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39 Cards in this Set
- Front
- Back
Accounting standards codification |
2009. Include the financial accounting standards board (FASB). Single source of authoritative nongov US GAAP. If it's not found in the code, it's not generally accepted in U.S. |
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What's the prime objective of financial reporting? |
provide info that's useful to existing and potential investors and creditors to make investment decisions. |
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SEC reporting requirements |
Govern the reports to be filed by public entities. Monitors the content and timing of reports. |
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GAAP |
Generally accepted accounting principles. Governs the manner that items are accounted for in financial statements. |
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Predictive value |
Qualitative characteristic. Contains info to produce future outcomes. |
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Confirmatory value |
Qualitative characteristic Provide info about evaluations previously made |
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Relevance |
Fundamental characteristic of financial reporting. Includes both predictive and confirmatory values. Is helpful to people making decisions about the entity. |
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Neutrality |
The need for financial info to be free from bias in selection or presentation. An ingredient of faithful representation. |
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Faithful representation |
Fundamental characteristic of fin reporting. Complete without bias and free from error. Neutrality. |
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Comparability |
Enhancing qualitative characteristic. Allows current and prior year comparisons. Compare one entity with another over same time period. |
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Verifiably |
Enhancing characteristic. Different observers are able to acknowledge that info is faithfully represented. |
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Timeless |
Enhancing characteristic. Investors want more info. Quarterly reports are more useful. |
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Understandability |
Enhancing characteristic. Classified, characterized, presented clearly and concisely. |
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4 enhancing qualitative characteristics |
VCUT. Verify Compare Understand Timeliness |
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Revenues |
Inflows (increases) of assets or settlements (decreases) of liabilities. Arise from primary operating activities, NOT ancillary. |
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Rising expenses |
Outflows of assets (decreases) or incurrences (increases) in liabilities from primary operating activities. |
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Deferred revenues |
Advances payments received, but not yet earned. Good not yet delivered, services not yet performed. Liability on the balance sheet. Mirrors prepaid assets (deferred espense) on books of the other company. |
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Accrued revenue |
Services performed but not yet billed. Reported with corresponding receivable. |
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Assets |
Probable future economic benefits obtained or controlled by particular entities because of past transactions or events. Tangible (prop. Plant equip) or intangible (goodwill) |
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Conservatism |
Losses should be recognized immediately (if probable and reasonably estimated) Gains are recognized when realized. Prevents assets and/or net inc from being overstated. |
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Consistency |
Using similar accounting practices from period to period |
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Comprehensive income |
All differences between begin and ending equity other then transactions between entity and owners (invests and distributions) |
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How to calculate the amount of net gain or loss to be reported? |
Loss or gain X (1-tax rate) Net the gains and losses for the year if necessary |
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Income from continu9ng operations |
Companies regular daily business activities. Tasks required to make products and services and deliver it to customers. Should be the prime income source. Same under GAAP and IFRS |
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Prospective treatment/ application |
Applying new accounting policy to transactions after date of policy change. Recognition of the policy change affects ESTIMATES in current and future periods. NO change to prior periods. EX. depreciation method. Useful life of asset. |
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Remember |
Change from Non US GAAP to GAAP does NOT count as change in accounting principles. |
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When can companies change accounting principles? |
If GAAP requires it. If the alternative accounting principle more fairly presents info. |
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How does a company report a change in accounting principle? |
Adjust the beginning balance of retained earnings, net of tax. EARLIEST period presented. |
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How to calculate the change from accounting principle? |
Difference from the change X (1-tax rate)= inc/dec in retained earnings begin balance. |
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Change in reporting entity |
Retrospectively applied to all prior periods presented. |
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How can you report comprehensive income? |
On a single financial statement with net income. Shown separately on it's own financial statement. |
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Summary of significant accounting policies. |
Requires by GAAP and IFRS. basis of consolidation, depreciation methods, amortization of intangibles, inventory pricing, long term profit on construction, revenue from franchising and leasing. Measuring cash equivalents. |
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Interim financial reporting |
Quarterly. Shortened. Increase use of estimate and allocations. More reliable. Seasonability of companies. Timeliness. |
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Qualitative characteristics of fin states based on conceptual framework |
Requires information that is relevant, reliable and comparable. |
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Due process steps followed by FASB to establish financial accounting and reporting standards. |
1. Board receives requests for possible projects and reconsideration of existing standards. Various sources. 2. Fasb chairman decides whether to add to agenda. 3. Board deliberates issue at one or more public meetings. 4. Board issues exposure draft. 5. Public roundtable meeting on draft if necessary. 6. Staff analyzes content letters and discussions. 7. Board issues accntng stand update describing amendment to codification. |
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When preparing consolidated fin states of a us parent comp with a foreign subsidiary, foreign subsid.'s functional currency is... |
The currency in which the subsidiary primarily generates and expands cash. |
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How do you account for R&D costs with no alternative future use? |
Charge all costs to expense when incurred. |
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What's considered required supplementary info for general purpose ext fin reporting of a local government? |
Management discussion and analysis. |
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State of $ flows should be included in what fin state for a government entity? |
Proprietary fund financial statements |