do you deal with restating prior periods?
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The cumulative effect of the error on periods prior to those presented shall be reflected in the carrying amt of A & L's as of the beg of the first period presented.
Any offsetting adj shall be made to the opening bal. of RE. |
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What happens if you notice an error subsequent to the issuance of the f/s.
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Should be reported as a prior period adjustment by restating the prior period f/s.
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