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FAR > 1. FASB > Flashcards

1. FASB Flashcards

1
Q

What entity oversees FASB?

A

FAF financial accounting foundation

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2
Q

What does GAAP address?

A

Recognition, measurement, disclosure

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3
Q

What does FASB do?

A

The standard setting body. A private sector body. Establish GAAP for business entities.

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4
Q

What entity is the federal government agency that administers the securities laws?

A

SEC The securities and exchange commission

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5
Q

FASB predecessors

A

CAP Committee on Accounting Procedure in 1939
APB Accounting Principles Board in 1959
Wheat Committee in 1971
All appointed by AICPA (The American Institute of Certified Public Accountant)

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6
Q

How many board members does FASB have?

A

Seven

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7
Q

What entity provides guidance on major policy issues, project priorities, and formation of task forces?

A

FASAC the Financial Accounting Standards Advisory Council

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8
Q

What process does FASB use when issuing an Accounting Standard?

A

Consider whether to add a project to its agenda, conduct research and issue a Discussion Memorandum, hold public hearing, issue an Exposure Draft, solicit additional comments and modifies the Exposure Draft, finalize and approve with a majority vote, issue an Accounting Standards Update (ASU)

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9
Q

What entity acts as a filter for FASB and can establish ruling without FASB and consensus of how many members?

A

Emerging Issue Task Force (EITF). 15

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10
Q

What’s negative economic consequences?

A

The effect of a proposed standard on a firm’s financial stmt, which causes earnings to decline, thus reducing the firm’s ability to raise capital

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11
Q

What entity has the authority to penalize?

A

SEC

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12
Q

Major impacts by Sarbanes-Oxley Act of 2002?

A

All publicly held companies must establish internal controls, auditing firms must attest to the stmts, etc

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13
Q

What is included in general purpose financial report?

A

IS, stmt of comprehensive income, BS, stmt of changes in owner’s equity, stmt of cash flow, footnote disclosures and supplemental information, auditor’s opinion

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14
Q

What is the sole authoritative source for non-governmental entities except SEC guidance?

A

FASB codification

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15
Q

How many hierarchy does codification have?

A

None only one level

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16
Q

What’s not included in codification?

A

Other comprehensive basis of accounting, cash basis, income tax basis, regulatory accounting principles

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17
Q

Does Codification affect or replace SEC guidance?

A

No

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18
Q

Both US and IRFS use which basis of accounting?

A

Accrual

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19
Q

Accrual Accounting to Cash. Formula?

A

Cash = L + E - Other assets

Only to compute NI

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20
Q

All inclusive approach, what stmt?

A

IS

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21
Q

What does OCI include?

A

Unrealized G/L in securities available for sale, certain pension cost adjustments, foreign currency translation adjustments

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22
Q

Which BS format presents assets and liab in a single line?

A

Report format

Account format - left and right

23
Q

BS assets are presented in which order? Liability?

A

In order of liquidity. In order of maturity

24
Q

Cost basis for Property, plant, equip, intangibles?

A

Historical cost

25
Q

Cost basis for receivables?

A

Net realizable value

26
Q

Cost basis for inventory?

A

Lower of cost or market

27
Q

Cost basis for investment in marketable securities?

A

Market value

28
Q

Cost basis for liabilities?

A

Present value

29
Q

What is cash equivalent?

A

Convertible to a known and fixed amount of cash, have an original maturity to the purchase of 3 mo or less

30
Q

Two primary qualitative characteristics?

A

Relevance & Faithful presentation

31
Q

What’s included in relevance?

A

Predictive value, confirmatory value, materiality

32
Q

What’s included in faithful presentation?

A

Completeness, neutrality, free from error

33
Q

4 enhancing qualitative characteristics?

A

Comparability, Verifiability, timeliness, understandability

34
Q

What’s net realizable value?

A

Current MV - cost of sale

35
Q

What’s current replacement costs?

A

Current MV (how much one must pay to replace today)

36
Q

Definition of FV?

A

The price that would be rcvd to sell an asset or paid to transfer a liab in an ordinary transaction

37
Q

What’s Net present value?

A

Values from discounting expected future cash flows

38
Q

When is revenue recognized?

A

Earned and realizable

39
Q

Expense - what principle?

A

Matching

40
Q

What’s principal market?

A

Has greatest volume and most activity

41
Q

What’s most advantageous market?

A

Can maximize sales

42
Q

Does FV include cost to transfer the item to the market?

A

Yes

43
Q

What’s the assumption for non financial assets?

A

The highest and best use. Physically possible, legally permissible, financially feasible

44
Q

What situations FV does not apply to?

A

Share-base pmt transactions, vender specific objective evidence, inventory pricing

45
Q

FV focus on exit price or entry price?

A

Exit price

46
Q

What does market approach to compute FV?

A

Market value

47
Q

What does income approach use to compute FV?

A

Discounted future cash flows

48
Q

What does cost approach use to compute FV?

A

Replacement cost

49
Q

Can FV be used for a single item wo using for other identical items?

A

Yes

50
Q

FV is not applicable to what?

A

Investment in a subsidiary that is to consolidated, an interest in a variable interest entity, pension benefits, items under lease accounting, shareholders equity

51
Q

What’s FV input hierarchy?

A

Level 1: quoted price in active markets for identical items (observable)
Level 2: for similar items (observable)
Level 3: entity’s assumptions, own data (unobservable)

52
Q

When does going concern need to be evaluated?

A

Both annual and interim stmt

53
Q

What are two areas FV option is not permitted?

A

Share-based pmt transactions and inventory valuation.

FAR (15 decks)

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