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29 Cards in this Set
- Front
- Back
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How is sustainability evaluated? |
by determining the proportion of reported earnings that can be expected to continue in the future.
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Conservative Accounting |
choices made within GAAP with respect to reported earnings that tend to decrease the company’s reported earnings and financial position (on the balance sheet) for the current period. |
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Aggressive Accounting |
choices that increase reported earnings or improve the financial position for the current period
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___________ accounting often results in decreased earnings in future periods, while _____________ accounting will tend to increase future period earnings. |
Aggressive, conservative
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Is Capitalizing current period costs, Aggressive or Conservative Accounting? |
Aggressive
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Is having Higher estimates of salvage value, Aggressive or Conservative Accounting?
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Aggressive
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Is accelerated depreciation or straight line depreciation Conservative Accounting? |
Accelerated depreciation |
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Is earlier or later recognition of impairments Conservative Accounting? |
Early recognition of impairments |
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Is more or less accrual of reserves for bad de Aggressive Accounting? |
less
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Is larger or smaller valuation allowances on deferred tax assets conservative Accounting? |
larger
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International Organization of Securities Commissions (IOSCO) |
coordinates securities regulation on an international basis with over 200 members, such as national securities regulators, stock exchanges, and regional authorities
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Financial Conduct Authority (FCA) |
UK SEC basically
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In addition to the audit opinion, a requirement for securities that trade in the United States what else must management include? |
must include an assessment of the effectiveness of the firm’s internal controls
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Why are non-GAAP measures used?
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The claim is often made that certain items are excluded because they are one- time or nonoperating costs that will not affect operating earnings going forward |
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Free-on-Board (FOB) shipping point vs. FOB at the destination? |
shipping point will mean that revenue is recognized earlier compared to FOB at the destination |
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Channel Stuffing
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Overloading a distribution channel with more goods than would normally be sold during a period channel stuffing. |
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Bill-and-Hold Transaction |
the customer buys the goods and receives an invoice but requests that the firm keep the goods at their location for a period of time
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In periods of high earnings, the allowance for bad debt is ____________ to reduce reported earnings, in effect storing these earnings for later use. |
increased
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What the use of fictitious bill-and-hold transactions? |
This can increase earnings in the current period by recognizing revenue for goods that are actually still in inventory.
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What does valuation allowance reduce? |
valuation allowance reduces the carrying value of a deferred tax asset based on the probability it will not be realized |
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What happens if there is a increase in the valuation allowance?
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increasing will decrease the net deferred tax asset on the balance sheet and reduce net income for the period |
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What happens if there is a decrease in the valuation allowance?
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a decrease in the valuation allowance will increase the net deferred tax asset and increase net income for the period
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What will a greater salvage value impact?
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This will slow depreciation so the carrying value of the asset is greater, depreciation expense is less, and net income is higher. |
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By ignoring or delaying recognition of an impairment charge for _________, management can increase earnings in the current period. |
goodwill
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During periods of rising prices, COGS under the FIFO method or weighted-average costing method? |
FIFO method |
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What's better during periods of falling prices, FIFO method or weighted-average costing method?
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weighted-average costing method |
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Stretching Payables |
Taking longer to pay suppliers increases operating cash flows
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Capitalizing interest expense will decrease cash flow from _________and increase cash flow from ___________ |
investing, operations
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How are LIFO liquidations to manipulate statements?
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they draw down inventory levels when LIFO (U.S. GAAP only) inventory costing is used so that COGS reflects the lower costs of items acquired in past periods, which increases current period earnings
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