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30 Cards in this Set
- Front
- Back
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Objective |
To provide decision useful information to capital providers such as the amount, timing, and uncertainty of a company's future cash flows. (PG 21-22) |
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Qualitative Characteristics |
FUNDAMENTAL: Relevance 1. Predictive value 2. Confirmatory value 3. Materiality
Faithful Representation 1. Completeness 2. Neutrality 3. Free from error
ENHANCING 1. Comparability(including consistency) 2. Verifiability 3. Timeliness 4. Understandability (PG 21) |
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Elements |
1. Assets 2. Liabilities 3. Equity 4. Investments by owners 5. Distribution to owners 6. Revenues 7. Expenses 8. Gains 9. Losses 10. Comprehensive Income (PG 21) |
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Recognition, Measurement, and Disclosure Concepts |
ASSUMPTIONS 1. Economic Entity 2. Going Concern 3. Periodicity 4. Monetary Unit
PRINCIPLES 1. Revenue recognition 2. Expense recognition 3. Mixed-attribute measurement 4. Full disclosure (PG 21) |
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Financial Statements |
1. Balance sheet 2. Income statement 3. Statement of comprehensive income 4. Statement of cash flows 5. Statement of shareholders' equity 6. Related disclosures(notes) (PG 21) |
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Assets |
Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. (PG 25) |
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Liabilities |
Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. (PG 25) |
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Equity(net assets)
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Called shareholders' equity or stockholders' equity for a corporation, it is the residual interest in the assets of an entity that remains after deducting its liabilities. (PG 25) |
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Investments by owners |
Increases in equity of a particular enterprise resulting from transfers to it from other entities of something of value to obtain or increase ownership interests in it. (PG 25) |
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Distributions to owners |
Decreases in equity of a particular enterprise resulting from transfers to owners. (PG 25) |
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Comprehensive Income |
The change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. (PG 25) |
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Revenues |
Inflows or other enhancements of assets of an entity or settlements of its liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing central operations. (PG 25) |
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Expenses |
Outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing central operations. (PG 25) |
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Gains |
Increases in equity from incidental or peripheral transactions of an entity. (PG 25) |
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Losses |
Represent decreases in equity resulting from peripheral or incidental transactions of an entity. (PG 25) |
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General Recognition Criteria |
1.Definition:The item meets the definition of an element of financial statements.
2.Measurability: The item has a relevant attribute measurable with sufficient reliability.
3.Relevance: The information about it is capable of making a difference in user decisions
4.Reliability: The information is representationally faithful, verifiable, and neutral
(PG 27) |
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Revenue Recognition |
Revenue is recognized when goods or services are transferred to customers(Performance obligation) for the amount the company expects to be entitled to receive for transferring those goods and services. Revenue is recognized over a period of time or a point in time, depending on when goods or services are transferred to customers. (PG 28) |
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Expense Recognition |
Often matches revenues and expenses that arise from the same transactions or other events. Based on four different approaches: 1. An exact cause-and-effect relationship; ex- sale of merchandise and COGS 2. By associating an expense with the revenues recognized in a specific time period; ex- employee salary costs indirectly related to revenues earned in a period 3. By a systematic and rational allocation to specific time periods; ex- depreciation, amortization, depletion 4. In the period incurred, without regard to related revenues; ex- advertisement expenses (PG 28-29) |
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5 Measurement Attributes of Mixed Attribute Model |
1. Historical cost 2. Net realizable value 3. Current cost 4. Present(or discounted) value of future cash flows 5. Fair value (PG 29) |
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Historical Cost Principle |
Measuring assets and liabilities based on their original transaction value. (PG 29) |
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Net Realizable Value |
The amount of cash into which an asset is expected to be converted in the ordinary course of business. (PG 30) |
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Current Cost |
The cost that would be incurred to purchase or reproduce the asset. (PG 30) |
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Fair Value |
Current market value; the price that would be received to sell assets or paid to transfer a liability between market participants at the measurement date. (PG 30) |
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3 Valuation Techniques to Measure Fair Value |
1. Market approaches; base valuation on market information 2. Income approaches; discount future amounts to find present value 3. Cost approaches; estimate amount that would be required to buy or construct an asset of similar quality and condition (PG 30) |
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Expected Rate of Return |
Dividends+share price appreciation/initial investment |
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Accounting Standards Update(ASU) |
Any new standard issued by FASB |
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Norwalk Agreement |
Signed in 2002 by FASB and IASB, which was a pledge to remove existing differences between their standards and to coordinate their future standard-setting agendas. |
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Roadmap |
Issued by the SEC that listed necessary conditions to be achieved before the U.S. will shift to requiring use of IFRS by public companies.
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FASB Standard Setting Process |
1. Board identifies issue 2. Decides whether to add project to technical agenda 3. Deliberation at public meetings 4. Board issues exposure draft 5. Roundtable meeting held 6. Staff analyzes gathered information 7. Board issues an accounting standards update |
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Model for ethical decisions |
1. Facts of situation 2. ethical issue 3. related values 4. alternative courses of action 5. Evaluation 6. Identify consequences 7. Make your decision |
